MY LIFE AS A CORPORATE MOLE FOR THE FBI
(FORTUNE Magazine) – For 2 1/2 years I worked undercover as an informer for the FBI. In numerous sessions, at which my bosses, colleagues, and competitors were present, I recorded conversations about fixing prices and about stealing technology from other companies. It's all there, all on the tapes. And it's already caused me more stress and grief than anything I ever could have imagined. I've been fired from my job and accused of stealing millions. My family has been threatened; we've been forced to move. My phones are probably tapped, and I have been hounded by the press.
Until now, I have chosen to say almost nothing to the news media. Now I have agreed to tell my story to FORTUNE. Here it is.
I. The customer is the enemy
I began my career at ADM in 1989. I was hired from a chemical company called Degussa to run a new biochemical products division. My educational background suited me well for this job. I have a Ph.D. in nutritional biochemistry from Cornell University and an MS and a BS in animal science from Ohio State.
Mick Andreas, the vice chairman and the son of Chairman Dwayne Andreas, was very much involved in the decision to hire me. He told me about how ADM lacked bureaucracy, about how quickly things moved, about how they were going to invest a lot of money in this new area--all things that very much turned out to be true. When I joined the company, I reported to Mick.
Our first major goal in the new division was to enter the business of making lysine--an amino acid derived from corn that's used in swine and poultry feed to promote the growth of lean muscle. We set out to become the world leader in this product, which, at the time, had no American producers. The market was dominated by two Japanese companies.
For the first few years I loved working at the company. I was very proud of ADM and how it operated. I was very enthusiastic about my work, very excited. And I'm still impressed with much of the way the company does business, especially with the speed at which it accomplishes things. We always took a great deal of pride in how quickly we moved, in our lack of bureaucracy, in our outstanding record of low-cost production, and in our quickness in engineering.
We were great at getting things started, at putting engineers out on a site and getting things built. We could get a plant engineered, built, and running in two or three years--the amount of time it might take some other companies just to get the engineering done. They might take five years to build a plant.
When we began our lysine business in Decatur, Illinois, we started off in September 1989 and had the thing running by February 1991. That's pretty good. As I said, our goal was to grow this into a massive business, and we really were on a roll--no doubt about it.
We invested over $150 million in the business. We hired lots of good people from the outside, and we set up a whole sales and marketing network worldwide.
We were setting up the distribution so we would really come out and be a major force. And before we even had the lysine network all in place, we were starting on other projects. Today ADM has close to a dozen products in the division.
Our first strategy with lysine, of course, was to get customers. Now, if you're just starting out, and you sell your product at the same price as competitors who have been in business 30 years, you're simply not going to be competitive. We decided that our first priority had to be market share and that profitability would come in the second phase. That's the normal practice at ADM.
We took market share so quickly. When we started selling, prices started falling, and there was a tremendous price war. Lysine went from about $1.30 a pound down to about 60 cents a pound. At that point we were losing money, a few million dollars a month. Production costs were high because we were just getting started, and it was a new kind of high-tech business for ADM.
It was during my first year or so at the company that I started hearing about price fixing at ADM--in four or five other divisions. People said it was fairly common. I didn't see it, but I heard about it from people who were involved with it either directly or indirectly. It wasn't an everyday topic. But it was stuff I would hear a couple of times a month. And one thing people would tell me when it came up was to beware of Terry Wilson, the president of the corn-processing division. But I didn't give it much thought. I was so busy getting my business established.
Then, around February 1992, about a year after the lysine business was up and running, I was approached by Mick Andreas and Jim Randall (ADM president). They told me that they wanted me to work closer with Terry Wilson. They assured me that this wasn't a demotion. It wasn't that I would be working for Terry, but that instead I should look to Terry as a mentor, someone to teach me some things about how ADM does business. It was phrased just that way: how ADM does business.
When they told me that, I had a strong feeling about what they were getting at, about what was coming next. I was thinking that we were going to get into some of the price-fixing activities that people had been warning me of.
Another interesting thing is what happened when ADM bought the citric acid business from Pfizer. Citric is kind of a bioproduct from a production standpoint, but they put the citric acid business under Terry. I now understand why they did that: so that the guy running citric would have Terry as a mentor too.
I didn't like this idea that I was going to be working with Terry. I took it as kind of a slap in the face. I kind of got discouraged by it--discouraged enough so that I updated my resume and started talking to some headhunters.
When Terry and I met in February 1992 to talk about our new relationship, it was a strange meeting. He didn't ask me any of the questions you would normally ask of a guy who's running a business. He didn't ask me who my sales people were or where our offices were around the world--none of the things you would normally ask a guy who's running a business. He did ask me what the total market size was, what our market share was, and who our competitors were.
Then Terry asked me whether I knew our competitors, and he said he wanted to meet them because we were losing several million dollars a month. But he added: "we're not blaming that on you. Obviously we needed to get market share first, and that's what we did. That was stage one. But now we need to take the business to a different tier."
He asked me to try to get our competitors to come to Decatur. But the two biggest companies--Kyowa Hakko and Ajinomoto--were in Japan and didn't want to come all the way to Illinois. So, in April 1992, Terry and I flew to Tokyo. We met at Ajinomoto's office first, and they were very cold. Keep in mind that we had just grabbed a third of the world's lysine business by dropping prices down to 60 cents a pound, taking them, in the process, from a profitable situation to a big loss. So their coldness was understandable, I guess.
Terry made his opening pitch by proposing that we form an amino acids association. He said the association could be a joint effort at promoting and expanding the lysine business, the way a dairy association would promote milk. Things got a little more friendly, and they said they could be interested in something like that, but they were still skeptical.
Next we went over to Kyowa headquarters and met with some of their people. They were a little friendlier. A few days later they met us in Hawaii and played golf with us for a day.
A few months later, in June, Terry and I got together with guys from both Japanese producers in Mexico City, in a conference room at the Nikko Hotel. At that time we had not brought any Korean producers into the picture. It was just us and Ajinomoto and Kyowa.
Terry got up. He had these flip charts on a tripod. He stood there and said: "Okay, let's go through this business. Let's look at capacity. How much do you produce? Ajinomoto, how much is your capacity?" And they told him. And so did Kyowa. Then, "Mark, what is ours?" So he put it all up there and totaled it up, then turned the page over. Then he said: "What's the market size we estimate in Europe, Latin America, Asia, and the U.S.?" And we all agreed on some numbers, and he totaled that up.
Then Terry summed it all up. "Well, gentlemen," he said, "here is our problem. We have about 20% to 25% more production capacity than what usage levels are." He took demand and multiplied it by 60 cents. Then he said, "Well, Mark, what was the price before we built our plant?" And I said, "Well, about $1.30 a pound." So he took that same usage level and multiplied it by $1.30 a pound. And the difference was about $200 million. Then he said, "Well, gentlemen, there's $200 million that we're giving to our customers. In other words, the customer is benefiting, not the people who spent hundreds of millions of dollars building these plants."
Then he said something that was a common phrase around ADM, a phrase that turns up lots of times on the tapes. Terry used to say it, and Mick would say it. It was our philosophy. And this was it: "The competitor is our friend, and the customer is our enemy." There are tapes of Mick Andreas quoting his father as always saying this.
We didn't make any deals that day in Mexico, but it definitely got everyone thinking. And when I came back to Decatur, several people from Terry's corn-processing division came up to me and said, kind of half-jokingly, "Oh, you and Terry have been at one of your price-fixing meetings." They knew Terry was not a lysine expert, so they assumed that was the only reason we would be traveling together.
At that point I was still unhappy, still talking to headhunters about making a move.
One of the things we had learned in Mexico was that our Japanese competitors were very skeptical of our plant size. When we told them our plant capacity was 250 million pounds a year, they didn't believe it. They said, "How could you build that big that fast?" But remember, we had built the plant to supply half the world's market. Our original thinking was that maybe one of the weaker competitors would drop out of the business, but no one did. So now we were going to do business by the Terry method.
Since seeing is believing, the next step was for the Japanese to come visit our plant. In the late summer of '92, Kyowa and Ajinomoto came at separate times. They each brought a couple of their engineers with them, and we showed them everything.
Suspicion of sabotage
Meanwhile, we were having major trouble keeping production costs down at our plant because of a contamination problem. In the process of producing lysine, you use bacteria. When you have contamination, you have some other bacteria in your fermenter that don't produce lysine. So you're putting in dextrose and electricity and steam, but you're not getting enough product in return. As a result, our costs were still running about double our market price.
We tried everything to solve the problem, including outside consultants, and nothing worked. We had a couple of engineers we'd hired from Ajinomoto working for us, but they couldn't figure it out either.
Eventually, we began to wonder if maybe someone was causing the contamination on purpose. Specifically, we started wondering about the Japanese. When we talked with them on the phone, they seemed to know a lot of stuff. They knew all about the contamination, and they seemed to ask questions about things they already knew that we were just learning about ourselves.
Then one day I got a call from a technical guy at Ajinomoto in Tokyo. A real nice, friendly guy who wanted to talk to us about our granulated lysine and how we made it; ours looked like salt, theirs like flour, and we were trying to get a patent on it. We talked for a while, and for some reason I just said, kind of as a joke, "Hey, you guys don't have a guy out here sabotaging our plant, do you?" But he didn't say anything, and I decided that with the language difference maybe he hadn't quite understood what I was saying.
Afterward, I got to thinking, and I told Mick that maybe this guy could help us. And he said, "You know, maybe we can offer him a finder's fee." Offer him some money. And that's legal. It's not illegal to pay a guy a finder's fee if he's telling us there's a mole out there. We weren't going to put him on salary or anything. He'd still be working for Ajinomoto. It would just be a one-time fee to help us out.
Mick said: "Well, let's think about that." If the guy could help us, he said, I should keep the relationship going, keep talking to him and getting to know him.
I did. He called a few more times, asking about the granulated product, and I kept asking him about the mole thing. He never said yes, but he didn't say no either, which made me think there probably was one.
So Mick and I kept talking about the problem and this guy, and Mick finally said, "You know what, I don't think it's so important that there's a mole out there or not. Not as much as it would be to get their technology."
Keep in mind, that's how ADM got other technology--one of these lump-sum deals, where you hire a guy as an employee, and he brings the organism with him. These are middle-management guys, and you can work a deal like this. It's a big risk, though. They're stealing in-house technology, and you can end up with quite a lawsuit on your hands.
We got our citric acid technology that way. From Cargill. But then we bought Pfizer's citric business, so we didn't use the Cargill technology. Our bacitracin technology came that way too, from another company. But we never got all the FDA approvals for bacitracin, so we never got into that business. I don't know what these deals were worth, probably about $100,000 or $200,000. They happened around the time I joined the company.
Anyway, Mick said, "Just think what the lysine technology would be worth to us. Sure, the mole too, if there's one out there. But maybe the contamination could be solved by having a better organism. You know, we're in this business for a year; they're in it for 30 years, so they're bound to be further along than we are."
And I said, "Well, I'll pose that."
So I talked to the Ajinomoto guy, and I told him that I had talked to my boss and that we were interested in the technology. We figured the technology would be worth a couple of million dollars.
So I talked about this with the Ajinomoto guy for maybe a month or five weeks. He always called me. Called me at my office. He didn't want me calling him. We probably had a half-dozen discussions, but he started to lose interest. He had 20 years with the company and a lot of loyalty. So it didn't happen.
Then one day in early November, the FBI showed up.
III. Enter the FBI
Mick called me into a meeting room on the second floor, right next to the executive kitchen, and he told me, "Aw, man, Mark, you're not going to believe this. My dad has this friend at the FBI, and they're interested in this sabotage problem we have in the plant." So it was actually Dwayne who first called in the FBI. And Mick definitely didn't like it that he had. He was pissed off. He wished his dad had told him before calling them. He said, well, his father obviously hadn't thought about all the ramifications of this, and so on. Mick was nervous.
He told me he had just met with the FBI and they wanted to ask me everything I knew about the sabotage problem--about how the Japanese seemed to know about it and also about the guy I had been talking to, the guy we were trying to buy the technology from. So he said I should tell them all about the con tamination, but he also said there were a couple of things he wanted to coach me on.
First, he said, he didn't want the FBI to know that we had approached this guy about the technology; he said we wanted the FBI to think that the Japanese had approached us. The other thing he wanted to know was which phone I had been talking on to the Japanese about lysine pricing. I told him that I had mainly used my home phone, and Mick asked me if I had any other phones in my house. Did I have an OPX line, which is a company phone? And I said yeah. And he said I should tell them that's the line that I used to talk to the Ajinomoto guy, the engineer guy we were trying to get the information from. That way, he said, if they decided to tap the phone, maybe they would tap the wrong phone. So at that point, he told me to lie to the FBI about those two points: trying to buy the technology and the phone line.
I went to meet the FBI at their Decatur office, and Mark Cheviron, head of ADM security, went with me. We met Brian Shepard, the head of the FBI in Decatur--a super-nice guy. I told him the whole story, including the two lies. Brian said that he wanted to come to my house that night so he could see the phone I used when I was talking to the guy. He said he would install a recorder on the line so I could record the conversations when I talked to anybody about trying to find the cause of the sabotage.
Two problems with that plan, of course. One, I had stopped talking to the Japanese engineer a month or more before. Two, the discussions about the lysine association were taking place on the other phone.
IV. The mole turns
I did not feel comfortable lying to the FBI. Definitely not. I made a decision between two o'clock that afternoon and ten that evening that I was going to tell the truth. I mean, it's the FBI, and I was just not going to lie to them. It wasn't even something that I had to think about. And when Brian Shepard showed up at my house, I told him the truth. I told him I had lied about the phone, and he asked me why, and I told him it was because I had been told to. And I told him I lied about the fact that we had tried to get the Japanese guy to sell the technology.
I tell you what, I would have told him the truth at his office that afternoon if Mark Cheviron hadn't been there. I was told exactly what to say, and I think Mark probably came along to make sure that's what I said.
Why did I decide to tell him the truth? There were several factors. One was the things we were starting to get into. The lysine association, the Terry Wilson discussion on prices and volume. Those went through my mind. Another was just logic. Logically, I thought, is the FBI really just going to put a recorder on that OPX line and say use it at your leisure? That didn't make sense to me. I was thinking they were probably going to put a tap on my OPX line, my home line, and my office line. Then I thought: Mick's the one who told me to lie, but why should I? What am I going to lie for? I've just been doing what I've been told to do. And I had nothing really to do with this pricing discussion we were starting to have. That was more Terry Wilson's deal. I was just the liaison there. But the main reason, really, was I was thinking: "Boy, they're going to have wiretaps all over here."
Another factor was Brian. He was a very trustworthy guy. I really hit it off with him well. We had probably a four-hour conversation, starting at 10 p.m. until 2 a.m. It was in his car. November 3, 1992. In my driveway.
I don't know. I just really trusted the guy. If it were another kind of guy, I might not have told him. He was really trustworthy, and I found it a real relief to talk with him. This was finally a chance to talk to a third party about what had been going on. It was friendly. A very friendly conversation. We really hit it off well.
I explained everything to him. I told him that what was happening on the one phone line was talk about price fixing. I said it wasn't going on yet, but I was concerned about it. I said there were discussions with competitors on pricing and buying, something we weren't yet doing on lysine, but something that ADM does on other products, and I told him it was pretty well known and that it was in the process of getting there on lysine.
A week or so later, Brian came back with another guy, a colleague, and we talked further. We built more and more trust. We met two or three times further over the next two weeks inside my house. And that's where the turning point came. Brian told me he was really interested in this case, and then he asked would I mind if he listened in on--he and his colleagues--some of the conversations I was having. He said, "We're not asking to tape anything, just to listen in on the kinds of conversations you might have with these competitors." They had these headphones that attached to the telephone. And I said, "No, I don't mind at all."
V. A spy is born
I called two guys that I normally talk with at Kyowa and Ajinomoto, and we talked about the lysine association. The FBI listened and recorded. And in that conversation one of the Japanese brought up the meeting in Mexico and Terry's point about the $200 million we were leaving on the table to our customers. Even the comment came up that competitors are your friends, and the customer is your enemy.
Then a week or so later the FBI guys asked me whether I knew if such discussions were going on in other products, and I told them that I heard they often did, but I wasn't involved and couldn't say for sure. Then they asked me if I minded taping some of the conversations that went on in the office. I said okay. They gave me a small recorder with a wire on it, hooked to my inside coat pocket. There was a little mike at the end of the wire.
I felt a little uncomfortable there for a while--even more uncomfortable than taping the Japanese conversations. But on the other hand, the Japanese were mentioning Terry and previous meetings, so really there was no difference in taping Terry talking in the office about the next meeting.
The FBI never forced me to do anything. They asked me, and I could have told them no. Easily. They never put any pressure on me. It was always, "We can't force you to, but we'd like you to do this." Some people at ADM are saying that the FBI turned me by saying, "You either work with us, or you're going to jail for price fixing," but it was definitely not the case. When I started the taping, there was no price fixing or volume fixing going on yet. It was all leading that way, but there was really nothing illegal yet. One thing that happened pretty quickly after it started: I began to trust the FBI guys more than the ADM guys.
Also, I think I should point out that from the beginning I wasn't comfortable with the idea of price fixing, not only because it's illegal but because I also believe it's the wrong way to do business. My philosophy was, let's get this plant going full ahead, become the low-cost producer, and kick butt. Don't make deals with competitors. Go out and earn the business and then take the prices up when you run everyone else out of the market.
So now it was getting close to Christmas. The FBI pointed out to me that I basically only had two choices. If you stay with the company, they said, you're going to be price fixing; you're going to be breaking the law. Or, they said, you could leave the company and be fine. You haven't broken the law yet. This was all in a very friendly atmosphere, by the way.
Then they said there was a third alternative. You could work with us and try to stop this stuff, which is actually a very serious crime. They made a very convincing argument that I would be doing a great thing by cooperating with them, that it was just the right thing to do. They made it clear that they couldn't force me because I hadn't yet broken the law. I bought in and said it was what I wanted to do.
After that, I sometimes wavered and thought I should leave the company, but it was down to those two choices: leave, or work with the FBI. By the way, when I was considering leaving before, in November 1992, I was promoted to corporate vice president and given responsibility for all the Asia proj ects in addition to my bioproducts work, so that was exciting. Later, in early 1993--after I was working with the FBI--I mentioned to the president, Jim Randall, that I was considering some opportunities outside the company, and he said I would be making the biggest mistake of my life. He said: "You are the top candidate to be the next president of this company." That was the deciding factor in my staying. The president of the Archer Daniels Midland company was a very appealing carrot.
I became very good friends with the FBI. I met with them on average a couple of nights a week for three years. I really believed I was doing a good deed. I still think that. I won't ever regret that part. I think I did a good thing. The consequences, however, are a little different from what I expected. I thought I'd be able to fix the problem and stay with the company.
VI. The tapes
So now I was working regularly with the FBI. My briefcase had a tape recorder concealed inside a panel, and I took it to certain meetings. But the taping of the key meetings was really set up by the FBI in hotel meeting rooms. I would tell them where the meetings were going to be, and they would set up everything beforehand for videotaping and audiotaping. In some countries the FBI couldn't get in to tape. But when they couldn't, I gave them notes after I got back.
It's amazing, some of the stuff that came up on the tapes. There were meetings where agreements on worldwide volume were reached, as well as prices. And it was important to get tapes showing that I wasn't leading this activity. So we have tapes with Terry Wilson saying, "Before we go to this meeting I'm going to go to Mick and get our marching orders." Or, "Mark, I'll tell you what we're supposed to do after I talk to Mick."
Sometimes there were real surprises. Once we were at Meigs Field, an airport in Chicago. We got out of the plane, and Terry Wilson and I were on our way to meet with one of the competitors. The general counsel and the assistant counsel were getting into a different taxi. I had already turned the briefcase on so we would get Terry's marching orders in the car, and the general counsel says: "Hey, guys, good luck with your price-fixing meeting." He kind of said it as a joke, the way everyone did. But it sounds like another example of everyone knowing what Terry does at the company.
We also have a tape of me going to an ADM staff attorney and telling him these kinds of things were going on. And of him telling me he doesn't want to hear about it. So there really wasn't any way to fix this problem internally. It was too far up. Too far up.
VII. The raid
I never really felt in any danger of being discovered, mostly because everything I did was just in the normal course of doing business. But of course I knew in advance that the FBI was coming. The night they came in, they interviewed me and took stuff out of my office just like everybody else. They had warned me that I would need an attorney and told me not to get one tied to ADM, but they didn't stress it, and I didn't think about it enough. I spent from six to ten that night talking to John Dowd, the attorney from Akin Gump Strauss Hauer & Feld hired by ADM. Dowd promised me he wouldn't tell anybody about my real role. But by 11 a.m. the next day, someone at ADM called me and said, "Hey, Dwayne told me your attorney just told him that you're the mole. You're the one who caused all this."
That morning, an ADM attorney had met me in the office and told me I had two choices: I could leave the office. Or he could stay with me in the office. So I went home. And it's been pure hell ever since. If I had it to do over again, I would have taken one of those other opportunities. I could have gone somewhere else. No problem.
It amazes me how just a few weeks ago I was potentially the next president of the company, and now it's pure character assassination. Here's what's being said about me: That I wasn't a good manager, that I wasn't good with people, that the feds caught me at price fixing.
I never dreamed of being a whistle blower. And I would tell other people in this kind of situation to take a stand. Try to solve the problem internally. Go to the top. If that doesn't work, go to the authorities. Second choice, I'd say, leave the company.
We've been threatened a lot. How serious they are, I don't know. But we've had to move.
The bottom line is that I know my story will eventually be confirmed by the FBI. There's no reason for me to put out a story they're not going to confirm. It would be crazy. And the nice thing is that I can have every single thing that happened at ADM confirmed by tape. It's all on tape. Everything that happened.