Dow Chemical Co. has settled multimillion-dollar lawsuits filed last year by former executives Romeo Kreinberg and J. Pedro Reinhard.
The settlement also covers a suit filed by Dow last year against Reinhard and Kreinberg in which the firm sought a return of equity rewards. Financial terms of the settlements were not disclosed in a June 2 news release from Midland-based Dow.
Kreinberg had been seeking $600 million for defamation and wrongful termination. Reinhard was asking for $75 million for libel and breach of contract. Each was fired in April 2007, accused of having unauthorized discussions about the potential sale of the firm.
In the settlement, Kreinberg and Reinhard admit to participating in discussions about a potential leveraged buyout of Dow, without the approval of Dow's board of directors. The two also acknowledge that Dow's actions were appropriate, agree that they should have informed Dow management of their actions and do not dispute Dow's initial news release regarding their firings.
Dow's board also acknowledges Kreinberg's and Reinhard's ``substantial contributions to Dow over their lengthy and illustrious careers.''
Reinhard's lawyer, Gary Naftalis, said in a June 2 statement that Reinhard ``is pleased with the financial settlement.''
``After over a year, [Reinhard] is glad the matter is behind him and looks forward to focusing on his many other interests,'' Naftalis said. ``The dispute with his former company and colleagues was distressing to him personally, and he greatly appreciates the company's public recognition and kind words.''
Kreinberg's lawyer, Stanley Arkin, could not be reached for comment. In a June 3 Wall Street Journal story, Arkin said he didn't agree with the settlement and advised Kreinberg against signing it.
At the time of the firing, Kreinberg had been with Dow for 30 years and was executive vice president of the firm's performance plastics and chemicals business. Reinhard retired as Dow's chief financial officer in 2005 after a 35-year career, but remained on the company's board. Kreinberg and Reinhard each ranked among Dow's largest individual shareholders when they were let go.
Shortly after their firings, Reinhard and Kreinberg each vehemently denied their involvement in the failed takeover attempt. Reinhard said at the time his ``conscience [was] clear'' and it was ``regrettable that [Dow] rushed to publicly condemn me in the face of my complete denial of wrongdoing.''
In a June 3 phone interview, Dow spokesman Chris Huntley confirmed Dow had made no payment on the claims made by Reinhard and Kreinberg, and had in fact recovered some of the equity rewards the two executives earned during their Dow careers.
Huntley declined to say how much Dow recovered, but he did confirm Reinhard had received $15 million and was due an additional $16 million, and Kreinberg had received $5 million and was due an additional $15 million.
Reinhard and Kreinberg ``will get to keep a portion of their long-term incentives, but their positions have been substantially compromised,'' Huntley said.
Under terms of their employment contracts, Dow was required to pay for Reinhard's and Kreinberg's legal defense. Dow advanced the two men more than $3 million for that purpose.
A 35-page filing made last month by Dow lawyers in Delaware chancery court describes an amazing series of events and meetings spread out over several months and taking place in England, Italy and the Middle Eastern nation of Oman.
Based on the filing, the spark for the eventual firing was Reinhard's work as a consultant with Access Industries Inc., a New York-based investment firm that owns plastics and chemical maker LyondellBasell Industries AF SCA, known then as Basell Holdings.
Reinhard first became involved when he played a behind-the-scenes role in Basell's offer to buy Dow's commodity chemicals business in March 2006. Dow rejected the offer. He next pitched the idea of a Dow takeover to Access Chairman Len Blavatnik at a meeting in Ferrara, Italy, in September 2006, the filing said. Blavatnik rejected the offer.
Kreinberg is first mentioned in the filing in October 2006, when Blavatnik rejected a third Dow takeover offer, this time involving the Omani State General Reserve Fund, a state-owned sovereign investment vehicle. Kreinberg had substantial business dealings with Oman while at Dow.
Reinhard and Kreinberg then took their case directly to the Omanis, meeting with them in Oman regarding a Dow takeover in December 2006, then again in London in January 2007 and in Marlow, England, in February 2007. For the February meeting, an entire 64-bedroom hotel in a converted English country house was rented out to maintain secrecy, according to the filing.
In order to attend the Marlow meeting, Kreinberg missed a customer conference and had an Omani business associate formally request a fictitious meeting to explain Kreinberg's trip, according to the filing.
All the while, the two Dow executives had been meeting with industry consultants and with representatives of financial firms JP Morgan Chase & Co. and Kohlberg Kravis Roberts to iron out details of the deal - including top positions for Reinhard and Kreinberg in the ``new'' Dow.
JP Morgan Chase exited the deal in March 2007 after rumors leaked in the European press. The filing claims that the Omani group was interested until Reinhard and Kreinberg were fired the following month.
Reinhard and Kreinberg were identified as the deal's architects by JP Morgan Chief Executive Officer Jamie Dimon in early April.
Reinhard and Kreinberg were confronted with that information at Dow headquarters the morning of April 12. Each ``recited a blunt denial of any involvement in the Dow takeover discussions and offered no explanation,'' the filing said. Dow President and CEO Andrew Liveris then fired them on the spot.
One former Dow executive described the Reinhard/Kreinberg saga as being ``like a spy novel.'' But he added that the seriousness of the situation made Dow act in an atypical manner.
``Historically, Dow has been nonconfrontational,'' the former executive said. ``They would look at something like this and say, `We can win it, but why waste the resources?' and then they'd just settle.
``But I think [Dow] recognized that they couldn't let this one go. This was more than a legal issue; it was ethical. [Reinhard and Kreinberg] had broken the family trust, and in Dow, you don't do that.''
