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The President's Favors to Tyson and IBP:

Consolidation, Perks and Cheap Labor

From The AGRIBUSINESS EXAMINER #101
Montioring Corporate Agribusiness From a Public Interest Perspective
A.V. Krebs Editor\Publisher
January 11, 2001

TYSON FOODS VICTORIOUS IN IBP BIDDING WAR
NOW NATION’S NO. 1 BEEF, POULTRY PROCESSOR


Frustrating efforts by Smithfield Foods, the nation’s largest pork producer, Tyson Foods Inc., the nation’s largest poultry producer, has agreed to buy IBP Inc., the nation’s largest beef processor for $4.7 billion in cash, stock and debt.

Tyson will pay $30 for each IBP share, approximately half in cash and half in stock and also will assume about $1.5 billion in IBP debt and other obligations.

"The acquisition will make Tyson the biggest meat producer in the U.S. by far.

SETUP ROLE OF THE CLINTON ADMINISTRATION
IN TYSON FOOD-IBP PURCHASE SUGGESTED


As the size and scope of Arkansas' Tyson Foods, plans to buy IBP, the nation’s largest red meat producer for $3.2 billion dollars was being analyzed by the nation’s media and business press last week News Max’s Carl Limbacher was reporting on a curious history between the two corporate giants that might be worth further exploration by federal investigators.

He notes that the most recent purchase by Tyson of IBP consummated a relationship that began with another Tyson takeover in 1997.

It was at that time that Tyson’s Arkansas neighbor Hudson Foods, a rival chicken processor with its own beef division, was the object of attention by Tyson. However, Hudson wasn't interested --- until the Clinton Agriculture Department stepped in to police an E. coli outbreak at one of Hudson's plants.

On August 12, 1997, Hudson issued a recall for 20,000 pounds of frozen hamburger when 16 people were sickened --- none fatally --- after eating undercooked burgers. Clinton Agriculture Secretary Dan Glickman later determined the meat was contaminated by a potentially deadly strain of E. coli. (Issue #8)

The Arkansas Democrat-Gazette described what happened to Hudson Foods next:

"Agriculture Secretary Dan Glickman used strong terms to characterize the Hudson investigation, which started with five investigators dubbed a SWAT team. It culminated in a 'non-negotiable' gauntlet for Hudson to recall that product and close the Columbus plant --- an action that the USDA had no power to enforce.

"The agency can only withdraw its inspectors,” the Democrat-Gazette added, “but that has the same hostage holding results for companies who can't sell their products without a government inspection seal."

By the time Glickman's crew was finished, Limbacher notes, Hudson had to recall a crippling 25 million pounds of beef, costing the company its largest customer, Burger King.

The Wall Street Journal also took note of the Clinton administration's heavy-handed tactics.

"Hudson's rapid tailspin has stunned some meat industry executives, who blame the record beef recall pushed by the Agriculture Department for breaking the back of Hudson. `What happened to Hudson Foods doesn't make sense,' said Patrick Boyle, president of the American Meat Institute, a meatpacking trade group. ..."

The Journal also noted that Hudson's brush with Glickman's inspectors made Tyson's buyout bid an offer the company couldn't refuse.

"Hudson and Tyson, which are neighbors in Northwest Arkansas, had spoken casually about a merger 'for about ten years,' but the decision to sell out now was prompted by the beef recall . . . The move by Tyson of Springdale, Arkansas would enlarge its position as the nation's largest poultry producer . . The acquisition 'adds beautifully to Tyson's distribution and production system,' said Leonard Teitlebaum, analyst at Merrill Lynch & Co."

The only problem was that Tyson didn't want to absorb Hudson's beef-processing division --- the now-shuttered operation that made it necessary for Hudson to sell in the first place.

IBP, which had been a major supplier to the Hudson plant, took the now defunct beef plant off Hudson's hands for what the Journal described as "an undisclosed amount."

But the story continues, Limbacher notes, for in the intervening years, IBP's "good deed" seems to have been rewarded, often through the good graces of the Clinton administration's Immigration and Naturalization Service (INS).

One way the beef giant had become dominant in its field was by recruiting low-skilled non-union foreign workers to staff its slaughterhouses, where the work is always arduous and often dangerous. IBP had been actively recruiting laborers from all over the world for years.

A little more than a year after IBP helped facilitate Tyson's takeover of Hudson, the Journal explored the company's practice of hiring foreign workers under the headline: "With Help from INS, U.S. Meatpacker Taps Mexican Work Force."

"So why isn't the INS turning its searchlights on IBP's Mexico campaign?," the Journal asked. "Why, instead, is the federal agency hailing IBP as a model of cooperation? The answer reflects the complex interplay between public policy, a company's economic needs and a government agency's political interests," reported the paper.

“Complex interplay?” Limbacher scoffs, “basically, in 1996 the Clinton INS offered the beef giant a program called Basic Pilot, which was designed to help big employers of foreign labor avoid undocumented workers and comply with immigration laws.”

But in practice, he adds, Basic Pilot often meant that immigration laws were ignored altogether. The meatpacking giant, which was hit by INS raids six times between 1994 and 1997 (the year of the Hudson buyout), hasn't had a single INS raid since. John Nathan, the INS official overseeing the program, told the Journal that "the INS assumes a high degree of compliance" with Basic Pilot.

“And IBP's good fortune didn't end there,” Limbacher continues, “turns out the Clinton administration's Bosnian refugee resettlement efforts also helped to keep labor costs down. Since 1995, for instance, the town of Waterloo, Iowa --- population 65,000 - has been swamped with 6,000 Bosnian refugees, many of whom wound up working for the No. 1 local employer, IBP.”

Until recently, IBP's 2,000-strong Waterloo workforce was one-third Bosnian. Most refugee families that settle there have a family member who at one time or another worked for the meatpacking giant. In fact, the meatpacking industry has a history of recruiting on the ground in Yugoslavia. But during the Clinton years, companies like IBP haven't had to travel that far.

Since 1995, the Clinton INS has resettled over 80,000 Balkan refugees, mainly Bosnian Muslims, primarily in America's Midwest. The immigrant deluge has earned Iowa the distinction of being the only state in the union with its own refugee bureau.

So, as Limbacher concludes his intriquing story, “perhaps it's fitting that IBP should finally be absorbed by Tyson Foods, with its long history of financial backing of both Bill and Hillary Clinton, especially since it was the Clinton Agriculture Department's heavy hand that brought the two meat processing giants together in the first place.”


CONVICTED TYSON FOOD EXECUTIVE
PARDONED BY DEPARTING BILL CLINTON

Archie Schaffer III, the chief spokesman for Tyson Foods, the nation’s largest poultry producer, was convicted by a jury under a 1907 law of trying to influence agricultural policy by arranging for former USDA Secretary Mike Espy to attend a Tyson birthday party in Arkansas in 1993. The sentencing of Schaffer was one of the final items in Independent Counsel Donald Smaltz's six-year, $23 million investigation of Espy. Another jury acquitted Espy in December 1998.

Last week Bill Clinton in the waning days of his presidency and who throughout his personal and political life has numbered Don Tyson and his Arkansas company as a key supporter and contributor, granted a pardon to Schaffer.

Arkansas Republicans and Democrats had urged Clinton to pardon Schaffer, arguing the spokesman was convicted under an obscure law by an independent counsel seeking to build a case against Espy. While the federal judge who oversaw the case said he believed Schaffer was innocent and twice tried to acquit him, he was reversed by an appeals court.

Thus, U.S. District Judge James Robertson reluctantly sentenced Schaffer to a year and one day in prison and a $5,000 fine, the minimum that he said was allowed under the Meat Inspection Act. The extra prison day would have made Schaffer eligible for good-behavior credits that could free him nearly two months early, the judge said.

Besides the pardon pleas, Schaffer supporters wrote nearly 100 letters to
Robertson asking that he show leniency. Schaffer, the nephew of the former
Arkansas governor and U.S. Sen. Dale Bumpers, Dem.-Arkansas, served in Bumpers' administrations and led a business group studying educational reforms during Clinton's tenure as governor.

Pleading guilty to giving Espy $12,000 in illegal gratuities, Tyson Foods, consented to pay the federal government $4 million in fines and $2 million in costs. Tyson chairman Don Tyson and his son John Tyson were also granted immunity from further prosecution.

While the media was reporting simply that independent counsel Donald Smaltz’s investigation centered on “favors from large companies with important interests before the government,” court papers stated that at the time it was bestowing gifts on Espy, Tyson Foods was urging USDA to go slow on imposing new meat and poultry handling instructions.

Smaltz's office said prompt imposition of the new rule would have cost Tyson Foods $30 million, although ultimately a court order blocked enforcement of the rule. It was also believed that Espy’s coziness with Tyson was the reason he hesitated to remove holdover appointees who were helping to block stricter regulation of meat and poultry.


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