Kimberly-Clark Outraged at Tampon Sales

      LITTLE ROCK, Ark. (CN) – Kimberly-Clark tried to do the right thing and hire a company to ecologically dispose of more than 1 million unusable Kotex tampons, but the contractor conspired to sell them on the Internet, the manufacturer claims in a federal RICO complaint.
     Kimberly-Clark claims Balcones Recycling produced fake disposal certificates of the tampons, then “offered [them] for sale in such places as reseller Internet websites.”
     Balcones insisted that the allegations against it “are completely without merit.”
     “Balcones destroyed all material that was delivered to our facility per the terms of our contract with Kimberly Clark,” the company said in a statement through 3 Point Partners.
     The complaint states: “Between October 2011 and July 2012, Kimberly-Clark utilized Balcones to dispose of at least fourteen (14) lot codes of Kotex Natural Balance Security Tampons that had been produced at Kimberly-Clark’s Conway, Arkansas production facility, constituting more than one million individual tampons. Upon inspection of these tampons, Kimberly-Clark had determined that they did not meet Kimberly-Clark’s product specifications and quality standards; accordingly, Kimberly-Clark utilized Balcones to dispose of and recycle them.”
     Kimberly-Clark claims it “chose Balcones as its contracting partner because, among other things, Balcones utilized sustainable methods (in particular, materials that Kimberly-Clark provided to Balcones were to be recycled into fuel cubes that could then be used as a source of alternative energy) and assured Kimberly-Clark that its disposal methods were secure and not subject to interference.” (Parentheses in complaint.)
     “Balcones repeatedly represented, in writing, to Kimberly-Clark that all of the substandard tampons in the affected lot codes had been destroyed. However, in fact, Kimberly-Clark discovered that, despite Balcones’ written assurances and representations, the tampons were not disposed of but instead were fraudulently diverted to the ‘grey market’ and offered for sale in such places as reseller Internet websites.”
     Kimberly-Clark defines the gray market as sale “through unauthorized distribution channels.”
     “After submitting the fraudulent certificates of destruction to Kimberly-Clark, defendant Balcones facilitated and/or enabled the Doe defendants to sell the tampons to unknowing consumer on the grey market, including over the Internet. Defendant Balcones transferred or facilitated the transfer of the affected tampons to the Doe defendants for sale,” the complaint states.
     “Defendants engaged in a pattern of fraudulent conduct together and shared the common purpose of defrauding both Kimberly-Clark and consumers, who believed that they were purchasing Kotex products that met Kimberly-Clark’s demanding safety standards for its products. Instead, consumers were purchasing products through interstate commerce that had been deemed unsuitable for sale and consumer use.
     “Defendants’ scheme was uncovered on or around July 12, 2012, when Kimberly-Clark discovered Kotex tampons for sale on Internet sites owned and/or operated by the Doe defendants that were not affiliated or approved by Kimberly-Clark for sale of Kotex products.”
     Kimberly-Clark claims its contract with Balcones stated that the disposal company shall not “in any way salvage, reuse, sell or distribute the waste material, or any part thereof, without the prior written consent of the company.”
     After learning of the scheme, Kimberly-Clark says it “began purchasing cases of the tampons in order to remove them from the grey market.”
     “To date, approximately 4,000 cases of affected tampons have been recovered by Kimberly-Clark. Efforts to purchase all of the remaining diverted product on the market remain ongoing. These efforts have required Kimberly-Clark to devote resources to recover the affected product, including, among other things, the time of its personnel and the funds necessary to purchase the affected product from the grey market,” the complaint states.
     Balcones said it actually assisted in Kimberly Clark’s investigation.
     “We cooperated fully with Kimberly Clark last year when it investigated the alleged diversion of tampons for resale on the gray market,” Balcones continued. “We later cooperated fully with the federal Food and Drug Administration on its separate investigation. It is our understanding that the FDA found no evidence of wrongdoing on our part. We will vigorously defend ourselves against Kimberly Clark’s false and unsubstantiated allegations.”
     Kimberly Clark seeks at least $2.4 million in actual damages, and punitive damages for racketeering, fraud, breach of contract and deceptive trade.
     It is represented by Chad W. Pekron with Quattlebaum, Grooms, Tull & Burrow.

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