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Is There Collusion On
South African Citrus Prices?

This is, at least for now, a small story. We hope it will fade away.

Thursday morning our phone here at Pundit Central began ringing off the hook as the usual assortment that calls in on these stories started to call in.

There were friends of the Pundit who call to help us stay informed, competitors with things to gain, disgruntled employees, suppliers and customers.

The information they gave was simple:

Agents from the FBI office in Atlanta coordinated raids on both DNE and Seald-Sweet to remove documents and computer files from their offices while simultaneously showing up at the New Jersey office of Fisher Capespan with a subpoena for the company’s President. We are told that other citrus companies have also been asked for information.

Our callers claim that the focus of the investigation is alleged price collusion on South African citrus. Nobody has even been charged with any crime much less convicted.

Seald Sweet issued the following statement:


Premium Citrus Supplier Continues to Provide Fresh Product to Customers

VERO BEACH, FLA. — Jan. 19, 2007 — As part of the Department of Justice’s preliminary investigation of the fresh citrus industry, Seald Sweet is cooperating in all respects with the Department’s request for information.

Seald Sweet’s operations continue to run normally; the company experienced a temporary impact in administrative functions yesterday only, as it complied with the Department’s request issued to Seald Sweet and other citrus companies on Jan. 18.

“We have communicated with our customers and growers that we continue to do business as usual,” said David Mixon, executive vice president of Seald Sweet. “The preliminary investigation will not affect our normal, ongoing relationships with our growers or our customers.”

“Seald Sweet has not been charged and denies any wrongdoing; there is no one company being singled out. At Seald Sweet we are cooperating with the Department in its investigation,” said Mayda Sotomayor-Kirk, executive vice president of Seald Sweet.

DNE issued a statement of its own:

Statement from Greg Nelson, President and CEO of DNE World Fruit Sales:

Yesterday, we were informed that the U.S. Department of Justice has initiated an investigation of alleged price-fixing within the citrus industry. DNE has cooperated and fully complied with all requests for information from the Justice Department. We know we have nothing to hide.

Now and always, we at DNE are committed to uphold the integrity and high business ethics set by our Company founder, Bernard A. Egan.

We apologize for any inconvenience which this disruption may have caused for you. Our sales and office operations are now back in high gear.

We were able to speak with Mark Hanks, Vice President, DNE World Fruit Sales:

We did get a visit from the FBI yesterday initiating investigation of alleged price fixing within the citrus industry.

The FBI met with me personally. It was the FBI group out of Atlanta. We talked and I believe they have a better understanding that this is a very competitive business. And in fact I emphasized that Sealed Sweet is one of our biggest competitors. It makes no sense that we would ever be collaborating on pricing. We’re all competing for customers and growers and the premise of the investigation is baseless.

We have no idea where this accusation arose, but we can only think its coming from someone thrown out of the deal or who can’t buy on a direct basis. We are cooperating fully and have fulfilled all FBI requests.

Since Bernie Egan founded this company, we have continued to uphold his integrity and high ethics. This has been very upsetting, and in the middle of our season caused disruption to our customers, Our company wasn’t functioning yesterday. It had to shut down, and phones weren’t working. Everyone had to step away from their computers. But I should say that the investigators were polite and it wasn’t intimidating. Unfortunately, we were on the five o’clock news. The T.V. station had a camera crew outside our door, reporting that the FBI was there all day. At least they let our company make a statement.

The FBI came to my home. I am an officer of the company, so they do these things to keep people separated during an investigation of this nature. The FBI got what they need and we’re all back in the office as usual today.

Andrew Southwood, vice president business development, Fisher Capespan spoke with us as well:

I can verify that the FBI did come to the offices in New Jersey looking for Mark Solomon, our president to serve a legal subpoena for information related to the price fixing investigation. Our president was up here in the Canadian office until late afternoon yesterday. I wasn’t party to what happened on the New Jersey side. Apparently two gentlemen arrived looking for the president of the company, and left the subpoena. That’s all. The company wasn’t raided. I understand a whole group of companies in the industry received the same treatment as we did. We’ve been doing business for years and years and we have nothing to hide.

At this point nobody knows what to make of all this. The word “raid” makes it seem worse than it is. The FBI shows up, removes people from their computers and, typically, the whole facility, to avoid destruction of documents or other evidence.

It is impossible to know if Fisher Capespan would have been raided if its headquarters were in the U.S. or what the end result of the investigation will be.

Off the record many of the companies spoke with us and several saw the hands of malicious competitors, etc. Hopefully they are right.

Still, one presumes the FBI doesn’t swoop down just because a competitor makes an allegation. There must be some threshold of evidence before they act.

Sometimes companies collude without everyone even knowing. An executive at one company can have an incentive to make his “deal” or “division” successful and others at the company are kept in the dark.

It is, however, a very serious matter. There was a price-fixing case regarding the Lysine Market and certain Archer Daniels Midland Co. executives were found guilty and the company pleaded guilty to a criminal felony and paid out hundreds of millions of dollars in fines, legal expenses, settlements and damages.

The story is what it is. An investigation is ongoing. Maybe it will turn out to all be a big mistake. Maybe not.

For that we will have to wait and see.

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