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IN THE UNITED STATES COURT OF APPEALS No. 99-3097 UNITED STATES OF AMERICA, v. MICHAEL D. ANDREAS, No. 99-3098 UNITED STATES OF AMERICA, TERRANCE S. WILSON, No. 99-3078 UNITED STATES OF AMERICA, v. MICHAEL D. ANDREAS and _____________________ ON APPEAL FROM THE UNITED STATES DISTRICT COURT (Hon. BLANCHE M. MANNING) BRIEF FOR APPELLEE AND CROSS-APPELLANT
JURISDICTIONAL STATEMENT................................................................................................1 STATEMENT OF THE
CASE............................................................................................1 STATEMENT OF
FACTS..................................................................................................2 SUMMARY OF ARGUMENT.........................................................................................10 ARGUMENT
.....................................................................................................................14
FEDERAL CASES Alderman v. United States, 394 U.S. 165
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(1979)...........20, 25- 26 Brogan v. United States, 118 S. Ct. 805
(1998).............................................................................56 By-Product Corp. v. Armen-Berry Co., 668 F.2d 956 (7th Cir.
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(1980).....................................19, 21, 23, 24-25 Chapman v. California, 386 U.S. 18
(1967)............................................................................54, 60 Corrugated Paper Product, Inc. v. Longview Fibre Co., 868 F.2d 908 (7th D'Amato v. Wisconsin Gas Co., 760 F.2d 1474 (7th Cir.
1985)....................................................31 DeRance, Inc. v. PaineWebber, Inc., 872 F.2d 1312 (7th Cir.
1989)............................................55 Dortch v. O'Leary, 863 F.2d 1337 (7th Cir.
1988)........................................................................60 Ex rel. Savory v. Lane, 832 F.2d 1011 (7th Cir.
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(1990)...............................20, 21 General Leaseways, Inc. v. National Truck Leasing Association, 744 F.2d Greer v. Miller, 483 U.S. 756
(1987)............................................................................................59 Griffin v. United States, 502 U.S. 46
(1991)..................................................................................27 Hennon v. Cooper, 109 F.3d 330 (7th Cir. 1997), cert. denied, 118 S.
Ct. 72 (1997)
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(1988)........................................................................34 Kastigar v. United States, 406 U.S. 441
(1972).............................................................................29 Metropolitan Industrial, Inc. v. Sammi Corp., 82 F.3d 839 (9th Cir.
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(1986)........................................................................................29 National Society of Prof'l Engineers v. United States, 435 U.S. 679 (1978)
................................21 National Collegiate Athletic Association v. Board of Regents, 468 U.S. 85 NYNEX Corp. v. Discon, Inc., 119 U.S. 493
(1998)......................................................................19 Northern Pacific R. Co. v. United States, 356 U.S. 1
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(1990)...........................................................................20 Pierson v. O'Leary, 959 F.2d 1385 (7th Cir.
1992).......................................................................64 Price v. Pierce, 823 F.2d 1114 (7th Cir.
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(1978)...........................................................................................38 Richardson v. Marsh, 481 U.S. 200
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(1997).............................................................................................19 Sugar Institute, Inc. v. United States, 297 U.S. 553
(1936)...........................................................20 Thomas v. Pearl, 998 F.2d 447 (7th Cir.
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1995).......................................................33,3436 United States v. Akinrinade, 61 F.3d 1279 (7th Cir.
1995)...........................................................34 United States v. Avila, 905 F.2d 295 (9th Cir.
1990).....................................................................71 United States v. Bailey, 859 F.2d 1265 (7th Cir.
1988).................................................................53 United States v. Barnes, 993 F.2d 680 (9th Cir.
1993)..................................................................71 United States v. Bell, 936 F.2d 337 (7th Cir.
1991).................................................................64-65 United States v. Blackburn, 992 F.2d 666 (7th Cir.
1993).............................................................52 United States v. Brack, 1999 WL 605640 (7th Cir. August 6, 1999)
..........................49,
51 United States v. Brady, 145 F.3d 889 (7th Cir.
1998)...................................................................37 United States v. Briscoe, 896 F.2d 1476 (7th Cir.
1990)...............................................................53 United States v. Buege, 578 F.2d 187 (7th Cir.
1978)...................................................................59 United States v. Bustamante, 45 F.3d 933 (5th Cir.
1995)............................................................29 United States v. Butler, 71 F.3d 243 (7th Cir.
1995)...............................................................58, 60 United States v. Caceres, 440 U.S. 741
(1979).............................................................................42 United States v. Capitol Services, Inc., 568 F. Supp. 134 United States v. Chaudhry, 850 F.2d 851 (1st Cir.
1988)........................................................44, 45 United States v. Cooperative Theatres of Ohio, Inc., 845 F.2d 1367 United States v. Cotnam, 88 F.3d 487 (7th Cir.
1996).......................................................57, 58, 60 United States v. Cotton, 101 F.3d 52 (7th Cir.
1996)....................................................................27 United States v. Craig, 573 F.2d 455 (7th Cir. 1977)
............................................39, 41, 63 United States v. Cruz-Camacho, 137 F.3d 1220 (10th Cir.
1998).................................................68 United States v. Delay, 440 F.2d 566 (7th Cir.
1971)....................................................................52 United States v. Dillard, 43 F.3d 299 (7th Cir.
1994)...................................................................73 United States v. Emerson, 128 F.3d 557 (7th Cir.
1997)...............................................................66 United States v. Evans, 92 F.3d 540 (7th Cir. 1996), cert. denied, United States v. Fawley, 137 F.3d 458 (7th Cir.
1998).................................................................51 United States v. Feekes, 879 F.2d 1562 (7th Cir.
1989)................................................................44 United States v. Garcia, 897 F.2d 1413 (7th Cir.
1990)................................................................47 United States v. Gibson, 170 F.3d 673 (7th Cir.
1999)............................................................34-36 United States v. Gillen, 599 F.2d 541 (3d Cir.
1979)....................................................................17 United States v. Given, 164 F.3d 389 (7th Cir. 1999), cert. denied, United States v. Gonzalez, 93 F.3d 311 (7th Cir.
1996)................................................................27 United States v. Gonzalez-Sanchez, 825 F.2d 572 (1st Cir.
1987)................................................33 United States v. Goodapple, 958 F.2d 1402 (7th Cir.
1992).........................................................61 United States v. Greer, 467 F.2d 1064 (7th Cir.
1972)............................................................59-60 United States v. Haimowitz, 725 F.2d 1561 (11th Cir.
1984)........................................................39 United States v. Hall, 109 F.3d 1227 (7th Cir. 1997), cert. denied, United States v. Hayter Oil Co., Inc., 51 F.3d 1265 (6th Cir.
1995)........................................64-65 United States v. Higgins, 75 F.3d 332 (7th Cir.
1996)...................................................................59 United States v. Howard, 774 F.2d 838 (7th Cir.
1985)................................................................64 United States v. Isaacs, 493 F.2d 1124 (7th Cir.
1974)...........................................................57, 58 United States v. Johnson, 26 F.3d 669 (7th Cir.
1994)..................................................................55
United States v. Johnson, 137 F.3d 970 (7th Cir.
1998)................................................................46 United States v. Kamoga, 177 F.3d 617 (7th Cir. 1999), United States v. Koster, 163 F.3d 1008 (7th Cir. 1998), cert.
denied, United States v. Kramer, 711 F.2d 789 (7th Cir.
1983).................................................................18 United States v. Long, 86 F.3d 81 (7th Cir.
1996).........................................................................36 United States v. Magana, 118 F.3d 1173 (7th Cir. 1997), cert.
denied, United States v. McGuire, 957 F.2d 310 (7th Cir.
1992)...............................................................68 United States v. Menting, 166 F.3d 923 (7th Cir.
1999)................................................................52 United States v. Meyer, 157 F.3d 1067 (7th Cir. 1998), cert.
denied, United States v. Misle Bus & Equipment Co., 967 F.2d 1227 (8th Cir.
1992)..............................17 United States v. Montoya-Eschevarria, 892 F. Supp. 104 (S.D.N.Y.
1995).................................38 United States v. Moore, 115 F.3d 1348 (7th Cir.
1997).................................................................59 United States v. Morano, 697 F.2d 923 (11th Cir.
1983)..............................................................33 United States v. Mounts, 35 F.3d 1208 (7th Cir.
1994).................................................................33 United States v. Mustread, 42 F.3d 1097 (7th Cir.
1994)..............................................................70 United States v. Nippon Paper Industrial Co., 109 F.3d 1 (1st Cir. 1997), United States v. Olano, 507 U.S. 725 (1993)
................................................................................60 United States v. Osourji, 32 F.3d 1186 (7th Cir.
1994).................................................................60
United States v. Park, 421 U.S. 658
(1975).............................................................................17, 35 United States v. Ramirez, 45 F.3d 1096 (7th Cir.
1995)...........................................................33-36 United States v. Reed, 2 F.3d 1441 (7th Cir.
1993).......................................................................60 United States v. Renteria, 106 F.3d 765 (7th Cir.
1997)...............................................................60 United States v. Robinson, 96 F.3d 246 (7th Cir.
1996)................................................................27 United States v. Rose, 12 F.3d 1414 (7th Cir.
1994).....................................................................58 United States v. Rourke, 74 F.3d 802 (7th Cir.
1996)....................................................................31 United States v. Russell, 411 U.S. 423
(1973)...............................................................................42 United States v. SKW Metals & Alloys, 4 F. Supp. 2d 166 United States v. Sblendorio, 830 F.2d 1382 (7th Cir.
1987)..........................................................57 United States v. Scott, 19 F.3d 1238 (7th Cir.
1994).....................................................................49 United States v. Scott, 660 F.2d 1145 (7th Cir.
1981)...................................................................57 United States v. Sepulveda, 15 F.3d 1161 (1st Cir.
1993).............................................................55 United States v. Shelton, 669 F.2d 446 (7th Cir.
1982).................................................................36 United States v. Shields, 675 F.2d 1152 (11th Cir.
1982)..............................................................39 United States v. Sierra, 1999 WL 615231, 4 (7th Cir. Aug. 13,
1999)...................................66, 71 United States v. Socony Vacuum Oil Co., 310 U.S. 150
(1940)........................................11, 20, 54 United States v. Taylor, 31 F.3d 459 (7th Cir.
1994).....................................................................14 United States v. Thompson, 944 F.2d 1331 (7th Cir.
1991)...........................................................38 United States v. Tousant, 619 F.2d 810 (9th Cir.
1980)................................................................39
United States v. Tracy, 989 F.2d 1279 (1st Cir.
1993)..................................................................64 United States v. Valez, 46 F.3d 688 (7th Cir.
1995)......................................................................63 United States v. Watson, 1999 WL 637059 (7th Cir.
1999)..........................................................64 United States v. Watts, 29 F.3d 287 (7th Cir.
1994)......................................................................45 United States v. Whitaker, 127 F.3d 595 (7th Cir. 1997), cert.
denied, United States v. Williams, 31 F.3d 522 (7th Cir.
1994).................................................................64 United States v. Williams, 580 F.2d 578 (D.C.Cir.
1978)..............................................................38 United States v. Williams, 737 F.2d 594 (7th Cir.
1984)...............................................................37 United States v. Wise, 370 U.S. 405
(1962)...................................................................................17 United States v. Zarnes, 33 F.3d 1454 (7th Cir.
1994)............................................................42, 43 Virginia Excelsior Mills, Inc. v. FTC, 256 F.2d 538 (4th Cir. 1958)
............................................21 Westinghouse Electric Corp. v. Gulf Oil Corp., 588 F.2d 221 White Motor Co. v. United States, 372 U.S. 253
(1963)..........................................................19, 21 Wilson v. Washington, 138 F.3d 647 (7th Cir. 1998), cert. denied, Womack v. Meiszner, 466 F.2d 555 (7th Cir.
1972).................................................................37-38
U. S. Constitution, Amendment
IV............................................................................................... 37 Title III of the Omnibus Crime Control and Safe Streets Act of 15 U.S.C.
1............................................................................................................................passim 18 U.S.C.
2511(1)..........................................................................................................................38 18 U.S.C.
2511(2)(c)................................................................................................................38, 39 18 U.S.C.
2511(2)(d)..........................................................................................................39, 42-43 18 U.S.C.
2515.............................................................................................................................39 18 U.S.C.
2516.............................................................................................................................44 18 U.S.C.
3231............................................................................................................................. 18 U.S.C.
3742(b)......................................................................................................................... 28 U.S.C.
1291............................................................................................................................. Fed. R. Crim. P.
11(e)(6)(D)..............................................................................................11, 28-31 Fed. R. Crim. P.
52(a)....................................................................................................................33 Fed. R. Evid.
403...............................................................................................................35, 36, 49 Fed. R. Evid.
404(b).................................................................................................................33-36 Fed. R. Evid.
804(b)(3)......................................................................................................46-48 U.S.S.G. §
8C4.1............................................................................................................................28 U.S.S.G.
§2R1.1.................................................................................................................64-65, 66 U.S.S.G.
§3B1.1.............................................................................................................66-73
Phillip Areeda and Herbert Hovenkamp, Antitrust Law
(1997)....................................................21 Williston on Contracts (3d ed.
Jaeger)...........................................................................................30 Federal Criminal Jury Instructions of the 7th Circuit
(1980)........................................................52 Webster's Third Int'l Dictionary
(1981)..................................................................................69-70
Appellants' jurisdictional statements are complete and correct as to Nos. 99-3097 and 99- 3098. In the government's cross-appeal, the district court had jurisdiction, pursuant to 15 U.S.C. 1 and 18 U.S.C. 3231. This Court has jurisdiction under 18 U.S.C. 3742(b) and 28 U.S.C. 1291. The district court sentenced appellants on July 9, 1999, entered judgment orders on August 16, 1999, and amended judgment orders on August 25, 1999. ABr. A1-11, WBr. VIII-XIX. The United States filed a timely cross-appeal on August 12, 1999 (No. 99-3078).
Appellants were officers of Archer Daniels Midland Company ("ADM") during the conspiracy period. ADM is a large agricultural processing company that manufactures products used by the food and beverage industry; its global sales in 1994 were approximately $13 billion. GA 6. Andreas was vice chairman of ADM's board of directors and executive vice president, focusing on sales and marketing. Tr. 759-60, 2607. Wilson, president of ADM's Corn Processing Division, reported to Andreas. Tr. 2606-07. Whitacre, president of ADM's BioProducts Division, was responsible for production, sale, and distribution of lysine. Tr. 2611, 2810. ADM entered the lysine market in 1991 and significantly expanded industry capacity with its large new plant. Tr. 908-09, 938, 1683. A Korean producer, Cheil Jedang Ltd. ("Cheil") also entered the market. Tr. 913. Three other companies were already in the market in 1991: Ajinomoto Co., Inc. ("Ajinomoto"), and Kyowa Hakko Kogyo Co., Ltd. ("Kyowa") of Japan; and, Miwon Foods Company, Ltd. ("Miwon") of Korea. The foreign lysine producers (except Cheil) had United States subsidiaries, and some also had foreign subsidiaries, including Eurolysine, S.A., a Paris-based company part-owned by Ajinomoto (Tr. 2163) during the conspiracy. Before ADM and Cheil entered the market, there had been periodic price-fixing among the existing three producers. Tr. 906-08, 1683, 4145. The new ADM lysine production resulted in oversupply, and a price war pushed prices down. Tr. 909, 915, 2173-75. In June 1992, when lysine was selling below 70 cents per pound, Wilson and Whitacre met representatives from Ajinomoto, Eurolysine, and Kyowa in Mexico City. Tr. 914-15. During this meeting, Wilson wrote on a blackboard how much the companies were losing by competing, and they discussed a "target" price at which the companies could sell "if we stop the competition." Tr. 4147-50. Ajinomoto's Kanji Mimoto ("Mimoto") testified that the participants tentatively agreed to phased-in price increases and also tried to reach a "quantity allocation agreement." Tr. 917-18. Wilson, who did most of the talking for ADM (Tr. 916, 927- 28; see also Tr. 2176), asserted that ADM's company policy was that it must be allotted the same share of sales as the industry leader -- Ajinomoto. Tr. 916. Ajinomoto's Hirokazu Ikeda's ("Ikeda") notes of the meeting (GA 62-67) confirm that ADM wanted the same market share as Ajinomoto, one-third of global sales. Tr. 925. Wilson insisted that the companies select an auditor and report sales volumes for established periods, or, alternatively, that all members meet periodically and confirm each company's volumes. Tr. 926-27. The Japanese companies promised to discuss the proposal with the Korean lysine manufacturers. Ikeda's notes state that "[i]f the discussions go smoothly, we will aim for prices at the level of $1.05/lb del[ivere]d for North America/Europe ... by October, and $1.20/lb ... in December .... All the companies are in basic agreement on the above." GA 64; Tr. 926. Alain Crouy ("Crouy"), who worked for Eurolysine, testified that the purpose of the meeting was to end the price war, through discussions of price and volume, and that an agreement was reached as to price, subject to approval by non-attendees. Tr. 2171-77. Crouy's detailed meeting notes (GA 82-89; Tr. 2177-98) stated that "[n]o one else in ADM knows about this meeting except Andreas." GA 84; see also Tr. 4172 (Wilson states that only Whitacre and top management (Andreas) know about "these meetings"). After the Mexico City meeting, Miwon, which had not attended the meeting, increased its price to 80 cents. Tr. 4150-511. Whitacre called Yamamoto and Mimoto the next week, and they agreed to increase their prices to 80 cents. Tr. 935-40, 4151-55; G.Ex. 219T (Yamamoto's notes of Whitacre's call). The conspirators later agreed to two further price increases (to 95 cents and $1.05) to take effect in August and October 1992. Tr. 4155-60; G.Ex. 220T. ADM increased its prices as agreed, as did the other conspirators, and the United States price of lysine rose in the summer of 1992 to $1.05. Tr. 936-37, 4161, 2199. In October 1992, all five lysine producers met together for the first time in Paris. Tr. 941, 4162. Whitacre and Wilson represented ADM. Id. Instead of discussing the legitimate topics listed on a fake agenda for the meeting, prepared by Eurolysine (G.Ex. 9; Tr. 946-47, 2200), the conspirators discussed and agreed on new lysine prices. Tr. 947-55, 2200-01, 4163-64; GA 68- 72 (Mimoto's meeting notes listing agreed-on prices); G.Ex. 128 (Miwon meeting notes). In late 1992 or early 1993, lysine supplies began to outpace demand, and prices began to fall. Tr. 960, 4164-65. The conspirators attributed the price decline to the absence of a volume allocation agreement (Tr. 960, 4164-65), and Ajinomoto officials met with ADM in Decatur on April 30, 1993, to address the situation. Tr. 1685. At that meeting (Tr. 1688, 2203-04), Andreas told Ajinomoto's Yamada that ADM had anticipated that ADM's entry would "confuse" a mature market, but that "out of chaos usually comes ah, order," and that ADM would now be pleased to "get involved." G.Ex. 4/30/93 1B46-WE-S1 at 24-25. Andreas also told Yamada that the only way to "stabilize" lysine is "from the supply side." Id. at 45. Andreas urged use of a trade association and emphasized that it would take more than two companies to achieve "stability." Id. at 24, 36-37. ADM's President, James Randall, added that ADM's philosophy is that "our competitors are our friends. Our customers are the enemy." Id. at 32. Yamada agreed that everyone understands that "it is necessary to adjust the supply delivery." Id. at 49. Shortly before this meeting, Wilson and Whitacre had met Eurolysine officials in Chicago. Tr. 2203-05. Wilson told them that ADM had done as it promised in Mexico City to raise the price to $1.05. As to the subsequent fall in price, Wilson agreed that volume had to be controlled or "prices go down." G.Ex. 4/28/93 1B43-WE-S2 at 84, 88-89; -S4 at 176. ADM and Ajinomoto officials met in Tokyo on May 14, 1993, to discuss allocating the market to improve prices. Tr. 2231-43; G.Ex. 5/14/93 1B52-WE, 1B54-WE. Wilson explained at length the mechanics of a price-fixing and volume allocation conspiracy involving citric acid (hereinafter "citric"), of which ADM was a member, and suggested that the lysine conspiracy should use similar methods. G.Ex. 5/14/93 1B54-WE-S1 at 1-11. Wilson said that when, as in citric, volumes are allocated, there is no need to monitor the price-fixing agreement closely because, "[a]s long as the volume turns out okay[,] [i]f they want to sell it for less money, that's their business." Id. at 6. Wilson said that volume allocation is preferable to customer allocation, because customers become suspicious when competitors decline to give price quotes because of an illegal customer allocation agreement. Id. at 11. No volume allocation agreement was reached at this meeting (Tr. 2232), but Wilson promised to tell Andreas that Yamada was "flexible." G.Ex. 5/14/93 1B54-WE-S3 at 45. All five companies met on June 24, 1993, in Vancouver, Canada. E.g., Tr. 961, 1702-03, 4165-67; GA 90-94 (Yamamoto's meeting notes); G.Ex. 134T (Miwon meeting summary). The parties reached an agreement on prices, but again failed to agree on allocating sales volume because "everybody want[ed] a bigger share." Tr. 961, 4165-72. Whitacre briefed Andreas about the meeting. Tr. 3840-41. In a taped telephone call to Ikeda the following day, Wilson and Whitacre told Ikeda that ADM would try to maintain the price "agreed ... [t]he other day" at the Vancouver meeting and would maintain current levels of sales if lysine prices remained stable. Tr. 1705-06; G.Ex. 6/29/93 1B11-WE-S1 at 1-3. All five companies raised prices by agreement during the summer of 1993. Tr. 4172-73. The conspirators met in Paris again on October 5, 1993. Tr. 984, 3850. A week later, Mimoto, who used the alias "Mr. Tani" when leaving messages for Whitacre (Tr. 972-73), called Whitacre and told him that the Paris meeting was valuable because they "could confirm the new price schedule." Mimoto also agreed that there would be problems again unless a volume agreement was worked out and that an upcoming Yamada/Andreas meeting was therefore key. G.Ex. 10/13/93 1B47-WE-S1 at 20-22. Whitacre briefed Andreas on the Paris meeting (see infra, p. 15). Andreas and Yamada negotiated a volume allocation agreement at an October 25, 1993, meeting (which the FBI videotaped) in Irvine, California. See Tr. 1706-07, 1730-31. Andreas told Yamada that ADM wanted to sell the same volume of lysine as it sold in 1993, plus a reasonable amount of the industry growth, and threatened to use its extra capacity to drive down prices if the other companies "don't agree" and "there becomes a free-for-all." GA 100-101; G.Ex. 10/25/93 1B56-57-58-SVHS-S1 at 133, 171; -S2 at 189. Yamada agreed to present the Irvine agreement to the other three lysine producers. Tr. 1707-10, 1731-33; G.Ex. 28 (fax from Ajinomoto to Miwon informing them of Ajinomoto/ADM agreement, and Kyowa's adoption of it); G.Ex. 223 & Tr. 4174-77 (Yamamoto's notes of meeting with Ajinomoto on November 10, 1993, at which Ajinomoto reported on Irvine agreement); G.Ex. 23 (easel sheet used at the Irvine meeting to show the sales allocation plan). The next step was a meeting in Tokyo on December 8, 1993, attended by Wilson and Whitacre for ADM and by representatives of Ajinomoto, Kyowa, and Miwon. Tr 1006-70, 1733, 4179-86, GA 95-99 (Yamamoto's meeting notes). Cheil was not invited because the other companies regarded its volume demand as unreasonable. Tr. 1006-07. The purpose of the meeting was to agree on lysine prices for the coming quarter and on the remaining quantity allocations and the mechanics of allocating lysine sales. Tr. 1049-51, 4180, 4183-86. The resulting agreement closely resembled the citric conspiracy earlier described to the participants by Wilson, and indeed Ikeda described the plan adopted as "ADM's proposal." E.g. GA 131- 141; see also Tr. 1058, 1067, 1648; G.Ex. 142T (Sewon meeting summary). Each conspirator was allocated both a percentage of the market, and an actual tonnage figure, based on estimated world market. GA 113-19; Tr. 1061-62. The group broke these allocations down by region, as a guideline for the conspirators. GA 125-30; Tr. 1064-65. Wilson discussed monitoring the agreement under cover of trade association meetings. He also discussed the year-end compensation provision of the agreement pursuant to which any conspirator that sold more than its allocated share at the end of the year would have to make amends by buying lysine from a conspirator that had sold less than its allocated share. But there would be no need for compensation if "we all come within 1%." GA 134; see also Tr. 1067. The parties also agreed on the need for an audit, but not on how to conduct it. Tr. 1058-59. Ikeda listed the assigned allocations (GA 103), while Wilson proposed that monthly numbers be reported to Mimoto (GA 105), and that if one company gets too far ahead of its allocation, it must slow down (GA 131- 32). See also Tr. 1067. Wilson warned the group to be careful about the telephone, and said that it was better not to meet in person, except quarterly. GA 140. Then Wilson threatened that, if there were another price war, ADM would increase its lysine volume. GA 144-45. At their next meeting in Hawaii on March 10, 1994 (videotaped by the FBI), the conspirators, including Wilson and Whitacre, discussed how the volume allocation agreement was working, reported their recent sales figures (Tr. 1081-96, 4189-95; G.Ex. 12 (Mimoto chart showing allocations and January results); G.Ex. 137T (Sewon meeting summary)), and agreed on prices worldwide. GA 3-4. The companies discussed who was ahead or behind schedule in allocated sales, and Wilson recommended continuing monthly reporting, as well as regional targets. G.Ex. 3/10/94 1B94,95,96,98-S1 at 22-36. They also talked about whether to admit Cheil to the allocation conspiracy -- and then discussed association business "just in case." G.Ex. 3/10/94 1B94,95,96,98-S2 at 120-30. After lunch, a Cheil representative joined the meeting and accepted an allocation of 17,000 tons. Tr. 4192, 4194. Wilson explained the mechanics of the conspiracy to him. G.Ex. 3/10/94 1B94,95,96,98-S3 at 179-203. See also G.Ex. 225 (Yamamoto's meeting notes). He also urged the conspirators to "trust each other" and not be "manipulated by . . . buyers." G.Ex. 3/10/94 1B94,95,96,98-S4 at 238-39. He emphasized that ADM's competitors were its friends and that, while customers were necessary, "they are not my friends." G.Ex. 3/10/94 1B94,95,96,98-S4 at 239. He told the conspirators to "put the prices on the board ...[and] all agree that's what we're gonna do and then walk out of here and do it." Id. After the Hawaii meeting, prices generally were maintained at the agreed-on level for 1994. Tr. 1101-02, 4213. The lysine producers reported their sales quantities to Mimoto on a monthly basis (GA 4-5), and Mimoto prepared and distributed to the conspirators tables showing the monthly reports and comparing actual sales with allocated sales. GA 73 (Mimoto summary for January to May 1994, showing ADM's allocated sales as 27% and its actual world sales as 25.2%); Tr. 1097-1101, 4210-11. Wilson did not attend the conspirators' regular meetings after the Hawaii meeting, because the allocation agreement was settled, and Wilson was not involved in day-to-day lysine business. Tr. 1103-04. However, in October 1994, Wilson and Andreas met in Chicago with Mimoto and Yamada and they discussed Sewon's (see n.4, supra) request for a bigger 1995 allocation. Tr. 1105-06. The conspirators continued to meet quarterly until the conspiracy ended. Tr. 1129-32, 1137. See also Tr. 958, 4214-17. At a January 1995 meeting in Atlanta videotaped by the FBI, the conspirators (except Sewon) agreed that they would stay at the same shares in 1995, and all 5 companies agreed on global prices. Tr. 1131, 4216-17; G.Ex. 138T (Sewon meeting summary). Mimoto collected sales volume figures for December 1994, and the parties agreed that they were "right on target" for the allocation. GA 151-67; Tr. 1132. Because the actual 1994 sales were very close to the allocation, it was not necessary to use the agreed-upon compensation system. Tr. 4216. The conspiracy ended abruptly on June 27, 1995, when a search warrant was executed at ADM. Tr. 1140-41, 3896, 4217. During interviews with the FBI that night, Andreas denied that there could be price-fixing in the lysine industry and said nothing about price-fixing by Asian lysine producers. Wilson denied that anyone at ADM had exchanged sales or production figures with competitors. Tr. 3590-91.
Andreas, but not Wilson, challenges the sufficiency of the evidence to support his conviction. ABr. 39-42. The district court rejected this claim (SA 171-74), and this Court should affirm because a reasonable trier of fact, viewing the evidence in the light most favorable to the government, could have found the essential elements of the offense beyond a reasonable doubt. SeeUnited States v. Taylor, 31 F.3d 459, 464 (7th Cir. 1994). Andreas contends that there was "no evidence of anyone telling Andreas about price- fixing" and relies heavily on Andreas' statements that ADM does not make "deals." But there was abundant evidence that Andreas knew about, authorized, and participated in the lysine conspiracy. Andreas attended three meetings with coconspirators to implement the conspiracy, and he authorized and supervised Wilson and Whitacre's activities in furtherance of the conspiracy. Andreas knew about the June 1992 Mexico City organizational meeting at which ADM agreed to fix prices (GA 84). On April 30, 1993, Andreas met with Ajinomoto's Yamada in Decatur and told Yamada that ADM anticipated that its entry would "confuse" the market, but that ADM now would "get involved" and "stabilize" lysine from the "supply side" (seesupra, p. 5). Wilson and Whitacre reported to Andreas on the May 1993 Tokyo meeting, and discussed further strategy with him. G.Ex. 5/17/93 1B57-S1 at 1-9. Whitacre also briefed Andreas about the Vancouver meeting. Tr. 3840-41. Andreas confirmed that Whitacre had told the other conspirators that ADM would raise its prices by "another nickel" in July and told Whitacre to tell the other companies that ADM would stay at its current volume. Andreas also said that he would like to meet with Yamada alone. G.Ex. 6/28/93 1B7-S1. Andreas was briefed about the October 5, 1993, Paris meeting. Andreas asked, "how did it come out?" Whitacre told Andreas that the volume agreement still needed to be worked out, but that there is "an official association now" and that the producers had agreed not to build any more capacity. Andreas then asked "[a]re we gonna start sending in volumes yet?" and Whitacre replied that volume information would not be provided until there was a "volume understanding." G.Ex. 10/12/93 1B46-S1 at 11-18; Tr. 3851-52.10 At the Irvine meeting, Andreas bargained with Yamada for a favorable share of volume and threatened to use ADM's extra capacity to drive down prices if the other companies did not agree (supra, at p. 7). As the district court noted, the videotape of this meeting "clearly dispelled any question in the minds of the jurors as to Andreas' keen interest in controlling the sales volume to ensure that prices remained high." SA 173.11 Andreas was also briefed by Wilson about the Tokyo meeting where allocations were finalized.12 And in October 1994, Andreas participated in his third meeting with coconspirators to discuss the progress of the conspiracy. During this meeting, Mimoto told Andreas and Wilson that Sewon had stopped reporting volume, but nonetheless had promised to "respect the price." Tr. 1127; G.Ex. 10/13/94 1B121-WE-S4 at 141-42, 148. Mimoto noted and Wilson agreed that "supply and demand is almost balanced now." -S4 at 151. The jury could reasonably have disbelieved Andreas' statements about not making deals. The evidence plainly shows that Andreas supervised and directed ADM's involvement in the lysine cartel. Indeed, Wilson cautioned Andreas to stop saying that ADM does not make deals, "[c]ause in their view we make deals" and such a statement might cause the coconspirators not to trust ADM. SA 657. In fact, Andreas told Yamada that ADM was a company that could make a decision, was not afraid to make its intentions known, and could be trusted to do what it said it would do. G.Ex. 4/30/93 1B46-S1 at 26-29; see also G.Ex. 4/29/93 1B48-S1 at 4. And when Wilson told Ikeda that Andreas said that ADM does not make deals, the statement produced laughter. SA 647 (cited at ABr. 40). Finally, while Andreas claimed at trial that he tried to break up the cartel, he falsely told the FBI that price-fixing was an impossibility in the lysine market. There was thus abundant evidence for the jury to conclude, beyond any reasonable doubt, that Andreas was an active member of the price-fixing and allocation conspiracy, both in person and through the activities of subordinates, whom he authorized and supervised. SeeUnited States v. Wise, 370 U.S. 405, 413 (1962)(corporate officials liable for subordinates' actions they supervise); United States v. Misle Bus & Equip. Co., 967 F.2d 1227, 1236 (8th Cir. 1992); United States v. Gillen, 599 F.2d 541, 546-47 (3d Cir. 1979). II. The Agreement To Allocate Sales Volumes Was Per Se Unlawful Appellants contend (ABr. 19-39; WBr. 3) that the district court erred in instructing the jury (SA 480-489) that agreements among competitors to allocate sales volumes are per se unlawful. This contention is wrong. 1. Like any other jury instruction, the court's instructions on sales volume allocation must be viewed not only in the context of the entire instruction but also within the context of the entire trial. United States v. Park, 421 U.S. 658, 674-75 (1975) (explaining that "seemingly prejudicial" instruction may in fact be appropriate when viewed in context of the entire record). The indictment charged that the conspiracy had two objectives: to fix prices and allocate sales volumes. SA 2. At their first meeting in Mexico City in June, 1992, the conspirators discussed both price-fixing and allocating sales volumes. While they agreed to fix prices at both this and subsequent meetings, they were initially unable to reach a sales volume allocation agreement because the other conspirators viewed ADM's market share allocation demands as unreasonable. The predictable result was that their price-fixing was not as effective as it could have been, particularly when seasonal demand was low. Tr. 913-14, 924-27, 960, 2231, 4164-65. To minimize the temptation to cheat on their price-fixing agreement, maintain agreed prices, and make policing that agreement easier, Wilson, acting on instructions from Andreas, repeatedly urged the conspirators to agree to allocate sales volumes in addition to fixing prices. See pp. 3-6, supra. When Wilson failed to finalize a volume agreement, Andreas intervened personally, met Yamada at Irvine, and negotiated an agreement that could be presented to the other conspirators and was eventually finalized in Tokyo and Hawaii. Seesupra, pp. 7-9. This agreement was in addition to a prior agreement not to build any new capacity. G.Ex. 10/12/93, 1B46-S1 at 14. 2. The district court instructed the jury that it could convict appellants if it concluded that they had conspired either to fix prices or to allocate sales volumes. United States v. Kramer, 711 F.2d 789, 797 (7th Cir. 1983) (single conspiracy to commit different offenses is a single criminal offense, and defendant can be convicted if he committed either offense). Both types of agreement, the court explained, were per se unlawful. After stating the elements of a Sherman Act violation and explaining the per se rule (SA 482-83), the court told the jury that a sales volume allocation agreement "is an agreement between competitors to divide sales of a particular product among the various competitors . . . for example, where two or more competitors agree among themselves that such competitor will limit its sales to a certain amount." SA 486. The jury was further instructed, among other things, that a business has the right unilaterally to determine the terms on which it will sell its products, that it is not unlawful in the absence of an agreement to charge the same price as a competitor, and that sharing information or stating "intentions concerning the prices and quantities of a product" does not by itself prove the existence of a conspiracy. SA 486-87. The court's instructions were correct. Certain types of agreement "have such predictable and pernicious anticompetitive effect, and such limited potential for procompetitive benefit, that they are deemed unlawful per se" under the Sherman Act. State Oil v. Khan, 522 U.S. 3, 10 (1997); Northern Pacific R. Co. v. United States, 356 U.S. 1, 5 (1958). The antitrust laws do not require proof that such an agreement is actually anticompetitive in the particular circumstances. NYNEX Corp. v. Discon, Inc., 119 U.S. 493, 497 (1998). An agreement among competitors as to the price they charge is the "archetypal example" (Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 647 (1980)), but other "naked restraints of trade with no purpose except stifling competition" (White Motor Co. v. United States, 372 U.S. 253, 263 (1963)) are also illegal per se. Participants in a cartel may employ various techniques in their effort to increase profits by selling less output at higher prices. Simply agreeing on price may suffice, but individual participants have a powerful incentive to increase their output, which places downward pressure on prices. Simply agreeing on output, on the other hand, may be difficult to enforce if competitors cannot readily ascertain how much other firms are selling. Cartel participants may thus determine that a combination of price and output restraints works best. They may also divide the market, or otherwise agree not to compete for certain sales, in an effort to limit individual participants' incentives and opportunities to undermine the success of the cartel. The cartel's choice of techniques makes no difference to the legal analysis under the Sherman Act. SeeSocony Vacuum, 310 U.S. at 223. Per se treatment is applied when a practice is "one that would always or almost always tend to restrict competition and decrease output." Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1, 19-20 (1979). Agreements among competitors to restrict their output thus are clear per se violations. SeeNCAA, 468 U.S. at 98-100 & n.19; FTC v. Superior Court Trial Lawyers Ass'n., 493 U.S. 411, 423 (1990). So are naked horizontal agreements not to compete for particular sales. See, e.g., Palmer v. BRG of Ga., Inc., 498 U.S. 46, 49-50 (1990) (per curiam). As this Court explained in General Leaseways (744 F.2d at 594-95): "[a]n agreement on output . . . equates to a price-fixing agreement . . . Thus, with exceptions not relevant here, raising price, reducing output, and dividing markets have the same anticompetitive effects." Naked restraints on price or output have been repeatedly condemned as per se unlawful. For example, in Socony-Vacuum, 310 U.S. at 190-91, a glut in the spot market for gasoline prompted the major oil refiners to engage in a concerted effort to purchase and store surplus "distress" gasoline. The refiners assigned themselves "dancing partners" whose distress gasoline they agreed to buy in order to prevent price decreases. SeeArizona v. Maricopa County Medical Society, 457 U.S. 332, 345 (1982). Although the agreement did not fix prices directly, it was nonetheless illegal per se; "the machinery employed by a combination for price-fixing is immaterial." Socony-Vacuum, 310 U.S. at 223. Similarly, in Sugar Inst., Inc. v. United States, 297 U.S. 553, 601-02 (1936), the Court held per se "unlawful an agreement to adhere to previously announced prices and terms of sale, even though advance price announcements are lawful and even though the particular prices and terms were not themselves fixed by private agreement." Catalano, 446 U.S. at 647. See alsoNat'l Soc'y of Prof'l Engineers v. United States, 435 U.S. 679, 692-93 (1978); Superior Court Trial Lawyers, 493 U.S. at 422-23.13 Courts have condemned agreements to restrict production as per se violations. Westinghouse Electric Corp. v. Gulf Oil Corp., 588 F.2d 221, 226 (7th Cir. 1978) (restricting production of uranium); Virginia Excelsior Mills, Inc. v. FTC, 256 F.2d 538, 539-40 (4th Cir. 1958) (agreeing not to increase productive capacity and to allocate orders among themselves based on productive capacities). In any event, it is not a precondition to per se treatment, as appellants suggest (ABr. 21), that courts have previously confronted exactly the same factual scenario. While courts do not condemn as unlawful per se practices with which they have little experience and which have uncertain competitive effects (White Motor Co., 372 U.S. at 263 (vertical distribution arrangements)), they do not hesitate to apply the per se rule to cartel conduct that may differ from that in prior cases but that nevertheless falls within the ambit of naked horizontal price-fixing, output restraints, or market division agreements. See, e.g., Catalano, 446 U.S. at 647-49 (agreement to stop giving credit "tantamount" to an agreement to eliminate discounts; "traditional per se rule against price-fixing" applied); Blackburn v. Sweeney, 53 F.3d 825 (7th Cir. 1995) (an agreement establishing geographic limitations on the areas in which lawyers could advertise, although they were free to practice law anywhere in the area, "sufficiently approximates an agreement to allocate markets, so that the per se rule of illegality applies"); United States v. Coop. Theatres of Ohio, Inc., 845 F.2d 1367 (6th Cir. 1988) (applying per se rule to agreement not to actively solicit a competitor's customers); United States v. Capitol Serv., Inc., 568 F. Supp. 134, 151-55 (E.D.Wis. 1983) (movie "splits" are type of price-fixing and unlawful per se, notwithstanding prior Justice Department view that rule of reason applied and the absence of a "chain of cases finding splits to be illegal"), aff'd, 756 F.2d 502 (7th Cir. 1985). 3. There can be no doubt that the sales volume allocation agreement alleged and proved in this case is a naked restraint on competition, and is thus unlawful per se. The conspirators had already agreed on prices, and had acted to limit output by agreeing not to build additional capacity. G.Ex. 10/12/93 1B46-S1 at 14. ADM had existing unused capacity, however, and Andreas threatened at the Irvine meeting to flood the market with lysine if the conspirators could not agree on a volume allocation. GA 100-01. Wilson later repeated that threat (GA 144). This ADM threat and demand for a volume allocation agreement meant that ADM would not utilize the full capacity of its plant and would restrict its sales to its allocated share of the market if its coconspirators similarly restricted their sales. See, e.g., G.Ex. 10/12/93 1B46-S1 at 14. The cartel responded by adopting a volume allocation agreement. Participants were assigned a volume of sales, and their monthly sales were to be checked to determine whether they had exceeded their quota. They agreed to "cut back" on volume as necessary to stay within the quota. By agreeing on actual tonnages each conspirator would sell for 1994 and 1995, the conspirators on two occasions directly agreed to restrain output. Further, the agreement as to percentage share was itself a device calculated to restrict cartel output and maintain high prices. By capping the individual participant's market share, the agreement eliminated each firm's incentive to seek additional sales by undercutting the agreed-on price.14 The district court instructed the jury that a volume allocation agreement is an agreement "to divide sales of a particular product among the various competitors," thereby identifying clearly the element that makes the volume allocation agreement in this case a per se offense. The court's example made clear that an agreement pursuant to which "two or more competitors agree among themselves that such competitor will limit its sales to a certain amount" is such an agreement. That instruction was correct and sufficient to explain the law governing naked horizontal volume allocation agreements. 4. Appellants nonetheless contend that the volume allocation agreement proved in this case should not have been treated as a per se offense.15 Their arguments are without merit. Appellants argue that the volume allocation agreement did not actually have the effect of diminishing output or competition in the United States (ABr. 31-33). The government, however, is not required to prove an actual effect on prices or output from per se unlawful conduct. Catalano, 446 U.S. at 649 ("when a particular concerted activity entails an obvious risk of anticompetitive impact with no apparent potentially redeeming value, the fact that a practice may turn out to be harmless in a particular set of circumstances will not prevent its being declared unlawful per se"). In any event, the volume allocation agreement functioned as intended by the cartel; the agreed-on price of lysine held relatively steady throughout 1994, and the conspirators reported that their 1994 sales closely matched their allocations. Tr. 1132-36, 4215-16; GA 160- 67. Even if output increased in 1994, that merely demonstrates that the cartel found it profitable to peg output at a slightly higher level; there is no reason to assume that 1994 output would not have been higher than it was if individual firms had been free to compete for sales in excess of their assigned quotas. Equally unavailing are appellants' arguments that the volume allocation agreement served procompetitive purposes. This volume allocation agreement was undertaken by a hard-core cartel; there is nothing in the record to suggest that the agreement was ancillary to any legitimate joint venture or other efficiency-enhancing integration of economic activity. Indeed, at trial, appellants conceded the existence of "a criminal cartel from Asia" that they knew "were price fixers" and admitted that they had attended meetings with members of this "criminal cartel." Tr. 765, 775; see also Tr. 761-62, 786, 830, 842, 5781-82. Appellants now belatedly argue (ABr. 34) that their restraints on competition were procompetitive because they kept firms from leaving the market. As the Supreme Court replied to a similar argument (defending price-fixing on the ground that it encouraged entry): If that potential justifies horizontal agreements among competitors imposing one kind of voluntary restraint or another on their competitive freedom, it would seem to follow that the more successful an agreement is in raising the price level, the safer it is from antitrust attack. Nothing could be more inconsistent with our cases. Catalano, 446 U.S. at 649. Similarly, appellants' claim that ADM was entitled to participate in a cartel because foreign competitors could otherwise reap the benefits of its efforts to promote lysine sales (ABr. 34) proves too much. Some free-riding by competitors is inevitable whenever a firm makes efforts to boost industry demand, but the antitrust laws do not provide blanket sanction to cartels as a solution. Appellants also assert (ABr. 35-36) that the sales volume allocation agreement was ancillary to a procompetitive information exchange. But there was no evidence of a procompetitive information exchange in this case. The conspirators exchanged information about future prices and sales, in furtherance of the cartel's efforts to raise price. Even if there had been such a procompetitive exchange, moreover, the sales volume allocation would not have been ancillary to it.16SeeGeneral Leaseways, 744 F.2d at 595 (per se rule applied when there was no organic connection between the restraint and the cooperative needs of the enterprise). Finally, appellants' complaint (ABr. 20, 24-25) that the jury should have been instructed that it had to find an output restriction is plainly wrong. The jury was correctly instructed, among other things, that it could not convict appellants unless it found that they had knowingly and intentionally become members of the conspiracy charged in the indictment by either agreeing to fix prices or allocating sales volumes and that sales volume allocation requires proof of an agreement to divide sales among the competitors. SA 482-491. There is no requirement in a per se case that the government prove an output restriction. That sales volume allocation agreements (like other naked restraints) "always or almost always tend to restrict competition and decrease output" simply explains why, if the jury finds such an agreement, the agreement is illegal as a matter of law. Broadcast Music, 441 U.S. at 19-20. 5. The district court also correctly observed that the sales volume allocation agreement in this case is per se unlawful because it was in furtherance of a price-fixing agreement. Appellants never disputed the existence of "a criminal cartel from Asia" that they knew was fixing prices. Tr. 765, 775. Moreover, the jury necessarily concluded that the evidence established the existence of the price-fixing conspiracy charged in the indictment because it convicted Whitacre.17 And it was this "criminal cartel" that appellants made more effective by persuading its members to agree to allocate their sales volumes. Accordingly, the sales volume allocation agreement was in furtherance of price-fixing that appellants facilitated rather than reported to the government. Appellants complain (ABr. 20) that the jury was not instructed that it must find that sales volume allocation was in furtherance of the price-fixing conspiracy. But a naked horizontal sales volume allocation is per se illegal; the jury need not make any additional findings about its purpose or effect. Further, the absence in the instruction of the words "in furtherance of the price-fixing conspiracy" was immaterial, because appellants conceded that a price-fixing conspiracy existed. If the jury found that the evidence showed the volume allocation, it necessarily also found that the allocation was in aid of the price-fixing -- because price-fixing was not contested, and because of the natural effect of output restrictions on price. 6. Finally, while the jury was instructed that it could convict if it found either a conspiracy to fix prices or a sales volume allocation conspiracy, there is no reason to believe that the jury convicted anyone of only allocating sales volumes. In convicting Whitacre, the jury necessarily concluded that the price-fixing conspiracy charged in the indictment existed before Whitacre became a cooperating witness in November 1992. The uncontradicted testimony concerning that period established that Wilson was the primary spokesperson for ADM at the Mexico City and Paris price-fixing meetings he attended and that Andreas was the only other ADM official who was aware of the real purpose of those meetings and had to approve any agreements made at those meetings. See pp. 3-4, supra. Accordingly, the most plausible interpretation of the jury's verdict is that it convicted all defendants of price-fixing and any error in the sales allocation jury instruction was harmless. Appellants were not prejudiced by evidence concerning an agreement to allocate sales volumes because that same evidence was admissible to prove price-fixing. And because there is sufficient evidence to support a finding that appellants conspired to fix prices, this Court can affirm the judgment on that basis alone. Griffin v. United States, 502 U.S. 46, 51-56 (1991); United States v. Gonzalez, 93 F.3d 311, 320-21 (7th Cir. 1996); United States v. Robinson, 96 F.3d 246, 250 (7th Cir. 1996); United States v. Cotton, 101 F.3d 52, 56 (7th Cir. 1996). III. After ADM Pled Guilty, The Cox Immunity Letter Conferred No Benefits On Appellants The district court correctly rejected appellants' argument (WBr. 21-26; ABr. 52-53) that they are third-party beneficiaries of an October 11, 1996, letter from the Antitrust Division to Cox's counsel, relating to a proffer of evidence by Cox. See, e.g., SA 31-39, 185-187. Cox was interviewed by the government on October 11 and 12, 1996, as a precondition to the government's execution of a plea agreement with ADM. SA 32. The ADM plea agreement provided for a reduction in fines in return for ADM's cooperation in the citric investigation. Id..
The interview with Cox provided the government with a preview of ADM's promised cooperation and enabled ADM to obtain a U.S.S.G. § 8C4.1 departure from the fine that it otherwise would have been required to pay on the citric count in the information. Id.; GA 190- 91. The ADM plea agreement explicitly excluded appellants from the immunity and non- prosecution protection extended to other ADM employees (GA 193-94). ADM was aware that the government intended to prosecute appellants and to use testimony and information given by cooperating ADM employees, including Cox, against them. Prior to interviewing Cox, the government provided a letter to his counsel that expressly referred to the "proposed [ADM] plea agreement" and stated that the government needed to interview Cox to assess the value of ADM's proffered cooperation, which included the cooperation of its employees. SA 27. The letter stated that the government had obtained a court order granting statutory immunity to Cox and that, if Cox was truthful and complete in providing information during the interview, "the United States and ADM will execute the contemplated plea agreement." SA 27-28. The letter acknowledged that statements made by Cox and information provided by him during the interview were covered by the immunity order and could not be used against him in a criminal prosecution. It then stated (SA 28): Further, the United States acknowledges that statements made by Mr. Cox and information provided by Mr. Cox during the interview are covered by Federal Rule of Criminal Procedure 11(e)(6) and also may not be used directly or indirectly against ADM or any of its employees, subsidiaries, or affiliates in any criminal prosecution.18 Rule 11(e)(6)(D) prohibits the use of statements made during plea bargain discussions that "do not result in a plea of guilty." The letter, extending Rule 11(e)(6), confirmed that not only Cox, but also ADM and its employees (including Andreas and Wilson) were protected from the government's use of Cox's statements if the plea agreement fell through after Cox was interviewed. In that unlikely event, the letter, coupled with Rule 11(e)(6), provided that ADM and its employees would be in no worse position than before Cox's cooperation. Once the plea agreement was signed and ADM pled guilty on October 15, 1996, the government was free to make use of Cox's statements against anyone but Cox. Indeed, it did use Cox's statements against ADM at the plea hearing without objection by ADM. GA 202-03. Appellants rely on the letter's final clause ("may not be used directly or indirectly against ADM or any of its employees") to argue that they are third-party beneficiaries of this agreement.19 They assert that the clause shows that the parties -- Cox, ADM and the government -- intended to prevent Cox's testimony from being used directly or indirectly against any ADM employee, even Wilson and Andreas, in any circumstance. This is the type of argument this Court has held "ignore[s] all common sense . . .[and] epitomizes why a lot of people hate lawyers." Wilson v. Washington, 138 F.3d 647, 650 (7th Cir. 1998), cert. denied, 119 S. Ct. 147 (1998). Most of the "clear" "propositions of law" that appellants cite in support of their argument (WBr. 22-23) are irrelevant. Unlike almost all of the cases appellants cite, this case does not involve any agreement that the government made with appellants; there is no letter to appellants promising them anything and no claim by appellants that the government misled them. And the only plea bargain at issue is the ADM plea bargain. Finally, appellants make no claim that they did anything in reliance on the Cox letter and, indeed, do not contend that they were even aware of the Cox letter prior to their indictment. United States v. Traynoff, 53 F.3d 168, 170-71 (7th Cir. 1995) (recognizing that government is not required to "fulfill every agreement or offer it makes" and refusing to enforce government agreement to dismiss a matter because the defendant had not acted in reliance on it). Accordingly, at best, appellants are third-party beneficiaries of the Cox letter. But exactly because any desperate defendant could claim to be the third-party beneficiary of an agreement to which he was not a party, appellants have the burden of proving that the letter was intended to benefit them as they claim. See, e.g., Corrugated Paper Prod., Inc. v. Longview Fibre Co., 868 F.2d 908, 910 (7th Cir. 1989); Williston on Contracts (3d ed. Jaeger) §356A at 836 & nn.3, 4. They do not come close to proving that the Cox letter conferred any benefits on them once ADM pled guilty. First, conspicuous by its absence in appellants' briefs is any reference to Fed.R.Crim.P. 11(e)(6), even though that rule is cited in the same sentence that the clause on which appellants rely appears and has been relied on by both the government and the district court (SA 186) in rejecting appellants' argument. As we have already noted, that reference confirms that any benefits conferred by the letter expired once ADM pled guilty. Moreover, it is manifest that the parties did not intend to deal with more than the Rule 11(e)(6)(D) contingency. Not only does the government deny any intention to confer any benefits on appellants, but neither Cox nor ADM (which received a similar letter) has ever claimed that the government violated any agreement with them, or filed anything suggesting that they intended the letter to benefit appellants if ADM pled guilty. Finally, contrary to appellant's assertions (WBr. 24), the district court correctly examined the surrounding circumstances to determine the intent of the parties. The letter itself referred to the proposed ADM plea agreement, and that agreement, while not filed until after Cox was interviewed, was substantially drafted before the Cox letter was sent, as the letter itself suggests.20 Moreover, the relation of the quoted clause to the rest of the sentence and the letter itself was not entirely clear from the letter itself. See, e.g., United States v. Rourke, 74 F.3d 802, 807 (7th Cir. 1996) (meaning of term not clear and definite; court properly turned to extrinsic evidence). Further, this Court, applying federal common law, looks to the surrounding circumstances to determine whether a contract involving the federal government creates a third- party beneficiary. See, e.g., Price v. Pierce, 823 F.2d 1114, 1121 (7th Cir. 1987); D'Amato v. Wisconsin Gas Co., 760 F.2d 1474, 1480-83 (7th Cir. 1985). The government would not simultaneously have both conditioned the plea agreement, which permits use by the government against Wilson and Andreas of information provided by ADM cooperating employees (GA 193-95), on Cox's satisfactory proffer, and promised not to use Cox's testimony against the very employees the government intended to prosecute. Nor could the government have used Cox's testimony at the plea hearing, without objection by ADM, if appellants' reading were correct. Further, appellants' reading is inconsistent with Paragraph 22 of the Plea Agreement (GA 199), which provides that it "constitutes the entire agreement between the United States and [ADM] concerning the disposition of the criminal charges in this case." In short, appellants' third-party beneficiary argument ignores both the plain language and context of the letter on which they rely and the contemporaneously-drafted ADM plea agreement. IV. Cox's Testimony About The Citric Conspiracy Was Properly Admitted The lysine conspiracy was consciously modeled on a price-fixing and volume allocation conspiracy in the citric industry, in which ADM participated. SA 96-98, 188-192. Indeed, Wilson repeatedly urged the conspirators to apply the citric model to lysine. E.g., GA 86 (Crouy notes); G.Ex. 4/28/93 1B43-S2 at 89-95, S4 at 181. At the Tokyo meeting in May, 1993, Wilson explained to the conspirators at length how the citric conspiracy worked, and how its format could be applied to lysine. G.Ex. 5/14/93 1B54-S1 at 1-11. Andreas was involved in three separate taped conversations during which the citric conspiracy was discussed. G.Ex. 10/12/93 1B46-S3 at 43-44)(Andreas stating lysine conspiracy is "not there yet" compared to citric conspiracy); G.Ex. 10/25/93 1B56-58-S1 at 159-161 (discussing submitting numbers to association, like citric); G.Ex. 10/13/94 1B121, 124-S1 at 14-16 (Andreas, Whitacre, and Wilson comparing roles in citric conspiracy with lysine conspiracy). In this Court, Andreas does not object to the numerous references to the citric conspiracy that the jury heard on tape. Rather, he contends (ABr. 42-46) that Cox's testimony about the citric conspiracy should not have been admitted against him. He asserts that there is no evidence that he was involved in the citric conspiracy, that Cox's testimony "did not implicate Andreas in the citric conspiracy" (ABr. 45), and that he should have received a limiting instruction preventing the jury from using Cox's testimony against him.21 The district court, however, did not abuse its discretion in admitting Cox's testimony. United States v. Adames, 56 F.3d 737, 742 (7th Cir. 1995); United States v. Ramirez, 45 F.3d 1096, 1101 (7th Cir. 1995); United States v. Mounts, 35 F.3d 1208, 1214 (7th Cir. 1994) ("An abuse of discretion occurs only when no reasonable person could take the view of the trial court"). 1. Because Andreas does not object to the numerous references to the citric conspiracy on tape, claims that any discussions of citric during taped conversations involving him were "innocuous" (ABr. 43), and contends that Cox's testimony "did not implicate" him in that conspiracy (ABr. 45), Andreas cannot argue that he was prejudiced by Cox's testimony. Fed. R. Crim. P. 52(a). And insofar as Andreas contends that Cox's testimony did not implicate him, Fed. R. Evid. 404(b) has no application, because that rule addresses only evidence of crimes or wrongs committed by the person against whom the evidence is offered. United States v. Gonzalez-Sanchez, 825 F.2d 572, 579-83 (1st Cir. 1987); United States v. Morano, 697 F.2d 923, 926 (11th Cir. 1983). Further, Rule 404(b) did not apply to Cox's testimony about citric because it was "directly related to the charged offense" and it was not offered against Andreas to prove "other crimes, wrongs, or acts." To the extent that evidence is of the same crime or wrong that is charged or alleged, Rule 404(b) by its terms simply does not apply.22 As the Advisory Committee Notes, 1991 Amendment, state, the Rule "does not extend to evidence of acts which are ‘intrinsic' to the charged offense." The district court correctly held that the citric evidence was intrinsic because it showed how Wilson obtained the expertise to organize the lysine conspiracy, the origin of the lysine conspiracy's structure, and how the lysine conspiracy was intended to function. SA 189-90; see, e.g., United States v. Akinrinade, 61 F.3d 1279, 1285-86 (7th Cir. 1995) ("evidence concerning the chronological unfolding of events that led to an indictment, or other circumstances surrounding the crime," not within 404(b)); Adames, 56 F.3d at 742; Ramirez, 45 F.3d at 1101-02 (evidence concerning marijuana and a gun found in defendant's apartment was admitted at his trial for conspiring and attempting to possess cocaine with intent to distribute). AccordUnited States v. Gibson, 170 F.3d 673, 680-83 (7th Cir. 1999). The conspirators, particularly Wilson but also Andreas on three separate occasions, repeatedly discussed the citric conspiracy in the middle of their recorded discussions of the lysine conspiracy. Andreas' failure to object on appeal to these recorded discussions of the citric conspiracy is an implicit acknowledgment of the direct relationship between the two conspiracies. Gibson, 170 F.3d at 682 ("gun discussions were so intertwined with the drug negotiations that admission of the portions of the taped conversations pertaining to gun sales was necessary to enable the jury to fully understand and make sense of the underlying negotiations for the sale of crack cocaine"). Because evidence concerning the citric conspiracy was not subject to Rule 404(b), Cox's testimony explaining the citric conspiracy was admissible if it was relevant and did not result in "unfair prejudice" under Fed.R.Evid. 403. Advisory Committee Notes on Rule 404(b), 1972 Proposed Rules. The citric evidence was probative of Wilson's guilt in the lysine conspiracy. Wilson (who does not object to citric evidence on appeal) repeatedly compared the citric conspiracy to lysine, and he put his intent at issue when he claimed that he was only pretending to fix lysine prices. Evidence that directly implicates one conspirator is admissible during a conspiracy trial whether or not it implicates other conspirators. Cox's testimony was also relevant to Andreas, because the testimony helped the jury to interpret taped conversations, some of which involved Andreas, about the lysine and citric conspiracies, and to understand the origins and operation of the lysine conspiracy. While Andreas dismisses those taped conversations as "innocuous" (ABr. 43), the jury had the right to hear about the citric conspiracy. Ramirez, 45 F.3d at 1101. Cox provided the evidence necessary to understand what Wilson and Andreas were talking about when they discussed citric and lysine. Gibson, 170 F.3d at 681-82; Ramirez, 45 F.3d at 1102-03. Cox's testimony also rebutted Andreas' defense that ADM does not make deals and never intended to agree to fix lysine prices or allocate sales volumes. Park, 421 U.S. at 676-78 (evidence of prior violations admissible to rebut defense that defendant had justifiably relied on subordinates); Ramirez, 45 F.3d at 1102 (evidence concerning marijuana "directly relevant" to defendant's "claim that he was an innocent bystander rather than a member of the [cocaine] conspiracy"). Finally, the district court correctly ruled (SA 98, 192) that Rule 403 did not preclude Cox's testimony because the evidence, although inculpatory, was not unfair. It was not likely to evoke an emotional response from the jury causing it to base its decision on considerations apart from the evidence. See, e.g., Gibson, 170 F.3d at 682-83; Adames, 56 F.3d at 742; Ramirez, 45 F.3d at 1103. 2. Even assuming that 404(b) applied to Cox's testimony, the district court did not abuse its discretion in admitting the evidence. United States v. Long, 86 F.3d 81, 83 (7th Cir. 1996) (listing four Rule 404(b) criteria). Cox's testimony was relevant and related to matters other than propensity to commit a crime -- showing intent to conspire, an important issue in the case, and the nature, origin, and context of the lysine conspiracy. It also placed in context other references at trial to citric. SA 97-98, 189-92. There is no dispute as to the existence of the citric conspiracy. And the probative value of the citric evidence far outweighed any possible danger of unfair prejudice (Fed. R. Evid. 403). SA 97-98, 198-91. Accordingly, nothing in 404(b), even if it applied, precluded admission of Cox's testimony. Finally, Andreas was not unfairly deprived of a limiting instruction (ABr. 45). The court declined to give a limiting instruction during trial but told appellants that they could renew their requests at the conclusion of the case (Tr. 2710-12). Andreas did not do so;23 the only relevant instruction that he offered (#7) (GA 182) would have precluded the jury from considering Cox's testimony against Andreas for any purpose. Since the district court correctly held that Cox's testimony was admissible against Andreas, that instruction was wrong and the district court did not abuse its discretion in refusing to give that instruction. A district court is not required to edit incorrect limiting instructions submitted by a defendant or to invent a limiting instruction that the defense has not requested. United States v. Shelton, 669 F.2d 446, 465 (7th Cir. 1982) ("[t]here is no requirement to give an instruction that is inaccurate or misleading"). Indeed, the district court could have reasonably concluded that having lost the battle to keep the jury from considering Cox's testimony against him, Andreas preferred to rely on his argument that Cox had not implicated him in the citric conspiracy and did not want any limiting instruction. V. Evidentiary Rulings Concerning the Whitacre Tapes Were Correct Appellants contend (WBr. 30-38, ABr. 53) that the district court erred in admitting into evidence the tapes made by Whitacre24 and in excluding (SA 461) testimony of FBI agent Athena Varounis, concerning later-retracted statements that Whitacre made to her (ABr. 46-48, WBr. 3). The district court, however, did not abuse its discretion when it admitted the tapes into evidence and excluded Agent Varounis' testimony. SeeUnited States v. Brady, 145 F.3d 889, 892 (7th Cir. 1998)(standard of review for evidentiary rulings). A. Appellants Failed to Establish Their Standing To Suppress The Whitacre Tapes The district court correctly held (SA 47, 62-63A) that appellants had failed to meet their initial burden of establishing standing to suppress the Whitacre tapes. Each failed to identify which of the tapes that they sought to suppress actually contained their voices. Id. Under both Title III of the Omnibus Crime Control and Safe Streets Act of 1968 ("Title III"), 18 U.S.C. 2510 et. seq., and the Fourth Amendment, a defendant cannot argue that evidence must be excluded because someone else's rights were violated. United States v. Williams, 737 F.2d 594, 616 (7th Cir. 1984); Womack v. Meiszner, 466 F.2d 555, 558 (7th Cir. 1972). A person who was not a party to an intercepted conversation does not have standing to seek suppression of evidence gathered from the interceptions. United States v. Thompson, 944 F.2d 1331, 1336, 1339 (7th Cir. 1991). Coconspirators are not entitled to special status. Alderman v. United States, 394 U.S. 165, 171-172 (1969). The burden of proof was on appellants to establish standing. See, e.g., Rakas v. Illinois, 439 U.S. 128, 132 n.1 (1978) ("proponent of a motion to suppress has the burden of establishing that his own Fourth Amendment rights were violated"); United States v. Williams, 580 F.2d 578, 583 (D.C.Cir. 1978); United States v. Montoya-Eschevarria, 892 F. Supp. 104, 106 (S.D.N.Y. 1995). Appellants should have itemized on the record, under penalty of perjury, the recordings on which their voices appeared. Id. This was not merely an academic exercise, because, in the absence of such a statement, they remained free to claim at trial that their voices were not captured on tape. Id. Indeed, appellants did contend that they had been framed through "manipulation and fabrication of unreliable evidence." See, e.g., DktNo. 93 at 9. Moreover, some of the tapes played at trial do not contain their voices but rather record conversations between Whitacre and one of the government's trial witnesses. E.g., G.Ex. 11/9/92 1B1; G.Ex. 7/13/93 1B21; G.Ex. 11/30/93 1B69.
B. The Tapes Were Admissible Title III (see 18 U.S.C. 2511(1)), generally prohibits intentionally intercepting oral communications (for example, by tape recording). An interception is lawful, however, if the person "is a party to the communication" and "acting under color of law to intercept" the communication (18 U.S.C. 2511(2)(c)). An interception is also lawful "where such person is a party to the communication," unless the communication is intercepted "for the purpose of committing any criminal or tortious act" in violation of state or federal law. 18 U.S.C. 2511(2)(d). Contrary to appellants' contention (WBr. 35-38), the tapes were admissible (see 18 U.S.C. 2515) under both sections. 1. Under Color of Law. Cooperating witnesses "who record private conversations at the direction of government investigators are ‘acting under color of law,'" under 18 U.S.C. 2511(2)(c). United States v. Haimowitz, 725 F.2d 1561, 1582 (11th Cir. 1984). See also, e.g., Obron Atlantic Corp. v. Barr, 990 F.2d 861, 864 (6th Cir. 1993); United States v. Shields, 675 F.2d 1152, 1156-57 (11th Cir. 1982); United States v. Tousant, 619 F.2d 810, 813 (9th Cir. 1980), United States v. Craig, 573 F.2d 455, 473, 474 n.13, 476 (7th Cir. 1977). Appellants argue that Whitacre was not acting "under color of law" because the government "exercised practically no control at all over [him]." WBr. 36-37. The district court, however, disagreed, finding that "Whitacre was supervised, and directed in his cooperation with the government" (SA 49, 63-63A). There is no reason for this Court to disturb this basically factual determination. The initial tape recording that Whitacre made on November 9, 1992, of his conversation with Yamamoto to demonstrate the existence of the conspiracy was directly monitored by FBI agent Brian Shepard. Tr. 2843-47. Whitacre thereafter signed a cooperation agreement (SA 10- 12 (text), 890-92), in which he agreed to act in a "covert capacity" "solely at the direction and under the supervision of agents of the FBI and [the U.S. Attorney's] office" and agreed to follow all their directions. See also G.Ex. 52 (taping consent forms signed by Whitacre). Whitacre's status was "cooperating witness" -- that is, an individual whose identity is concealed until he testifies and who furnishes substantial information in an operational role, collecting evidence, at the direction of the FBI. SA 877-78, 897; Tr. 2894-96.25 The FBI gave Whitacre a microcassette recorder and tapes and directed him how to use them. It also sometimes gave him a reel-to-reel Nagra recorder, made specifically for law enforcement uses. STr. 145, 574-75; Tr. 2883-84. Agent Shepard maintained and tested the devices; he affixed them to Whitacre's body on occasion. Tr. 2885-86. Whitacre made 120 to 130 tapes during the investigation. Tr. 2890. The FBI scheduled frequent meetings with Whitacre to discuss recent and expected developments, talk about future taping, and pick up tapes and documents. Tr. 2889-90, 3780- 82.26 And it cautioned Whitacre when he exceeded his instructions. STr. 557-59; Tr. 2904-05; compare WBr. 5 n.4. FBI Form 302's memorialize more than 160 meetings, on average at least a meeting per week. Tr. 3994-96. The FBI agents often picked up the tapes the day they were made; usually pick-up was within two days. STr. 576; Tr. 2890-91, 3994. Fewer tapes were collected after the conspiracy was well-established. Tr. 2906-07. An FBI agent listened to almost all the tapes as soon as they were received, and discussed them with Whitacre. STr. 60, 197; Tr. 2891. There were several layers of review of Whitacre's actions both within the FBI and by Department of Justice attorneys. Tr. 2898. Whitacre was instructed to tape particular scheduled meetings (STr. 576) and entire conversations involving violations of federal criminal statutes, but not to record legitimate ADM business. SA 886-87, 887A; Tr. 2899. Whitacre had to have discretion concerning which conversations he taped because it was not possible to run tapes constantly during the 2 1/2-year investigation. Further, the FBI could not attend meetings within ADM to supervise Whitacre, or get transmissions from the ADM plant, or infiltrate the lysine conspiracy. STr. 76, Tr. 2899- 2901. In these circumstances, Whitacre was clearly acting under color of law in making the audiotapes. He had formal status as a cooperating witness, and his recording activities were supervised to the extent possible, considering the nature of the investigation. See SA 63-63A. Craig, on which appellants principally rely (WBr. 36), is not to the contrary; this Court held only that the degree of supervision in Craig was adequate under Section 2511(2)(c), not that the same degree of supervision was necessary in every case. 573 F.2d at 476. Indeed, Whitacre's supervision by the FBI was greater than that approved in Obron. In Obron, the government by letter acknowledged witness Owen's cooperation and set out terms, and it instructed him on how to conduct himself during recording. Owen used his own equipment to record and decided which conversations to tape. In contravention of instructions, Owen failed to keep a log of conversations. There were no procedures for regular meetings, and contact for a 10-month period was negligible. In total, there were about 50 contacts between Owen and DOJ. 990 F.2d at 862-65. In both this case and Obron, the "undisputed evidence of continuous, albeit irregular, contact between [the cooperating witness] and [DOJ], following their explicit request that he assist them in this very way and their instructions on how to conduct the calls, outweighs the lack of direct DOJ supervision over the recording process ..." Id. at 865.27 2. Criminal or Tortious Purpose. Whitacre's taping was not "for the purpose of committing any criminal or tortious act in violation of the Constitution or laws of the United States or of any State." 18 U.S.C. 2511(2)(d). See also, Thomas v. Pearl, 998 F.2d 447, 451 n.5 (7th Cir. 1993) (person acting under color of law is, by definition, not committing a crime or tort). Appellants had the burden of proving an unlawful purpose by a preponderance of the evidence. United States v. Zarnes, 33 F.3d 1454, 1469 (7th Cir. 1994). While they charge that Whitacre made the tapes in hopes of advancing his career at ADM, by discrediting other ADM officials (WBr. 37), they utterly fail to explain why "career advancement" (id.) is tortious or criminal.28 Further, to the extent that Whitacre made the tapes to curry favor with the government and obtain leniency, taping a conversation in hopes of turning the tape over to the government to obtain a better deal for oneself is not an unlawful purpose under Section 2511(2)(d). Zarnes, 33 F.3d at 1469 (collecting cases). Appellants also argue (WBr. 37-38) that Whitacre made the tapes in order to "escape[] investigation and prosecution for his extortion attempt" and to "ke[ep] his embezzlement from being discovered,"29 but they do not substantiate their claim. Under subsection (d), the "purpose" of the taping must be "committing any criminal ... act" -- such as blackmail or extortion. By- Prod. Corp. v. Armen-Berry Co., 668 F.2d 956, 960 (7th Cir. 1982); United States v. Jones, 542 F.2d 661, 670 n.18 (6th Cir. 1976). This statutory formulation does not appear to encompass taping as a diversionary tactic, to conceal, rather than commit, a crime. As to appellants' unproven claim that Whitacre intended fraudulently to appropriate the $6 million that Ajinomoto allegedly was demanding from ADM, only one conspiracy-related tape was made before Whitacre admitted to the FBI that he had fabricated the virus sabotage story. Accordingly, the taping can hardly have diverted the FBI from this matter. And appellants failed to explain how taping provided cover for Whitacre's admitted embezzlement activities. Shepard testified that he did not know about or suspect the embezzlement while Whitacre was making tapes for the FBI (SA 370B; Tr. 2866), and appellants did not show how the trail of the lysine conspiracy could have led to evidence of Whitacre's embezzlement, but was deflected by the taping. In short, as the district court held (SA 49-50), appellants "failed to establish a logical link between Whitacre's alleged criminal motives and his actions." C. Admission of Tapes Recorded by Whitacre Did Not Deny Appellants Due Process Appellants contend (WBr. 34-35) that the Whitacre-made tapes were so unreliable that their admission denied them due process. The district court, however, correctly concluded after an evidentiary hearing that the tapes were admissible. While appellants contend that Whitacre selectively recorded conversations and omitted exculpatory matters, they have not identified any specific exculpatory matters that could have been taped but were not.</ |