UNITED STATES V. ANDREAS, 216 F.3D 645 (7TH. CIR. 2000)
EXCERPTS
Updated: August 27 2015

Before KANNE, ROVNER and EVANS, Circuit Judges.
Opinion
KANNE, Circuit Judge.

For many years, Archer Daniels Midland Co.’s philosophy of customer relations
could be summed up by a quote from former ADM President James Randall: “Our
competitors are our friends. Our customers are the enemy.” This motto animated
the company’s business dealings and ultimately led to blatant violations of U.S.
antitrust law, a guilty plea and a staggering criminal fine against the company.
It also led to the criminal charges against three top ADM executives that are
the subject of this appeal. The facts involved in this case reflect an
inexplicable lack of business ethics and an atmosphere of general lawlessness
that infected the very heart of one of America’s leading corporate citizens. Top
executives at ADM and its Asian co-conspirators throughout the early 1990s spied
on each other, fabricated aliases and front organizations to hide their
activities, hired prostitutes to gather information from competitors, lied,
cheated, embezzled, extorted and obstructed justice. {650}
 
After a two-month trial, a jury convicted three ADM officials of conspiring to
violate § 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, which prohibits any
conspiracy or combination to restrain trade. District Judge Blanche M. Manning
sentenced defendants Michael D. Andreas and Terrance S. Wilson to twenty-four
months in prison. They now appeal several issues related to their convictions
and sentences, and the government counter-appeals one issue related to
sentencing. We find no error related to the convictions, but agree with the
government that the defendants should have received longer sentences for their
leadership roles in the conspiracy.
 
I. HISTORY

The defendants in this case, Andreas and Wilson, were executives at Archer
Daniels Midland Co., the Decatur, Illinois-based agriculture processing company.
Mark E. Whitacre, the third ADM executive named in the indictment, did not join
this appeal.1 ADM, the self-professed “supermarket to the world,” is a behemoth
in its industry with global sales of $14 billion in 1999 and 23,000 employees.
Its concerns include nearly every farm commodity, such as corn, soybeans and
wheat, but also the processing of commodities into such products as fuel
ethanol, high-fructose sweeteners, feed additives and various types of seed
oils. ADM has a worldwide sales force and a global transportation network
involving thousands of rail lines, barges and trucks. The company is publicly
held and listed on the New York Stock Exchange.
 
The Andreas family has long controlled ADM. Dwayne Andreas is a director and the
former CEO, G. Allen Andreas is the board chairman and president, and various
other family members occupy other executive positions. Michael D. Andreas,
commonly called “Mick,” was vice chairman of the board of directors and
executive vice president of sales and marketing. Wilson was president of the
corn processing division and reported directly to Michael Andreas.
 
A. THE LYSINE INDUSTRY

Lysine is an amino acid used to stimulate an animal’s growth. It is produced by
a fermentation process in which nutrients, primarily sugar, are fed to
microorganisms, which multiply and metabolize. As a product of that process, the
microorganisms excrete lysine, which is then harvested and sold to feed
manufacturers who add it to animal feed. Feed manufacturers sell the feed to
farmers who use it to raise chickens and pigs. The fermentation process tends to
be very delicate, and utmost care must be used to keep the fermentation plant
sterile. {651} 
 
Until 1991, the lysine market had been dominated by a cartel of three companies
in Korea and Japan, with American and European subsidiaries. Ajinomoto Co., Inc.
of Japan, was the industry leader, accounting for up to half of all world lysine
sales. Ajinomoto had 50 percent interests in two subsidiaries, Eurolysine, based
in Paris, and Heartland Lysine, based in Chicago. The other two producers of
lysine were Miwon Co., Ltd. (later renamed Sewon Co., Ltd.) of South Korea, and
Kyowa Hakko, Ltd. of Japan. Miwon ran a New Jersey-based subsidiary called Sewon
America, and Kyowa owned the American subsidiary Biokyowa, Inc., which is based
in Missouri.
 
Lysine is a highly fungible commodity and sold almost entirely on the basis of
price. Pricing depended largely on two variables: the price of organic
substitutes, such as soy or fish meal, and the price charged by other lysine
producers. Together, the three parent companies produced all of the world’s
lysine until the 1990s, presenting an obvious opportunity for collusive
behavior. Indeed the Asian cartel periodically agreed to fix prices, which at
times reached as high as $3.00 per pound.
 
In 1989, ADM announced that it was building what would be the world’s largest
lysine plant. If goals were met, the Illinois facility could produce two or
three times as much lysine as any other plant and could ultimately account for
up to half of all the lysine produced globally. Even before the plant became
operational, ADM embarked on an ambitious marketing campaign aimed at attracting
large American meat companies, such as Tyson Foods, in part by capitalizing on
anti-Asia sentiment prevalent at the time. Also around 1990, another South
Korean company, Cheil Jedang Co., began producing lysine. Despite some early
difficulties with the fermenting process, the ADM plant began producing lysine
in 1991 and immediately became a market heavyweight, possibly even the industry
leader. The two new producers created chaos in the market, igniting a price war
that drove the price of lysine down, eventually to about 70–cents per pound. The
Asian companies understandably were greatly concerned by developments in this
once profitable field.
 
B. START OF THE CONSPIRACY

Against this background, Kyowa Hakko arranged a meeting with Ajinomoto and ADM
in June 1992. Mexico City was chosen as the site in part because the
participants did not want to meet within the jurisdiction of American antitrust
laws. Ajinomoto was represented by Kanji Mimoto and Hirokazu Ikeda from the
Tokyo headquarters, and Alain Crouy from its Eurolysine subsidiary. Masaru
Yamamoto represented Kyowa Hakko, and Wilson and Whitacre attended for ADM.
Mimoto, Ikeda, Crouy and Yamamoto testified as government witnesses at trial. At
this meeting, the three companies first discussed price agreements and
allocating sales volumes among the market participants. Wilson, who was senior
to Whitacre in the corporate hierarchy, led the discussion on behalf of ADM. The
price agreements came easily, and all present agreed to raise the price in two
stages by the end of 1992. According to internal Ajinomoto documents prepared
after the meeting, the cartel’s goal was to raise the price to $1.05 per pound
in North America and Europe by October 1992 and up to $1.20 per pound by
December, with other price hikes for other regions. The companies agreed to that
price schedule and presumed that Ajinomoto and Kyowa would convince Sewon and
Cheil to agree as well.
 
The sales volume allocation, in which the cartel (now including ADM) would
decide how much each company would sell, was a matter of strong disagreement. In
ADM’s view, ADM should have onethird of the market, Ajinomoto and its
subsidiaries should have one-third and Kyowa and the Koreans should have the
remaining third. Ajinomoto—the historical industry leader—disagreed vehemently
and thought ADM did not deserve an equal portion of the market and could not
produce that much lysine in any case. Wilson also suggested each company pick an
auditor to whom sales volumes could be reported so that the cartel could keep
track of each other’s business. The meeting ended without a sales volume
allocation agreement, but two months later, at the recommendation of Whitacre,
the cartel raised prices anyway, and prices rose from $.70 to $1.05 per pound.
{652} 
 
Still, the cartel considered a price agreement without allocating sales volume
to be an imperfect scheme because each company would have an incentive to cheat
on the price to get more sales, so long as its competitors continued to sell at
the agreed price. With cheating, the price ultimately would drop, and the
agreement would falter. An effort had to be made to get the parties to agree to
a volume agreement, and to that end, Whitacre invited Ajinomoto officials to
visit ADM’s Decatur lysine facility to prove that it could produce the volume
ADM claimed. Mimoto, Ikeda and other Ajinomoto officials, including an engineer
named Fujiwara, visited the plant in September 1992. At a meeting before the
tour, Whitacre and Mimoto confirmed the price schedule to which the parties had
agreed in Mexico City.
 
The cartel met again in October 1992, this time in Paris. All five major lysine
producers attended, along with representatives of their subsidiaries. Wilson and
Whitacre again represented ADM. To disguise the purpose of the meeting, the
parties created a fake agenda, and later a fictitious lysine producers trade
association, so they could meet and share information without raising the
suspicions of customers or law enforcement agencies. According to the agenda,
the group was to discuss such topics as animal rights and the environment. In
reality, they discussed something much dearer to their hearts—the price of
lysine. According to internal Ajinomoto documents, the “purpose of the meeting”
was to “confirm present price level and reaction of the market, and 2, future
price schedule.”
 
Shortly after this meeting, under circumstances explained below, Whitacre began
cooperating with the FBI in an undercover sting operation aimed at busting the
price-fixing conspiracy. As a result, most of the meetings and telephone
conversations involving Whitacre and other conspirators after October 1992 were
audiotaped or videotaped.
 
Despite the cartel’s efforts to raise prices, the price of lysine dropped in
1993. According to executives of the companies who testified at trial, without a
sales volume agreement, each company had an incentive to underbid the agreed
price, and consequently each company had to match the lower bids or lose sales
to its underbidding competitors. This resulted in the price of lysine falling in
the spring of 1993. The group, calling itself “G–5” or “the club,” met in
Vancouver, Canada, in June 1993 to deal with the disintegrating price agreement.
Wilson and Whitacre again represented ADM. At this meeting, the Asian companies
presented a sales volume allocation that limited each company to a certain
tonnage of lysine per year. ADM, through Wilson, rejected the suggested tonnage
assignment because it granted ADM less than one-third of the market. Ajinomoto
still considered ADM’s demands too high.
 
That summer’s strong commodities market permitted frequent increases in the
lysine price, to which each of the companies agreed, despite the absence of a
volume allocation. The cartel’s continued strong interest in a volume allocation
to *653 support the price agreement led to another meeting in Paris in October
1993. The failure to reach a volume schedule in Paris finally led to a call for
a meeting between the top management at Ajinomoto and ADM: Kazutoshi Yamada and
Mick Andreas.
 
In October 1993, Andreas and Whitacre met with Yamada and Ikeda in Irvine,
California. With Whitacre’s assistance, the meeting was secretly videotaped and
audiotaped. Andreas threatened Yamada that ADM would flood the market unless a
sales volume allocation agreement was reached that would allow ADM to sell more
than it had the previous year. The four discussed the dangers of competing in a
free market and hammered out a deal on volume allocations, with Andreas
accepting less than a one-third share of the market in exchange for a large
portion of the market’s growth. Specific prices were not discussed, but Andreas
acknowledged the price deal that had already been negotiated. Yamada agreed to
present ADM’s proposal to the other three Asian producers.
 
A central concern to Andreas was the difficulty he expected the Asian producers
to encounter in maintaining their agreed price level. As Andreas explained at
some length, the Asian companies had a more decentralized sales system that
depended on agents making deals with customers. ADM featured a very centralized
system in which agents played a small role in overall sales and had no
discretion over price. In such an environment, maintaining control over price
was easy; for the Japanese, Andreas feared it would be difficult and suggested
that Ajinomoto move to a more ADM-like centralized pricing system. Andreas also
expressed concern that customers could “cheat” the producers by bargaining down
the price, apparently by claiming to have received lower bids from competing
producers. Ikeda and Yamada agreed that customer cheating was a problem, and the
four briefly discussed a quick-response system that would allow the producers to
verify with each other the prices offered to particular customers.
 
After the Irvine meeting, the cartel met in Tokyo to work out the details of the
Andreas-Yamada arrangement. All the companies except for Cheil now agreed to
both tonnage maximums and percentage market shares. The group excluded Cheil
from this discussion because it considered Cheil’s volume demand unreasonable.
The cartel, expecting the lysine market to grow in 1994, thought it wise to
agree on percentages of the market that each company could have since it was
possible that all five producers could sell more than their allotted tonnage.
With a total expected market of 245,000 tons for 1994, Ajinomoto was to sell
84,000 tons, ADM would sell 67,000 tons, Kyowa would sell 46,000 tons, Miwon
would sell 34,000 tons and Cheil, if it eventually accepted the deal, would get
14,000 tons, according to the deal hammered out by Yamada and Andreas in Irvine.
 
As they had before the Andreas–Yamada meeting, Wilson and Whitacre attended
these Tokyo meetings for ADM. In Tokyo, Wilson suggested, and the members
agreed, that each producer report their monthly sales figures by telephone to
Mimoto throughout the year, and if one producer exceeded its allocation, it
would compensate the others by buying enough from the shorted members to even
out the allocation. The producers also agreed on a new price of $1.20 for the
United States market. The agreement to buy each other’s unsold allocation
cemented the deal by eliminating any incentive for a company to underbid the
sales price. According to Mimoto: “[S]ince there is an agreement on the quantity
allocation, our sales quantity is guaranteed by other manufacturers of the
lysine. So by matching the price, to us, lowering the price is very silly. We
can just keep the price.” With the agreement on prices and quantities in place,
the lysine price remained at the agreed level for January and February 1994.
 
On March 10, 1994, the cartel met in Hawaii. At this meeting, attended by Wilson
and Whitacre on behalf of ADM, the producers discussed the progress of the
volume allocation agreement, reported their sales figures and agreed on prices.
They also considered letting Cheil into the allocation agreement and agreed to
grant the company a market share of 17,000 tons. Cheil accepted this arrangement
at a meeting later that day, at which Wilson explained that the conspiracy would
operate almost identically to the scheme used to fix prices in the citric-acid
market. The cartel further agreed on prices for Europe, South America, Asia and
the rest of the world, and discussed how the global allocations would work on a
regional basis. According to the figures reported to Mimoto through May 1994,
prices were maintained, and both ADM and Ajinomoto were on track to meet their
sales volume limits. {654}
 
In the summer of 1994, the producers met in Sapporo, Japan, for a routine cartel
meeting. Whitacre represented ADM by himself. At this meeting, Sewon demanded a
larger share of the market for 1995. This created a problem for the cartel,
which necessitated another meeting between Andreas and Yamada. In October 1994,
while on a separate business trip to the United States, Yamada met with Andreas
in a private dining room at the Four Seasons Hotel in Chicago. Whitacre, Wilson
and Mimoto also attended along with their bosses.
 
The cartel met in Atlanta in January 1995, using a major poultry exposition as
camouflage for the producers being in the same place at the same time. The
cartel, without the presence of Sewon, decided to cut Sewon out of the agreement
for 1995 because of its unrealistic volume demand. Sewon then joined the meeting
and agreed to abide by the set price, if not the volume. The group discussed the
year-end sales figures for 1994, comparing them to each company’s allocated
volume, and discussed the new allotment for 1995. According to the 1994 numbers,
each company finished fairly close to its allotted volume. The cartel met once
more in Hong Kong before the FBI raided the offices of ADM in Decatur and
Heartland Lysine in Chicago. These raids ended the cartel. Heartland Lysine
immediately notified its home office in Japan of the search, and Ajinomoto began
destroying evidence of the cartel housed in its Tokyo office. Mimoto overlooked
documents stored at his home and later turned these over to the FBI. Included in
these saved documents were copies of internal Ajinomoto reports of the Mexico
and Paris meetings.
 
C. THE INVESTIGATION

Mark E. Whitacre joined ADM in 1989 as president of its bioproducts division.
That year, ADM announced that it would enter the lysine market dominated by
Asian producers. Whitacre, who held a Ph.D. in biochemistry from Cornell
University and degrees in agricultural science, answered directly to Mick
Andreas. Just 32 years old when he joined the company, Whitacre’s star clearly
was rising fast at ADM, and some industry analysts thought he could be the next
president of ADM.
 
In 1992, Whitacre began working with Wilson, and the two attended the first
meetings of the lysine producers in Mexico City. Also in 1992, Whitacre began
embezzling large sums of money from ADM and eventually stole at least $9 million
from the company by submitting to ADM phony invoices for work done by outside
companies, who would then funnel the money to Whitacre’s personal offshore and
Swiss bank accounts. To cover up the embezzlement, Whitacre hatched a scheme in
the summer of 1992 to accuse Ajinomoto of planting a saboteur in ADM’s Decatur
plant. Whitacre would accuse the saboteur of contaminating the delicate
bacterial environment needed for the production of lysine, a story made
believable because of the many early difficulties the ADM lysine plant
encountered.
 
In accordance with the plot, Whitacre told Mick Andreas that an engineer at
Ajinomoto named Fujiwara had contacted him at his home and offered to sell ADM
the name of the saboteur in exchange for $10 million. The story was a lie.
However, Dwayne Andreas believed it and feared it could jeopardize relations
between the United States and Japan. He called the CIA, but the CIA, considering
the matter one of federal law enforcement rather than national security,
directed the call to the FBI, which sent agents out to ADM to interview Whitacre
and other officials about the extortion. Whitacre apparently had not expected
this and realized quickly that his lie would be discovered by the FBI,
particularly after Special Agent Brian Shepard asked Whitacre if he could tap
Whitacre’s home telephone to record the next extortion demand. Whitacre knew
that when the extortionist failed to call, Shepard would know Whitacre had
invented the story. Whitacre confessed the scheme to Shepard, but to save
himself, he agreed to become an undercover informant to help the FBI investigate
price fixing at ADM. He did not come totally clean with the FBI, however; he
failed to mention the millions he embezzled and in fact continued to embezzle
after he began working for the government. For the next two-and-a-half years,
Whitacre acted as an undercover cooperating witness—legally a government
agent—and secretly taped hundreds of hours of conversations and meetings with
Wilson, Mick Andreas and the other conspirators. In addition, the FBI secretly
videotaped meetings of the lysine producers. {655}
 
Whitacre made between 120 and 130 tapes for the FBI during the investigation,
beginning with a November 9, 1992, conversation with Yamamoto, by using
recording equipment, tapes and instruction provided by the government. FBI
agents met with Whitacre more than 150 times during the investigation. The tapes
were collected and reviewed usually within a day or two of the FBI receiving
them, and Department of Justice (DOJ) attorneys regularly participated in
reviewing the tapes and monitoring the supervision of Whitacre. However, the
FBI’s supervision of Whitacre was not flawless. Whitacre was, to say the least,
a difficult cooperating witness to handle. Whitacre lied to the FBI during the
probe, failed polygraph tests, bragged to his gardener about his role as an FBI
mole, all while continuing to embezzle millions of dollars from the company. He
even envisioned himself ascending to the ADM presidency as a hero once Andreas,
Wilson and Randall2 were taken down in the FBI sting. In short, he was out of
control, and the FBI struggled to keep him on track. Nonetheless, the FBI and
the DOJ considered him the best opportunity to stop a massive price-fixing
scheme.
 
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