Chemours Board Accused of Hiding PFAS Liability, Insider Trading

Chemours Co.'s board and senior leadership concealed billions in potential environmental liabilities related to PFAS, a class of “forever chemicals,” while two top executives sold stock at prices inflated by the scheme, investors allege in a federal lawsuit in Delaware.

“Chemours inherited massive liabilities” in its 2015 spinoff from DuPont “that rendered it insolvent from the start,” and it has admitted under oath that management and the board were “fully aware” its public liability estimates were “baseless concoctions,” one of two lawsuits says.

Meanwhile, its CEO and chief operating officer “each sold unusually large amounts of company stock"—a combined $12.3 million—"precisely at a time when they could maximize their insider profits,” the other complaint says. The “coordinated” sales were allegedly “strategically timed” at “near-term highs for company stock,” just before “several disastrous corrective disclosures” sent it crashing 70%.

Chemours called the shareholder complaints baseless in a statement Tuesday.

Liability Exceeding $2.5 Billion

The derivative suits, filed in the U.S. District Court for the District of Delaware, concern a wave of litigation and environmental cleanup demands involving cancer-linked forever chemicals, which were once used in firefighting foam and nonstick cookware.

The companies agreed in 2017 to split a $671 million settlement related to about 3,550 health claims, but they’re still at odds over others.

The new investor complaints stem partly from an earlier lawsuit Chemours brought in Delaware’s Chancery Court in May 2019 disputing the extent of its obligations toward DuPont. Chemours recently asked the state’s top court to overturn a March order sending the case to arbitration.

The public unsealing of the Chancery Court case—after a sharply contested dispute over DuPont’s bid to keep it under wraps—caused Chemours’ market value to plummet on news that its PFAS liabilities likely exceeded $2.5 billion, the shareholder suits say.

‘Misread and Misinterpret’

In its statement Tuesday, Chemours said the lawsuits “misread and misinterpret” the earlier case.

That lawsuit seeks an order “limiting DuPont’s indemnification rights against Chemours” to the “high-end maximum realistic” liability estimates it offered as part of the spinoff or the return of a "$4 billion dividend it extracted from Chemours premised upon these maximums,” the company’s statement said.

The new complaints, filed Monday and July 24, partly echo a proposed securities class action consolidated in the same court.

Cause of Action: Sections 10(b), 14(a), and 20(a) of the Exchange Act; breach of fiduciary duty; corporate waste; unjust enrichment.

Relief: Damages, costs, fees, a constructive trust, and an order requiring the company to reform its oversight and governance procedures.

Attorneys: One plaintiff is represented by O’Kelly & Ernst LLC and Gainey McKenna & Egleston. The other is represented by Cooch & Taylor PA and Robbins LLP.

The cases are Lee v. Brown, D. Del., No. 20-cv-989, complaint filed 7/24/20 and Savage v. Vergnano, D. Del., No. 20-cv-995, complaint filed 7/27/20.