The Informant

by Kurt Eichenwald

  Prosecutors pushed the agents to drop the theft investigation and work exclusively on the more promising price-fixing cases. Before Eich_0767903277_5p_02_r1.qxd 10/11/01 3:57 PM Page 501

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  shutting down the effort, Shepard and Herndon decided to polygraph Graham. Herndon felt sure the witness would fail. Then, at least he could be comfortable with the knowledge that ADM had not escaped the possibility of being charged on a technicality.

  On June 4, Graham sat down with a Bureau polygrapher. During the interview, the polygrapher asked two relevant questions: Did Graham lie when he said that ADM executives had met with a security firm about stealing microorganisms from a competitor? Did he lie when he said that the executives had discussed using prostitutes to gather information about competitors?

  Both times, Graham answered that he had not lied.

  When the test was done, the examiner called Shepard and Herndon into a room alone.

  “He passed,’’ the examiner said.

  Graham was apparently telling the truth. And, largely because of statute of limitations problems, there was little the government could do about it.

  Anxiety was spreading at Biomar International about the start-up’s finances. Since October, when Whitacre had joined as chief executive, the company—then called Future Health Technologies—had burned through its reserves quickly. A new cash infusion was needed desperately. In a meeting with Nelson Campbell, a company cofounder, Whitacre raised an idea. His elderly mother, Evelyn Whitacre, had some retirement money. She might be willing to lend as much as

  $100,000 to Biomar, he said.

  “But listen, Nelson,’’ he said. “My parents don’t have a lot of money, and it would be a pretty big risk for them. So really, I don’t think they could give us a loan unless we paid them fifty percent in interest.’’

  “Fifty percent?’’ Campbell said, surprised. That was far higher than the rates the company usually paid.

  “I know it’s a lot, but I need to protect my parents.’’

  Desperate for cash, Campbell accepted the terms. Whitacre agreed to write up the loan documents and have his mother sign right away.

  Sometime later, Whitacre printed out the finished loan agreement on his computer. With no one around, he reached for a pen and signed his mother’s name to the papers.

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  On another day at work, Whitacre called Campbell.

  “My mother signed,’’ he said. “Everything’s done.’’

  Days later, with the loan documents finalized, Whitacre approached a teller at a Chicago bank where Biomar kept an account. He handed over a one-hundred-thousand-dollar check, from his account at Swiss Bank Corporation. It was made out to his mother, not Biomar. But her name was signed on the back.

  The teller accepted the check—sent from Switzerland almost a year before to Mike Gilbert, Whitacre’s brother-in-law in Ohio—and deposited it in Biomar’s account.

  Cash from the ADM frauds was now financing Whitacre’s new company. And neither Campbell—nor Whitacre’s mother, who had never seen the check—had any idea.

  The Fraud Section’s battle for ADM documents was finally heard by the judge in Peoria on June 12. The hearing could scarcely have gone better for the prosecutors. ADM was ordered to produce most everything that the government wanted—invoices and related records, journals from the Bioproducts Division, correspondence, as well as wire transfers and other documents relating to the company’s Cayman Islands corporations.

  Victory in hand, Mackay and Nixon began to leave the courtroom. Vince Connolly, a lawyer for ADM’s accountants, Ernst & Young, approached. Given the ruling, Connolly said, the firm would drop its opposition to showing the government its ADM documents. That afternoon, the accountants agreed to work out a schedule for the FBI to review any document covered by the subpoena.

  The game of hardball had paid off.

  In Springfield, Lou Rochelli found his seat before the twenty-three grand jurors, held up his right hand, and swore to tell the truth. Rochelli, a former ADM controller, remained central to Whitacre’s claims that the company knew all about his financial dealings. Whitacre maintained that Rochelli had called him shortly after the raid with word that Jim Randall was on a tear around ADM, telling the controller to pull specific invoices that would prove the company’s newfound enemy was an embezzler. That, Whitacre insisted, was the evidence that ADM’s top managers knew all about the bogus invoices. How else would they know exactly where to look?

  As the grand jurors listened on that Thursday, June 20, Don Mackay led Rochelli through a description of the confusion that Eich_0767903277_5p_02_r1.qxd 10/11/01 3:57 PM Page 503

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  reigned inside ADM after the raid—followed by the shock when Whitacre’s role in the case emerged. Still, Rochelli said, he maintained contact with Whitacre for a while, simply because he considered the man a friend.

  Mackay glanced at his notes. “Do you recall having any discussions with Whitacre in which you indicated to him that you had heard Jim Randall, president of ADM, had asked people to start pulling files on transactions that Whitacre had been involved in?’’

  Rochelli looked only at Mackay.

  “I believe we did, in one conversation, discuss the fact that I had heard people were being told to pull expense reports, things like that regarding trips Whitacre had taken and I informed him of that,’’ he said. “Again, understanding Mark is a friend, I wanted him to be aware of what I knew and what was going on and whether that came from Jim Randall, I don’t recall. Jim Randall certainly never discussed that with me.”

  Expense reports— the first stop for any company looking to discredit a former executive. No mention of invoices. Another critical support under Whitacre’s story had collapsed.

  Sounding its horn, the ferryboat from the Star Line slowly approached the dock on Kowloon Peninsula, across the harbor from Hong Kong’s main island. On board, a group of Americans—including Brian Shepard, Bob Herndon, Scott Lassar, Jim Griffin, and Jim Mutchnik—gathered their belongings for the short walk along the waterfront to the elegant Kowloon Shangri-La Hotel. There, over the next few days, the Harvest King investigation would obtain its most critical evidence since the Whitacre tapes.

  By June, negotiations with Ajinomoto and Kyowa Hakko had resulted in tentative plea deals. Both agreed to pay $10 million, and one executive from each company—Kanji Mimoto of Ajinomoto and Masaru Yamamoto of Kyowa Hakko—would also plead guilty and pay fines. No resolution had been reached on Kazutoshi Yamada, the powerful managing director of Ajinomoto whose meeting in California with Mick Andreas had resulted in the illegal volume agreement. The government was free to indict him.

  Now, the Harvest King team had come to Hong Kong to hear the stories of the Japanese executives. If the statements and evidence offered over the next few days proved worthwhile, the agreements would be finalized.

  The American team, dressed casually in sport shirts and slacks, Eich_0767903277_5p_02_r1.qxd 10/11/01 3:57 PM Page 504 504

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  headed into the lobby of the Shangri-La. Light from a huge chandelier spilled across the starburst design in the lobby’s marble floor. The group came to a stop; they had no idea where to go. Before anyone was able to ask a question, David Westrup, a lawyer for Yamamoto, appeared.

  “Welcome to the Shangri-La,’’ Westrup told the group. “We’ve got you set up in a room over this way.’’

  The group paraded through the lobby behind Westrup, toward the hotel’s twenty-four-hour business center. The offices dripped elegance. The walls were polished cherry wood; luxurious carpeting lined the floor. A smartly dressed Chinese woman typed on a computer at the front. The lawyers and agents traipsed past her, toward a cramped conference room. They were joined by two other defense lawyers, James
Kennedy and A. Paul Victor. Westrup took out an accordion folder, removing several books and stacking them across the narrow conference table.

  “These are Mr. Yamamoto’s personal diaries and calendars,’’

  Kennedy said. “The diaries include notes and observations of meetings and phone calls. The calendars also have notes in them, but are largely just schedules.’’

  The defense lawyers left the room, and for hours the government team pored through documents. The leather diaries and calendars seemed particularly interesting. Though written in Japanese, Yamamoto used many proper names; numbers from the conspiracy appeared throughout. It was obvious that the documents were a perfect record of price-fixing, going back further than any of the Whitacre tapes. The next morning, the Americans broke up, conducting separate interviews in conference rooms located two floors below the lobby. During a break, the group that had been questioning Yamamoto was near the hotel’s Japanese restaurant, waiting for the others. Kevin Culum, a young antitrust lawyer known as “K.C.,’’ bounded out of a room where another Kyowa Hakko executive was being interviewed.

  “Hey, my guy’s been giving up Wilson right and left,’’ Culum raved. He pumped his fist. “Yeah!’’ he said. “We’ve got Wilson!’’

  The group stared at Culum, then broke out laughing. Culum seemed to have forgotten that Wilson was already featured on several dozen tapes.

  “Hello? K.C.?’’ Herndon laughed. “We’ve had Wilson.’’

  Still, the day proved to be a watershed in the investigation. With the benefit of his diaries and calendars, Yamamoto was almost a Eich_0767903277_5p_02_r1.qxd 10/11/01 3:57 PM Page 505

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  perfect witness. His recall of events was encyclopedic; his demeanor and style were inviting.

  He would be stellar in a courtroom. Despite all of the troubles, the antitrust case was back on track.

  The proffer meetings came to an end after more than a week, and the antitrust team flew home, delighted with the state of their once troubled case. The prosecutors didn’t need Whitacre anymore. Now, they had other witnesses.

  The air was stale and hot inside the dingy room where Jhom Su Kim, the president of Sewon America, had come to confess his crimes. Herndon, Mutchnik, Mann, and a half dozen others—including Susan Booker from the antitrust office and Peter Hwang, a Koreanspeaking Illinois state policeman who was assisting in the investigation—sat uncomfortably in the dimly lit conference room of a New York law firm, preparing their questions for Kim. It was the morning of August 12, a Saturday. No one had figured on the firm’s airconditioning being off for the weekend, particularly on such a humid day. Worse, Kim and one of his lawyers were chain-smokers; the room reeked of tobacco. No one was happy to be there.

  Sewon was joining its Japanese competitors in striking a deal. Under the terms, both its American division and Kim would plead guilty and pay fines. But again, before signing off, the government wanted to hear Kim’s information, to be sure it was worth the break he and Sewon were receiving.

  The meeting started on a note as unpleasant as the setting. Translations of some Korean documents that the prosecutors had been expecting were not yet available. Kim grimaced when he saw the government’s official translator was a woman, saying that she would be unable to understand business terms. Herndon and the prosecutors continued with their interview, dismissing the complaint. Kim sucked down cigarettes at a rapid clip as he answered questions. With the translator speaking simultaneously in English, Kim explained that it was common for Korean competitors to have discussions about stabilizing prices and volumes. It was during the meetings, he said, that he learned he was violating American law. Hours later, Mutchnik wrapped up with a final question. “Mr. Kim, we appreciate your help. How do you feel about all this?’’

  The question was translated. Kim said nothing, staring at the table as he took a long draw on his cigarette. Then, without warning, tears Eich_0767903277_5p_02_r1.qxd 10/11/01 3:57 PM Page 506 506

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  ran down his face. Unable to speak, Kim rushed out of the room, heading to his lawyer’s office. The antitrust team was momentarily stunned. What just happened?

  Mutchnik looked toward Peter Hwang, the Illinois policeman who spoke Korean. “Peter,’’ he said, “you’ve got to go find out what’s going on.’’

  Hwang met with Kim and his lawyer behind closed doors. When he returned, Hwang explained that Kim had misunderstood. The Korean executive knew he would be pleading guilty and believed—

  now that the interview was over—that he was heading to jail. In the weeks before, Kim had even traveled to Korea to bid his family goodbye. Shaken, Kim was brought back into the room. The prosecutors slowly explained that he was finished, that he now could return to Korea, that he was going home. His deal, they explained, allowed him to avoid jail in exchange for his testimony. He would simply be paying a seventy-five-thousand-dollar fine. Slowly, the information sank in. Overjoyed at the reprieve, Kim thanked the prosecutors again and again.

  That day in Chicago, Jim Epstein met with Don Mackay, Scott Lassar, and Jim Griffin to discuss Whitacre’s fate.

  Whitacre faced an array of charges; his sole defense that ADM

  managers had approved the illegal money transfers made no difference to his own criminal culpability. He had paid no taxes, he had laundered the money, he had submitted bogus invoices. All of it was illegal. Mackay said that Whitacre faced up to four counts of conspiracy, six of wire fraud, sixteen of money laundering, and five more for filing false income tax returns.

  “He’s also going to have to pay restitution,’’ Mackay said. “He’ll have to forfeit his house and all his cars.’’

  But Whitacre’s exposure didn’t end there. After the successful Hong Kong trip, the government had sent target letters to Mick Andreas and Terry Wilson, informing them that they faced imminent indictment. About the same time, Lassar and Griffin had tentatively decided that Whitacre would be joining his former ADM colleagues as a defendant.

  His immunity gone because of his frauds, Whitacre now faced possible indictment for price-fixing.

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  On August 27, the Justice Department announced the plea agreements of the Asian companies and executives in the price-fixing case. ADM’s strategic game board was thrown into disarray. With the sudden capitulation of its competitors, ADM now stood alone as the last giant lysine producer in the prosecutors’ sights.

  Settlement talks had reached a standstill. The government issued a deadline to the company: Settle the case by September 17—or be indicted. Still, Dwayne Andreas remained torn; the legal dilemma facing his company was seen through the prism of whether his son would go to jail. He was working to ensure that the special-committee members knew his concerns, seemingly to little avail. For the first time in his life, Dwayne Andreas’s skills at negotiating deals were failing him, as the stakes climbed with each passing day.

  Andreas was pulled from all directions. Williams & Connolly assured him that Mick would be helped if the company fought the government and destroyed its case in court. But some board members, having heard descriptions of the tapes from Beattie, were demanding that Mick be tossed out of ADM immediately. Even Mick ripped into his father, alternately telling him to stay out of the case and accusing him of bungling everything.

  Bob Strauss, the Washington superlawyer who was both an ADM

  director and a friend to Dwayne Andreas, was incensed. He thought Williams & Connolly’s scorched-earth strategy was a foolish blunder; the lawyers were in danger of cutting off possible solutions. Strauss, confident of his skills in Washington backrooms, suggested that he contact prosecutors to negotiate a deal; Aubrey Daniel scuttled the idea. By the summer of 1996, Strauss was out of patience. He and other advisors suggested
to Dwayne Andreas that it might be time to replace Williams & Connolly.

  “They’re a bunch of assholes,’’ Andreas responded.

  Still, after hashing it through, the group decided that it would be foolish to switch lawyers so late in the game. Instead, a plan was launched to gain control over the legal strategy. ADM’s war against the government had to end. At that point, only one person seemed to be in the position to accomplish that: Dick Beattie, the legal advisor to the special committee, the man so distrusted in Decatur. Strauss brokered a summit between Beattie and Andreas. The night of the meeting, Beattie arrived at 810 Fifth Avenue in Manhattan and made his way to Andreas’s apartment. Andreas was waiting in the Eich_0767903277_5p_02_r1.qxd 10/11/01 3:57 PM Page 508 508

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  living room with Zev Furst, his longtime advisor. For hours, the three talked, with Andreas pushing Beattie to explain the reasons that ADM

  should settle. Beattie handled the situation delicately.

  “I understand what you’re going through,’’ Beattie said. “I know your son is facing serious problems. He’s in the crosshairs of the government.’’

  Andreas listened, his face revealing nothing.

  “But I saw the tapes—’’ Beattie continued.

  “You saw the tapes they wanted you to see,’’ Andreas interrupted sharply.

  “That’s true,’’ Beattie said. “I’ve seen tapes selectively played by the government. But they are very powerful evidence.’’