Wednesday, April 28, 2004
JEREMIAH STETTLERTHE SAGINAW NEWS
A New York-based investment research firm has declared Dow Chemical Co. a risky investment.
Innovest Strategic Value Advisors Inc. says the Midland-based chemical giant has entered a perfect storm of environmental liabilities that could threaten the security of its shareholders.
The firm claims Dow has underreported the environmental risks facing the company on issues such as asbestos, Agent Orange, dioxin and the contamination of Bhopal, India.
"Dow Chemical is facing significant environmentally and socially-related pressures," said Marc Brammer, author of the report. "While most chemical companies carry ample environmental liability burdens, Dow appears to have many large-scale challenges converging all at once in this area."
Innovest, which previously ranked Dow as a secure investment, now indicates that the company likely will "underperform in the stock market over the mid- to long-term."
Dow officials question the objectivity of the 100-page report, particularly because it was commissioned by the Ann Arbor-based environmental advocacy group Ecology Center.
"The clients (of Innovest) are long-standing activists groups that have Dow stock," said Dow spokesman John Musser. "They have purchased this to leverage their agenda. This is more of an advocacy piece than an objective financial assessment."
In a prepared statement, Dow officials disputed claims that the company has failed to disclose to shareholders its environmental liabilities.
"Contrary to Innovest's assessment, Dow has provided information to investors regarding environmental matters in its (Security Exchange Commission) filings in compliance with legal requirements," officials said.
Among elements of the report is Innovest's claim that Dow may shoulder some of the legal and social liabilities associated with a 1984 toxic gas leak in Bhopal, India.
"The Bhopal disaster is an ongoing concern with significant potential to harm the company's reputation or pose material liabilities, as well as constrain the company's investment in Asia," the report states.
"Continuing and heated controversy over reparations to victims, deaths and birth defects ... and pollution of the city's water supply could result in potential legal liability."
Musser said Dow did not inherit legal responsibility for the Bhopal disaster when it acquired the plant's parent company, Union Carbide, in 2001 -- a position Dow has stated repeatedly. He said claims of legal liability have no basis in fact.
The report also suggests that Dow has underestimated its liability for dioxin contamination along the Tittabawassee River, Saginaw River and Saginaw Bay, particularly with the filing of a proposed class-action lawsuit against the company.
While Dow reports $54 million in dioxin-related liabilities, Innovest said the dollar amount likely will resemble the cleanup of PCBs on the Hudson River in New York. There, General Electric Co. will pay an estimated $500 million for remediation and $200 million in legal costs.
Dow officials called Innovest's judgment a matter of speculation and opinion rather than fact.
The report isn't the only environmental-related thorn in Dow's side as it approaches its annual shareholders meeting on Thursday, May 13.
The company also faces a shareholders resolution, sponsored by the environmental activist group Trillium Asset Management of Boston, that would require Dow to disclose the costs of remediation and financial liabilities associated with dioxin contamination, Agent Orange and other pollution issues.
Agent Orange was a defoliant Dow and other companies made during the Vietnam War.
The resolution, which demands a vote, asks Dow to phase out products that include bioaccumulative chemicals or to explain why it is unable to do so. t
Jeremiah Stettler is a staff writer for The Saginaw News. You may reach him at 776-9685.
© 2004 Saginaw News
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