Canterbury Malting Co Sold To US TNC Convicted Of International Conspiracy

In July 2000, the Overseas Investment Commission (OIC) gave approval for the International Malting Company LLC to acquire Canterbury (NZ) Malting Company Ltd, the "main New Zealand producer of lager malt", for a suppressed amount. International Malting is owned 60% by Lesaffre Malt Corporation of France and 40% by Archer Daniels Midland Company (ADM) of the USA. Top executives of ADM, one of the largest agribusinesses in the world, are currently making headlines in the US due to their convictions for conspiracy to fix prices on a spectacular international scale. CAFCA has written to the OIC, pointing out that this appears to be in clear breach of the requirement that those controlling investments be of "good character", which is the basis on which this approval has been given (see below for CAFCA’s letter and the OIC’s reply. Ed.).

Canterbury Malting’s previous owners were the two main breweries in Aotearoa, both overseas companies, Lion Nathan and DB (in equal shares). Lion Nathan Ltd is 45% owned by Kirin Brewery Company Ltd of Japan, part of Mitsubishi. The DB Group is 75% owned by Asia Pacific Breweries Ltd, which is 40% owned by Heineken NV of the Netherlands and 40% by Fraser, Neave Ltd of Singapore. The remaining 20% is in small shareholdings in Singapore.

The recent story of Canterbury Malting is a sad one. One of only three surviving malthouses in Aotearoa, its primary customers were the two breweries which owned it. It even commissioned Crown Research Institute, Crop and Food Research, to develop its own high yielding, dual purpose malting and feed barley, Valetta, tailored to local conditions

(see http://www.crop.cri.nz/psp/broadshe/valetta.htm)

However, its Achilles’ heel – which should have been a strength – was its substantial export market to Japan, which took about one third of its output. After Kirin took control of Lion in its controversial raid in 1998, it treated Canterbury Malting’s exports as a threat to its own Japanese production and stopped the exports. The result was the closure of one of Canterbury Malting’s two production facilities, in December 1999. To add insult to injury, it was the Canterbury one, in Heathcote Valley near Christchurch, with 130 years of history. The direct loss was 18 jobs, but that followed another 20 redundancies earlier in the year as a result of the loss of the export market (Press, "End of era as malting company closes", 31/8/99, p3; "Malting facilities sold to USA", 11/7/00, p6; http://www.breworld.com/NEWS/COMPANYNEWS/STORIES/11677.htm, 3/9/1999, "The Canterbury Malting Company Announces Closure"). Its remaining production facility is at Marton (on five hectares of land) and a storage facility at Ashburton.

Price Fixing: $US100 Million Fine,
Senior Executives Imprisoned

Its new ownership may be even sadder. ADM, as well as being one of the largest agribusinesses in the USA (it is that country’s leading corn processor for example), has one of the dirtiest records for price fixing, and a long history of political meddling. So much so that it has the dubious privilege of recently having had a book published about its latest price-fixing scandal: "Rats in the Grain: The Dirty Tricks and Trials of Archer Daniels Midland, The Supermarket to the World", by James Lieber (Four Walls, Eight Windows, 2000. See our review elsewhere in this issue. Ed.). In a review of the book, Russell Mokhiber (editor of Corporate Crime Reporter) and Robert Weissman (editor of Multinational Monitor) summarised the events it covers as follows:

"In October 1996, ADM pled guilty to antitrust crimes and was fined US$100 million. Senior vice presidents Michael Andreas, the son of Chairman Dwayne, and Terrence Wilson were convicted of antitrust crimes in 1999 after a trial in federal court in Chicago. They were sentenced to three years in prison each".

That’s fairly serious stuff. The crimes involved the two former ADM executives conspiring with four Asian competitors to rig the US$650 million a year market for lysine, a lucrative livestock feed additive made by ADM: without any exaggeration, an international conspiracy of huge proportions. The US action was not the end of the matter. On 7/6/00, the Wall Street Journal ("EU Fines Archer Daniels Midland And Asian Firms for Price Fixing") reported that:

"The European Union on Wednesday fined Archer Daniels Midland Co and four Asian companies a combined 110 million euros (US$105 million) for their involvement in a price-fixing scheme".

ADM was fined the lion’s share, at 47.3 million euros. ADM has a history of this sort of behaviour, as the report continued:

"The investigation found that the five companies fixed lysine prices worldwide, including in the European Union (EU). The investigation also determined that the companies fixed sales quotas for the EU market and exchanged information concerning those quotas from ‘at least’ July 1990 through June 1995.

"The fines stem from a probe that began in 1997 when ADM disclosed the EU was conducting an inquiry into the grain processing giant’s European units and other companies. Wednesday’s announcement is the latest blow to the Decatur, Illinois, agribusiness, which has been found guilty of price fixing in the past.

"In 1996, the US Justice Department fined ADM $100 million after the company pleaded guilty to fixing prices for lysine and citric acid. In 1998, ADM also paid a fine of 16 million Canadian dollars (US$10.83 million) for price fixing on the Canadian market".

And the story goes on. Close observer of US agribusiness, Al Krebs, in his 18 October 2000 Agribusiness Examiner (number 91) quotes New York Times reporter, Kurt Eichenwald on "the growing scandal of the genetically engineered corn seed StarLink, which is not fit for nor has it been approved for human consumption". This has recently made the news in Aotearoa, following concerns raised by Green MP, Sue Kedgley, that the contaminated corn might have been in taco products on sale here. Eichenwald wrote:

"Millions of bushels of the unapproved corn, known as StarLink, have been found in flour delivered to more than 350 grain elevators around the country… StarLink corn was first found last month in store bought taco shells distributed under the Taco Bell brand by Kraft Foods, which issued a nationwide recall. On Wednesday, a similar finding was made in house brand taco shells sold by the Safeway supermarket chain. The two products were made of yellow corn from the same mill, run by Azteca Milling in Plainview, Texas.

"Yesterday, Mission Foods, which produced the Safeway shells, announced a recall of all its tortilla products made with yellow corn on the chance that some might contain StarLink corn. The company, a subsidiary of the Gruma Group of Mexico, which is based in Irving, Tex., sells products under the Mission name as well as numerous private-label brands … Azteca Milling, also a Gruma subsidiary based in Irving, announced its own voluntary recall of all yellow corn flour yesterday".

But, Krebs points out, "What Eichenwald does NOT report in his story is that the company, Gruma Group of Mexico, is a joint venture with Archer Daniels Midland whose mills located in Texas ground the corn used to produce the taco shells". He says Eichenwald has claimed that he controls what is printed in the New York Times concerning ADM. Things then get more sinister:

"But the StarLink contamination has also raised other questions relative to ADM’s role in this latest scandal. One longtime ADM critic, Nick Hollis of the Agribusiness Council, poses a rather thoughtful question in that regard.

"Could ADM, as the nation’s largest corn processor, Hollis asks, ‘be using its ‘inside info’ on which food processors are receiving the tainted flour (from their milling operations) to ‘plant problems’ and sabotage the food from certain companies which had stood up to them several years ago during the civil phase of the pricefixing case on lysine?’

"Hollis notes that Kraft Foods was one of the biggest ‘holdouts’ in the civil case, requesting more damages from ADM as a result of pricefixing. Kraft had led a group of dissenting companies, including Hudson Foods and others in the ‘holdouts’ column and, as a result, they did receive more settlement money.

"’While this was underway’, he adds, ‘a story broke in November 1997 in the Chicago Tribune, by Nancy Milman which pointed out Kraft’s efforts to get the US Department of Justice action surrounding allegations that Dwayne Andreas himself had used coercion and bribes to derail a cooperative from building a high fructose corn syrup facility in North Dakota (which would have supplied Kraft).

"This story dried up as key witnesses suddenly refused to talk about their meeting with Dwayne. If you look carefully at Aventis, a key focus of the corn shell recall, you may find a similar disturbing pattern since just a few days ago, this company was mentioned within a larger group of firms settling a civil suit on pricefixing of vitamins".

The intrigue is lent credibility by ADM’s long history of political connections, particularly through its Chairman, Dwayne Andreas. Eichenwald describes it (presumably with considerable understatement) like this:

"Since the time of Thomas E Dewey – the former New York Governor and Republican Presidential candidate who, when he was a lawyer in private practice, served as an adviser to Dwayne Andreas – Archer Daniels has been a strong political force. With an ease that bred envy among other corporations, the $9.2 billion food industry giant navigated between the Republicans and Democrats while helping to form this country’s agricultural policies" (New York Times, "Former Archer Daniels Executives Are Found Guilty of Price Fixing", 18/9/98, pA1).

"Forming this country’s agricultural policies" includes an important role in gathering subsidies and in forming the US policies in world trade negotiations.

Washington Post reporter, Steven Mufson described the politics in more detail (Washington Post, "Andreas Steps Down; ADM Chief Took Politics to a New Level", 26/1/99) when Dwayne Andreas stepped down as Chairman (but remained on the board) in the wake of the scandal. He began his article, "Dwayne O Andreas, the grain company executive who pioneered the art of political campaign contributions and built one of the country’s biggest food-processing empires, stepped aside yesterday as chairman of Archer Daniels Midland Co.".

He writes: "’It was a wistful day’, said Democratic insider Robert S Strauss, a long time Andreas friend and ADM director, after the company’s board meeting in Bal Harbour, Florida, yesterday. Strauss said Andreas ‘was a player on the global stage before most people could spell ‘global’.

"But to his critics, Andreas cultivated a network of relationships to secure foreign deals for his company and protect direct and indirect US government subsidies for many of his products, such as the corn-based ethanol added to gasoline.

"’Andreas has been a truly historical figure, a charter member of the world of campaign finance abuses’, said Fred Wertheimer, a lobbyist for campaign finance reform. ‘He may not have paid the price for it, but the country has – through the corrupt system that undermines public trust and provides improper influence for special interests at the expense of citizens and taxpayers’.

"’Archer Daniels Midland . . . has been the most prominent recipient of corporate welfare in recent US history’, said a 1995 study by Cato Institute analyst James Bovard. ‘ADM and its chairman . . . have lavishly fertilized both political parties with millions of dollars in handouts and in return have reaped billion-dollar windfalls from taxpayers and consumers’.

"Bovard cited federal protection of the domestic sugar industry, ethanol subsidies, subsidized grain exports and other programs".

He gave "lavishly" to both Democrats and Republicans – at one time donating both to Nixon and to his opponent in the 1968 election, Hubert Humphrey. And

"Nixon secretary Rose Mary Woods testified in a deposition to the Watergate prosecutors that Andreas delivered an unmarked envelope containing US$100,000 worth of US$100 bills in 1972. As the Watergate investigation closed in on Nixon, the president gave back the money, which had been in a White House safe".

He quotes a former ambassador, saying he watched "Andreas hold court for American politicians, Russian apparatchiks and American labour union leaders in his Florida hotel apartment. A Merrill Lynch stock analyst recalls being forced to wait in an outer office while Andreas took a call from Britain’s then Prime Minister".

Mufson says ADM "employs 23,000 people worldwide, owns 274 processing plants and has shareholder equity of US$8.5 billion. It possesses one third of the nation’s soybean processing capacity, is the largest producer of natural vitamin E, and makes more than a third of the nation’s ethanol". He quotes a Merrill Lynch analyst saying that ADM "possesses the nation’s largest fleet of barges, state-of-the-art plants, and a completely integrated, very efficient system".

ADM’s joint venture with Lesaffre was formed in mid 1998, and combined their malting operations: ADM’s US facilities of Fleischman Malt in Chicago, Milwaukee, and Red Wing, Minnesota, and Lesaffre’s US Froedtert Malt facilities in Milwaukee and Winona, Minnesota (http://www.smallgrains.org/dtnfiles/070898.htm, quoting Reuters). Lesaffre can therefore have had no illusions about the nature of ADM when it formed the joint venture.

International Malting Company operates barley malting plants in the United States, Canada and France, according to ADM (Securities and Exchange Commission 10-K filing for 30 June 1998: http://www.secinfo.com/d6T3.7y.htm).

Lesaffre is more specialised than ADM, saying on its web site that "the business activities of the Lesaffre group have developed essentially around the culture of yeast and the experience gained in fermentation technology, without forgetting its original activity: ethanol production". It describes itself as the world market leader in yeast production and production of yeast extracts and autolysed yeast, and "one of the world leading malt producers" with operations in France, United States, Canada and Australia. The Lesaffre family in France founded it in 1853 as a major producer of grain and sugar beets. It says it is a "totally independent, privately owned company operating on five continents and in more than 180 countries with nearly 4,000 employees"

(http://www.lesaffre.com/Eng/Institutionnel/i_metiers.htm, and
http://www.saf-agri.com/english/about.htm).

9 October 2000
Mr Stephen Dawe, Secretary
Overseas Investment Commission
Box 2498
Wellington

ARCHER DANIELS MIDLAND: LACK OF GOOD CHARACTER

Dear Mr Dawe,

OIC Decision Number 200020006 (12/7/00) approves the purchase of the Canterbury Malting Company Ltd. by the International Malting Company Ltd. IMC is 40% owned by Archer Daniels Midland Company, of the US.

"The Commission is further advised that the persons who exercise control over the applicant are of good character…". We beg to differ.

Archer Daniels Midland (ADM), and some of the persons who exercise control over it, has been at the centre of the biggest criminal antitrust case brought against a company, and its highest level executives, by American authorities. It is a current, ongoing case, not old history. The prosecution was successfully brought, not by local, state or specialist environmental or commercial law agencies. No, it was brought by the FBI, using all the modus operandi (covert surveillance, secret witnesses wired for sound and film, etc, etc) that it would use for any other major criminal activity.

Here is how it was described by Janet Reno, US Attorney General:
"Archer Daniels Midland has agreed to plead guilty and pay a $(US)100 million criminal fine, the largest criminal antitrust fine ever, for its role in two international criminal conspiracies to fix the price of lysine, a feed additive used to ensure the proper growth of livestock, and citric acid, a flavor additive and preservative found in soft drinks, processed foods, detergents and other products. Because of these illegal actions, feed companies, poultry and swine producers, and ultimately America’s farmers, paid millions more to buy the lysine additive. Also, manufacturers of soft drinks, processed foods, detergents and other materials, paid millions more to buy the citric acid additive, which ultimately caused consumers to pay more for these products" ("Rats In The Grain", p38).

The matter didn’t end there – Michael Andreas, Executive Vice President, and son of ADM’s CEO, was sent to prison for two years, as was another senior executive. The whistleblowing executive got nine years (because he was embezzling the company, as well as being involved in the conspiracy and informing for the FBI).

But that still wasn’t the end of it. As recently as September 2000, a prosecution appeal against the length of the prison sentences was upheld. Andreas, who had been expected to succeed his father, had one year added to his sentence; the other executive got an additional nine months.

The trial featured an extensive list of eyebrow raising allegations by the whistleblower about how ADM does business. And, in June 2000, the European Union fined ADM and four Asian companies $US105 million for price fixing (on top of a $C16 million fine for ADM, in 1998, for price fixing in Canada).

These are not "technical" offences, but serious criminal matters, "international criminal conspiracies", in the words of the highest law officer in the US. The US authorities certainly thought it was a big enough crime to levy "the largest criminal antitrust fine ever" (to quote the Attorney General again), and imprison senior executives (and then get those prison terms lengthened). The ADM price fixing conspiracy is so notorious in the US that it is the subject of a brand new book – "Rats In The Grain: The Dirty Tricks and Trials of Archer Daniels Midland, The ‘Supermarket to the World’", by James B. Lieber.

As corroboration, we enclose a 1998 report from the New York Times; a 1999 Washington Post article; an extract from a 1999 issue of the Agribusiness Examiner; June and September 2000 reports from the Wall Street Journal; and a publisher’s synopsis of "Rats In The Grain". There is more, should you request it, plus plenty available on line. We would recommend a read of the book (copies of these American articles are available upon request. Ed.).

The question arises – when this international criminal conspiracy case was so extensively reported in major US media, why did the OIC certify ADM and the persons controlling it as "being of good character" and thus approved for investment in New Zealand? We look forward to your explanation.

Even more, we look forward to you withdrawing that approval for ADM, in light of the large body of recent and current evidence against it.

Please reply promptly.

Yours sincerely,

Murray Horton
Secretary/Organiser

OIC Reply: Nothing To Worry About