168: The Fix Is In
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Prologue
Ira Glass
From WBEZ Chicago, it's This American Life distributed by Public Radio International. I'm Ira Glass. And today's program is one that we first ran back in the year 2000. And we're rerunning it today because most of the show is about an FBI informant named Mark Whitacre. When this first aired, a screenwriter heard it on the radio. And he thought, this would make a good film. And this week, nine years later, that film, starring Matt Damon, directed by Steven Soderbergh, is opening around the country. And we thought it would be fun to listen back to the amazing, true story. It's really quite something, what really happened.
But before we get to that story, just to kind of set things up and sort of set the stage for it, consider for a moment all the situations where you stop and you wonder, am I being paranoid? Is something wrong happening right in front of me here or is that just my imagination?
Andy Hail
People I know were complaining about the high price of milk. And my father-in-law, for example, who lives in Detroit, would come into town and say, my gosh, your milk is like a dollar higher that what we pay.
Ira Glass
This is Andy Hail, an attorney here in Chicago. A year ago, he'd already sued a grocery store for anti-competitive practices. And when he looked into the price of milk, he found that the two big supermarkets in town, Dominick's and Jewel, not only had the same price, but it was more than anyone else's price in town. And it always seemed to change at the same time.
Andy Hail
Because we followed the price of milk from about $3.09 up to $3.19 to $3.29. I forget how many exact price bumps there were. But we get to $3.69 And as far as we could tell, whenever one changed it seemed like the other one changed simultaneously.
At most grocery stores at other cities in the country, it was about a dollar cheaper. And in fact, farmers are getting the lowest price they've gotten in two decades. But at the same time, milk in Chicago was at its highest level historically.
Ira Glass
But here's the crazy thing, even though Andy Hail knows all that, that still doesn't prove that anything illegal is going on. It still doesn't mean that the two stores are sitting down in a back room somewhere, and hatching evil plans to drive up the prices of the dairy products that make the city run.
After all, it's legal for stores to see what their competition is doing. It's legal for them to match prices that fit well, to stay competitive. We all benefit from that. It's legal for them to raise prices if they think they can get away with it. Dominick's and Jewell say that that is all that is going on here. And Andy Hail does not have proof of anything else.
Andy Hail
The difficult thing with price fixing cases, the difficult with conspiracy cases is proving an agreement. And usually it's very difficult because people don't admit to that.
Ira Glass
Is the fix in or is it just our imagination. Consider this case, our state legislature here in Illinois recently passed a bill. It was signed into law and it said that if you were a company that made liquor, any kind of liquor product, and you had some distributor in Illinois, who was doing what a liquor distributor does, which is buying from you and shipping to stores and bars and whoever, and if you decided at some point that you wanted to switch to a different distributor, somebody whose service was better, somebody more reliable, whatever, this law said that unless a special board ruled that you had a good reason to switch, and the reasons had to be really, really good, you were not allowed to switch.
Basically it was a law that stopped you from freely choosing who you wanted to do business with. And who was the main force behind this law? Cindi Canary, the head of the Illinois Campaign for Political Reform, will tell you the answer. And be forewarned, it may sound suspicious. It was a man named Bill Wirtz. And his job?
Cindy Canary
He owns the largest liquor distributorship in the state.
Ira Glass
What was the rationale that they had for this bill when it was debated?
Cindy Canary
Well, what they lobbied on in the legislature was they took the tack that if manufacturers could go wherever they wanted, all of these liquor distributor jobs would go to foreigners. They would all go overseas.
Ira Glass
But wait a second--
Cindy Canary
I know. It's crazy.
Ira Glass
If they're distributing liquor in Illinois, then that would pretty much mean that these are trucks that are delivering alcohol--
Cindy Canary
I know.
Ira Glass
--in the state of Illinois. Right.
Cindy Canary
I know. But the big pitch was we were going to lose all these jobs.
Ira Glass
The Federal Trade Commission examined the bill and concluded that there was no evidence of any need for it. And that in fact it would protect liquor distributors, like Bill Wirtz, from normal market forces. And would probably increase alcohol prices besides.
Cindy Canary says that a year before the bill passed, legislators used to point to this bill as an example of the kinds of special interest proposals they were protecting us from every day. Proposals that could never actually get to be real laws.
Cindy Canary
I was on a panel out in the suburbs with a number of other panelists, including some members of the Illinois legislature. And one state senator said to me, he said, now you campaign finance people, you always make such a big deal about quid pro quo and graft. You always say there's something there, he goes. And I'll give you an example there's nothing there. This Wirtz bill, it'll never pass. If it passes, I'll take everyone in this room out to dinner. There were at least 70 people in the room. We've yet to take him up on his invitation.
Ira Glass
And that legislator, he voted against it, I presume.
Cindy Canary
No, he voted for it.
Ira Glass
Wait. What happened?
Cindy Canary
I don't know. This is Illinois. And things can change with the wind blowing a different direction.
Ira Glass
As you may have heard, the wind shifts directions a lot in these parts around Chicago.
And some really beautiful reporting, in the Chicago Tribune, pointed out how Bill Wirtz may have helped the wind blow through numerous $10,000 and $15,000 contributions to key legislators and by hiring 28 lobbyists. 28! Including a former governor, Jim Thompson. But, is it fair to say that Wirtz just put the fix in, just bought this vote?
Cindy Canary
I think there's always a hazy area. You can never know for sure. If it's a for sure thing, then you get into the area of bribery. If you say here's $10,000 for your campaign committee. I want you to vote this way. That's bribery. If you say, here's $10,000, we just really like you and we'd like you to hear our position, that's just a campaign contribution.
Ira Glass
So even in the case of a bill like this, where there doesn't seem to be any public merit to it at all, unless you happen to be an alcohol distributor, even in this case we can't say for sure that money bought this vote?
Cindy Canary
There's no way to absolutely nail that down.
Ira Glass
My friend, yes we suspect all kinds of conspiracies. And the problem is we almost never find out if we're right. Well today, on our program, for once we find out. We get the most definitive, satisfying proof possible.
Today we're devoting our program to one story, in which we get a look inside the back rooms of one international business. And we see the intricate workings, recorded on tape, tapes we have, of people putting the fix in. This is also the story of an FBI informant, an informant who had so many different lies going, with so many different people, that eventually he got caught by his own lies.
Today's program, The "Fix Is In". Stay with us.
Act One: Act One
Ira Glass
Act One. This is the story of the fix being in on a global scale. Five companies, from Japan, Korea, and the United States, including a company called ADM, Archer Daniels Midland, based in Decatur, Illinois. A company that is perhaps best known to Public Radio listeners for their underwriting spots on many of our programs, a company that donates aggressively to both political parties, a company whose chairman has been close to a number of presidents and senators, a company that has the fix in so thoroughly that you, I, all of us, are ADM consumers, and we don't even have any choice about it.
Kurt Eichenwald
I mean literally if you walk into an American kitchen and start taking away all the things that have ADM ingredients in them, pretty soon you're not going to be able to make dinner.
Ira Glass
Kurt Eichenwald covered the fix at ADM for The New York Times and then consolidated his reporting into a rather gripping account of what happened in ADM in a book called The Informant.
Kurt Eichenwald
They're in Kellogg's corn flakes, they're in waffles, they're in Gerber cereals, they're in popsicles, they're in pepperoni, they're in pudding. They sell an additive that goes into laundry detergent. There isn't a single laundry detergent that doesn't have citric acid in it. The same product is found in every form of a soft drink that's available on the market. So if you have a Coke, you have a Pepsi, you're dealing with ADM for a couple of different ingredients.
Ira Glass
This is the story of how ADM's stock price dropped by 50%, how the president of one of its largest divisions went to prison with the company's vice chairman, the son of its chairman, after the FBI caught ADM red-handed, on videotape, engaged in an international criminal conspiracy. The FBI's key witness was an informant inside ADM, an informant who helped the FBI record what are probably the most remarkable videotapes ever made of an America corporation right in the middle of committing a crime.
And the whole case dropped into the FBI's lap as a kind of fluke, because of a lie. A lie that later turned out to be relatively small, compared with the lies that were later revealed, a lie told by a young executive, who wasn't meeting his production goals at ADM.
Kurt Eichenwald
Mark Whitacre was a very young, whiz kid executive, who'd been hired by ADM to run its newest and most high tech division, the bioproducts division.
Ira Glass
This division used biotechnology to make all sorts of food additives. And ADM's first big foray into the field was a product called lysine, an additive to hog and chicken feed, that helps fatten them up fast. Mark was 32, boyish looking and outgoing, but things were not going well.
Kurt Eichenwald
The problem was that the lysine plant wasn't working. And one day, Mark Whitacre came into the office, and he said, I just received a phone call at my home from one of our competitors and they have a saboteur in our plant. The man who called me said he would identify the saboteur if we paid him $10 million. And what should we do?
And ADM reacted to that, first by alerting the Central Intelligence Agency, which determined that they had no authority over this matter. So the matter was turned over to the Federal Bureau of Investigation.
Ira Glass
And much, much later Mark Whitacre admitted that he had made this up actually.
Kurt Eichenwald
The whole story of the saboteur was fictitious.
Ira Glass
It's possible that Whitaker told the story to buy himself more time to get the plant running. In any case, this one lie gets the FBI involved. And they start poking around at ADM. And one night, November 5, 1992, a special agent named Brian Shepard drops in on Mark Whitacre at his house, to put a device on his phone which would tap his calls.
Kurt Eichenwald
Whitaker was supposedly getting these phone calls from the competitor asking for money. And so the FBI wanted to get that on tape. He hooked up the device. He was about to head out the door. Mark Whitacre's wife, who was aware that there were other things going on at ADM that her husband had not told the FBI, was pushing him to open up. He wasn't going to. As Shepard literally was headed out to his car, she began to push past her husband to go outside and tell the agent what she knew. And instead, Whitacre called out to agent Shepherd and said, do you have a moment?
Ira Glass
So he stops the agent. And he tells the agent, what?
Kurt Eichenwald
Well, he and Shepherd go into Shepherd's car. And they're sitting there. And he, after dancing around the topic for some time, he tells Shepherd, I have been working with ADM to fix worldwide prices of lysine. And it's not just lysine. We fix prices in a number of products. What Whitaker was telling Shepard that night was ADM is in a massive conspiracy with all of its competitors in this market to rip off its customers.
Ira Glass
At one level this is a completely foolhardy thing to say to a federal agent. And if you asked Mark Whitacre today about why he did it, he'd tell you that he felt boxed in, that his wife would have told them anyway, or that the FBI would figure out that something was going on by listening to his phone calls.
But once he said it, the FBI asked them to prove it by recording some conversations that would confirm this rather incredible story. So Mark agree, not thinking it would take much time. Here he is.
Mark Whitacre
Well, my goal was, and what I was hoping was, was that we would have that meeting that night. I would have verified it in a tape, a couple days later. And that would have been it. I would never dreamed it would have been almost three years of helping them.
I met with the FBI sometimes two nights a week. It ended up being a second job for me. I mean it took tremendous amount of hours over the 33 months while I made literally hundreds of tapes. I think over 200 hours of tapes and hundreds of tapes themself.
Kurt Eichenwald
I've spoken to a lot of people in law enforcement about Whitacre did,--
Ira Glass
Again, reported Kirk Eichenwald.
Kurt Eichenwald
--and again and again, I have heard phrases like there has never been a cooperating witness like this guy. I've never seen anybody who was so skilled at doing it.
Mark Whitacre
They told me a few times I was the best, the best informant they've ever had, the FBI. They told me that a lot.
Kurt Eichenwald
He was a cooperating witness on a scale like there has never been seen. I mean this was an individual at the highest reaches of a Fortune 500 company, who was walking around, wired, all the time.
Tani Mimoto
Hello.
Mark Whitacre
Hey, Mr. Tani.
Tani Mimoto
Ahh, how are you?
Mark Whitacre
Fine, how are you?
Tani
Fine. And thank you very much for your telephone call.
Kurt Eichenwald
And he was very, very good at it.
Mark Whitacre
No problem.
Kurt Eichenwald
He was very good at drawing people out. He was very good at making sure people were positioned in front of the cameras that were hidden away in a room somewhere. He was very good at getting them to repeat themselves. In other words, if there was an earlier conversation that was missed on tape, so he got them to repeat everything when the tapes were rolling.
Mark Whitacre
How do you feel the meeting in Paris last week, the October 5 meeting? How do you feel about it?
Tani Mimoto
I think-- how do I feel? I think I appreciate that meeting for the price. Because if there was no such meeting, I think we were about to decrease the price.
Ira Glass
Bob Herndon was one of the two FBI agents who worked most closely with Mark Whitacre. He says that one of Whitacre's most impressive moments was right at the beginning in the investigation, when the FBI had this problem that they did not know how to solve with the case. They knew the five companies that make lysine were meeting. There were two from Korea, two from Japan, and ADM. But the companies always met overseas, outside the reach of US law enforcement, in countries where the FBI was not allowed to set up secret cameras and videotape them.
So how to get them to meet in the US. Here's agent Herndon.
Bob Herndon
We would have these debriefing sessions about once a week. In this particular one, in July of 1993,--
Ira Glass
By the way, one sign that you have testified in a federal trial, you remember the dates of everything.
Bob Herndon
--in July of 1993, that night, myself and Brian Shepard, the other agent I worked with on this case, we're kind of hitting him hard about well Mark, what suggestions can you come up with, how could we get this next meeting between all of the competitors in the United States? And it was Mark Whitacre himself who suggested golf.
Kurt Eichenwald
And so they think about it. Hawaii has great golf courses.
Ira Glass
Again, reporter Kurt Eichenwald.
Kurt Eichenwald
And so they tell Whitacre to dangle the prospect of a golf game on a stellar course in Hawaii to the Japanese competitors as a means of enticing them to come to the United States.
Tani Mimoto
Hello.
Mark Whitacre
Hello.
Tani Mimoto
Ahh, yes.
Mark Whitacre
Mr. Mimoto?
Tani Mimoto
Yes, speaking. Is it Mark speaking?
Bob Herndon
While we were listening to the call while the call was going on and Mark Whitacre asked Mr. Mimoto to think about coming to the United States for the next lysine meeting.
Mark Whitacre
I think in our next meeting, since you guys hosted the Vancouver meeting, I think ADM should host the next meeting, don't you think?
Tani Mimoto
Yeah. That's fine.
Mark Whitacre
And maybe we host it in Maui?
Tani Mimoto
Maui?
Mark Whitacre
The lysine-- have the lysine meeting, the group meeting like we had last time in Vancouver, the group lysine meeting, to have it in Maui, Hawaii.
Tani Mimoto
Maui, Hawaii is still the United States.
Kurt Eichenwald
Now of course, Whitacre knows exactly what the man means. What's wrong with still in the United States? He knows what it means. But rather than letting it drop, he says well, what does that mean, still in the United States, because he wants it on tape.
Mark Whitacre
Yeah, but what's that mean? Still in the United States.
Tani Mimoto
Still in the United States means the United States is very severe for the control of antitrust activity, no?
Kurt Eichenwald
Well, there's your bingo moment. The man just stated, still in the United States means that the United States is very severe for the control of antitrust activities.
Bob Herndon
That statement there--
Ira Glass
Agent Bob Herndon.
Bob Herndon
Mimoto's explanation about the laws of the United States became a very key statement in the prosecution of him and his company. That statement showed that the competitors knew what they were doing was violating the law of the United States.
Kurt Eichenwald
And as soon as he gets that on tape, Whitacre moves on. He goes back to trying to lure him. His next big phrase is well, Hawaii, next to an 18-hole hole golf course. He's not going to let it go.
Mark Whitacre
Yeah, but you think in Hawaii next to an 18-hole golf course.
Tani Mimoto
Maui is very convenient for us. But I don't know. Or if your company does it, no problem. Maybe I will consult with legal department.
Ira Glass
Again, Mark Whitacre.
Mark Whitacre
I was intense about it. If they wanted something, I was going to get it for them.
Ira Glass
Would you psych up before one of these meetings? In other words, would you have a thing, you'd tell yourself, I'm going to do this, I'm going to do this, I'm going to do this. Here's the way I'm going to play this off. Would you go through that in your head?
Mark Whitacre
I would. I would mentally go over every detail, every detail. And they would tell me three or four things they needed in particular. And I didn't have to write them down. And I would make sure in each one of those meetings that I hit all three or four of those things, in every single meeting. I was obsessed with it.
Ira Glass
The phone calls worked. And they had the meeting in Hawaii, and other meetings as well.
For one get together in Atlanta, a tape recorder that was concealed inside Whitacre's briefcase wasn't working. So he left it with FBI agents, who frantically tried to fix it. And then he went to the meeting room, where the big five lysine producers were getting together, where a secret camera was already concealed inside a lamp.
Kurt Eichenwald
So they arrive in this very nice room. And it's the very opening of the meeting. And they're just sort of, for lack of a better term, taking attendance. And Whitacre says to the assembled group, now we have a couple of other people joining us, I think, don't we. And one of the executives, yeah, we have a couple more. Then one of the execs says, well is this two more from this Korean company?
Mark Whitacre
And then come two more, right? Two more at that point?
Man
Two more.
Mark Whitacre
Two more. Two. Because I've got plenty of space. Yeah.
Man
Two more from Miwon.
Kurt Eichenwald
And one of the European executives is over fixing himself a drink at the banquet cart. And he says, no, no. It's two more from the Korean company and one from Tyson and one from ConAgra.
Man
One from Tyson. One from ConAgra. One from--
[LAUGHTER]
Kurt Eichenwald
Now this is, I guess price fixing humor. Tyson and ConAgra are the customers among those who are being cheated. And so one of the Japanese executives jumps in with his own joke. He looks straight Whitacre and says--
Man
And one from FBI.
[LAUGHTER]
Kurt Eichenwald
And one from FBI.
[LAUGHTER]
Which in fact is exactly what Whitacre was. Now as all this is going on, in the other room the FBI at that moment has successfully fixed the briefcase recorder. And so they need to get it back to him. So the conspirators are laughing about FBI, FTC. There's a knock at the door. And one of the Japanese executives looks up and says yes, FTC?
Man
Yes? FTC?
Kurt Eichenwald
And Whitacre walks over and opens the door. And no, it wasn't the FTC. It was the FBI.
Bob Herndon
I hope I have the right room.
Mark Whitacre
Yeah.
Bob Herndon
This was left out in the cafeteria.
Mark Whitacre
OK.
Ira Glass
At this point the agent, Bob Herndon, pretends he works for the hotel and says, I hope I have the right room. This was left down in the cafeteria and hands Whitacre the briefcase with the secret recorder.
Ira Glass
When they said that, did your heart just sink?
Mark Whitacre
No, at that point I've already made tapes for well over two years at that point. And I knew they were just joking. And they had 100% trust in me.
Ira Glass
Did you imagine to yourself what would have happened if they would caught you in one of these meetings?
Mark Whitacre
No. I just went in with the impression that I'm never going to get caught. Never. I mean I was very trusted within those groups. I mean I was even being discussed to be the next president of the whole company. And I was so trusted within that company, and also among the Japanese and Korean companies, that there was just no way that I was even concern about it.
Ira Glass
Did you have a plan for what you would say if in fact somebody noticed the wire on?
Mark Whitacre
Well, I really didn't a plan. I was just counting on not getting caught.
Ira Glass
I told writer Kurt Eigenwald, who spent years getting to know Mark Whitacre, how surprised I was when Whitacre told me he never considered the possibility that he'd be caught. I wasn't sure if he was telling me the truth.
Kurt Eichenwald
I totally believe that. Whitaker always believed that no one would ever question him. He would sometimes come into the United States carrying cash in his suitcase that he did not declare, effectively committing a crime.
Ira Glass
Like thousands and thousands of dollars cash.
Kurt Eichenwald
Thousands and thousands of dollars in cash. And when asked, well what would you have done if you had been caught, he just looked at the person asking the question and blinked and said well, it never occurred to me they'd stop me. Why would they? I'm a respectable looking guy. I wear a suit. I am an executive. Why would why would they ever stop me? And that's kind of attitude-- he just always believes that he's got control of the situation. And in the end, that's also the trait that led him to become completely undone.
Ira Glass
It was also one of the traits that made him such a good witness.
Kurt Eichenwald
Absolutely.
Ira Glass
On these tapes, the other men at the price fixing meetings also seem to have remarkable faith that they won't get caught. What's striking is not how nervous they all seem, as they set up an international criminal conspiracy, but how at ease. When people come to deliver lunch, they do not even bother to hide the chart that they've made, dividing the world market among themselves. If anything, they make world domination seem profoundly banal.
In a typical tape, the scene is a Marriott hotel conference in Irvine, California, half-eaten breakfast rolls on the table, hotel coffee cooling in the air conditioning, there's an easel, one of those big corporate presentation notepads. And, can't take over the world without, magic markers.
Man 1
87.
Man 2
87. And 60--
Man 1
65.
Man 2
[UNINTELLIGIBLE].
Man 1
Not this year.
Man 2
[UNINTELLIGIBLE].
Ira Glass
In the movies, this would happen somewhere in a hollowed out volcano on a remote Pacific island. But fixing the world market turns out to involve dozens of picky little details. If you're going to raise the price, should you do it all at once or gradually? How gradually? What should the prices be for bushels and car loads, for delivered and undelivered, for full or half orders. There is a surprising amount of long division, and fractions, and multiplication, with long pauses, as they work out the math.
Man 1
8%.
Man 2
OK. 230 times--
Man 1
6.
Man 2
6. OK.
Man 1
Times 10 is 23, divided by 2, 11.5. 6% is 12.5.
Ira Glass
It's sickening and a little thrilling to think that any bright fifth grader has the math skills necessary to fix a global market. If any young people listening to radio right now have ever asked the eternal question, when in real life will I ever use long division, now you know when.
Kurt Eichenwald
There is one point in this conspiracy where these conspirators sit and they're ready to fix the Canadian market. And they do so by flipping open the paper-- the newspaper-- checking the exchange rate for that day, running a quick calculation saying, OK, here's the price in Canada and moving on. And they literally fixed a $100 million market in two minutes.
Ira Glass
The only hard parts of running an international criminal conspiracy are kind of what you'd expect, they have trouble trusting each other. And it's not clear how to verify that everyone is sticking by the agreement. They talk a lot about that. At one point somebody even suggests calling in auditors from an accounting firm.
And it's not clear how to divide all the profits. And this is a very interesting business problem, if they are essentially bypassing the workings of the free market, that is, if they're not going to be competing for customers anymore, if they're all going to have the same price, if the fix is really in, then they have to decide upfront how much of the world market in lysine each of the five companies will be allowed to have.
Man 1
So that's 2,000 tons, out of that.
Man 2
So they want two.
Man 1
They want two.
Man 2
Kyoto wants two.
Man 1
Miwon, stay the same?
Man 3
They say it's probably six tons.
Man 1
Plus two.
Man 2
Miwon wants two.
Man 3
OK.
Man 2
Tell them they can't have anymore than the other big guys there. You're two.
Man 1
So it's six. And there's are seven or eight left.
Man 2
So there's eight left. Is that right?
Man 1
Yeah.
Man 2
There's eight left.
Ira Glass
Also, if you're no longer working in a real competitive market, it kind of destroys the normal ways that your sales force is going to work. No longer will your salesmen be able to get business by for example offering a lower price to a good customer. So what are they going to do instead? Lose the sale, says an ADM executive. Completely counterintuitive. And it's going to be very hard to explain to your sales team, since they will not know that the fix is in.
Man
It's tough to do. If you lose the business, you're just going to have to be patient. Somebody is going to get the order.
Kurt Eichenwald
I've written a lot about corporate crime over the years. And I'll often give speeches--
Ira Glass
Again, reporter Kurt Eichenwald.
Kurt Eichenwald
--and one of the things I used to say that I don't say anymore is the misconception of white collar crime is that it starts off with some top-level executive sitting down, pointing at an underling, and saying, let's go break the law. I said it's usually much more subtle than that.
Well, boy was I wrong. You look at these tapes and it is indisputable that that is exactly what was happening at ADM.
Man
I want to be closer to you than I am to any customer. They are not your friend. They are not my friend. We've got to have them. Thank God, we've got to have them. But they are not my friends. You're my friend.
Mark Whitacre
That's really how it was in that company.
Ira Glass
Again, FBI informant and former ADM executive, Mark Whitacre.
Mark Whitacre
The customer is our enemy and the competitor is our friend. And I heard that hundreds of times. That should be the slogan, not "Supermarket to the World."
Ira Glass
Did you all ever talk about that slogan, supermarket to the world?
Mark Whitacre
I would see them on Sunday on like Meet The Press. And ADM's ad would come on, "Supermarket to the World." And we're so customer focused. And we're so people focused. And I'm thinking, well shoot, this whole week we've been fixing prices in order to rip off the consumers. I mean we're not the supermarket to the world. We were the super criminals of the world, is what we were.
Ira Glass
The US Justice Department estimates that ADM made $80 million by fixing the price of lysine. The biotech division, which has been in the red, turned into a huge profit center. Mark Whitacre claims that they went from $7 million a month in losses to $7 million in revenue. This presumably nudged up the price of chickens and pork for you and me by a few pennies. But for agricultural businesses, it a meant a lot more than that.
During the secret investigation, one of the FBI agents on the case, a man named John Hoyt, visited his and his brother-in-law. The brother-in-law just started his own feed business. Kurt Eichenwald tells the story.
Kurt Eichenwald
As a farmer, he was always dependent on the banks and the weather and a lot of things beyond his control. And he had decided to try and take control of his life. And this agent is sitting there after dinner with his brother-in-law, and they're just you're looking up at the stars, and his brother-in-law starts spilling this story of how troubled his business is, how much difficulty he's having because lysine prices are going through the roof. And he doesn't know how he's going to keep the business going.
And the agent is listening to this, knowing not only that prices are not going to come down any time soon, they're going to go up further. And he can't say anything about it.
Ira Glass
Well, coming up after the break, what happens when the person who is lying to everyone so he can help the FBI, turns out to be lying to the FBI as well? Lying in a big, big way.
That's in a minute, from Public Radio International, when our program continues.
Act Two: Act Two
Ira Glass
It's This American Life. I'm Ira Glass. Each week on our show of course we choose some theme, bring you stories on that theme. Today's show, "The Fix Is In". And we're devoting most of our program today to one story that we originally ran on our show in the year 2000. We're rerunning it today because it was just made into a movie called The Informant, starring Matt Damon. It's a story about an international criminal conspiracy and it involves a company called ADM, Archer Daniels Midland, and an FBI informant, who revealed the conspiracy, Mark Whitacre.
One of the most stressful things for any person to do is to lie, to maintain a secret. Mark Whitacre worked as a double agent in his own life for three years. And at times, his behavior got a little strange. For instance, he firmly believed up until the end that when it was revealed that he had been spying on his co-workers, including people who were running the company, the company would reward him by promoting him to president.
Or he would do things like trying to talk to an FBI agent about the case while they were in a public restroom, at great risk to himself. The executives who he was taping and spying on me were just outside the restroom.
Here's reporter Kurt Eichenwald.
Kurt Eichenwald
The truth is that Mark Whitacre had some, and I believe has some, psychological issues that drive a lot of what he did here. I mean this was a man who in the course of this investigation was literally coming apart. This was a man who stopped sleeping.
Mark Whitacre
Being in this situation, during the time I would not have said that my mental state was deteriorating. But I'm just hearing things that my wife tells me and other friends have told me since that time. Now it's been awhile, its been five years since 1995. But my wife's told me there are many times that I would be out in the driveway at two or three in the morning, blowing the driveway off with a gas blower, blowing the leaves off, and it would be raining.
Ira Glass
So you're standing out there in the middle of the night, and a leaf falls in the driveway. And you use the leaf blower and just knock it away?
Mark Whitacre
Yeah.
I mean my wife and kids remember that frequently. And it would be raining. I mean it would be raining. I'd be blowing leaves as it rained. I became over compulsive as a result of all this stress. Over compulsive on certain things. And the driveway was one thing I became addicted to. And my wife constantly said, you've got to get some sleep. But what I felt like why lay there, if you can't sleep.
So I'd go up and do things. I'd go over to the horse stable. I'd be riding horses at 3:00 or 4:00 in the morning. Come over, sleep for an hour, take a shower, and go to work. And work until 6:00 or 7:00, meet the FBI in the evening, and come back and start the routine all over again.
Ira Glass
But before this, were you especially close to any of these guys who you were working with?
Mark Whitacre
No. Not at all. None of them. I mean I was close with a lot of people within the company. But not the ones that were the targets of this investigation. Not at all.
Ira Glass
What was it like for you, knowing that you were taping them and building a case against them. And here they are. And you're going out and playing golf with them. What was that like for you?
Mark Whitacre
It was nerve wracking. I mean there was just so much deception. There was so much deception for so long. I mean you're acting as their friend. In reality, you're taping them. I mean, your whole life is deception.
Ira Glass
There were three distinct lives that Mark was leading. He was deceiving some people about the fact that he was cooperating with his competitors. He was deceiving others about the fact that he was cooperating with the FBI. And after three years of meeting several nights a week with the FBI, collaborating with them, it turned out that he was deceiving the FBI as well.
Bob Herndon
During one lunch, over moo shu pork I believe, it all unraveled.
Ira Glass
Again, special agent Bob Herndon.
Bob Herndon
On the first week of August of '95, myself and Brian Shepard picked Mark Whitacre up at his house. And we went to a Chinese restaurant. Just from the very beginning, after knowing Mark for two and a half years, it was pretty easy to see that something was on his mind.
Ira Glass
Umhum.
Bob Herndon
He wanted to tell us something. In fact, he started out the conversation by saying my attorney does not want me to tell you this, but I need to tell you something. Well, right there I said, Mark, time out. You're not going to tell us anything your attorney does not want you to tell us.
Ira Glass
Reporter Kurt Eichenwald.
Kurt Eichenwald
But Whitacre can't stop himself. And while they're at lunch, Whitacre finally begins to spill his story.
Bob Herndon
He starts talking about-- giving us examples. He starts saying, is this a crime? For example, he starts talking about employees taking pens and pencils from the company.
Ira Glass
[LAUGHTER].
Bob Herndon
Yeah. And they tell him this is not a big deal, don't worry about it. And Whitacre says well, suppose an executive used a corporate airplane for personal use? Well, the agents tell him there may be some tax implications. But it's not really a major problem.
And Whitacre says well, let me give you one more. OK. Well, what if the activity involved was kickbacks to corporate executives? At that point in time I said, Mark, what is it that you want to tell us? What is on your mind? And then after asking that question he says well, I need to tell you guys something. And he starts to tell us about his embezzlement of $500,000 from ADM.
Ira Glass
What'd you say to him?
Bob Herndon
Why? Why didn't you tell us before? What is wrong with you? What were you thinking? And is this it? Is there anything else? Are there any other skeletons in your closet? Did you take any more than just $500,000? Is this it? And he swore up and down that $500,000 was it.
Ira Glass
And that turned out not to be truthful over time.
Bob Herndon
No. It turned out that he embezzled over $9 million.
Ira Glass
Jim Griffin is a Deputy Assistant Attorney General at the Justice Department's antitrust division in Washington, DC. He was one of the lead prosecutors in the ADM case. And he remembers hearing the news about the embezzling.
Jim Griffin
I could hardly forget that. It was August 3, 1995. And it ranked right up there with one of the worst days of my professional career, yes.
Ira Glass
At that point was your feeling that he could very seriously jeopardize the case?
Jim Griffin
It's not a happy day when you hear that the cooperating witness you anticipated relying on telling the story to a jury and describing the events leading up to and captured on tape, has so destroyed his credibility that he's probably useless as a witness and has engaged in criminal activity that you're going to have to investigate and prosecute.
Ira Glass
One frightening possibility for the prosecution that none of those beautiful videotapes, unprecedented videotapes, of corporate officials conspiring to fix prices, all painstakingly shot over three years, that none of them would be usable in court because they wouldn't have a witness who would confirm what they were and who the people were and when they all happened. The Justice Department solved this by getting some of the foreign businessmen at the meetings to testify against ADM.
By concealing his embezzlement from the FBI for three years during the investigation, Mark Whitacre violated the terms of what it meant to be a cooperating witness. Not only would he be prosecuted for the $9.5 million, he would also be prosecuted for price fixing. In other words, the videotape said he had made so carefully would be used as evidence against him.
To this day, Mark Whitacre insists that it was common in ADM for executives to siphon off money, like he did, to themselves. That it was expected. That the only reason that ADM told the federal government about it was to punish him.
Federal authorities and journalists, including Kurt Eichenwald, have investigated this claim and found no evidence that it is true. ADM, by the way, declined to comment about this, or Mark Whitacre, or price fixing on our program.
Whitacre spiraled downward. He revealed all sorts of damaging information about his case to reporters. He claimed he was abducted by kidnappers. He wrote fake letters and faxes to all sorts of people. He tried to kill himself. He undermined his own attorney, Jim Epstein.
At one point, Epstein flew to the Justice Department in Washington, DC. The government had great evidence to convict Whitacre, if they decided to use it. Epstein wanted to convince them to offer Whitacre a plea bargain deal, a guilty plea in exchange for a shorter sentence. Kurt Eichenwald.
Kurt Eichenwald
Epstein went to Washington and made what by all accounts was a stellar presentation, where he talked about-- rather than talking about Mark Whitacre, the person, he talked about Mark Whitacre, the symbol. Mark Whitacre as what this means for law enforcement.
Yes, Mark stole $9 million. But he gave you people who were committing crimes, many, many multiples of that. And if what ends up happening here is you guys insist on having a very long sentence, then we will have a sentencing hearing. And I will lay out everything that has happened to Mark, good, bad, indifferent. I will lay out how he has been out there by himself for two years. I will lay out how he had no training, how he had no support.
And the statement he made that just rang throughout the room is-- and then all of my words will be picked up in newspapers all around the country, everyone will read it, and you will never, ever, get a phone call from somebody who might be a cooperating witness again.
And it's true. I mean it was a true statement. And it was very powerful. There was the possibility that Whitacre would end up with as little as three years.
Epstein was very happy about this. But when he presented it to Whitacre, Whitacre reacted to that by deciding if this person wants me to plead guilty, essentially he decided that Epstein must be part of the government conspiracy to get him.
Ira Glass
Whitacre fired Epstein and got himself a new lawyer, somebody without much experience in these kind of cases.
In some sense, the last straw came for Whitaker when he accused the FBI agent who had contacted him in the first place, Brian Shepard, of ordering him to destroy evidence and denying him access to doctors and lawyers. Serious charges, that he later admitted that he'd made up. But they did a lot of damage, mostly to himself.
Kurt Eichenwald
Whitacre didn't know that behind the scenes, the people in the antitrust case, were trying to get things to work out for him. Whitacre did have this thing of turning against people who were his allies. He turned against Jim Epstein, his first lawyer. He turned against the FBI that worked with him on the antitrust case. And he turns around and goes after a beloved member of this team with a story that upends this man's career. They have to open up an investigation. He has to end up with a lawyer. He has a lawsuit he has to deal with.
At that point, Mark Whitacre had nobody in the government who could even in the slightest way care one whit about what happened to him.
In the end, Whitaker was sentenced to 10 and 1/2 years. The ADM executives convicted of price fixing only had to serve sentences of three years. ADM paid a fine of $100 million, which was 10 times bigger than any previous antitrust fine. It was a landmark case.
Jim Mutchnik
It changed how the antitrust division, and the entire Justice Department frankly, viewed business conduct.
Ira Glass
This is Jim Muchnick, one of the federal prosecutors in the case.
Jim Mutchnik
In the sense that when I started in the antitrust division in 1991, antitrust prosecutions were more white glove in orientation. For example, it was virtually unheard of to conduct search warrants, to use tape recorded evidence, to engage in confrontational interviewing, meaning that unannounced, drop-in interviews by agents and attorneys of suspected price fixers. It just didn't happen.
Ira Glass
It's interesting to think to what degree that change in law enforcement is due to Mark Whitacre.
Jim Mutchnik
I don't think any of the people still in the division would like to admit it, how much he's meant to antitrust enforcement. But if you're asking me, he was it. He totally changed the antitrust enforcement policy.
Ira Glass
What a flawed vessel for doing good he turned out to be.
Jim Mutchnik
Yes, he did.
Ira Glass
ADM didn't exactly lead the antitrust division to tackle more cases. It's still about 85 or 90 active cases each year. But now half the cases are international ones, like ADM's. The investigations are more aggressive. To give you a sense of just how quickly the fines have grown, ADM was the largest fine ever back in 1995. By 2000, it was only the fifth largest. Antitrust prosecutions netted over $1 billion in fines in just those four years, half of that from just one case. A half billion dollar penalty to Hoffman-La Roche for fixing prices in vitamins. Ever wonder why they're so expensive? And to get at the question that we all wonder about when we hear about these kinds of cases, here's a little talk that I had with special agent Herndon.
Ira Glass
How typical do you think this is?
Bob Herndon
Well, strictly speaking from what the evidence in the case showed us, it appears to me that this is more typical than we realize.
Ira Glass
Yeah.
Bob Herndon
We saw how casual these business executives were in dealing with one another. We used to joke at one point in the case that if you saw a group of middle-aged white males with gray hair getting together in a hotel room during the middle the day, no good can come from that.
Ira Glass
So when you're in the grocery store, do you think about this stuff?
Bob Herndon
I do now.
Kurt Eichenwald
I didn't just look at the products in the supermarket with suspicion, I looked at everything that's on sale everywhere.
Ira Glass
Writer Kurt Eichenwald.
Kurt Eichenwald
It went through my head when I was driving. It went through my head when I was going to sleep. It went through my head when I was walking through the grocery store. It went through my head when I opened my refrigerator. I used to look at the ingredients labels on the Hellman's Mayonnaise and see what the ingredients were from ADM.
There is no way to watch these tapes and to listen to these tapes and not wonder.
Man
All of this an official agenda for the meeting?
[LAUGHTER].
Kurt Eichenwald
Am I right now being a victim of a criminal conspiracy? And to this day, I don't know the answer to that question.
Ira Glass
In light of how everything unfolded, one of the most intriguing questions about this entire case has to do that very first night that Whitacre spoke to an FBI agent in his car, admitting that he was part of a conspiracy and agreeing to help the FBI. Whitacre says to this day that he only did that because of his wife's insistence and because of the possibility that he would be caught by the FBI for price fixing himself. But maybe, just maybe, he agreed to cooperate with the FBI because he suddenly realized that they were snooping around and they might discover that he was embezzling.
Kurt Eichenwald.
Kurt Eichenwald
If you think about it, he knew the entire saboteur story, the thing that had gotten the FBI there was a fake. He knew he had made it up. And that they weren't going to be able to find any evidence that this in fact was occurring. He knew that if anybody started scratching the surface of him, which would certainly be what would happen, since he had just lied to federal agents in telling the story, that it would not take very long that there was the potential they would start finding all of these embezzlements he had engaged in.
He's like, you're looking at the saboteur. Well, wait. Look over here at price fixing. And the FBI looked over there.
Bob Herndon
I've often thought about that.
Ira Glass
FBI agent, Bob Herndon.
Bob Herndon
And I think my conclusion now is, in a ironic twist, that it was the embezzlement scheme that forced him to cooperate with the FBI and that led to all of the convictions in the price fixing investigation.
Ira Glass
So it's something good that came out of something bad, really?
Bob Herndon
Yeah. Exactly. That's not unusual. In my line of work, it often takes a crook to catch a crook. It's just that in this case, we thought we had the exception, that he was going to turn out to be doing the right thing for all of the right reasons.
Mark Whitacre
It's like the FBI, well we're going to say you're a hero for what you did right. But you did right because you were so well at deceiving. But in the same way, we're going to smack you down and give you a 10 and 1/2 year sentence for what you did wrong. To me, they both come in the same package. I mean I was only a good informant because of what I did well for them.
Ira Glass
A lot.
Mark Whitacre
Yeah. Both. This is the package.
Ira Glass
In the end, one of the most surprising facts about this case is that it ever happened at all. It was pure accident that the FBI stumbled upon it. It was luck that they found a guy who was simultaneously well connected, skilled at gathering evidence, and willing to become a cooperating witness before any lawyer had a chance to tell him not to.
Today, Mark Whitacre says that the only reason that he continued taping people after the first week or two is that he thought that if he didn't, the FBI would get enough evidence without him to throw him in prison, which agent Herndon admits today, isn't true.
Ira Glass
The FBI's case would have probably have fallen apart without him.
Bob Herndon
Mark Whitacre was simply the only person in a position to gather the evidence that we needed to prove what was going on.
Ira Glass
I asked Mark Whitacre about this during our interview at a minimum security federal prison in Edgefield, South Carolina.
Mark Whitacre
Knowing what I know now, I was only seven or eight years out of college at that point, and I didn't know anything about law enforcement at that stage. Knowing what I know now, there is no way they would had hardly any evidence to do anything. And all I would have had to do is go to ADM and tell them what was going on. And ADM would have worked with me so much and put so much behind it, that there's no way they could have done anything. There's no way.
I definitely regret my part of it because to me, my family's more important than solving the price fixing problems of the world. And therefore I wish I just would have left and been with my family instead being sent in here as a result of working on a big price fixing case.
Ira Glass
You did good, by accident.
Mark Whitacre
Yeah, by accident. Purely by accident, believe me.
Ira Glass
And with that, the guards took Mark Whitacre away to dinner. He looks good by the way. He's tan, slim, runs every day. His wife and kids visit every weekend. Prison suits him.
I didn't see Mark again for nine years. And then in 2009, just this week, I caught up with him at the premiere of The Informant, from when Matt Damon plays him. I asked Mike if he remembered me and producer Alex Blumberg visiting him in prison in South Carolina? And he said sure. He said it was September 10, 2000, which I don't know if that's right or not. He says he likes the film. And people sitting near him heard him laughing all the way through.
My guess is that a lot of what he did back in those days was a result of a bipolar disorder. He's on meds now. He told me all about them. I sure did a lot of crazy stuff back then, he told me.
Credits
Mark Whitacre
I mean you're acting as their friend. In reality, you're taping them. And I mean your whole life is deception.
Ira Glass
I'm Ira Glass. Back next week with more stories of This American Life.
Announcer
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