Cartel Wasn’t in Asking Price, Investors Say

LOS ANGELES (CN) - Thermo Fisher Scientific sold a Mexican manufacturing plant to investors without telling them a Mexican drug cartel had taken over the factory in Reynosa, a private equity firm claims in court.

OpenGate Capital Group and three RoundRock entities sued Thermo Fisher in Federal Court.

They claim they paid more than $40 million in October 2012 for Thermo Fisher's Lab Workstation Business, a lab furniture maker, whose most profitable facility is in border city of Reynosa, Mexico.

OpenGate claims that within hours of taking over the plant, it discovered that the place was controlled by the Gulf Cartel.

"Thermo Fisher acted in bad faith to induce plaintiffs to purchase its Lab Workstation Business in October 2012, by, among other things, fraudulently concealing critical information related to the safety, security, viability and operation of the business, including the fact that its primary manufacturing facility has been overrun by a reputably violent and hostile Mexican drug cartel," the complaint states.

Calling Lab Workstation "neglected" and "'orphaned,'" Opengate claims Thermo Fisher hired Barclays bank to dump the business "as fast as possible, and, eventually, regardless of purchase price."

"Desperate, in part, on account of financial and reputational factors incentivizing Thermo Fisher to remove the neglected business from its books, Thermo Fisher acted with haste to exploit the steadfast interest of RoundRock," the complaint states. "What RoundRock did not know at the time was that Thermo Fisher had additional, more compelling reasons to cause it to divest itself from what can only be described as a business fraught with logistical and legal complications that threatened not only the profitability of the business but its viability at all-including that the Reynosa Facility was under siege and the subject of repeated, near-daily security breaches by members of the Gulf Cartel, an intimidating and violent criminal syndicate and drug trafficking organization residing in Mexico."

OpenGate says Thermo Fisher knew a year before the sale that the plant had been infiltrated by the cartel. It did not disclose it, though, nor did it disclose that cartel members had brandished guns at the plant and parked tractor trailers there overnight, "filled with unknown cargo."

"On or about Sep. 23, 2012 - in the midst of negotiations between plaintiffs and Thermo Fisher, no less - armed militants entered the cafeteria at the Reynosa facility after being followed by rivals (either opposing cartel members or soldiers). They stayed for an hour or more before leaving," the complaint states.

OpenGate claims that cartel members known as "hawks" stand sentinel outside the gate of the plant 24-7, "even taking comfort in the air-conditioned security booth when it is helpful."

"On at least one occasion in 2013, members of the Gulf Cartel again utilized the Reynosa facility to take cover from a gun battle taking place outside of the facility," the complaint states.

OpenGate claims that Thermo Fisher went to "painstaking efforts" to conceal the threats to the plant, and violence in the surrounding area. It claims that Thermo Fisher assured it it was "'committed to the ongoing success'" of the plant, though it was really "turning a blind eye" to the cartel, and doing nothing to secure the facility.

Before the keys to the plant were handed over to RoundRock, OpenGate says, Thermo Fisher refused to let it enter the plant, or "(s)tructured site visits in a manner designed to avoid RoundRock's discovery of the hostile encroachment."

OpenGate claims that plant employees were ordered to "follow a strict code of silence," and that Thermo Fisher's senior executives "deliberately withheld all information related to the cartel activity, including situation reports and proposals for security upgrades to address the ongoing breaches."

Lab Workstation was formerly run by several companies, including Thermo Fisher subsidiary Hamilton Fisher. None of those entities are named defendants.

Reynosa is in northern Tamaulipas, across the border from Hidalgo, Texas.

OpenGate Capital Group seeks damages and punitive damages for securities violations, fraudulent misrepresentation, negligent misrepresentation, breach of contract, and breach of the implied covenant of good faith and fair dealing.

It is represented by Amin Al-Sarraf, with Glaser Weil Fink Jacobs Howard Avchen & Shapiro.

Thermo Fisher Scientific did not immediately respond to a request for comment on Monday.

The Gulf Cartel is one of several drug groups at war with the Mexican army and police forces for control of the drug trade. The U.S. and Mexican governments portray it as a war against drugs, though virtually all the evidence shows that it is a war to see who will control the drugs as they head to the United States.

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