Business
Bad News, Baird’s
In 1995 Texas’ premier white-bread maker turned a profit and took in a lot of dough. So how did the company end up in bankruptcy court?
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“No,” said Oler, who noted that he typically told Green that he would check with Carroll Baird, then call Green back and tell him what Mrs Baird’s was going to do. When Mrs Baird’s decided not to match Flowers’ price, Flowers often rescinded its proposed increase. On a few occasions, however, Mrs Baird’s did increase its price after Flowers proposed a hike.
Rosenberg asked Oler, “Were there times that Carroll Baird told you to contact Flowers and tell them that we are going to increase our prices along with them?”
“Yes,” Oler replied.
“. . . And when Carroll Baird relayed that information to you, Mr. Oler, then Mrs Baird’s would put out a price letter?”
“Yes.”
“Having the same net wholesale per unit that Flowers did?”
“Not exactly,” Oler said. “Most products would be the same, but not necessarily the variety breads and such . . .”
Attorneys for Mrs Baird’s argued that Oler’s conduct might be ethically questionable, but it wasn’t illegal. “The Sherman Anti-Trust Act does not say you can’t exchange price lists with competitors,” Evans argued. “It says you can’t have an agreement in restraint of trade.” He described Oler’s actions as part of an extensive information-gathering operation in which salesmen were expected to keep their supervisors apprised of what the competition was doing. Rosenberg countered that swapping price letters was a sneaky way of permitting the two companies to determine prices together.
Across the state, in West Texas, Johnny Greenwood had taken over the Mrs Baird’s bakery in Abilene in 1984, when an old-timer named Hart Shoemaker took ill. One of its rivals was Mrs. Boehme’s, in San Angelo, the maker of Holsum bread. Shortly after Greenwood got to Abilene, he received a phone call from Allen Baird. “As far as I was concerned, Holsum was a competitor, and we could outsell them,” Greenwood told the jury. “. . . Then I received this call . . . and it changed my mind a little bit about what the situation was . . . Mr. Allen explained that they had been out there for years, they were independent bakers, just like Mrs Baird’s. There seemed to be some kind of mutual respect for each other, and as I recall, he said, ‘You know, we don’t mind them having some business—we don’t want them to have too much, but we don’t mind them having some business.’” The unorthodox coziness between Mrs Baird’s and its rivals, Greenwood implied, was born of the company’s small-town, old-time character.
Around the same time, Greenwood received a call from Carroll Baird instructing him to contact Graham DeLaney, who was about to take over Mrs. Boehme’s from DeLaney’s father. Carroll told him to talk to DeLaney about how both companies could remain profitable. When Greenwood blithely noted in a memo that he intended to “contact Graham DeLaney,” he received another call from Carroll Baird. “He said I should not have listed that on my weekly check sheet,” Greenwood testified. Nevertheless, when Mrs Baird’s wanted to increase the price of bread and didn’t want to be undersold, Greenwood would call DeLaney. “[Carroll] informed me that we were going to increase the price on bread on a particular date, [and asked] did I think that Holsum would go along at that time, and I would inform him that I would find out,” he explained to the jury.
When Shoemaker returned to work, Greenwood learned that Mrs Baird’s and Mrs. Boehme’s regularly divvied up bids to Air Force bases and school districts. For several years after, Greenwood and DeLaney decided together what their bids would be, so that Mrs Baird’s always won the contracts for Dyess Air Force Base and the Abilene school district, while Mrs. Boehme’s won the contracts for Goodfellow Air Force Base and the San Angelo and Brownwood school districts. However, Greenwood testified that he rigged bids on his own and didn’t tell his superiors of the practice, and by the late eighties the scheme started to fizzle anyway, as other bakeries began bidding on the contracts. Then, in April 1990, Greenwood and other general managers received a memo from Vernon Baird (Allen and Carroll’s brother), who was the chairman of the company. The memo stated that market conditions, pricing, and other aspects of operating in a market were not to be discussed with competitors. Greenwood testified that as soon as he got the memo, he stopped discussing prices with DeLaney.
This was good news for Mrs Baird’s: The statute of limitations on conspiring to fix prices is five years, and by the time of the trial, it had been six years since the memo was written. It had been even longer since Greenwood had rigged a bid. So even if his actions had been criminal, they were arguably outside the scope of the prosecution. The trouble was, Stanley Oler testified that he didn’t remember getting the memo and that he kept doing business the old-fashioned way until he retired in 1992. On the strength of that information, the jurors took three and a half days to convict Mrs Baird’s of price-fixing in East Texas (Mrs Baird’s is appealing the conviction). They acquitted the company in West Texas and acquitted Carroll Baird entirely.
The ordeal wasn’t over, though. While the criminal trial unfolded, plaintiff’s lawyers were converging on Mrs Baird’s like ants heading for a picnic hamper. They represented clients, including corner stores, supermarkets, and school districts, who could claim to have been financially damaged by the alleged price-fixing. One class-action lawsuit—known as the Piggly Wiggly litigation after the grocery store in Clarksville—was created after three separate civil suits were filed in federal court in East Texas. Then two grocery stores and half a dozen school districts filed a class-action suit in Johnson County. The suits threatened to cost Mrs Baird’s a lot of money—probably more than the criminal fine. They also kept the controversy in the newspapers, and that kind of publicity was bad for business.
To move beyond the scandal, company officials steeled themselves and put Mrs Baird’s into Chapter 11. “I didn’t know you could file for bankruptcy unless you were bankrupt,” Allen Baird said shortly afterward, “but the bankruptcy laws are such that you can anticipate what will happen to you.” Within a month’s time, the plaintiffs accepted a negotiated settlement from Mrs Baird’s of $18 million—far less, everyone agrees, than the company might have paid if the suits had gone through. That just about put the whole mess to rest.
Now Mrs Baird’s is spending the next few months putting together a reorganization plan. Allen Baird is not looking forward to the public scrutiny, but so far, Mrs Baird’s has raced through all of the required filings and will probably be out of bankruptcy court in something close to record time. The company that emerges will not be the same as the one Ninnie founded. The Mrs Baird’s board has hired the first top executive from outside the family’s ranks: Larry Wheeler, a longtime Pillsbury official who replaced Carroll Baird as president and CEO last May. Wheeler and the Bairds have been working to reposition the bakery to survive in a changed world. The company they are creating is leaner and more efficient—they have already closed their bakery in Austin and have switched employees to a cheaper health care plan—but will offer a broader range of products. Mrs Baird’s recently introduced its first line of tortillas.
Ninnie Baird would probably have done no differently. A lot of Texans must imagine her turning in her grave at the thought of her company facing charges of price-fixing and a stint in bankruptcy court, but the flesh-and-blood Ninnie surely possessed a lot more grit than the prim woman portrayed in the gilt-framed painting. If she were alive, she would probably congratulate Allen for pulling the bakeries out of trouble and suggest they get on with making more dough.
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