Dow Chemical said it settled lawsuits with former CFO J. Pedro Reinhard and a former divisional executive vice president stemming from a dispute over whether the pair took part in a secret effort to take over the company.
Under the deal — described in a press release purporting to be from Reinhard; the other executive, Romeo Kreinberg; and Dow Chemical — the two men were said to have acknowledged participating in discussions, not authorized by Dow’s board, concerning a potential leveraged buyout of Dow.
Attempts by CFO.com to reach legal representatives of Reinhard and Kreinberg were not immediately successful on Monday, and Dow’s press representative, Chris Huntley, said that he could not comment for the two, although Huntley was the only contact listed on the press release.
In that release, Reinhard and Kreinberg were said to have acknowledged that the actions taken by Dow’s board were “appropriate under the circumstances.” The release also said that Dow, Reinhard, and Kreinberg agreed that it would have been appropriate for the two men to have informed the CEO and the board of the LBO discussions.
In April 2007, Dow fired Reinhard and Kreinberg, asserting that they were “involved in unauthorized discussions with third parties about the potential acquisition of the company.” In the press release on Monday, Reinhard and Kreinberg were said to have agreed that they did not dispute the Dow press release of April 12, 2007, which declared that their business activity in the LBO matter “was highly inappropriate and a clear violation of Dow’s code of business conduct.” In the same April 12 release that was said to be not disputed by the two, Dow CEO Andrew Liveris was quoted as saying he was “saddened by the disrespect shown by our former colleagues.”
The latest announcement, about the settlement, did say that the board “acknowledges Mr. Reinhard and Mr. Kreinberg’s substantial contributions to Dow over their lengthy and illustrious careers at Dow.”
No monetary terms were disclosed in the press release, and the company said other settlement arrangements were confidential.
In comments to CFO.com, however, Dow spokesman Huntley did add that “there have been no payments for either of the defamation claims” made in lawsuits by Reinhard and Kreinberg. Huntley also said that in the company’s case against the two men, Dow “was basically looking to claw back equity awards” for the two, and that, as part of the settlement, “both men have substantially compromised their positions on that. They are not getting all of the equity they sought.” The spokesman said that the company had agreed “not to provide any more detail than that.”
The strange saga of the failed LBO first became public in February 2007, when Britain’s Sunday Express reported that a bid for Dow was in the offing. Shortly before the firings, the tabloid reportedly wrote that a group of private equity firms and Middle Eastern investors were close to announcing a $50 billion buyout. Despite this and similar whispers, however, the company stated flatly at the time that it has had “no discussion about a leveraged buyout.”
In May 2007, several weeks after his firing and the press release citing inappropriate conduct, Reinhard sued his former employer for libel and breach of contract. That complaint, filed in U.S. District Court for the Southern District of New York, also named Liveris as a defendant. According to a press release from Reinhard at the time, the lawsuit was seeking recovery for damage to Reinhard’s reputation resulting from “false and malicious statements” by Liveris and Dow.
Reinhard joined the company’s Brazilian operations in 1970 in the finance department, became CFO and was elected to the board in 1995. Reinhard retired as CFO of Dow in 2005 after 10 years, but stayed on as a senior advisor to the company.
In May 2007, he was excluded from the slate of board members re-elected to a new term during the company’s annual meeting.
Kreinberg joined Dow in 1977; his most recent title was executive vice president of performance plastics and chemicals. He also had executive oversight for the corporate marketing and sales organization.