Were you aware of this? ADM IMPORTS alcohol from EUROPE to make its ethanol.
Wine-Alcohol Trade Is Investigated
In Europe for Possible Corruption
By BRANDON MITCHENER
Staff Reporter of THE WALL STREET JOURNAL
BRUSSELS -- The European Union's main antifraud office is investigating the wine-alcohol trade for possible corruption, the office confirmed.
The EU sells undrinkable wine alcohol to bidders at public auctions several times a year to stabilize prices for regular wine in Europe. Investigators are looking into whether certain traders manipulated the system. European wine alcohol is used in the U.S. by Archer-Daniels-Midland Co. and others to make ethanol, which is blended with gasoline to reduce pollution. The EU confirmed it was investigating the issue after allegations were raised in the U.S. Congress that ADM colluded with other bidders at European wine auctions.
The European Anti-Fraud Office started its investigation in 1998, said spokesman Alessandro Buttice. He said the office "is investigating suspicions of fraud and possible manipulation of the market."
People familiar with the case said the probe was looking into possible corruption of EU officials, and into whether some of the wine alcohol had been doctored and sold as regular wine in the Caribbean, where some wine alcohol destined for the U.S. is processed. The EU props up wine prices by buying huge vats of low-quality wine from massive overproduction in Spain, Italy and France. That wine is distilled to a brew that is over 95% pure alcohol and is auctioned a few times a year, typically at a loss.
The wine-alcohol auctions are run by the Wine Management Committee of the EU's executive arm, the European Commission. The commission said an auction scheduled for last October was suspended after the commission's agriculture service became suspicious.
For example, a Swedish company paid as much as ?22.98 ($20.51) per hectoliter for 50,000 hectoliters in a June 2001 auction held for those who would use the product within the EU, commission records show, at a time when wine alcohol at auctions for export was fetching less than ?10 per hectoliter.
Commission records also show that at one auction for exporters held last July, ED&F Man Alcohols Ltd. paid between ?10.03 and ?10.48 per hectoliter for wine alcohol to be processed in El Salvador, Jamaica and Costa Rica and then exported to the U.S. At the same auction, ADM Ingredients Ltd., a U.K. unit of Archer-Daniels-Midland, bought 50,000 liters for processing in Costa Rica for ?10.51 per hectoliter.
In light of the allegations in the U.S. Congress, the EU antifraud office said it may seek the cooperation of the U.S. Customs Service, the U.S. Federal Bureau of Investigation or other authorities. The EU office has no power to pursue criminal prosecutions.
ADM is "looking into" the allegations raised in the U.S. but hasn't found relevant company documents, Larry Cunningham, ADM's senior vice president of corporate affairs, has said. George Fitch, a Virginia consultant who lobbies in Brussels to make more wine available to ADM and others, has said the EU's action is part of an effort to increase revenue. He has called allegations of collusion in bidding "utter nonsense." ED&F Man didn't return calls seeking comment on a story published in Thursday's Wall Street Journal.
-- Glenn Simpson in Washington contributed to this article.
Write to Brandon Mitchener at brandon.mitchener@wsj.com
Updated April 26, 2002 4:26 a.m. EDT
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