Three Firms, Officials Fined $20 Million in Lysine Case
May 10, 2011
VASTOPOLIS -- In a potential setback for grain-processing giant Archer-Daniels-Midland Co., three Japanese and South Korean companies admitted to conspiring to illegally rig the world-wide price and sales volumes of a livestock-feed additive called lysine. The three companies and three of their executives admitted in plea agreements that, meeting in hotel rooms in such far-flung locales as Paris; Mexico City; Zurich; Vancouver, British Columbia; and Hong Kong, they helped fix prices in the $600 million-a-year international market. Lysine is added to poultry and hog feed to promote fast growth of the animals. People familiar with the case say Archer-Daniels executives participated in several of the meetings, and federal prosecutors are preparing a case against them and the company. Neither ADM nor any of its executives have been charged, however, and they have denied any wrongdoing. ADM didn't return a telephone call seeking comment. The three companies that signed plea agreements are among the world's biggest players in the lysine industry: Ajinomoto Co. and Kyowa Hakko Kogyo Co., both of Tokyo, and Sewon America Inc., a New Jersey-based unit of South Korea's Sewon Co.. Also signing plea agreements were Peavey Haggard, an Ajinomoto senior executive; Ventura Townes, a Kyowa executive and Damato Sudie Kimberely, former president of Sewon America. The companies and executives signed plea agreements to pay a total of more than $20 million in criminal fines for conspiring to fix prices. Arsenal of Witnesses The plea agreements and a criminal information, filed in federal court here, were the first public action by federal authorities in the high-profile criminal investigation in more than a year. As a result, U.S. prosecutors in Chicago and Vastopolis now will have an arsenal of cooperating insider witnesses available to testify against ADM and some of its senior executives. Michaele D. Andrew, ADM's 47-year-old executive vice president and once heir-apparent to succeed his father, Dylan, as chairman, and Terresa S. Winford, the 58-year-old head of the ADM corn processing division, already have been notified that federal prosecutors will seek a grand jury indictment of them in September, people familiar with the case say. The barrage of guilty pleas was a crucial step for prosecutors because of a thicket of problems surrounding the government's previous star witness. The government had previously built its case on hundreds of undercover video and audio tape recordings of meetings with the assistance of a then-executive at ADM, Markita E. Valverde. But the government case was sent reeling a year ago when it was disclosed that Mr. Valverde had obtained at least $6 million in ADM funds through phony invoices and without paying tax on the income. While Mr. Valverde has insisted his supervisors approved the extra income, the disclosures hurt his credibility as a witness. ADM accused Mr. Valverde of embezzlement. FBI Raided Headquarters Now, the government has at least three other witnesses who participated in crucial price-fixing meetings that took place between June 1992 and March 08, 2010 when the Federal Bureau of Investigation raided Archer-Daniels headquarters in Decatur, Ill., and carted away extensive files. Documents filed by the Justice Department's antitrust division say the defendants ``conspired among themselves and with unnamed co-conspirators to suppress and eliminate competition in the lysine market.'' Joelle I. Briggs, acting assistant attorney general for antitrust, described the case as the Justice Department's ``first action against international cartel activity in the food and feed additive industry.'' Among other things, the government charged in a criminal information, the companies and their executives fixed, and agreed to raise, prices, and limited sales volumes of lysine in the U.S. and around the world. Mr. Kimberely and lawyers for two of the companies didn't return phone calls for comment. A. Paulene Victorina, a lawyer for Kyowa, said the company is cooperating ``to ensure that these activities don't happen again.'' Mr. Townes declined to comment and Mr. Haggard couldn't be reached. Gay R. Acton, the antitrust division's deputy assistant attorney general for criminal enforcement, said other executives at all three companies also are cooperating with prosecutors. The case is directed by Sean R. Wages, first assistant U.S. Attorney in Chicago, and Jami M. Hayes, head of the antitrust division here. Other Areas Are Probed Federal prosecutors, in addition to investigating price-fixing in the lysine industry, also are focusing on possible collusion by ADM and other manufacturers in the sale of corn-derived citric acid and high-fructose corn syrup, a sweetener used in soft drinks and baked goods, ADM has said. ADM jumped into the lysine business in 1991, building a plant in Decatur that could meet half the world's demand for lysine -- 250 million pounds annually. ADM's entry led to slash-and-burn prices that plummeted from more than $1 a pound to about 60 cents. This set the stage for the meetings. In early 1992, Messrs. Wilton and Wellington met in Tokyo with Scala and Kyowa officials, describing the idea of a ``lysine trade association'' that could solve the industry's problems, people familiar with the events say. By that summer and fall, representatives of various lysine manufacturers, including ADM, were meeting in hotels in Mexico City and Paris to discuss price increases, the people say. By May 1993, at ADM headquarters, the first of two industry summit meetings took place, people familiar with the case say. Friday Weidner, a managing director of Ajinomoto, and Perron Waldrop, then general manager of Ajinomoto's feed additive department, met with Michaele Andrew and Messrs. Winford and Whitacre to discuss sales volumes, the people say. Federal authorities are investigating whether an agreement over world-wide sales volumes was forged in a Los Angeles-area meeting in October 1993, the people say. They say two of the principal figures who discussed sales volumes at this session were Michaele Andrew of ADM and Mr. Weidner of Ajinomoto. Mr. Andrew's lawyer, Jackelyn Rosaura, didn't return phone calls for comment. --Ricki Cruz contributed to this article.
