Investor Blasts Dow Board After Settlement

(CN) - Dow Chemical's board of directors wasted corporate assets by fighting price-fixing allegations for 10 years before agreeing to a $835 million settlement, a shareholder claims in court.

The shareholder derivative action filed on behalf of The Down Chemical Company in Detroit Federal Court is an example of how the death Supreme Court Justice Antonin Scalia is having consequences on litigation throughout the federal court system.

In 2005, Dow, BASF, Huntsman International and Lyondell Chemical Co. were accused in a class action of conspiring to artificially inflate polyurethane prices.

Dow was the only defendant that refused to settle.

A Kansas jury found the chemical company liable in 2013, and Dow appealed to the U.S. Supreme Court.

But the death of Justice Antonin Scalia left Dow with a slim chance of victory. Its briefs relied heavily on two rulings authored by Scalia regarding class action law, one in favor of Wal-Mart, and another in favor of Comcast.

In February, Dow agreed to pay $835 million to settle the case.

"While Dow is settling this case, it continues to strongly believe that it was not part of any conspiracy and the judgment was fundamentally flawed as a matter of class action law," the company said in a statement announcing the settlement.

Shareholder S.M. Levine sued the Dow CEO Andrew Liveris and the company's board on Wednesday, alleging that "Dow's Board and knowledgeable senior officers, out of misguided loyalty to defendant Andrew N. Liveris, Dow's Chairman and Chief Executive Officer, conspired to acquiesce in and 'cover up' massive, unjustified, multi-year misuse of Dow's assets by him."

The lawsuit describes Liveris has having "complete hegemony over the company and fellow directors."

Levine says Liveris wasted Dow's assets by exposing the company to almost $1 billion in damages in the polyurethane class action, which "could have, and should have, been settled for far less and/or not brought in the first place had adequate internal controls and antitrust compliance procedures been in place to prevent the wrongdoing."

Liveris, a 40-year veteran at Dow, plans to retire by mid-2017, following the completion of Dow's prospective merger with DuPont Company. At the time, he will reportedly receive $53 million in cash and stock.

Dow's CEO faced a whistleblower action filed in 2014 by a 25-year employee of Dow accusing him of substantially misusing corporate assets. This case settled after a judge denied Dow's motion to dismiss, but Levine says he will seek to have the complaint unsealed to determine the extent of Liveris's abuses, and the amount the company spent to defend the suit.

Liveris allegedly repaid Dow a portion of the misused assets, but there has been no complete accounting, the shareholder says.

Levine seeks damages on behalf of Dow for breach of fiduciary duty and waste of corporate assets, and a court order for the reform of the company's internal control procedures.

He is represented by Michael Pitt with Pitt, McGehee, Palmer & Rivers in Royal Oak, Michigan.

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