NEW YORK — A Justice Department dragnet, laid to catch members of an alleged cartel that aimed to fix prices in the polyester staple industry, snared another major chemical company Thursday.
This story first appeared in the November 1, 2002 issue of WWD. Subscribe Today.
KoSa and one of its executives entered guilty pleas to federal charges of conspiring to fix prices in a U.S. District Court in Charlotte, N.C. The company agreed to pay a $28.5 million fine, while the executive, Troy F. Stanley, agreed to a $20,000 fine and an eight-month prison sentence.
“Today’s cases reflect the Antitrust Division’s resolve to prosecute companies and executives engaged in cartels that harm American consumers,” said Charles A. James, Assistant Attorney General for the division, in a statement.
For more than a year, the Justice Department has investigated charges that makers of polyester staple from September 1999 through January 2001 conspired to fix prices, allocate customers and hike prices in a coordinated ring. As reported, R. Bradley Dutton, a former employee of Nan Ya Plastics Corp., in September was indicted by a federal grand jury on similar charges.
Officials at the other major players in the U.S. polyester staple industry — DuPont, Wellman and DAK Americas — have acknowledged that they, too, have been contacted by the Justice Department. No charges have been filed against those three companies.
A DuPont spokesman said that the Wilmington, Del.-based chemical giant had originally tipped the Justice Department off to the pricing shenanigans.
In court papers, Arteva Specialities SARL, a Luxembourg-based division of Houston-based KoSa, said that it “and co-conspirators entered into and participated in a combination and conspiracy to suppress and restrain competition by fixing the price of, and allocating customers for, polyester staple.”
Polyester staple is a short version of the fiber typically used as an insulative fill in outerwear and blankets.
The papers said KoSa met with unnamed competitors to discuss prices, coordinate price increases, allocate customers and share sales information.
Mary Wilson, general counsel for the U.S. and Canada for Arteva, said in a phone interview, “I’m not sure that we can say exactly how it happened.
“What we can say is that we believe there were no personal profit motives. We think that Troy Stanley, being a long-term employee of the textile industry, truly believed that he was engaged in practices that would strengthen the textile fibers industry,” she continued. “Our position is, regardless of his motive, what he did was wrong. We have accepted the terms of the [settlement] agreement and taken steps to prevent this kind of poor judgement from happening in the future.”
Stanley, a resident of Forest City, N.C., served as director of textile staples and has been an employee of KoSa and its predecessor companies — the polyester operations in question were previously owned by Hoechst Celanese — since the mid-Eighties. Wilson said he is on a leave of absence pending the final resolution of the case.
Stanley’s attorney, Stephen T. Smith of the Raleigh, N.C. firm McMillan Smith and Plyler, confirmed the terms of the settlement but declined further comment.
The Justice Department’s investigation focuses on a time when rising oil prices prompted makers of polyester staple —as well as suppliers of polyester filament and other synthetic fibers — to try to raise their prices to make up for ground lost after the Asian financial crisis of 1997. The price increases came in waves, beginning in June 1999 when DuPont said it would hike the price it charged for polyester filament. Wellman, KoSa and Nan Ya followed suit, and in August, the four makers raised their prices on staple.
Over the next two years, the fiber makers tried to impose further rounds of price increases. While they tended to make public announcements that they intended to raise prices by set percentages (typically 7 to 15 percent) fiber buyers said actual selling prices rarely rose as much as threatened.
Bart Daniel, attorney for Dutton, who served as a sales manager at Nan Ya during the period being investigated, said, “We are actively preparing for trial.”
No trial date has been set.
A Justice Department spokeswoman declined to comment on whether any other companies or executives might be charged in the matter.
During the period being investigated, DuPont was engaged in a polyester staple joint venture with Mexican chemical maker Alpek.
A DuPont spokesman said Thursday: “DuPont, Alpek and their former polyester staple joint venture, DuPont-Akra, originally brought this matter to the attention of the Department of Justice. We have been advised by the Department of Justice that neither DuPont, Alpek or DuPont-Akra, nor any of their affiliates or employees, will be charged with any misconduct in connection with this matter. Due to the confidential nature of the investigation, we are not at liberty to comment further.”
The Justice spokeswoman said she had no comment on that claim.
A spokeswoman for Charlotte, N.C.-based DAK Americas, which operates DuPont’s former polyester staple business, said Thursday, “We are aware of and cooperating fully with the Department of Justice in their investigation.”
At Shrewsbury, N.J.-based Wellman, a spokesman said, “We have not been charged with anything, and vehemently deny that we have fixed prices or allocated customers.”
To ensure that the company or its employees do not again engage in price-fixing or other illegal or unethical practices, KoSa created a new position — vice president of compliance. The company last fall named Carol Murin to that post. She reports to chief executive officer George Gregory.