USDA Defends ADM Plea Agreement

Two separate responses from the US Department of Agriculture have taken issue with the contention that by failing to debar Archer Daniels Midland (ADM) it in effect forced the American taxpayers to fork up over $80 million of the $100 million fine imposed on ADM for price fixing.

In letters to Secretary of Agriculture Ann Veneman, Attorney General John Ashcroft and President-Select George W. Bush, the issue of a compliance agreement in lieu of debarment was raised by a Redondo, Calif., concerned citizen Oscar B. Pichardo.

"I have just finished reading Rats in the Grain by James B. Lieber," Pichardo wrote in his letters, "detailing the criminal activities of ADM over the last four decades; particularly over the past ten years. The author points out a very disturbing fact: although convicted of criminal behavior, the USDA has not debarred Archer Daniels Midland."

In a response to Pichardo, a USDA Acting Deputy Administrator for Commodity Operations Alex King noted:

"On October 15, 1996, ADM entered into a plea agreement with the United States represented by the DOJ whereby ADM agreed to plead guilty to two counts of violating the Sherman Antitrust Act. ADM paid a fine totaling $100 million based on the Plea Agreement. In the Plea Agreement, DOJ acknowledged that ADM provided substantial assistance in the investigation conducted by the United States.

"Additionally, a Compliance Agreement in Lieu of Debarment was made between ADM and USDA as part of our efforts to ensure that future business dealings would be conducted with the high degree of integrity that the Government expects of all its business partners. Based on USDA's reviews and verification of ADM's adherence to the compliance agreement, it was decided at that time that further action was not necessary to protect the Government's interests."

In a May 21 letter to Pichardo, another Acting Deputy Administrator of USDA's Commodity Operations, Steve Gill, added, "Your letter implies that suspension and debarment are appropriate forms of penalties. This is not correct. As stated in the regulations governing suspension and debarment of government contractors '[t]he serious nature of debarment and suspension requires that these sanctions be imposed only in the public interest and not for purposes of punishment.' (48 C.F.R. *9.402(b). The Department of Agriculture views the Compliance Agreement as adequately protecting the United States and in our overall best interests."

In replying to King's letter Pichardo expressed his dissatisfaction with the USDA explanation.

"It is a matter of public record ADM did not provide 'substantial assistance' in the price fixing investigation," Pichardo responded to King. "Nowhere in the Plea Agreement is this 'substantial assistance' mentioned. Neither is the Compliance Agreement in Lieu of Debarment a part of the Plea Agreement nor was this agreement disclosed in open court as required by law.

"On October 15, 1996, when Judge Ruben Castillo asked if any other agreements or promises have been made to the company, the ADM representative responded none have been made. This represents a serious misrepresentation in obtaining the Plea Agreement, as defendants are required by law to disclose all agreements in open court before a settlement can be finalized.

"Furthermore, your statement USDA's 'reviews and verification of ADM's adherence to the compliance agreement' is flawed. The Plea Agreement between DOJ and ADM covered the period ending June 1995. Since then, ADM has been named in various anti-trust suits in Illinois, California, Massachusetts, Alabama and Georgia. It has also settled law suits against it for irregularities in the marketing of HFCS and sodium gluconate not covered in the Plea Agreement.

"Additionally," he adds, "the Commission of European Communities and the Mexican government commenced investigating ADM activities in September 1997, November 1998 and February 1999. These investigations are not consistent with future business dealings conducted `with the high degree of integrity that the Government expects of all its business partners.'

"Likewise the statement 'on December 3, 1996 the Department of Justice indicted three top level ADM executives, subsequently suspended from Government contracting, in accordance with the rules and regulations stipulated in the Federal Acquisition Regulations' is misleading. One of the indicted was the whistle blower who alerted and cooperated with the FBI regarding ADM's illegal activities. He was subsequently dismissed by ADM in August of 1995.

"On the other hand, the other two executives were provided well connected law firms [Williams & Connolly] for their defense, and their legal expenses were assumed by ADM. Their supposed suspension from government contracting per the FAR would not take place until September of 1998 when convicted. Since one retired and the other took a leave of absence from ADM in October of 1996, the suspensions amount to window dressing -- making for great publicity with no de facto penalty. In the meantime ADM has continued conducting business with the USDA, and American taxpayers have been subsidizing both fines and legal expenses incurred by ADM as a by-product of their illegal activities.

"Frankly," Pichardo concludes, "Mr. King I fail to comprehend how this construes 'protecting the Government's interests' or demonstrates 'the interests and concerns of the American taxpayer take first priority in USDA's programs.' I find it unconscionable ADM continues to conduct business with the USDA, raking profits from the American taxpayer it has defrauded.

"I am not sure the amount of effort expended in composing your reply, but it fails to adequately address the issues raised in my original letter. It also raises another issue demanding investigation," he adds.

"Why was the Compliance Agreement in Lieu of Debarment not disclosed to Judge Ruben Castillo as required by law? The failure to comply with this legal requirement casts a serious shadow on the legality of the Plea Agreement between ADM, DOJ, and USDA granted by Judge Castillo on October 15 1996."

SEC Probes ConAgra Sales

ConAgra Corp., the nation's second largest food manufacturer, has joined IBP, Rite Aid and Xerox among corporations targeted by the Securities and Exchange Commission (SEC) investigators on suspicion that they manipulated earnings to mislead investors. Investigators believe ConAgra's farm-products unit led to an overstatement of profits for the past three fiscal years.

Since last November ConAgra's United Agri Products (UAP) revealed that the unit improperly booked revenue on sales for delivery that were to take place at a later date, and that some contracts were fictitious or not binding.

In March ConAgra said that profit at UAP was hurt by concerns among growers over biotechnology, changes in farm policy, and high natural gas prices. UAP, which distributes seed, fertilizer and agricultural chemicals to agricultural growers, is one of three businesses in ConAgra's agricultural-products segment and represented about 9% of ConAgra's operating profit for the fiscal years 1998, 1999 and 2000.

According to company spokeswoman Karen Lynn the fictitious sales were "relatively small."

Rebates that ConAgra received from its suppliers, which were connected to the deferred sales of seeds, fertilizers and pesticides, also were improperly recorded, the company has concluded from their own in-house investigation.

Analyst William Leach of Banc of America Securities pointed out to Bloomberg News' Robert Finkelstein that the report of accounting irregularities at United Agri Products comes on top of the poor earnings news, and might indicate other problems.

"In a company as diverse as ConAgra, you wonder if this is just the tip of the iceberg," Leach said. "ConAgra's profit fell in the third quarter ended February 25, partly because of a loss at United Agri Products. Losses at the division, which analysts say has 40% of the US market for seed, fertilizer and pesticides, more than offset gains in other agricultural businesses.

With sales of about $27 billion a year, ConAgra is the nation's largest food-service manufacturer and second-largest retail-food supplier. It owns companies across the food chain from the "field to the table," and its major brand names include Healthy Choice, Hunt's tomato products, Banquet meals and Armour meats.

While ConAgra Chairman and Chief Executive Bruce Rohde notes that the company's "preliminary findings indicate that certain conduct at UAP circumvented generally accepted accounting practices and violated ConAgra Foods' corporate policy," the Omaha World-Herald's Victor Epstein reports that "heads may roll" at ConAgra in the wake of the discovery that their employees reported false sales to boost their commissions in its troubled agricultural products division.

Lynn said she could not discuss the number of employees involved in the fake sales because the company's internal investigation is ongoing, but she said the matter is being viewed very seriously by Rohde.

"Bruce Rohde has seized this moment to clearly and unequivocally communicate that this behavior is inappropriate," Lynn said. "(It's) his belief that ConAgra Foods shall be a respected and trusted company, and he will take the necessary steps to regain that trust and respect."

Food industry analyst Christine McCracken of Chicago-based Midwest Research has said the prospect of a sale of the Greeley, Colo.-based agriculture division, which has been a money loser since energy prices began to soar last year, is more important than the financial adjustments and accounting changes recently reported by ConAgra.

"What happened is that there were accounting procedures set up at ConAgra that weren't closely monitored, and some salespeople took advantage of them, and they're probably going to be gone," McCracken said. "The bigger issue is whether this incident will prompt some strategic action to reduce the company's exposure to this kind of activity."

"That's Wall Street lingo," Epstein notes, "for selling off the agriculture division, which has long been part of ConAgra, which was founded in 1919 under the Nebraska Consolidated Mills banner."

Veneman Professes Ignorance of Pork Check-Off Reports

US Secretary of Agriculture Ann Veneman has recently admitted to a Des Moines, Iowa, press conference that she knew nothing about two key government reports when she ordered the continuation of the pork tax program, even though hog farmers voted to end it.

Last fall, over 30,000 hog farmers voted 53% to 47% in a nationwide referendum to end the mandatory pork tax which is assessed against hog farmers on each hog they sell.

During the USDA sponsored press conference, Veneman said she was unfamiliar with the reports issued by the US General Accounting Office (GAO) and the USDA's Office of Inspector General (OIG).

In September 2000, the GAO investigation concluded that former Ag Secretary Dan Glickman acted within his statutory authority when he held a referendum to terminate the pork tax.

On Jan. 10, 2001, the OIG issued a report on their investigation into National Pork Producers Council (NPPC) claims of voting irregularities in the referendum. The OIG report dismissed the NPPC's specific claims of voting irregularities and concluded, "after our review of the information and interviews with [government] staff, we concluded that there were controls in place governing the conduct of the referendum ... we found no evidence that the controls did not work as intended. Thus we have no basis for further inquiry."

Recently the Campaign for Family Farms filed a federal lawsuit against Secretary Veneman, challenging her decision which overturned the democratic referendum and required hog farmers to continue paying the failed and unpopular tax. The lawsuit asks the court to order USDA to end the pork checkoff and prohibit the collection of the $54 million a year pork tax.

"We're appalled Veneman made such a monumental decision without even looking at these two reports. It smacks of incompetence," said Land Stewardship Project Policy Program Director Mark Schultz. "Veneman claims that her decision was based on legal concerns and 'insurmountable flaws' surrounding the vote --- yet these issues were thoroughly addressed and dispelled by the two government reports."

The Campaign for Family Farms is the multi-state coalition that has led the fight to end the mandatory pork tax over the last three years. Member groups of the Campaign for Family Farms are: Iowa Citizens for Community Improvement, Missouri Rural Crisis Center, Illinois Stewardship Alliance, and Land Stewardship Project.

A.V. Krebs operates the Corporate Agribusiness Research Project, P.O. Box 2201, Everett, Washington 98203; email;

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