June 4 (Bloomberg) -- DuPont Co., the maker of Pioneer genetically modified corn, was sued for $1 billion by an investment fund that claims company directors promoted herbicide-resistant crop traits knowing they didn’t work.
The Ironworkers District Council of Philadelphia & Vicinity Retirement & Pension Plan contends that some past and present DuPont directors wasted corporate assets and fraudulently promoted a specific gene trait, known as GAT, in a Delaware Chancery Court lawsuit made public today.
Before filing the suit, plaintiff’s lawyers issued a legally defined “demand” on DuPont’s board “to investigate and commence an action” against directors and executives, court papers show.
Dan Turner, a DuPont spokesman, said today that “several months ago, DuPont’s Board of Directors unanimously rejected the shareholder derivative claims” following an independent investigation by former Delaware Chancellor William Chandler and two independent DuPont directors. Turner said they concluded the claims “were not supported by the facts or the law and that pursuing those claims would not be in the best interest of DuPont.”
GAT grew out of Wilmington, Delaware-based DuPont’s efforts to develop products that increase crop yields, including genetic engineering of seeds to make plants more resistant, for instance so herbicides kill weeds but not crops.
According to court papers, DuPont in 2002 took licenses from Monsanto Co. to use its Roundup Ready trait, which helps crops resist otherwise harmful effects of Monsanto’s Roundup herbicide. By 2005, DuPont decided to develop its own trait -- GAT.
DuPont “with great fanfare” announced in 2006 that in 2009 it would begin selling GAT, which stands for glyphosate acetolactate synthase tolerance, with possible sales of $200 million a year, according to the complaint. GAT seeds are genetically altered to tolerate weedkillers known as ALS herbicides.
Soon “field trials of GAT were producing disappointing results” and DuPont “continued to publicly hype GAT” and “conceal the failure,” the fund said.
In 2009, DuPont disclosed it was adding a Monsanto Co. genetic technology, used to make crops resistant to weedkillers, to its product because the combination helped boost crop yields. Monsanto sued and in August 2012 a federal jury in St. Louis awarded Monsanto $1 billion in damages.
As a result of wasteful mismanagement, according to the lawsuit, “the company was sanctioned by a federal judge and millions of dollars were spent on attorneys’ fees and other expenses,” while directors “failed to institute and maintain adequate controls” and damaged the company.
After the judgment, DuPont appointed an “evaluation committee’ to investigate claims made by shareholders. The board retained authority to take any action. The committee issued a report in late November and subsequently provided it to the fund’s attorney.
‘‘The report is not an objective analysis of the record and relevant evidence,” the fund said. It doesn’t “provide an objective and reasoned analysis on which the board could reasonably rely.”
The Ironworkers accuse DuPont of civil fraud, negligent and intentional misrepresentation, waste of corporate assets and breach of fiduciary duties.
Today’s filing is a derivative lawsuit, filed in behalf of the company with any damages earmarked for DuPont rather than shareholders. Money awarded to the company sometimes comes from directors’ and officers’ insurance and assessments from executives’ alleged wrongdoing.
Defendants include Ellen Kullman, DuPont’s chief executive officer; and directors Eleuthere I. du Pont and Lamberto Andreotti, who is also CEO of Bristol-Myers Squibb.
The case was assigned to Judge Sam Glasscock III, who sits in Georgetown in southern Delaware.
The case is Ironworkers v. Lamberto Andreotti, CA9714, Delaware Chancery Court, (Wilmington).
To contact the editors responsible for this story: Michael Hytha at email@example.com. Joe Schneider, Andrew Dunn