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U.S. unit of Bayer fined $50 million in citrus price-fixing case

January 30, 1997

WASHINGTON (AP) _ A U.S.-based unit of the drug and chemical giant Bayer AG agreed to pay a $50 million fine Wednesday to settle criminal price-fixing charges involving the worldwide sale of citric acid, a widely used ingredient in soft drinks and processed foods.

The Justice Department said the penalty against Haarmann & Reimer and a senior executive, Hans Hartmann, was the second-largest criminal antitrust fine in the department’s history.

Citric acid _ an additive to detergents, cosmetics, and foods _ has a worldwide market value exceeding $1 billion a year, said Joel Klein, the agency’s antitrust division chief.

``We will not tolerate international conspiracies that defraud American consumers,″ Attorney General Janet Reno said in a statement.

The case is the fourth round of charges in the department’s international investigation of price fixing in the food and livestock feed additives industry, which reaches from the U.S. to Europe and Asia. It’s one of the largest conspiracies the department has ever prosecuted.

``This again underscores the antitrust division’s strong commitment to ferret out worldwide cartels that harm U.S. consumers and to chase down these people throughout the world in order to bring them to justice,″ said Joel Klein, the agency’s antitrust division chief.

Last year, the Justice Department fined Archer Daniels Midland $70 million for price fixing in a case involving lysine, a popular additive to animal feed, and $30 million for citrus price fixing. In addition, two Japanese companies and a Korean business agreed to settle charges last August involving lysine price fixing.

So far, the department has recovered $170 million in criminal fines since the first charges were brought in August 1996.

Haarmann and the executive Hartmann pleaded guilty in U.S. District Court in San Francisco later in the day and were sentenced by U.S. District Judge Fern Smith. Hartmann was fined $150,000, with no jail time. The case was filed in San Francisco because the Justice Department’s office there played a central role in the investigation.

Haarmann & Reimer is a New Jersey-based affiliate of Bayer AG, the German industrial giant that’s best known as the maker of Bayer aspirin.

The company pleaded guilty to one count of price fixing of citric acid and agreed to pay the $50 million fine in installments over five years. Hartmann, a former director of Haarmann & Reimer, also pleaded guilty to one count.

Justice Department investigators allege Hartmann and Haarmann & Reimer worked with a group of unidentified corporations to suppress and eliminate competition in the citric acid market from July 1991 to June 1995. They also were accused of meeting with co-conspirators to set prices.

At the San Francisco hearing, Justice Department lawyer Phillip H. Warren said the company’s U.S. sales were $400 million during the five years of the price-fixing conspiracy, and the fine under federal sentencing guidelines would normally be between $128 million and $256 million.

He told Smith the reduced penalty was justified by the company’s cooperation and ``the significant role Haarmann & Reimer played in securing the cooperation of other conspirators and getting them to come forward.″ He declined to identify any other conspirators or describe the extent of the conspiracy when questioned by reporters.

Warren told Smith that under the price-fixing agreement, each company was assigned a certain percentage of its worldwide sales, down to a tenth of a percentage point, as its maximum U.S. sales volume. The companies monitored the agreement closely, requiring those who exceeded their allocation to buy the excess production of other companies, he said.

Haarmann & Reimer’s chairman, Richard L. White, pleaded guilty on the company’s behalf.

``We communicated with our competitors with the intent to fix prices of citric acid in the United States,″ White told the judge.

The Justice criminal investigation is continuing.

Separately, Haarmann & Reimer in December proposed a settlement to a related private lawsuit by paying $46 million to customers. A Haarmann & Reimer spokesman said that settlement is awaiting court approval.

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