September 13th 2014


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Articles from this issue:

CANBERRA OBSERVED Successful National Marriage Day celebrated in Canberra

NATIONAL AFFAIRS Nick Minchin tells ADM to try again for GrainCorp

UNITED KINGDOM Will Scotland's vote spell the end of the Union?

ILLICIT DRUGS Marijuana 'for medicinal purposes' a wolf in sheep's clothing

SOCIETY How Australia can combat prostitution and trafficking

NATIONAL MARRIAGE DAY Reflections on the revolution of 2004

NATIONAL AFFAIRS Mining tax repeal puts government back on track

EDUCATION The case for granting schools more autonomy

EDITORIAL No winners in escalating Ukraine conflict

INTERNATIONAL AFFAIRS Downsized NATO no match for Putin's Russia

CINEMA The unlikely origins of heroism

BOOK REVIEW Historical myths demolished

BOOK REVIEW Ambassador to Hitler's Germany

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NATIONAL AFFAIRS
Nick Minchin tells ADM to try again for GrainCorp


by Patrick J. Byrne

News Weekly, September 13, 2014

If Australia’s iconic wheat single-selling desk was dismantled because of corrupt practices by AWB Ltd, then it surely follows that Treasurer Joe Hockey should reject Nick Minchin’s recent proposal that United States grains giant ADM should make a new bid for Australia’s GrainCorp.

The grain-growers’ single desk was dismantled after AWB Ltd was found culpable in the oil-for-food scandal, which involved kickbacks to the former Iraqi dictatorship of Saddam Hussein.[1]

Nick Minchin (left) and Joe Hockey 

ADM, or Archer Daniels Midland, “has a long history of corrupt price-fixing”, according to Max Baker, lecturer in accounting at the University of Sydney business school. He adds that this is “mentioned in almost every textbook or article written on the subject”.[2]

ADM’s corrupt history was the probable reason that Treasurer Joe Hockey rejected ADMs first takeover bid for GrainCorp last November.[3]

Coincidentally also, it was just three weeks before the U.S. Department of Justice and the U.S. Securities and Exchange Commission made the latest corruption finding against ADM (on December 20, 2013), involving $54 million in charges and criminal fines.

On this occasion, ADM subsidiaries in Germany and Ukraine were found to have paid roughly $22 million to two vendors (nearly all of which was to be passed on to Ukrainian government officials) in order to obtain over $100 million in value-added tax refunds.

This resulted in a benefit to ADM’s subsidiaries of roughly $41 million.[4]

The associate director of enforcement at the U.S. Securities and Exchange Commission, Gerald Hodgkins, said ADM had “lacklustre anti-bribery controls”.[5]

This is despite ADM issuing a revised 36-page code of conduct in 2010, following a long history of corruption revelations and convictions, including one connected with the Watergate scandal that brought down U.S. president, Richard Nixon.

Earlier last year, Treasurer Hockey said that he would make his final decision on the ADM takeover of GrainCorp by December 17. Perhaps his November 29 decision was hastened by the anticipated criminal findings against ADM.

Mr Hockey argued that his decision against the takeover had “attracted a high level of concern from stakeholders and the broader community.” Consequently, it “would not be in the national interest,” he said.[6]

Strong opposition to the sale came from New South Wales Liberal Senator Bill Heffernan and newly-elected NSW Liberal MP Angus Taylor. The Nationals solidly opposed the takeover.

Subsequently, Treasurer Hockey did approve ADM increasing its stake in GrainCorp from 19.85 per cent to 24.9 per cent.

However, recently, Australia’s new Consul-General in New York, former Howard government minister and Liberal powerbroker Nick Minchin, has advised ADM to bid again for Australia’s leading grain company.[7]

Minchin’s invitation to ADM comes at a time when Australians have become particularly sensitive to corruption issues.

Almost daily, the NSW Independent Commission Against Corruption (ICAC) has been uncovering corrupt business interference with government, donations to political parties and party preselections.

There have been revelations of port developers using significant funding to defeat sitting members and political candidates opposed to their projects, and even developers “helicoptering” in candidates who are supportive of their development plans.

So if, as it seems, NSW developers can use their financial power to have pro-port development politicians elected to parliament, then other powerful companies could potentially stop the emergence of competitors building new ports. Many citizens, particularly in NSW, are already concerned about how business is being conducted with government.

How are ICAC’s revelations relevant to ADM’s desires for GrainCorp?

ADM is a huge global grains and food company. In the 2012 fiscal year, its revenue was $89 billion, with assets of $41.6 billion and net income $1.22 billion.[8]

If it gained control of GrainCorp, ADM would control 87.5 per cent (seven-eighths) of Australia’s east coast grain-handling infrastructure, seven grain-elevators across seven ports in eastern Australia, two special terminals, and 280 elevators in the country.[9]

A takeover such as this would give the U.S.-based ADM a virtual monopoly of our east coast grain trade and put the global giant in a position to potentially block any competitors from entering the market.

Of particular concern is ADM’s long history of corruption.

Here is a short summary provided from a company profile of ADM[10] and other sources:

1965: ADM and 11 other firms paid fines for price-fixing in the bakery flour market.

1974: U.S. President Richard Nixon resigned after a payment by the then ADM CEO Dwayne Andreas was discovered in the account of a Watergate burglar, linking the President to the break-in.[11]

1976: ADM pleaded no contest when charged with false grading and short-weighting exported grains.

1978: ADM and two other companies were convicted of conspiring to fix prices in the Food for Peace program.

1994: ADM paid $80,000 to the state of Florida and $1.4 million more to soft drink bottlers and others in order to be dropped from a case alleging price-fixing and market allocation in the liquid carbon dioxide business.

1996: ADM agreed to plead guilty to price-fixing in international markets for lysine (an amino acid used as an animal feed additive) and citric acid (a food additive), and paid a record US$100 million fine. Three former top ADM executives — Michael (“Mick”) Andreas, Terrance Wilson and Mark Whitacre — were also indicted by a federal grand jury in December 1996 and forced to serve time in jail.[12]

2001: ADM and five other producers of sodium gluconate, an organic solvent, were fined $52 million in Europe for running a price-fixing cartel from 1987 to 1995.

2004: ADM paid $400 million to settle an antitrust lawsuit that claimed the company had conspired to fix the price of high-fructose corn-syrup.[13]

2010: ADM issued a revised 36-page code of conduct.

2013: ADM agrees to pay $54 million in charges and criminal fines for bribery of state officials by ADM subsidiaries in Germany and Ukraine.[14]

Nick Minchin’s suggestion that ADM should have another go at bidding for GrainCorp would not be in Australia’s national interest and would put at risk the east coast grains and food-processing industries.

Patrick J. Byrne is national vice-president of the National Civic Council and co-author of the book, High and Dry: How Free Trade in Water Will Cripple Australian Agriculture (Melbourne: Freedom Publishing, 2006).



Endnotes

[1] Patrick J. Byrne, “Huge cost of abolishing national wheat pool”, News Weekly, March 3, 2012.
URL: www.newsweekly.com.au/article.php?id=5088

[2] Max Baker, “Archer Daniels Midland, GrainCorp and the liability firewall”, The Conversation (Melbourne), November 19, 2013.
URL: http://theconversation.com/archer-daniels-midland-graincorp-and-the-liability-firewall-20424

[3] “Joe Hockey rejects proposed takeover of GrainCorp by U.S. company Archer Daniels Midland”, The Australian, November 29, 2013.
URL: www.theaustralian.com.au/business/mergers-acquisitions/joe-hockey-rejects-us-takeover-of-graincorp/story-fn91vdzj-1226771002239

[4] “ADM subsidiary pleads guilty to conspiracy to violate the Foreign Corrupt Practices Act”, Office of Public Affairs, U.S. Department of Justice, December 20, 2013.
URL: www.justice.gov/opa/pr/2013/December/13-crm-1356.html

[5] Michael Calia, “Archer Daniels Midland settles corruption case, to pay more than $36 million”, Wall Street Journal, December 20, 2013.
URL: http://online.wsj.com/news/articles/SB10001424052702304367204579270741234244758

[6] “Joe Hockey rejects proposed takeover of GrainCorp by U.S. company Archer Daniels Midland”, The Australian, November 29, 2013.
URL: www.theaustralian.com.au/business/mergers-acquisitions/joe-hockey-rejects-us-takeover-of-graincorp/story-fn91vdzj-1226771002239

[7] “Nick Minchin steers ADM to new tilt for GrainCorp”, The Australian, August 25, 2014.
URL: www.theaustralian.com.au/business/nick-minchin-steers-adm-to-new-tilt-for-graincorp/story-e6frg8zx-1227035127651

[8] ADM Annual Report 2012, U.S. Securities and Exchange Commission.
URL: http://pdf.secdatabase.com/106/0000007084-12-000034.pdf

[9] Margaret McKenzie, “WCB approval fuels bid war — but GrainCorp decision looms”, The Conversation (Melbourne), November 14, 2013. 

URL: https://theconversation.com/wcb-approval-fuels-bid-war-but-graincorp-decision-looms-20142

[10] “Company profile: Archer Daniels Midland”, Crocodyl: collaborative research on corporations (sponsored by CorpWatch, the Center for Corporate Policy and the Corporate Research Project), June 2, 2010. 

Archived a URL: http://archive-org.com/org/c/crocodyl.org/2014-01-23_3577316_25/Anglo_American_PLC_Crocodyl/

[11] Anna Cekola, “Agribusiness executive donates $1 million to Nixon think tank”, Los Angeles Times, June 6, 1994. 

URL: http://articles.latimes.com/1994-06-06/news/mn-1099_1_nixon-library

[12] “Former top ADM executives, Japanese executive, indicted in lysine price fixing conspiracy”, U.S. Department of Justice (Washington, DC) media release, December 3, 1996. 

URL: www.justice.gov/atr/public/press_releases/1996/1030.htm

[13] Kurt Eichenwald, “Archer Daniels settles suit accusing it of price fixing”, New York Times, June 18, 2004. 

URL: www.nytimes.com/2004/06/18/business/archer-daniels-settles-suit-accusing-it-of-price-fixing.html?pagewanted=all&src=pm

[14] “ADM subsidiary pleads guilty to conspiracy to violate the Foreign Corrupt Practices Act”, Office of Public Affairs, U.S. Department of Justice, December 20, 2013.
URL: www.justice.gov/opa/pr/2013/December/13-crm-1356.html




























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