3M Sues Porton Capital, CEO Harvey Boulter Over ‘Blackmail’

3M Co. (MMM), the maker of Scotch tape, sued Porton Capital Inc. and its chief executive officer, Harvey Boulter, in New York state court, accusing them of trying to extort $30 million in connection with a lawsuit in the U.K. over 3M’s purchase of a medical technology company.

Porton and Ploughshare Innovations Ltd., two of the shareholders who sold their stakes in the technology company, sued 3M in London over the deal. The trial began last week and is expected to continue into July, St. Paul, Minnesota-based 3M said yesterday in a New York State Supreme Court filing. Ploughshare is a unit controlled by the British Ministry of Defense, according to the suit.

“Instead of awaiting the outcome of the pending litigation, defendants and their investors have engaged in an unlawful campaign to blackmail 3M into paying $30 million in order to avoid the continuation of the campaign,” the company said in its complaint.

3M also said in its complaint that the “defendants seek to publicly defame 3M and its chairman/CEO.” George W. Buckley is the chairman and chief executive officer.

‘Ransom Demand’

“I got what my client believes was a ransom demand,” William Brewer, the lawyer for 3M who filed the suit in New York, said in a telephone interview.

Brewer said the defendants implied that a settlement unfavorable to them would hurt 3M’s chances to do business in the U.K.

“He broke the rules of settlement under confidentiality, which in most places in the world is both unprofessional and unethical for a lawyer of his supposed standing,” Boulter said in an e-mail. “To publicly characterize a settlement negotiation as blackmail is shameful of Mr. Brewer.”

The trial centers on 3M’s acquisition from Porton and other investors of Acolyte Biomedica Ltd., which was developing products to detect microorganisms, according to the complaint.

Acolyte’s only product on the market in the U.K. was BacLite, which would help hospitals screen patients for antibiotic-resistant Staphylococcus germs known as “superbugs.” 3M said it conducted trials of BacLite in the U.S. and the results were “alarmingly below those claimed” by Acolyte before the acquisition.

Former Shareholders

3M said it contacted the former shareholders of Acolyte, as required in the purchase agreement, about its plan to shut down the business and offered $1.07 million as an estimated payment on what net sales would have been through the end of 2009.

Porton and Boulter demanded $65.6 million, discussions were “unfruitful” and 3M was sued in December 2008 in the U.K. for having “failed to actively market BacLite,” according to 3M’s suit.

Attached to the complaint in New York were e-mails said to be written by Boulter to Brewer. One e-mail said that a court victory in London for 3M could leave the British Government “quietly seething.” It also said a proposed settlement for more than $30 million would allow the British Ministry of Defense to “internally save face.”

The attached e-mail also referred to a notice from England’s Queen Elizabeth that 3M CEO Buckley, a native of the U.K., would become a Knight Bachelor. It said the British Cabinet “might very shortly be discussing the rather embarrassing situation of George’s knighthood.”

“I have no influence of the knighthood process,” Boulter said in his e-mail to Bloomberg.

Porton Capital Technology Fund, which is managed by Porton Capital, is also named as a defendant. Porton has offices in London and in Dubai.

3M rose 78 cents to $92.56 at 4 p.m. in New York Stock Exchange composite trading. The stock has gained 7.3 percent this year.

The case is 3M Co. v. Boulter, 651708/2011, Supreme Court of the State of New York (New York County).

To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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