The Informant

by Kurt Eichenwald

  Beattie explained the implications of the tapes for the publicly traded company, and the difficulties ADM and its shareholders would face at a trial, where the recordings would undoubtedly be made public.

  “It’s in the company’s interest to settle this,’’ Beattie said. “And I believe that by settling it now, you’ll be able to help Mick later.’’

  By evening’s end, Andreas’s opinion of Beattie had shifted dramatically. Never one to hold lawyers in high regard, he developed a level of trust for Beattie’s judgment. As the days wore on, Andreas began to wonder if the answer to his problems had been with Beattie all along. Andreas relayed a message to the lawyer. Concerns about ADM

  shareholders were largely behind the push for a settlement. But if ADM was no longer a public company, the shareholders would be out of the equation. Was it possible, Andreas wondered, that Henry Kravis of KKR might want to purchase ADM and take it private? After the call, Beattie laughed; the enemy had now become the savior. Later, he phoned Kravis.

  “Dwayne Andreas wants to know if you’d be interested in ADM,’’

  Beattie said with a bemused tone.

  “Should I be?’’ Kravis asked.

  Beattie didn’t miss a beat. “No,’’ he said.

  September 10. Seven days until the scheduled indictment of ADM. With the deadline looming, lawyers for the company and its executives met with prosecutors in Washington to feel out where everyone stood. John Bray, the lawyer representing Mick Andreas, held firm that his client would never plead. He thanked the government for the tapes; his team had found nuggets that they believed proved Mick’s innocence. Eich_0767903277_5p_02_r1.qxd 10/11/01 3:57 PM Page 509

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  “My client was set up by Mark Whitacre,’’ he said.

  Terry Wilson’s lawyer, Reid Weingarten, argued that his client was simply a hostage. Wilson would never testify against the Andreas family, Weingarten said. As long as Mick Andreas refused to plead, Terry Wilson would, too. He would never turn his back on ADM. Negotiations with the company were more direct. Gary Spratling, Deputy Assistant Attorney General for the Antitrust Division, spelled out the government’s terms: ADM would plead guilty to price-fixing in both lysine and citric acid. Barrie Cox, who ran the citric business, would receive immunity and testify about conspiracies in that market. In exchange, ADM would be fined $125 million—far lower, the prosecutors said, than the company would face at trial. Williams & Connolly reacted with indignation; $125 million was exorbitant, they argued, some ten times the next highest price-fixing settlement. As the negotiations stalled, Spratling and his team ended the meeting. On the way out the door, Spratling turned to Aubrey Daniel.

  “Just so you know,’’ he said, “the $125 million is negotiable. But not by much.’’

  Four days left.

  At 10:00 on the morning of September 13, the ADM special committee gathered in a windowless conference room on the twenty-sixth floor at 425 Lexington Avenue in Manhattan, the offices of Simpson Thacher & Bartlett. Aubrey Daniel opened with a briefing on the negotiations; in the past three days, the government had dropped the fine demand to $120 million. Other terms were unchanged: ADM would still have to plead guilty to two price-fixing conspiracies. The terms left the committee shaken. One director, Glenn Webb, argued that the amount of money being sought was simply too high. Ross Johnson, Brian Mulroney, and several others voiced their agreement. The directors instructed Williams & Connolly to head back to the bargaining table and haggle over the price.

  As the lawyers left, the same thought hung over the room. This was the end of something bigger than a criminal case. ADM was throwing in the towel; once a settlement was in place, Dwayne’s succession plans for his son, so carefully nurtured over the years, would be destroyed.

  John Daniels, the former ADM chairman who was cochairman of the group, leaned forward in his chair.

  “I think we’re all aware here of the tragedy being faced by Dwayne and his family,’’ he said.

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  The other directors murmured their agreement.

  Daniels glanced around the room.

  “We’re probably looking at the end of an era,’’ he said. September 17. Deadline.

  During heavy negotiations, the government had agreed to drop the fine to $100 million, cautioning that the offer would not go any lower. It was $100 million or indictment.

  Negotiations continued into the night. An endless series of details remained to be resolved. Finally, Aubrey Daniel had enough. He stood.

  “We are not going to be railroaded into an agreement,’’ he said sharply. “Before we agree to any settlement, we want to review every document. And you’re not speaking to Barrie Cox until everything is done.’’

  The evening ended without resolution. But the two sides were so close, prosecutors extended the deadline by one week. The clock started all over again.

  Two days later, Aubrey Daniel and Barry Simon received a letter from the Antitrust Division that spelled out the terms of settlement. Daniel thought it was outrageous.

  Under the terms, everyone at ADM would be granted immunity from prosecution, with a few exceptions. As expected, Mick Andreas and Terry Wilson still faced indictment. But in addition, Dwayne Andreas and Jim Randall would not receive immunity, either. Instead, ADM would have to cooperate fully, even as its chairman and president remained open to prosecution. The defense lawyers thought it was like putting a target sign on the backs of both men. Daniel almost smiled. The government, he thought, had overstepped. The board would never accept this. He contacted Spratling.

  “Thanks,’’ Daniel said, “the letter makes this easier to reject.’’

  “What are your concerns?’’ Spratling said.

  “Bottom line, I want all investigations of Dwayne Andreas and Jim Randall off. They’re done. Second, we’re not going to pay one hundred million dollars. We’ll pay twenty-five million for lysine, ten million for citric. But that’s it.’’

  Spratling paused.

  “It’s one hundred million,’’ he said. “Or it’s off.’’

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  sounded too much like the prosecutors wanted to make a case against Dwayne Andreas and Jim Randall by rooting around inside the company. Unanimously, they rejected the proposal. The lawyers were instructed to tell the government that everyone at ADM was to receive immunity, except for those already targeted for indictment. Anything else was a deal breaker.

  But the directors made it clear that the time had come for a deal.

  “The stock price is depressed,’’ Ross Johnson said. “And it will stay depressed until we get this over with. We’ve got to clean up the mess.’’

  Aubrey Daniel nodded. He understood.

  At 11:05 the next morning, September 20, Gary Spratling’s telephone rang. It was Aubrey Daniel.

  “ADM says yes to one hundred million,’’ Daniel said. “Don’t tell anyone. Keep it on a need-to-know basis for now.’’

  There were some conditions, Daniel said. Dwayne Andreas and Jim Randall had to receive immunity. That was not negotiable; if the government refused, the case was going to trial. Spratling took a few notes, saying the government would examine the issue. The lawyers agreed that they would work out the details in the coming days. Spratling hung up and called Jim Griffin in Chicago. ADM, he said, appeared ready to cut a deal.

  The answers to many of the remaining questions in the fraud case arrived—coincidentally—that same morning.

  After months of negotiations, the fraud team had scheduled to meet Marty Allison, Whitacre’s first hire at ADM. His lawyer, Michael Monico, had tried mightily to cut an immunity deal in exchang
e for testimony, but the government balked. Finally, Allison offered to submit to an interview under a proffer agreement, in hopes of leniency. They met at the U.S. Attorney’s office in Chicago. The full team on the case—Bassett and D’Angelo from the FBI, Mackay and Nixon from Justice—were there, pens in hand. Monico and Allison took seats on one side of the conference table. Allison seemed calm and embarrassed.

  After introductions, Bassett began the questioning. Allison explained that he had first met Whitacre at an industry conference in the spring of 1989. At the time, Allison worked with Kyowa Hakko’s lysine division; Whitacre was with Degussa, and spent their first meeting pumping Allison for information about the lysine business. Then, later that year, Whitacre called, saying that he had been hired to run ADM’s Eich_0767903277_5p_02_r1.qxd 10/11/01 3:57 PM Page 512 512

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  lysine division and was looking for a salesman. Allison was hired after one interview with Jim Randall, starting work at ADM in January 1990.

  Bassett decided to move into the frauds.

  “What led to the first financial involvement with Whitacre?’’ he asked.

  Allison nodded and took a deep breath. “It started my first year at ADM, when Mark got a letter from Nigeria.’’

  The second floor of ADM was bristling with activity on that day in 1990. The low roar of orders from the trading room echoed around the office. No one ambled or loitered about. At ADM, it seemed, there was always work to be done. Marty Allison, the first new executive hired for Mark Whitacre’s division, was still awed by the pace of the company. He re- mained astonished at how quickly he had been hired and how easily Ran- dall had agreed to his salary demands. He was glad that Whitacre had told him to inflate the number.

  Allison was approaching the elevators when he heard Whitacre call out behind him. His boss was excited, his face beaming with delight.

  “Hey, Marty,’’ Whitacre said. “Come to my office for a second. I want to show you something.’’

  With Allison inside, Whitacre shut the door to his office and fished a sheet of paper out of his desk drawer. He thrust it toward his salesman.

  “Look at this,’’ he said.

  Allison studied the paper. It was a strange letter, from someone claim- ing to be connected to the Nigerian Ministry of Petroleum Resources. The writer said that, through some complex fraud, he had gained access to millions of dollars that could be freed up with the help of someone like Whitacre.

  Allison looked up. Whitacre was watching him eagerly.

  “Is this for real?’’ Allison asked.

  “Absolutely, absolutely. It’s a great opportunity. My stepfather did this same thing, and he made a lot of money off of it.’’ Allison nodded. At the time, he had no idea that Whitacre didn’t have a stepfather.

  “I’ve been talking to them,’’ Whitacre said. “The Nigerians. They want me to give them company letterheads, a bank account to send the money, and some bogus invoices.’’

  “Wait a minute,’’ one of the prosecutors interrupted. “What bogus invoices?’’

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  “At the time I didn’t know,’’ Allison replied. “But he eventually told me that the Nigerians directed him to make the invoice related to the oil industry since he was supposed to be dealing with the oil ministry.’’

  Bassett wrote that down. Whitacre had sent bogus invoices to Nigeria, apparently before ever using them at ADM. Had he picked up the idea of invoice fraud from the Nigerians?

  “What did you think about this Nigerian transaction?’’ Bassett asked.

  “I was skeptical, but I had a lot of confidence in Mark. He’s very respected in the industry.’’

  “Did Whitacre ever tell you anything about his dealings with the Nigerians?’’

  “Yeah, at one point I was on a business trip with him, and he told me that he had been in contact with the Nigerian representative and had faxed him documents.’’

  “Did you ever become more involved in the Nigerian transaction?’’

  Allison nodded. “Yes,’’ he said.

  The dealings with Nigeria continued for months. Allison discussed the arrangements with an old college chum, Milos Lee Covert. At times, when Whitacre was traveling for ADM, he would telephone Allison or Covert, asking for help in faxing documents to the Nigerians. As a sign of good faith, Whitacre even asked Covert to send some watches to Lagos. Whitacre kept making noises about how Covert and Allison would share in his good fortune once the money finally arrived. Then, one day, Whitacre came by Allison’s office with a proposal.

  “Marty, you should invest with the Nigerians,’’ Whitacre said excit- edly. “It’s going to be a big payoff.’’

  Allison made a face. He didn’t even like sending the faxes; he sure didn’t want to send his own money.

  “I don’t know, Mark,’’ he said. “The whole thing makes me a little un- comfortable.’’

  “Marty, we’re almost there. All we need is one more payment, just twenty thousand dollars, and the money’s ours. You’ll get your own por- tion. We’ll all be rich!’’

  Allison didn’t like being pressured by his boss. Still, he held his ground.

  “I don’t think so, Mark,’’ he said. “I can’t afford to lose that kind of money.’’

  Whitacre smiled. “None of it’s gonna be lost, Marty! We’re going to make a fortune!’’

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  “I don’t know . . .’’

  “Listen, I’ll guarantee your money. You won’t lose anything. I’ll take all the risk.’’

  Allison thought about it for a moment.

  “All right, Mark,’’ he said.

  “So you invested in the Nigerian deal?’’ Bassett said.

  “No, not at all,’’ Allison protested. “I viewed this as nothing more than a loan to Whitacre.’’

  “You didn’t see this as giving you a better chance for financial gain?’’

  “No. He was already promising me a portion for my help with the faxes. I didn’t think this changed things much.’’

  “So what happened with the money?’’

  “I wired it from my bank to a New York account. Whitacre gave me all the wiring instructions.’’

  “Okay. What did Whitacre say about that?’’

  “He was all excited,’’ Allison said. “He kept saying, ‘We’ll be rich.’ ”

  Allison glanced at the faces around the room.

  “That ended in a couple of days,’’ he said.

  Whitacre appeared at Allison’s desk, obviously harboring some inner alarm.

  “Something’s wrong,’’ he said. “The money hasn’t shown up in the ac- count.’’

  “Have you talked to the Nigerians?’’ Allison asked.

  “I can’t find them.’’

  Neither man made a sound or a movement.

  “I think the money’s been lost,’’ Whitacre said, sounding shaken. In the months that followed, Allison rarely raised the issue of Whitacre’s guarantee of his $20,000. But in December 1991, Allison was preparing to buy a new house. He needed money to close the deal. He went to see Whitacre.

  “So, Mark,’’ Allison said, after explaining the situation, “I really need my money. I’m sure it’s tough, but I need it back.’’ Whitacre nodded, deep in thought.

  “We’ll figure something out,’’ he said casually. Allison left Whitacre’s office, concerned. The tone of his comment bothered him. It was obvious he didn’t have the money; how would they figure something out?

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  A few days later, Whitacre told Allison that he had come up with a so- lution.

  “Listen, here’s what I’m going to do,’’ Whitacre said, sounding el
ectri- fied. “I’m going to put together an invoice for twenty thousand dollars and submit it to ADM. They’ll pay it, and that’ll get your money back. Maybe even Lee Covert would help here. We could disburse the money through him.’’

  Allison stared at his boss. This proposal sounded very familiar. It was the fraud that the Nigerians had claimed in their letter to have perpe- trated against their government. Only now, Whitacre was suggesting that he, Allison, and Covert do it for real, against ADM.

  “I don’t know, Mark,’’ he said. “I thought the money would come from you.’’

  Whitacre held up his hands.

  “Hey, Marty,’’ Whitacre said. “Listen, you’re not going to be alone here. I’ve lost more than two hundred thousand dollars to the Nigerians, and I need to recover some losses, too.’’

  Still, Allison felt uncomfortable. What if somebody found out? Whitacre smiled.

  “Marty, I’m the division president,’’ he chuckled. “Nobody will ques- tion me.’’

  “What happened after that meeting?’’ Bassett asked.

  “I agreed to contact Lee Covert to get this going,’’ Allison said. “I told him we needed to do it to recover the losses from the Nigerian transaction.’’

  Covert agreed to help. Under the plan, Whitacre would submit a bogus invoice for slightly more than $80,000. Whitacre and Allison would each receive $20,000; Covert would keep the rest and pay all the taxes. Covert formed a company, Covert & Associates, which submitted the bogus invoice. On January 9, 1992, following Whitacre’s written instruction, ADM sent Covert & Associates $81,250.

  “What happened to the money?’’ Bassett asked.

  “In January or February of that year, I met several times with Covert,’’ Allison said. “Over the course of those meetings, he delivered forty thousand dollars in cash to me.’’

  “Why to you?’’

  “I was living in St. Louis by then. I was nearby.’’

  “What did you do with the money?’’

  “I kept twenty thousand, and delivered the rest to Mark.’’

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