The high-level legal dispute between Dow Chemical Co. and former executive Romeo Kreinberg generated some more headlines today, with the news that Kreinberg filed a complaint on Oct. 12 suing J.P. Morgan for its alleged role in the dispute. The New York Times has a fascinating story about the development today, as well as a link to the latest court filing. For those who don't remember, Dow fired Kreinberg in April, along with Pedro Reinhard, a senior advisor and member of the board of directors, accusing the pair of engaging in "business activity that was highly inappropriate and a clear violation of Dow's Code of Business Conduct. Reinhard and Kreinberg were involved in unauthorized discussions with third parties about the potential acquisition of the Company." A month later, Kreinberg and Reinhard turned around and sued Dow and CEO Andrew Liveris for $675 million. The latest chapter in the saga is Kreinberg's suit against J.P. Morgan, which alleges that the investment bank deceived Dow about the attempt to sell the company. According to the Times story:
Some time in late 2006, J.P. Morgan — without informing Mr. Liveris — got in contact with various investors, including the government of Oman and some private equity groups, to explore the possibility of a Dow deal. Reports about the talks kept popping up in the press, prompting Mr. Liveris to begin an aggressive search for their source. When it emerged that J.P. Morgan was the financial adviser behind the rumored talks, Mr. Liveris called the bank out on the carpet. What followed was a dinner — most likely a tense one — on April 9 in Midland, Mich., where Dow is based. It was attended by Mr. Liveris; Mr. Dimon; Christopher Iannaconne, a senior banker at J.P. Morgan; and Geoffrey Merszei, Dow's chief financial officer. The complaint described the dinner conversation this way: Liveris made clear to Dimon and Iannacone that the company (or more precisely, Liveris personally) was out for “scalps.” Liveris indicated that the bank could curry favor by helping him implicate Kreinberg. Within a few days, Mr. Kreinberg and Mr. Reinhard were fired.I still can't believe this case hasn't been settled. Kreinberg's suit against J.P. Morgan is full of redacted details that surely will come out if this ever goes to trial. This is going to end up being embarrassing for some high-powered executives. To put it in poker terms, it looks like Kreinberg just raised the stakes. Will Dow go all-in, or fold?