Chemtura Probe Showed Evidence of `Suspicious' Asia Payments, Lawyers Say
Chemtura Corp. made “suspicious payments” in Central Asia that were concealed, the law firm Morgan Lewis & Bockius LLP said in court papers defending its fees as special counsel to the bankrupt chemical maker.
Morgan Lewis, hired by Chemtura to assess policies on customer incentive programs, made the statement May 21 in papers in U.S. Bankruptcy Court in New York. The U.S. Trustee, a government bankruptcy-monitoring agency, earlier challenged the law firm’s right to its fees, saying the description of its work was vague and the amount should be cut by $200,000.
“The investigation conducted by Morgan Lewis revealed evidence of suspicious payments made to persons in certain Central Asian countries and of activity intended to conceal the nature of those payments,” the law firm said.
Chemtura spokesman John Gustavsen said an investigation is continuing and declined to comment further.
LyondellBasell Industries NV, a chemical company which exited bankruptcy in April, reported conduct that could raise compliance issues in the Central Asian country Kazakhstan to the Justice Department, according to a March 30 court filing. Justice Department spokeswoman Laura Sweeney said she could neither confirm nor deny the existence of an investigation into either company.
Chemtura reported possible violations of U.S. anti- corruption laws to the Securities and Exchange Commission and has continued to update the agency, Morgan Lewis said.
The Middlebury, Connecticut-based company said in its quarterly report for the period ended March 31 that a review of its customer incentive program was being done by its audit committee and board of directors. The review found payments were directed to “persons other than the customer,” and not recorded in a transparent way, Chemtura said in the filing.
The incentive payments were part of the company’s AgroSolutions Engineered Products segment, formerly known as Crop Protection Engineered Products, in its Europe, Middle East and Africa region. The division makes insecticides, plant growth regulators and seed treatment products to increase crop yields.
Morgan Lewis, after reviewing more than 144,000 electronic records, couldn’t divulge details of its investigation without jeopardizing confidentiality, lawyers for the firm wrote.
The company said in its SEC filing that it can’t estimate the amount of sanctions that might be imposed as a result of the review and the issue won’t lead to a material change of its financial statements.
Chemtura filed for bankruptcy in March 2009, citing falling demand for resins, electronics and construction materials made with its products. The company listed assets of $3.06 billion and debt of $2.6 billion.
The case is In re Chemtura Corp., 09-11233, U.S. Bankruptcy Court, Southern District of New York (Manhattan).