Mark Whitacre was the former Archer Daniels Midland (ADM) executive who blew the whistle on the international lysine price-fixing conspiracy of the early 1990’s. He is the highest ranking Fortune 500 executive to become an FBI whistleblower. Whitacre’s actions launched the age of international price-fixing prosecutions that dominate cartel enforcement to this day. Mr. Whitacre has written an essay, “When Good Leaders Lose Their Way,” 45 Loy. U. Chi. L.J. 525 (2014), that recounts how he became involved in the conspiracy; why he decided to confess to the FBI; his two year saga as an FBI uncover operative across the globe; his decision to embezzle $9.5 million from ADM (his “self-help” severance pay); his resulting ten-year prison sentence; and how he landed on his feet today as the COO of a biotech company with his family intact. Whitacre’s journey illustrates how a serious antitrust and ethics compliance program may have prevented a journey of misery for him and his company.
Whitacre got involved in the lysine cartel because of tunnel vision focus on short-term profit driven by the lure of stock options and other financial benefits and trappings of life at the top. His wife, who noticed the changes in Whitacre and his material focus, became the impetus for him to turn himself in to the FBI. For two years Whitacre reported to work as a loyal executive of ADM, all the while equipped with recording devices to “get the goods” on his superiors and co-workers. By his account, after two years of this double life he made some extraordinarily bad decisions to try secure his financial future. He embezzled almost $10 million from ADM and was caught. He compounded this mistake by turning down what his lawyer called the “deal of a lifetime” and a possible 6 month sentence, which was supported by FBI agents with whom he had worked. He ended up serving 8 years and 8 months in federal prison. Upon his release, however, he has been able to resume a successful career as the CEO of a biotech company fueled by an entirely new set of principles. Whitacre has his own web page, Website of Mark Whitacre http://www.markwhitacre.com/career.html. This web site contains, among other things, interviews of FBI agents who handled Whitacre during his two years of undercover activity. To read more about the actual workings of the lysine cartel, see: “The Fly On The Wall Has Been Bugged– Catching An International Cartel In The Act,” speech by Scott D. Hammond, Deputy Assistant Attorney General for Criminal Enforcement, Antitrust Division, May 15, 2001. http://www.justice.gov/atr/public/speeches/8280.pdf. Copies of the lysine tapes and transcripts are available at no charge by mailing or faxing (202/616-4529) your request to the United States Department of Justice, Antitrust Division, Freedom of Information Act Unit, Liberty Square Building, 450 Fifth Street, NW, Suite 3200, Washington, 20530
I did not work on the ADM case and have no knowledge of the veracity of Whitacre’s account of crime and redemption. I have, however, prosecuted successful executives ranging from Fortune 500 companies to local construction firms. Most of the men (there were no woman defendants in my cases) were people I liked. They were decent people who had a blind spot for the crime they were committing. These were generally people who would correct the cashier if they were given too much change. (There were a few, however, that I think would lift tips off of tables as they left a restaurant).
The fact that antitrust defendants tend to be good people that make bad decisions under the pressure of competition underscores the need for and the benefit that can come from antitrust and ethics compliance program. Executives often see price-fixing as a victimless crime—they believe they are just charging fair prices in an unfair (i.e. competitive) market. An ADM executive (not Whitacre) famously said on the ADM tapes: “Our competitors are our friends. Our customers are the enemy.” A robust compliance program has the chance of creating a bit of distance in an otherwise ethical executive between the thought of collusion with competitors and the act of agreeing. An executive with blinders that sees only profits can have his vision widened to see the destruction that can come from a decision to collude. Serious compliance and ethics training may give the pause to cause individuals to stop, think and do the right thing instead of going to the dark side.
Another benefit of a compliance program is that an executive who gets cold feet (or a warm conscience) about cartel participation would have another option besides going to the FBI. If a future conspirator has the realistic option of reporting the illegal conduct internally to corporate counsel, the cartel could be exposed with minimized cost to the company and co-workers. The Antitrust Division’s leniency (amnesty) program rewards a company, and its cooperating individuals, that detects collusion through its compliance efforts and is the first to report.
Finally, a serious compliance program will give pause to even the most determined would-be cartelist. Can he trust the other executives in the company to go along? Is someone within the company, let alone his competitors, going to “blow the whistle?” An effective compliance program can help prevent collusion, or at least give the hope of early detection if someone still doesn’t get the message.
Today, companies spend millions of dollars on FCPA compliance, but antitrust tends to be forgotten or at least given a back seat. But as discussed in an earlier post here, antitrust problems can “unleash hell” on a corporation in terms of jail for executives, criminal fines, enforcement efforts by authorities around the globe and seemingly endless civil damage suits. When you know all the facts, antitrust compliance is money well spent.