Thursday, January 28, 2010

Book Report – “The Informant!” by Kurt Eichenwald

From the Desk of Joe Rollins

Where I grew up in Abington, Virginia, there was only one movie theater. Quite frankly, the theater wasn’t particularly nice and it always had a musty odor, but it was the center of our social lives almost every Saturday afternoon until I was about 10 years old. I vividly recall my father giving me exactly one dollar to last the whole day. In retrospect, it was a fairly inexpensive way for him to keep me entertained for the day. It cost twenty-five cents to get into the theater, and the rest of my money would quickly be spent on popcorn, candy and sodas. It was a kid’s dream come true!

In those days, movies didn’t always start at specific times. That didn’t matter to me and my friends, though, because when we went to the theater, we were there for the whole day. It wasn’t unusual for us to arrive at the theater in the middle of a movie and watch it through several times throughout the day. The highlight of the day was the cartoons that were played for a few minutes in between features.

I recall our gang of kids being a rowdy bunch. The audience was often louder than the films on-screen; since almost everyone had already seen the movie at some point earlier in the day, we were usually more interested in talking to one another than paying attention to the movie. Life was simpler back in those days.

Until I was about 10 years old, that’s how I spent almost every Saturday. After then, my Saturdays were consumed with outdoor athletics except for when the weather was bad, which is when I went to the bowling alley. At the age of 12, on one of the few occasions I went to the movie theater anymore, I discovered the balcony (but that story is for another day). It’s funny how your interests change as you grow older. I still enjoy movies, but there’s no way I could sit in a movie theater watching the same film over and over all day long.

This past fall, I went to see the movie, “The Informant!” starring Matt Damon. The film was based on the book of the same name by investigative reporter Kurt Eichenwald, and was about Mark Whitacre, a high-level executive at Archer Daniels Midland who became an FBI whistleblower regarding ADM’s price fixing schemes. Ironically, Whitacre ultimately spent eight and a half years in prison for embezzling $9 million from the company during the time he was an FBI informant. Although I knew nothing about the story before seeing the movie, it seemed highly fictionalized. First off, Matt Damon’s character was very low-key and it didn’t seem possible for anyone in the business world to be so brazen.

After the movie, I bought Eichenwald’s book to find out the full story behind Mark Whitacre. However, because of the hectic holiday season, I wasn’t able to get to it until this past weekend. The book was over 600 pages, but it was so compelling that I read it entirely over two days. If I didn’t know this was a true story, I would’ve thought it was an incredible work of fiction! It reads like an international spy novel, but it’s almost stranger than fiction. Furthermore, it’s even more incredible how Whitacre went from being a hero to a villain over the course of three years.

I want to provide you with a brief synopsis of Mark Whitacre’s story, but I highly recommend you read The Informant! yourself to get the elements of espionage and humor that made it such a page-turner. Whitacre worked as President of the BioProducts Division at Archer Daniels Midland (ADM) from 1989 to 1995. ADM is a major publicly-traded company that specializes in agricultural products. The company is very well-known and influential in the agriculture sector.

In the early 1990’s, ADM complained that they were the victim of corporate spying from one of its competitors. The FBI came in to investigate, and during their investigation, Mark Whitacre privately alleged to an FBI agent that he and other ADM executives were involved in a multi-national price fixing scheme. ADM was apparently in cahoots with domestic and international companies to fix a minimum price for agricultural commodities.

After making the price fixing allegations, Whitacre became the highest-level executive to ever become a whistleblower in U.S. history. Whitacre’s intentions, however, were misguided, as his goal was to be named the President of ADM. However, his cooperation with the FBI was the reason they were able to recover over $1 billion in fines from ADM and other involved companies regarding the scheme. Additionally, ADM paid millions more to customers and plaintiffs of class action cases.

As part of Whitacre’s whistleblower agreement with the FBI, he would report and document any of ADM’s illegal activities to the FBI in exchange for immunity. However, he nullified that agreement by virtue of embezzling money from the corporation at the same time he was an FBI informant on the price fixing scheme. Over the course of the FBI investigation, he embezzled over $9 million from ADM. The hero takes a fall…

It’s likely that you’ve heard of the well-publicized Nigerian $25 million advance free frauds, where the target receives a letter from a Nigeria who attempts to persuade them to advance a significant amount of money with the promise of receiving a large gain in return. I can recall receiving these letters for at least the last 25 years, often receiving two or three per month. I never took them seriously, though.

According to the FBI, Mark Whitacre’s motive for embezzling from ADM was because he had been scammed, and that the losses he suffered in the Nigerian scam – over $400,000 – may have been the initial reason behind his embezzlement activity. While Whitacre cannot be classified as unintelligent – he has a PhD and was the President of a major division in an international company – he certainly was naïve. The FBI asserts that Whitacre’s original attempts to embezzle funds from ADM were for the purpose of recovering his losses from the Nigerian scam. This further illustrates just how bizarre this case is in the corporate scandal world.

Mark Whitacre was sentenced to 10 years in a federal prison camp, but served only eight and a half years for good behavior. He and his wife became born-again Christians, and he is currently the President of Operations and Chief Operating Officer at a biotechnology firm in California called Cypress Systems.

In short, I highly recommend both the book and the movie. The book is more in-depth than the movie, but both are very entertaining. It’s a look into a part of the corporate world that most people never see, and it’s fast-paced and darkly humorous.

The moral of the story? No good deed goes unpunished.

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