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Price-Fixing Alleged in Wastewater Treatment

NEWARK (CN) - Detroit's water department claims General Chemical Corp. conspired for years to fix prices of liquid aluminum sulfate, a major component of wastewater treatment.

The federal class action claims that General Chemical and its subsidiary General Chemical Performance Products conspired with unnamed companies for 13 years to submit false bids and price quotes, to guarantee itself the winning contracts.

The two lead defendants are referred to as Genchem. Also sued are GenTek, which owned Genchem from 1999 to 2009, and Frank Reichl, a former senior executive at General Chemical.

Reichl has pleaded guilty to conspiracy on Oct. 27, the water board says. As General Chemical's vice president of sales and marketing, Reichl admitted gaming the bidding process from 1997 to 2010 by meeting with co-conspirators to submit fake "throw away" bids to favor one intended winner. This cheated municipalities and paper companies of millions of dollars, the water board said, citing Department of Justice officials.

The conspiracy was run through "secret meetings" in which Genchem gauged historical prices for the chemical, then set up a fake bidding system to raise prices in its contracts with Detroit and other municipalities, according to the Nov. 4 complaint.

The Detroit Water and Sewerage Department claims the effects of the conspiracy are far-ranging. The 21-page lawsuit mentions "various other persons, firms, corporations, and entities" as unnamed co-conspirators, and says that "hundreds" more plaintiffs may be added. It claims that the price-fixing was "fully authorized and/or ordered by Genchem."

Aluminum sulfate is a coagulant and flocculant. Flocculants make small particles bind together into a floc, to make them more easily skimmed.

Aluminum sulfate has many industrial applications, including wastewater treatment, removing algae from lakes, and making paper and pulp. The bidding process for the coagulant is typically competitive, as there are no adequate chemical substitutes.

As a result of the intense competition and unique nature of aluminum sulfate, the market for the chemical is susceptible to collusion and cartelization, Detroit says.

The water department seeks class certification and damages for antitrust violations.

Its attorney Jeffrey Corrigan, with Spector Roseman Kodroff & Willis, of Philadelphia did not return a request for comment.

The Justice Department does not comment on its investigations.

General Chemical was acquired for $900 million in early 2014 by Ontario chemical supplier Chemtrade Logistics Income Fund. Calls to General Chemicals' main line went unanswered Thursday. Calls to Chemtrade's corporate office went to the general voicemail. A message left with Chemtrade CEO Mark Davis was not returned.

Central Arkansas Water lobbed similar claims in a federal class action against Genchem and parent company Chemtrade on Nov. 2 in Newark.

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