Tuesday, July 02, 2013

More Woes Surrounding the Dow-Kuwait-Rohm-&-Haas Deal

I keep thinking that the last developments surrounding the Dow/Kuwait/Rohm & Haas business deals have been written, but that never seems to be the case. You may recall that way back in early 2009, the Kuwaiti-stated-owned Petroleum Industries Corporation pulled out of a joint venture with Dow. As part of that JV, Dow was to be given money for capital assets that were transferred to the JV. At that point in time, the price of gas was down considerably so the Kuwaiti's were short the cash, as they had counted their chickens before they had hatched and assumed that the petroleum money would be there. Similarly, Dow also counted their chickens before they had hatched, and before the Kuwaiti's pulled out of the JV, had already committed in public that promised money to purchase Rohm & Haas. Dow was able to purchase Rohm & Haas with other financing, plus 4 years later get a $2.5 billion dollar settlement from Kuwait. The Kuwaiti cabinet has started an investigation into what went wrong on their end, already sacking a number of executives. All in all, there has been plenty of unhappy people associated with the deal.

But that is all in the past, although the misery continues. Now it has been discovered that a former Dow executive, (the VP of Information Systems) partook in some insider trading on that knowledge. The VP became aware of the pending purchase of Rohm and Haas via his girlfriend who was an executive assistant to Dow's CFO (!). And of course, he told his buddy who then told his broker. Over a million dollars in profits were generated from this little tidbit of information, which is quite understandable as Dow did pay a nice premium for the Rohm & Haas stock.

How someone who is smart enough to be the VP of IS would be stupid enough to not think that the SEC would catch up with him and his cohorts is beyond me. I imagine that the SEC probably became aware of the trades by look first at the broker, so there is likely plenty of love lost between the two friends over why the friend had to flap his lips to his broker. And there is plenty of love lost between the VP and the girlfriend who is now the VP's wife. She and her husband have both undoubtedly lost their jobs and will have an impossible time finding anything similar in payscale again ("Do you want fries with that?" "Welcome to Walmart!" ). She also must be ruing the day that she started flapping her lips over the whole matter.

As Ben Franklin once said, three people can keep a secret if two of them are dead. In this case, you had four people, all of them very much alive. Imagine the elation they felt when they first got the money; imagine the pain and suffering they are now feeling. To quote my fellow Minnesotan Marge Gunderson,
"And for what? For a little bit of money. There's more to life than a little money, you know. Don'tcha know that? And here ya are, and it's a beautiful day. Well. I just don't understand it."

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