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Corn sweetener makers face trial in price-fixing

(Wednesday, Feb. 26, 2003 -- CropChoice news) -- Laurie Asseo, Bloomberg News, 02/25/03: Archer Daniels Midland Co., Cargill Inc. and another maker of corn sweeteners must face a trial over price-fixing claims after the U.S. Supreme Court refused to throw out a $4 billion suit by food companies.

The suit says the producers colluded to fix the price of a corn sweetener used in soft drinks, candy and baked goods.

In a separate 1996 case, ADM, the world's largest grain producer, paid a then-record $100 million fine and three executives were sent to prison for conspiring to fix the price of lysine, an animal feed additive.

ADM and closely held Cargill are the two biggest rivals in the $3 billion U.S. market for the high-fructose corn syrup. ADM's purchase of Minnesota Corn Processors LLC last year put it ahead of Cargill, which had surpassed it earlier in the year by buying Cerestar.

"We don't think there's any basis to the suit, us and everybody else," said Dwight Grimestad, vice president of investor relations at ADM. The high court refused to hear the case "so we're in trial," he said.

The justices, without comment Monday, declined to hear arguments by Decatur, Ill.-based ADM, Cargill and A.E. Staley Manufacturing Co. that the food and beverage companies didn't provide enough evidence of a price-fixing conspiracy to go to trial.

"While we're disappointed by the court's decision not to review the case, it wasn't a ruling on the merits," said Cargill spokesman Bill Brady. "Cargill observed the law in its business practices, and we look forward to presenting our case at trial."

Shares of ADM fell 31 cents to close at $10.83 in New York Stock Exchange composite trading.

The 1995 class-action suit was filed on behalf of several thousand food companies, such as PepsiCo Inc. and Coca-Cola Co.

The companies estimate they suffered $1.4 billion in damages and will ask a jury to triple that amount, said their lawyer, Robert Kaplan.

"There are thousands of people, bakeries, dairies, bottlers, canners" who would benefit if the suit is successful, Kaplan said Monday.

The food makers say the corn- sweetener producers agreed in 1988 to raise prices. The suit claims the companies implemented the policy the following year and the conspiracy continued until the Federal Bureau of Investigation raided ADM in 1995 over the lysine price-fixing case.

Kaplan said that after the raid, corn-sweetener prices went down even though corn prices rose.

Former ADM vice chairman Michael Andreas was among the three executives sent to prison for the lysine conspiracy. The company cooperated in a federal investigation of the sweetener producers, which ended in 1999 without any charges.

After a federal judge threw out the food and beverage companies' lawsuit in 2001, the 7th U.S. Circuit Court of Appeals revived it last June. While the evidence wasn't conclusive, it was "highly suggestive of the existence of an explicit, though of course, covert agreement to fix prices," the court wrote.

ADM, Cargill and Staley argued in separate appeals to the Supreme Court that the evidence was too weak to warrant a trial. Cargill's lawyers called the price- fixing evidence "speculative and ambiguous." Cargill contended there was evidence against a conspiracy, saying major corn-sweetener buyers such as Coca-Cola and Pepsi "wielded their purchasing power to obtain deep discounts," demonstrating that suppliers were willing to discount their prices to obtain sales.

The 7th Circuit court also had ruled that trial jurors can be told that Andreas and another jailed former ADM executive asserted their constitutional right against self-incrimination when authorities asked whether they fixed prices for corn sweetener. ADM unsuccessfully asked the justices to reverse that decision.

ADM chairman Allen Andreas, a cousin of Michael Andreas, took over the company in 1997 and replaced more than half of the top management. He barred his cousin from returning to work at the company when the former executive's three-year sentence ended last year.Archer Daniels had $23.5 billion in sales in its fiscal year ended June 30. Cargill, based in Wayzata, Minnesota, the largest privately held U.S. company, had $50.8 billion in sales in its fiscal year ended May 31, 2002. Staley is a unit of Tate & Lyle Plc, the U.K.'s largest sugar maker.