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Business Practices Gone Bad
Kurt Eichenwald's new book looks at what happened when a high-profile company declared war on its own customers
Posted Jul 6, 2001
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Convincing customers to continue to do business with you because you have formed a "relationship" with them is often expensive and time consuming.

If you could easily get their money without the expense and effort, you probably would. But would break the law to do it? One very high-profile company--Archer Daniels Midland ("Supermarket to the World")--did just that.

As recounted in Kurt Eichenwald's gripping new book The Informant (Broadway Books, 2000, $26) ADM boldly--and illegally--dispensed with traditional business practices and declared war on its customers.

ADM colluded with its top competitors and fixed prices in the global market for lysine, an additive to animal feed. ADM and its partners in crime brazenly eliminated market competition and charged farmers ridiculously inflated prices. Eichenwald reports that Decatur, Ill.-based ADM embraced this new business practice behind closed doors, adopting the motto "The customer is our enemy."

The Informant reads more like a spy novel than the well researched, compelling case study that it is. The true story unfolds like this: The FBI gets a tip from an insider at ADM that the company's Japanese competitors are trying to steal highly sensitive information on ADM's lysine operations. FBI agents Brian Shepard and Robert Herndon interview the head of the these operations, Mark Whitacre, about the alleged Japanese activities, only to find out that Whitacre, a young, brash, hyper-intelligent rising star at the company, made up the entire story.

Under pressure, Whitacre reveals that for years ADM has engaged in price fixing schemes with the very competitors he tried to frame--and the company's CEO, Dwayne Andreas, is one of the most politically powerful people in America. Andreas, an advisor to presidents from Kennedy onward, gave millions to both the Democratic and Republican Parties alike. When Andreas calls, presidents answer.

Best Laid Plans

Whitacre then becomes an undercover informant for the FBI. But as the pressure builds, he exhibits increasingly erratic behavior and puts the entire operation in jeopardy. Like agents Shepard and Herndon, the reader is left to wonder who Whitacre is really working for, and if any facts in the case are actually true, or just figments of a highly disturbed imagination.

Eichenwald peppers his story with anecdotes of intra-governmental infighting, corporate treachery, and human arrogance and frailty in those operating on both sides of the case. He also briefly writes of a farmer who faces financial difficulties because of sky-rocketing lysine prices.

For those of us working in an industry that promotes a "customer-is-king" philosophy, this final point, perhaps more than any other, makes The Informant most compelling. Through price fixing, ADM and its competitors forged illegal and ultimately very expensive relationships with their customers. But in the end, these partners in crime were the real losers. As Eichenwald reports, the case resulted in jail sentences for ADM management, shattered lives and a $100 million fine imposed by the federal government on ADM.

For anyone with customers, The Informant is a cautionary tale offering a valuable lesson in CRM. While the costs associated with influencing buying decisions through customer relationships may seem high, they pale in comparison to the very tempting alternative.

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