Firm seeking merger with Union Carbide sued
by Suman Guha Mozumder, India Abroad News Service

New York, May 26 - Lingering legal issues arising from the Bhopal gas disaster of 1984 have landed a leading chemical company seeking a merger with Union Carbide Corporation (UCC) in trouble.

Dow Chemical has been sued for allegedly failing to disclose to the Securities and Exchange Commission (SEC), the U.S. market watchdog, that the UCC is exposed to potential criminal and other liabilities from its former pesticide plant in Bhopal.

A class action lawsuit has been filed in the U.S. District Court for the Southern District of New York on behalf of all persons who held the common stock of Dow since August 13, 1999. The complaint alleges that Dow violated federal securities laws in an SEC filing on August 13, 1999, that contained "false statements and omissions" concerning potential liabilities and dangers of business disruption to which it would be exposed on its acquisition by merger of UCC.

Specifically, the complaint alleges with regard to the Bhopal gas disaster that Dow failed to disclose that UCC continues to be named defendant in a criminal prosecution in a Bhopal district court and is charged with culpable homicide, manslaughter and other serious criminal charges that expose it to potentially billions of dollars worth of criminal fines and sanctions.

The complaint also alleges that Dow did not disclose that UCC failed to appear in India to face criminal charges and was found by courts there to be a "proclaimed absconder" from Indian justice. This, the suit alleged, resulted in all of UCC's assets located within India being attached in an ongoing effort by the Indian courts to compel it to appear in criminal court.

The complaint alleges that Dow also failed to disclose that upon acquisition of all of Union Carbide's assets and liabilities, Dow's Indian holdings would be in danger of being attached just as were UCC's assets, in an effort by Indian courts to compel Dow to appear and face criminal charges that UCC has thus far refused to face. It alleges that such a disruption of Dow's Indian holdings would also interfere with its announced plans to expand extensively its business operations in India.

Earlier this month, while welcoming the European Commission's decision to approve its merger with UCC, the company had said Dow and Union Carbide are a good fit as they are complementary in their technical knowhow, product ranges and geographic scope. "This combination will enable the new company to provide customers with the widest range of chemical products on a worldwide basis," it said in statement.

But the lawsuit alleges that Dow's failure to disclose these matters has substantially impaired its shareholders' abilities to make adequately informed decisions regarding the costs and benefits of the planned merger.

Dow is a leading science and technology company producing chemical and plastic. It serves customers in 162 countries and had $18.4 billions in net sales in 1998.