Dow CEO’s Spending Questioned in Whistle-Blower Case

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Dow Chemical Co.’s former fraud investigator can pursue a claim that she was unlawfully fired for finding financial misdeeds, including Chief Executive Officer Andrew Liveris’s expenses for family vacations and payments to a Greek charity, a federal judge ruled.

Kimberly C. Wood, the ex-investigator, said she was fired in October 2013 after telling her supervisor she found “financial statement fraud” in an ethylene plant project. Her prior reports had questioned spending by Liveris, who is also chairman. Dow’s bid to dismiss the case was denied Dec. 15 by U.S. District Judge Thomas L. Ludington, in Bay City, Michigan.

The case, filed under the whistle-blower provisions of the Sarbanes-Oxley Act, may bring unwanted attention to Liveris, who was accused of a series of “broken promises” last month by Third Point LLC, a hedge fund that has called for Dow’s breakup. Dow, based in Midland, Michigan, is giving the activist investor two board seats, and Third Point, founded by Daniel Loeb, agreed to stop disparaging the company for a year.

Wood is a disgruntled employee making false allegations in retaliation for Dow’s denial of “unearned benefits,” Rebecca Bentley, a Dow spokeswoman, said today in an e-mail statement. Most of the claims in an earlier state case were dismissed, and the federal court’s ruling made no determination on the truth of Wood’s allegations, she said.

“While we strongly believe the case should have been dismissed outright, we will move forward and defend the merits of the case vigorously,” Bentley said.

Wood was a “career employee” of Dow who didn’t want to leave the company, said Victor Mastromarco Jr., her attorney.

‘Wrong Heels’

“She was nipping at the wrong heels,” Mastromarco said in a phone interview today. “They wanted to get rid of her.”

Wood, a 25-year Dow employee, was a company fraud investigator in 2009 when she found the renovation of the Dow-owned H Hotel in Midland had exceeded its $13 million budget by $20 million, according to court papers. A Dow employee was fired for trying to limit cost overruns and the involvement of Liveris’s wife and her friend, according to Wood’s complaint.

Wood alleges that Dow in 2012 was “funneling money” to The Hellenic Initiative, a Greek charity co-founded by Liveris, court documents show. Liveris, an Australian, was born to Greek parents.

New York advisory firm Teneo Holdings LLC billed Dow for work done for the charity, Wood claims. Teneo’s founders were on the board of the charity, and Dow tripled its annual payment to Teneo to $16 million, from $5 million, in the middle of the contract year, Wood alleges in court papers. A spokesman for Teneo declined to comment on the claims.

Safari Vacation

Wood also found Dow had paid for Liveris and his family to take an African safari vacation, a $218,938 trip to the 2010 Super Bowl, a trip to the 2010 World Cup in South Africa, and a trip to the 2010 Masters Tournament, she said. Liveris agreed to repay $719,923 after an audit found the expenses weren’t business related, Dow said in a 2011 regulatory filing. Wood claims the disclosure misrepresented what transpired.

Wood claims her supervisor responded to the investigation by telling her in December 2012 that “nothing from the CEO’s past was to be looked at again.”

Other Liveris expenses questioned by Wood include commercial flights she valued at $88,626; $9,763 in Olympic tickets for a Hellenic Initiative adviser; a $10,360 limousine rental in Istanbul; $18,280 for an Australia trip; and $300 in flowers for Hillary Clinton, according to legal filings.

Her final investigation alleged Dow managers improperly recorded expenses to hide cost overruns at the Olefins 2 ethylene project, which she flagged to her supervisor as fraud on Oct. 9, 2013. She was told the next day that Oct. 31 would be her last day at Dow, according to the complaint.

The case is Wood v. The Dow Chemical Co., 14-cv-13049, U.S. District Court, Eastern District of Michigan (Bay City).

(An earlier version of this story was corrected to identify the Teneo representative as a man.)