On 23 March, Andrew N. Liveris, the chief executive of The Dow Chemical Co, wrote a scathing performance review about one of his top lieutenants.
“I expect to see that your negative body language when you disagree with a course of action is eliminated,” he wrote to the executive, Romeo Kreinberg, who ran the company's $21 billion (Rs86,100 crore) performance plastics and chemical business portfolio. “Frankly, your recent behaviour was the last straw and I will not allow such destructive behaviour to be repeated."
Liveris gave Kreinberg three months to change his behaviour. Otherwise, he warned, “I will have no choice but to sever your links with Dow.”
Three weeks later, Kreinberg was indeed dismissed. But the reason cited was very different—and far more explosive. Dow Chemical accused him and a board member who had also clashed with Liveris of being “involved in unauthorized discussions with third parties about the potential acquisition of the company”. The firings followed a series of reports in British newspapers that a huge buyout of the company was in the works.
Tuesday, the story became even more bizarre—and clouded—as Kreinberg and the board member, J. Pedro Reinhard, sued Dow Chemical, contending that they were defamed. The company, in turn, has sued both men.
The duelling lawsuits present two possible situations: Were the two men rogue agents trying to put Dow Chemical in play? Or were the two executives disliked by Liveris, who acted impetuously to rid himself of them?
Caught in the middle is James Dimon, the chief executive of JPMorgan Chase, who told Liveris that the two men had held unauthorized talks, according to all three lawsuits.
According to Dow Chemical's lawsuit, the company relied solely on Dimon's comments to Liveris in firing the two men and publicly disclosing the reasons. A Dow Chemical spokesman on Tuesday acknowledged that the firings were “based solely on a single source” who had “impeccable credentials.”
But JPMorgan's involvement raises questions. As a long-time adviser to Dow Chemical, it had motive to try to prove its loyalty to the company's management. Yet the firm had also been working with an unidentified West Asian client that was interested in making a bid for Dow Chemical, according to Dow Chemical's lawsuit.
At the heart of the mystery is a rendezvous outside London worthy of a cold-war spy novel. At the Compleat Angler, a luxury hotel overlooking the Thames, the two Dow Chemical officials met two senior executives of JPMorgan Chase in early February, according to people who attended the meeting.
In addition to Kreinberg and Reinhard, the meeting was attended by William Winter, the co-head of investment banking of JPMorgan, and Ian Hannam, a managing director of JPMorgan Cazenove who was the point man on the discussions. The meeting was organized by Terrance J. Ruane, a consultant to Dow Chemical who had helped lead the company's deal making in Oman.
JPMorgan declined to comment on the meeting. Reached on his mobile phone this week, Ruane said: “I can't confirm or deny anything. I shouldn't be on the phone with you.”
According to people close to Kreinberg and Reinhard, they met Ruane to discuss gas prices in Oman, not knowing that the executives from JPMorgan would be joining them. Winter and Hannam showed up at the meeting and began badgering them with a series of questions about how receptive Dow Chemical's board would be to a takeover proposal, the people close to the two former Dow officials said.
The men, according to the people close to them, said they were not authorized to talk with them and that the company would probably not be interested in such a proposal. They say the meeting lasted no more than about 10 minutes.
People close to Dow Chemical and JPMorgan suggest otherwise, contending that the men had scheduled the meeting and that they laid out their plan to buy the company.
People close to either side spoke only on the condition that they not be identified because of the litigation.
Reinhard said in a statement, “I have and will continue to categorically deny that I have been part of any secret effort to take over or acquire Dow Chemical.”
Kreinberg said, “We believe our complaint sets out solid and substantial claims for profound reputational injury caused by the malicious and irresponsible conduct of Andrew Liveris and the Dow Chemical Company.”
Weeks after the February meeting, news reports began surfacing in London about a takeover bid for Dow Chemical that jolted the company's shares higher. The news sent Liveris into an irate panic, according to people close to him. He began calling investment bankers and private equity executives, including Dimon, around the country to find out if they were working on anything. Dimon told him that the bank had been peddling the company and promised to stop.
But the takeover talk would not die. On 8 April, The Sunday Express reported that Dow Chemical was in talks on a buyout. Liveris issued a statement the next day denying that the company was in talks with anyone.
That night, Dimon flew to Midland, Mich., where Dow Chemical is based, to have dinner on the second floor of the Midland Country Club, known as the Dow Club, with Liveris.
At dinner, Dimon suggested that his bank had been secretly working with executives at Dow.
The next day, Dimon called Liveris to point specifically to Kreinberg and Reinhard. Kreinberg's lawsuit, however, contends that Dimon “advised Liveris that no one from Dow expressed any design or authority to buy or sell the company in whole or in part.”
“To the contrary, JPMorgan was told by the Dow employees that they were without any such authority,” the lawsuit says. “Dimon suggested that the parties' interaction was not atypical from exchanges commonly held among industry businessmen.
He asked Liveris to inform the Dow board of his report, and cautioned that Liveris should not jump to conclusions or take any action in the absence of careful thought and investigation.”
Dow Chemical's version is different, suggesting that Dimon provided conclusive evidence that it acted on.
After receiving the information from Dimon, Liveris brought the issue to the board and asked them for permission to fire the two men.
That night, Reinhard, who had missed the board meeting for a previously scheduled commitment, boarded a private Dow Chemical plane in New York to fly to Midland. Also on that flight was Martin Lipton, the long-time adviser to corporations on deals and management changes who is Dow Chemical's outside lawyer.
Reinhard thought he was going to the continuation of the company's board meeting.
Lipton knew the real reason.