NOVEMBER 1996 · VOLUME 17 · NUMBER 11
N A M E S I N T H E N E W S
ARCHER DANIELS MIDLAND agreed in October to plead guilty and will pay a $100 million criminal fine -- the largest criminal antitrust fine ever -- for its role in conspiracies to fix prices to eliminate competition and allocate sales in the lysine and citric acid markets worldwide.
But the plea agreement came under immediate attack from victim and shareholder groups.
Under the plea agreement, all executives and employees of ADM -- except for two -- will be protected from prosecution if they cooperate with the government. The two unprotected ADM executives are Vice Chair Michael Andreas and Vice President Terance Wilson.
Stock analysts applauded the agreement, saying that ADM could now put the matter behind it, and ADM stock prices went up after the announcement of the plea.
"There are a whole number of ADM executives who committed these crimes," asserts David Hoech, co-founder of the ADM Shareholders Watch Committee of Hallandale, Florida. "Those executives should have been indicted first."
Hoech says that political campaign contributions from ADM to both political parties inoculated ADM and its executives from a just result. He predicts that no ADM executives will be indicted.
But Gary Spratling, the official who handled the plea negotiations for the government, defends the $100 million fine, saying "we made all of our decisions based on the evidence we had developed -- we don't think anybody is getting off the hook."
"ADM didn't dictate to us the terms of the plea agreement, believe me, because they wouldn't have paid $100 million and left two individuals out there subject to prosecution," he says. "I can tell you based on negotiations, ADM did not consider $100 million a pittance."
DAMON CLINICAL LABORATORIES, Inc., a unit of Corning Inc., pled guilty in October to a one-count criminal information charging the company with conspiring to defraud the United States by submitting false claims to the Medicare program.
The Corning unit will pay $119 million to resolve the dispute -- $35.2 million as a criminal fine and $83.7 to resolve related civil liabilities.
If approved by U.S. District Court in Boston, the criminal penalty will be the largest ever recovered in a health care fraud prosecution.
Federal officials said that the $119 million payment represents a recovery of three dollars for every one dollar that the company stole from federal and state health care programs.
U.S. Attorney Donald Stern says Damon cheated Medicare "by submitting literally millions of fraudulent claims for payment to federal and state health care programs for medically unnecessary laboratory tests. What was marketed as a LabScan was actually a massive lab scam."
Federal officials charged that the company bundled three different tests with certain blood panels, causing doctors to order tests that were not medically necessary for the treatment and diagnosis of Medicare beneficiaries.
After physicians had ordered the medically unnecessary tests, Damon then billed Medicare for the bundled tests, knowing that the tests were in fact not necessary.
In August 1993, Damon was purchased by Corning Clinical Labs, a division of Corning Inc.
"We are very disappointed at the final amount of [the] settlement," says Corning Chief Executive Officer Roger Ackerman. "However, those actions occurred prior to our acquisition of Damon and the government has acknowledged the amount of its potential claim was reduced significantly by the compliance program implemented by [Corning] following its acquisition of Damon."
Sweating Sears, et. al.
SEARS, ROEBUCK AND CO., Macy's West, Hub Distributing, Inc., and Guess, Inc. have received merchandise made in sweatshops, U.S. Secretary of Labor Robert Reich charged in October. The companies received apparel goods manufactured by Chums Casual of Los Angeles.
A Labor Department investigation of Chums revealed that the company paid its cutters, sewers and trimmers $170 for working 50 to 55 hours a week. The hourly wage averaged as low as $3.10 in some cases. The firm paid $80,000 in back wages to 72 workers and $12,240 in fines for repeat violations of the Fair Labor Standards Act.
Labor Department officials identified Sears, Macy's West, Hub Distributing and Guess as recipients of Chum's goods following the manufacturer's submission of sales records in response to a Department of Labor subpoena. This marked the first time in the history of the Labor Department's "No Sweat" initiative that a subpoena was used to obtain records to trace goods from a manufacturer to a retailer.
Reich noted that one of the retailers, Guess, Inc. is included among the department's "Trendsetters" -- a list of retailers and manufacturers who have pledged to ensure that their merchandise is not made in sweatshops.
"Guess has provided the department with a copy of its monitoring program and we are reviewing their efforts," Reich said.
"Guess has no business relationship with Chums," Guess said in a statement. "The company did place three orders with this contractor in September 1995, but terminated its relationship within a few weeks after receiving its first shipment of goods." -- Russell Mokhiber