There was a time not long ago when Gregg L. Engles was considered a genius in the dairy industry, a shrewd CEO who had cobbled together a string of local businesses to create the nation’s largest milk bottler, Dean Foods.
Dean’s website described Engles as the primary architect of dairy consolidation, the often painful and perhaps inevitable shift to fewer, larger farms and bottling plants. The company’s units include Reiter Dairy operations in Summit County.
His company’s soaring share price made him a Wall Street star.
In fawning profiles in the business press, dairy cliches flew: Engles was “cream of the crop,” “head of the herd” and “milkman to the nation.”
These days, however, as he prepares to step aside as chief executive of Dean Foods, Engles, 55, is perhaps better known for his paychecks, which continued to be hugely generous even as his company’s fortunes tumbled.
The Motley Fool investment publication noted in March that he had averaged $20.4 million in compensation over the previous six years, while Dean’s stock fell 11 percent a year, on average. Forbes ranked him among its Worst Bosses for the Buck in 2011.
Wall Street soured on the nation’s milkman.
A long-running antitrust lawsuit in a federal courthouse in Greeneville, Tenn., offered one possible explanation for his early success, by contending he engaged in a conspiracy more than a decade ago that helped expedite dairy industry consolidation and make himself a bundle.
Filed by a group of dairy farmers in 2007, the lawsuit said Engles cut a deal with the head of the nation’s largest dairy cooperative, the Dairy Farmers of America, to eliminate competition in the Southeast. Another lawsuit was filed in Vermont in 2009, involving allegations of a similar scheme in the Northeast. Dean Foods, whose brands include Garelick Farms, Land O Lakes and Horizon Organic, has settled both lawsuits, without admitting wrongdoing; the suits continue against the DFA.
By normal rhythms of the industry, Engles and Gary Hanman, 78, a former chief executive of the DFA, would be financial adversaries. That’s because bottlers try to buy raw milk as cheaply as possible. Many farmers joined cooperatives in the hope of getting higher prices.
But according to the lawsuit, the deal that Engles made with Hanman went against normal economics. Engles promised that the DFA would be the exclusive supplier to Dean’s milk plants. The DFA, in turn, promised a reliable supply of Dean’s main ingredient, raw milk, at the lowest prices, plus rebates and credits so Dean could acquire more milk plants.
Hanman was paid $31.6 million during his seven-year tenure as chief executive, including bonuses for increasing the cooperative’s market share, according to court records.
As for Engles, his compensation over the last decade comes to $156 million, according to Equilar, a firm that tracks executive pay.
Dairy farmers say they didn’t share in the riches. Instead, they say that they were paid suppressed prices for raw milk, and that the fallout continues. They are seeking more than $1 billion, including penalties, in the Southeast; the damage estimate for Northeast farmers remains under seal.