From Decatur, Illinois to Hollywood: A look back at lessons learned from the ADM lysine conspiracy
The recent movie, “The Informant!” (released Fall 2009), was based on the United States Department of Justice Antitrust Division’s investigation and prosecution of the worldwide lysine cartel in the 1990s. The lysine cartel involved five companies: two Japanese companies; two Korean companies; and Archer Daniels Midland Co. (ADM), which is headquartered in Decatur, Illinois. The cartel participants agreed to divide up the world market for lysine, which is an animal feed additive, and to fix the price at which the product was sold. While the conspiracy was still ongoing, an executive at ADM began cooperating with the Antitrust Division. This ADM executive worked undercover with Federal Bureau of Investigation making audio and video recordings of secret price-fixing meetings for the government, which not only provided evidence for trial, but also made the international business community more cognizant of the implications of antitrust crimes. The lysine investigation and trial received attention from the business community and “unprecedented exposure” in the media at the time, due to, among other things, the government’s use of an informant inside ADM, the execution of search warrants, and the existence of these video and audio tapes showing the lysine conspirators at meetings fixing prices and carving up the world market for lysine. While the use of these investigative techniques to detect cartels is now common here in the United States and abroad, it was not then.
Indeed, the lysine prosecution was a milestone in cartel enforcement for the Antitrust Division. ADM, which was the last company to plead guilty, paid a then record-breaking $100 million fine. At the time, this fine was more than six times larger than the highest fine previously paid. In addition, three ADM executives were found guilty at trial of violating the Sherman Act, 15 U.S.C. Section 1, and sentenced to prison terms for the Sherman Act offense at or near the maximum, which was three years at the time.
The government’s investigation of the lysine cartel was the subject of the best-selling book, “The Informant,” and now a Hollywood movie. On May 13, 2010, we had an opportunity to discuss the lysine price-fixing conspiracy and lessons that still can be learned from the case, with former prosecutor Jim Mutchnik, an alumnus of the Antitrust Division’s Midwest Field Office who played a significant role in the ADM investigation. Mr. Mutchnik is now a partner at Kirkland & Ellis, here in Chicago, and focuses his practice on antitrust law and white-collar criminal defense matters. Notably, Mr. Mutchnik was also an ISBA Antitrust & Unfair Competition Section Council member from 1998 to 2006 and served as CLE Programs Chair.
Here, in sum, is what we discussed with Mr. Mutchnik:
Q. Since an antitrust cartel was recently a topic for Hollywood in “The Informant!” and you were a named character in the movie, we would like to talk to you about your experience in the ADM investigation. What was your role in the case?
A. In general, I worked on bringing the case from covert to overt. I worked with the agents and our cooperator to plan and execute the search warrants and conduct the simultaneous raids on the subjects of the investigation. Every morning I had a conference call with the agents. This was one of the first search warrants the Division had ever executed and the whole process took about 7-8 months. Then, I was part of the trial and sentencing team for a few more years.
Q. “The Informant!” shows the government’s cooperating witness taping secret meetings between the coconspirators of the lysine conspiracy. The real tapes of the actual meetings between coconspirators have been made public. What impact do these tapes and the possibility of covert taping have on antitrust compliance?
A. I always show the tapes when conducting antitrust compliance training for my own clients. The tapes are a fantastic education tool. You don’t often get to see cartels in action; observing crime while it’s happening is rare. However, the stuff captured on the tapes is just too outrageous. The challenge is to combat the reaction of “I would never do that” and teach more realistic scenarios of how one might cross the line and what to do to stay out of trouble. You have to try to find a balance.
Q. What about the possibility of a government informant out there – what effect does the possibility of an informant have on antitrust compliance?
A. The fact that another cooperator is lurking out there increases the risk of getting caught. A whistleblower gives would-be offenders pause, so that’s a good thing. That plus wire taps, global cooperation among antitrust enforcers, etc., make it more risky to collude. Do I think that is enough to stop cartels from again happening – no. They will continue and ADM and the movie will not change that fact.
Q. Suppose an executive or company employee attends a cartel meeting and then wants to “come clean” and report the conduct to the company. What mechanisms should companies have in place to learn about illegal behavior from their employees?
A. A best practice is to have in-house counsel know their business leaders and become trusted advisers. There must be a time commitment by business leaders on compliance and they must have a presence and desire to get the right message to the organization about antitrust compliance. There also must be some mechanism for employees so they know that they have a place to go to report.
Q. The co-conspirators in the “Informant!” used trade association meetings as “cover” to conceal the true nature of their cartel meetings. What steps would you advise trade association members to take to avoid crossing the line at legitimate association meetings?
A. Most trade associations today tend to have lawyers present at meetings and systems to manage the risks. It is the job of the General Counsel for each participating firm to know who is attending these meetings and make their companies aware of the risks. The General Counsel should be aware of environments where business leaders meet with or come in contact with competitors. Even legitimate trade association meetings might, without appropriate safeguards, create the appearance of collusion and/or relationships among competitors that are hard to control.
Q. We know you have shared your experiences on many panels and in interviews since the movie; what is one lesson that you would like to share about your experience with our readers?
A. Working on the investigation was a once in a lifetime sort of experience for me. It shows you how cool antitrust can be. It’s an exciting place to practice; it’s dynamic; it combines law and business with actual people. I’m sold on antitrust.
Q. Any words of advice for young lawyers and law students who might want to practice antitrust law?
A. I go to law schools all the time to encourage people to go into the practice of antitrust law. The practice area presents such a wide range of opportunities – from counselor to litigator; prosecution to defense; intellectual property to cartel enforcement. There is room for everyone. ■