Informant Blew the Whistle on Price Fixing at ADM
Mark Whitacre, the corporate whistleblower who exposed a price-fixing scandal at Archer Daniels Midland in the 1990s, told a group of fraud examiners that his wife was the person who convinced him to go to the FBI.
Whitacre talked about his experiences in a fascinating keynote speech at the Association of Certified Fraud Examiners’ annual conference in Orlando, Fla., on Wednesday. He worked for ADM from 1989-1995 and said the company has become radically improved today in terms of corporate integrity. But back when he was working for the agricultural giant as president of its bioproducts division, ADM’s price fixing of lysine helped drive up the price of corn syrup used to sweeten a wide array of consumer products from Coca-Cola, Pepsi, Kellogg's, and Tyson Foods. Those higher costs were ultimately passed along to the consumer.
Whitacre was portrayed by Matt Damon in the 2009 movie “The Informant!” based on the book by Kurt Eichenwald and directed by Steven Soderbergh. He described an atmosphere of rampant corruption at the company going back before he started working there. He and other top executives had lost $660,000 on a Nigerian investment scam, but they ended up charging the losses back to the company. That encouraged Whitacre to participate in further embezzlement and fraud at the company.
“Greed became my focus and became my downfall,” he said.
The corporate culture at ADM encouraged executives to look the other way because the company was involved at the time in the much larger price-fixing scheme. The former treasurer had been involved in a separate fraud scheme, according to Whitacre, but could not be prosecuted because he knew about the price fixing.
When Whitacre told his wife Ginger about the fraud in 1992, she immediately insisted that he call law enforcement, saying she wouldn't be able to live with him otherwise. He credited her high moral compass and integrity. The two had been dating since he was in the eighth grade and married in 1979. She said she could see the changes in him since he began working at ADM. He contacted the FBI and agreed to wear a wiretap every day. That lasted for three years. At the time, they had to use tapes, which needed to be changed every hour, so Whitacre was often forced to go to the bathroom during long meetings with fellow executives to change the tapes. The tape recorder is now in the FBI Museum in Washington, D.C.
Wherever he traveled, the FBI arranged to have the same green lamp with a bugging device set up in every hotel room where he stayed and met with fellow executives, no matter whether it fit in with the hotel décor. Whitacre noted that if there had been any female executives at these meetings, they probably would have spotted the same lamp, but none of the male executives ever seemed to notice. “That green lamp followed us around the world,” he said.
His fellow executives were callous about their price-fixing talks and even were caught on tape joking when they heard a knock at the hotel room door, “Maybe that’s the FBI.”
Ultimately the Justice Department prosecuted senior ADM executives for the lysine price fixing, and vice chairman Michael Andreas was sentenced to a federal prison term in 1999. The company was fined $100 million in 1997 for antitrust violations and paid $400 million in 2005 to settle a class-action lawsuit filed by its customers.
Whitacre, for his part, feared he would be fired once ADM learned that he had helped the FBI and he would be blackballed from the industry. He embezzled $9 million from the company, thinking that would help him survive without a job. Once the price-fixing scheme went public, ADM found evidence of the embezzlement by pulling his invoices at the accounting department.
Whitacre was prosecuted for embezzling from the company. However, he credited the FBI agent who worked with him, Brian Shepard, for standing by him and helping him get expert legal help. Nevertheless, he rejected a plea deal that would have allowed him to serve just six months in prison. He ended up with a 10 and a half year sentence, of which he served about eight years. His devoted wife Ginger visited him every weekend and holiday and moved across four states every time he was relocated. Whitacre grew emotional as he described how one of his children grew up while he spent time in prison.
When he was finally released, he was hit with an $8.3 million tax bill from the IRS, but his friends at the FBI had it dismissed. “The three FBI agents and prosecutors were my full supporters,” said Whitacre. “They stayed in contact.”
The corporations who were helped by Whitacre’s actions, including Coca-Cola, Pepsi, Kellogg’s and Tyson Foods, also helped his family while he was in prison, paying for his wife to go back to school and helping pay for his children’s education.
The day after he was released from prison at age 49 in 2006, Whitacre landed a job at a biotech company, Cypress Systems. Ultimately he was promoted to president and chief operating officer. However, he noted that he has nothing to do with the company’s finances, adding that he wouldn’t want to have access to them.