WILMINGTON, Del.—A. Schulman Inc. has filed a lawsuit against the previous owners of Citadel Plastics, accusing them of falsifying results before selling the company for $800 million.
Fairlawn, Ohio-based Schulman filed the suit June 15 in Chancery Court in Wilmington, Del. Schulman is seeking unspecified damages from former Citadel owners including Huntsman Gay Capital Partners and Charlesbank, as well as from several former Citadel executives, including Michael Huff and Matthew McDonald.
Most of Schulman's accusations center around Lucent Polymers, an Evansville, Ind.-based compounding firm that Citadel bought in late 2013. Schulman acquired Citadel in early 2015 in what was the biggest deal in Schulman's 88-year history.
According to the filing, Schulman “never would have purchased, much less paid $800 million for Citadel had it know that [Lucent] was engaging in fraudulent business practices that…substantially reduced [Citadel's] profitability and growth prospects.”
Schulman also accuses Citadel/Lucent of falsifying certificates of analysis given to customers that exaggerated flame retardant properties and other characteristics of the compounds that Lucent was making.
“Knowledge of this pervasive fraudulent scheme…went all the way to the top,” Schulman officials said in the filing. “Lucent and Citadel officers and directors knew of and condoned these wrongful practices.”
Huff declined to comment on the suit.