U.S. v. Andreas, 96 CR 762.
| Decision Date | 30 December 1998 |
| Docket Number | No. 96 CR 762.,96 CR 762. |
| Citation | 39 F.Supp.2d 1048 |
| Parties | UNITED STATES of America v. Michael D. ANDREAS; Mark E. Whitacre; Terrance S. Wilson; and Kazutoshi Yamada Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Jerry Michael Santangelo, Neal, Gerber & Eisenberg, Chicago, IL, Jeffrey D. Hoeh, Richard L. Klein, Willkie Farr & Gallagher, New York City, for Bloomberg LP.
James T. Phalen, Schwalb, Donnenfeld, Bray & Silbert, Washington, DC, Kevin M. Dinan, John David Shakow, King & Spauling, Washington, DC, Joseph J. Duffy, Stetler & Duffy, Ltd., Chicago, IL, for Michael D. Andreas.
Bill T. Walker, Granite City, IL, for Mark E. Whitacre.
Robert W. Fleishman, Mark J. Hulkower, Reid H. Weingarten, Steptoe & Johnson, Washington, DC, Kristina M.L. Anderson, Chicago, IL, for Terrance S. Wilson.
Michael Jerry Freed, Much, Shelist, Freed, Denenberg, Ament & Rubenstein, P.C., Chicago, IL, for High Fructose Corn Syrup Antitrust Litigation Class.
Philip A. Guentert, United States Attorney's Office, Chicago, IL, Jerry Michael Santangelo, Neal, Gerber & Eisenberg, Chicago, IL, for United States.
In late 1996, the court began a journey in search of the truth behind what really happened at the Archer Daniels Midland Company(ADM) when it entered the international lysine market, in 1991. That is, were ADM executives Michael D. Andreas, Mark E. Whitacre, and Terrance S. Wilson guilty of price-fixing in violation of the Sherman Antitrust Act, 15 U.S.C. § 1? The journey ended on September 17, 1998, when a jury convicted all three defendants of conspiring to fix the global price and allocate the sales volume of lysine.1
The defendants now offer a plethora of reasons for why they deserve to be acquitted, granted a new trial, or have their judgments of conviction arrested pursuant to Federal Rules of Criminal Procedure 29, 33, and 34. While the defendants move separately, their motions raise, in part, common issues of fact and law applicable to all three defendants. Accordingly, their requests to incorporate each others motions to the extent that they are applicable to each defendant is granted.
Andreas, Whitacre, and Wilson are former ADM executives. Andreas was vice chairman of ADM's board of directors and executive vice president. Wilson was an ADM group vice president and head of ADM's Corn Processing Division. Andreas and Wilson were major players at ADM, both having worked there since the early 1970s. Whitacre joined ADM in 1989, as the president of ADM's thennewly formed BioProducts Division, which produces lysine.
The government accused ADM of masterminding the underlying international conspiracy with its foreign competitors, including: Ajinomoto Co. Ltd., (Japan), Sewon America, Inc., (Korea) Kyowa Hakko Kogyo Co., Ltd. (Japan), and Cheil (Korea). By all accounts, ADM's initial entry into the international lysine market spurred competition and caused a serious decline in the global price of lysine; customers reaped the benefits of price competition. Almost overnight, ADM took the lead in the U.S. market share. But it seems that greed spurred ADM to violate the Sherman Act.
The government alleged that in early 1992, ADM, through Wilson and Whitacre, and at the behest of Andreas, joined an international conspiracy with their competitors to fix the price of lysine. Initial discussions with Ajinomoto and Sewon in April 1992, led to a formal meeting between all of the competitors in Mexico City, Mexico, on June 23, 1992. The FBI and the Department of Justice's Antitrust Division caught wind of this plot when, in November 1992, Whitacre alerted the FBI during an investigation of alleged industrial espionage at ADM's Decatur, Illinois lysine manufacturing plant.
Besides price-fixing, Whitacre's criminal escapades include extortion and embezzlement. In April 1991, Whitacre began embezzling money from ADM by filing phony payment vouchers for goods and services never provided to ADM.2 While common sense suggests that it is not wise to draw attention to yourself while committing a felony, Whitacre decided to throw caution to the wind and take another roll at the dice by attempting to extort $10 million from ADM in order to conceal his embezzlement. Whitacre falsely claimed that Mr. Fujiwara, a Japanese national employed by Ajinomoto, told him that ADM competitors were sabotaging its Decatur plant to disrupt lysine production and harm ADM's market share in lysine. Whitacre related the Fujiwara story to Andreas, indicating that Fujiwara wanted to sell Japanese trade secrets and biotechnology to ADM for $10 million; the deal, of course, to be consummated through Whitacre as the middleman.
The story was inherently suspicious since Whitacre later claimed that Fujiwara lowered his price to $6 million. Andreas contacted an anonymous ADM associate who, through a round about way, (Tr. at 716), caused the FBI to investigate Whitacre's sabotage claims. As it turns out, Whitacre failed two FBI polygraph tests and then admitted that the Fujiwara incident was a hoax, and that Andreas never agreed to buy stolen Japanese biotechnology. Things were looking grim for Whitacre. Although the FBI was unaware of the embezzlement, Whitacre clearly was the prime suspect in the extortion attempt. Snatching victory from the jaws of defeat, Whitacre won a temporary reprieve when he told the FBI that he and other ADM executives were conspiring to fix the global price of lysine, in violation of the Sherman Act. The FBI listened to Whitacre, but declined to inform ADM about the Fujiwara hoax.
Despite his prior deception, the government offered Whitacre an immunity agreement in December 1992. In exchange for immunity from prosecution for the lysine conspiracy, Whitacre agreed to provide completely truthful information to the government, assist the government with its investigation into ADM, and not to commit any crimes. Needless to say, Whitacre did not volunteer information concerning his embezzlement. A two and one-half year covert FBI investigation using Whitacre as a cooperating witness ensued. Over that period Whitacre surreptitiously recorded conspiracy conversations on audio and videotapes between Andreas, Wilson, and ADM's competitors.
On June 27, 1995, the FBI raided ADM's corporate offices, and everyone ran for cover. The government played the investigatory equivalent of "musical chairs" and passed out an assortment of immunity/cooperation agreements to certain ADM executives, including ADM executive Barrie Cox, and to ADM itself. Cox, at the time, was a Vice-president of Sales and Marketing of ADM's Food Additives Division, and was involved with ADM's endeavors in the citric acid market. While Cox was not alleged to be involved in the lysine conspiracy, he was allegedly aware of another uncharged, yet similar, conspiracy allegedly led by Wilson to fix the price of citric acid. The government has always contended that the lysine conspiracy was modeled after the alleged citric acid conspiracy, and sought to introduce Cox's testimony for that limited purpose. See infra, § IV D.
Whether they were too slow to grab a deal or simply not offered one, Andreas and Wilson were indicted. ADM eventually pled guilty to price-fixing and paid a $100 million fine. Despite his aid, the government withdrew Whitacre's immunity agreement after finally discovering that he had bilked ADM to the tune of approximately $10 million with his phony voucher scheme. As a result Whitacre once again joined his lysine brothers-in-arms, Andreas and Wilson; only this time as a co-defendant facing a potential three year sentence. Cox received immunity pursuant to 18 U.S.C. § 6001 and agreed to testify against all three, in the sense that he would establish that their lysine conspiracy was modeled after the alleged citric acid conspiracy. The court previously held that the government's proffer of evidence demonstrated that any citric acid evidence was admissible as direct evidence against Wilson and Andreas as to the existence of, and their participation in, the lysine conspiracy. The government contends that it felt compelled to immunize Cox, a British national, in order to prevent extradition disputes from delaying the prosecution.
By indicting Whitacre, the government caused its investigation to take a turn for the surreal. After his indictment, Whitacre became a media sensation by announcing that he had secretly taped many of his conversations with his FBI handlers, particularly Special Agent Brian Shepard, during his two-year odyssey as "the ADM mole." Moreover, Whitacre accused Shepard of instructing him to destroy exculpatory portions of the so-called "Whitacre tapes." Whitacre then filed a Section 1983 action against SA Shepard in the Central District of Illinois, alleging mistreatment in violation of his civil rights, which included threatening Whitacre and ignoring Whitacre's threats to commit suicide during the covert investigation.3 The veracity of Whitacre's allegations are hotly disputed and is the crux of an ongoing due process challenge to the indictment by Andreas and Wilson, alleging selective taping and destruction of exculpatory evidence. See § IV B.
The FBI's Office of Professional Integrity launched an investigation into Whitacre's allegations. On April 16, 1997, Whitacre met with government counsel and FBI Agent Athena Varounis who recorded the accusations in an FBI 302 report. Similar to his numerous newspaper and magazine interviews, Whitacre claimed that his audiotapes were phony and the FBI was railroading him. To bolster his claim, Whitacre asserted that he had taped conversations with SA Shepard in which Shepard instructed Whitacre to destroy tapes. Whitacre asserted that his wife, Ginger Whitacre, and confidant David Hoech, a...
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