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Borden Agrees to Pay Fine to Settle Bid-Rigging Charges

February 12, 1993

WASHINGTON (AP) _ Borden Inc. agreed to pay an $8 million fine to settle federal charges that it rigged bids in milk sales to schools and other public institutions in Texas.

The Justice Department also charged a second company Thursday - Preston Dairy Inc. - with rigging bids on dairy products in Oklahoma and Texas. The announcements came a day after a third company, Maola Milk and Ice Cream Co., was indicted on similar charges in North Carolina.

The charges against the three companies are unrelated except that they are part of the Justice Department antitrust division’s nationwide crackdown on bid-rigging in sales of dairy products to public institutions, department spokeswoman Gina Talamona said.

″We estimate that the cost to consumers could be in the hundreds of millions of dollars,″ Talamona said. ″It’s been a widespread investigation, crossing many states.″

Justice accused Borden of five felonies in Texas stemming from five separate alleged conspiracies involving milk sold to public school districts and hospitals around the state, plus Reese Air Force Base and Texas Tech University.

The conspiracies, which the department said began as early as 1964 and continued as late as June 1990, involved Borden’s operations in Lubbock, Dallas-Fort Worth, Tyler, Amarillo and Abilene, the department said.

Jeanne Washko, a Borden spokeswoman, said the New York-based company agreed to pay $7.5 million in fines and penalties for the felony charges and $500,000 for a government civil claim. She said the agreement must be approved by a federal court in Texas.

She said Borden had been cooperating with the Justice Department since mid- 1991. Companies that allegedly conspired with Borden are expected to settle their cases individually. They were not identified Thursday.

″Borden is pleased that the company can now move forward instead of dealing with issues from the past,″ the company said in a statement.

Borden pleaded guilty to bid-rigging three years ago in a Florida case, paying a $4 million fine and a civil settlement of $1.5 million.

Preston Dairy Inc. of Burkburnett, Texas, was accused in two one-count felony complaints, one filed in Oklahoma City and the other in Dallas.

No one could be reached at Preston headquarters late Thursday.

The Oklahoma case accuses Preston of conspiring to rig bids for the sale of milk to schools and other public institutions from as early as 1982 until at least June 1988. It is the first such case filed in that state, the department said.

The Texas charge concerns an alleged conspiracy to rig the same kind of bids with public school districts in north-central Texas, from at least as early as 1985 to at least June 1991.

On Wednesday, a federal grand jury in Wilmington, N.C., issued a four-count indictment against Maola and its former president, Kenneth Gex Reesman, both of New Bern, N.C. They were accused of conspiring to rig bids for dairy products sold to North Carolina public schools and committing mail fraud.

The indictment says the conspiracy began at least as early as spring of 1983 and continued at least through mid-1988.

The antitrust division has filed 83 criminal cases against 47 corporations and 56 individuals in the dairy industry since 1988. The states involved are Florida, Georgia, Illinois, Indiana, Kentucky, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia.

So far, 37 corporations and 41 people have been convicted, and fines of $35 million and civil damages of more than $7 million have been imposed, the department said. The milk industry is still being investigated by 34 grand juries in 23 states.