Opinion ID: 448913
Heading Depth: 2
Heading Rank: 4

Heading: IBP's Response.

Text: 31 In a letter dated August 1, 1979, IBP declined Congressman Smith's invitation to testify. The letter sharply criticized Congressman Smith and his conduct of the Subcommittee's investigation. IBP accused Smith of demonstrable prejudice against IBP and obvious ulterior motives--to make political capital and to aid a friend and political crony, presumably Lex Hawkins, in antitrust litigation against IBP. Explaining its decision to reject Smith's invitation, IBP wrote: 32 Because of your plain prejudice against us and your unwillingness in the past to abide by due process and the rule of law, we were initially inclined simply to reject your invitation and, when appropriate, tell our story in the courts or before congressional committees having jurisdiction over the meat industry where we would be fairly treated. But your attacks upon us and the distortions of the truth occurring in your hearings have reached such an extreme that we owe those persons who deal with us on a day-to-day basis and whose trust we have earned over the years a specific rebuttal of the accusations that have been made in your hearings and published by the press. Therefore, while we reject your invitation to appear at your hearings, we submit the following statement to show that our unwillingness to appear results not from an inability to refute the charges made against us, but instead from our firm conviction that we would not be provided a fair forum and would be used as simply another opportunity on your part to grab headlines by anti-IBP accusations. Accordingly, we ask that this letter be made part of the official proceedings of your Subcommittee. 33 We realize that our rebuttal will not have the least impact on you or on your continuing attacks on this Company, but we hope that open-minded members of your Subcommittee, the media, the cattle and beef industry, and the public who may read it will begin to question and not uncritically accept what you are saying. 34 In its thirty-one page letter, IBP responded to each charge made against it before the Subcommittee from the fall of 1977 to July of 1979. Approximately fourteen pages of the letter dealt with the charges made by Bagley, whom it characterized as a disgruntled ex-IBP employee who had stolen IBP documents and misused IBP confidential information to defame and cause problems for IBP. (Emphasis added.) 35 Beginning with Bagley's charge of yield misrepresentation, IBP stated that [b]ecause the formula and the role of the primal yield are complex, Bagley was able to conceal the truth in confusion   . (Emphasis added.) In an attempt to elucidate, IBP explained that it guaranteed its customers a price per hundred-weight on its boxed beef, necessarily based, because all cattle are different, on an assumed yield. Although the actual yield varied, buyers were unaffected because they made their purchasing decisions based on the price per hundredweight. In guaranteeing its price based on an assumed yield, IBP took the risk that the actual yield would fall short of the assumed yield, and reaped the benefits when the actual yield exceeded the assumed yield. IBP also maintained that the gradual increase in its stated yields resulted from improved production techniques and leaner, better-yielding cattle, rather than an attempt to correct an earlier misrepresentation as Bagley claimed. 36 Next, IBP responded to Bagley's allegation of preferential pricing: 37 Although Bagley admitted that he did not know the origins or rationale of IBP's Cattle-Pak formula pricing to the Waldbaum chain, he felt free to suggest that it was illegal, below-cost pricing used by IBP as a tool to break into the New York market. The facts are otherwise. 38 IBP explained that when it finally persuaded Waldbaum to accept boxed beef despite bitter union opposition, it developed a special packaging suitable for the New York market, which required a new and different pricing formula. IBP conceded that Waldbaum's service fees were lower than those of other New York buyers, but attributed this difference to an agreement between IBP and Waldbaum, wherein IBP promised that service fees would not increase in return for Waldbaum's commitment to pioneer in the establishment of Cattle-Pak on the east coast. 39 Finally, IBP addressed the quantity discount program that Bagley described, stating that Bagley's version of IBP's quantity discount program is absolutely false, and, we believe, constitutes perjury for which he should be cited. (Emphasis added.) IBP admitted offering a quantity discount, but asserted that it offered the discount to all its customers that purchased the requisite quantity. In addition, IBP maintained that it discontinued the program in September of 1973, pending a long-range cost accounting study to identify and quantify those savings believed to be inherent in volume purchases. According to IBP, Bagley was intimately involved in the termination of the program and his attempt to suggest that it was not then terminated is clear perjury. (Emphasis added.) IBP went on to say that Bagley again perjured himself by suggesting that [certain rebate checks] had anything to do with the [quantity discount program]    [emphasis added]. As Bagley well knows, that occasion represented a special one-time price reduction program under which IBP rebated $8 per head to all customers purchasing any quantity of Cattle-Pak during [a given period]. 40 In closing, IBP stated, we have demonstrated that Bagley's stories about illegal or questionable conduct by IBP are false. IBP went on to say that Bagley's claim that he met with Krieger and others to prevent a massive take-over by IBP of the packing industry was 41 simply a fabrication to conceal the malice with which he sought to stir up trouble for IBP and to create a defense for IBP's breach-of-fiduciary-duty suit. 42