SEC Charges Former Executives of Lucent Polymers, a Plastics Manufacturer with Fraud
On February 12, 2019, the SEC charged two former high-ranking executives, of an Indiana-based plastics manufacturer with concealing from potential buyers of the manufacturer the fact that the company’s core business model was a sham.
According to the SEC’s complaint, Lucent Polymers, Inc. premised its business model on its ability to transform “garbage to gold” – that is, to use low-grade, non-prime feedstock to develop high-quality plastics. The company’s near-magic “garbage to gold” process, the SEC alleges, was a huge commercial success. However, the complaint alleges that Lucent’s business model was a fraud. The complaint alleges that the company routinely lied to its customers and falsified its certifications of test data to show that its products complied with customer specifications, including on important aspects such as fire-retardant measures, when in fact the products did not meet customer specifications.
According to the complaint, Kevin Kuhnash, Lucent’s CEO and Jason Jimerson, Lucent’s COO, hid Lucent’s fraudulent practices and made misrepresentations in the sale of Lucent to Citadel Plastics Holdings, LLC, an Illinois-based plastics manufacturer. The complaint further alleges that, after the sale to Citadel, Kevin Kuhnash and Jason Jimerson continued to conceal the fraud in order to secure future escrow payments under the deal and to help secure Citadel’s eventual sale, when they would receive additional payments. In March 2015, Citadel’s stock was sold to a publicly-traded company. Between the 2013 and 2015 stock sales, Kevin Kuhnash received more than $1.3 million, and Jason Jimerson received more than $600,000, according to the complaint.
The SEC’s complaint, filed in federal court in southern Indiana, charges Kevin Kuhnash and Jason Jimerson with fraud in violation of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctions, disgorgement plus interest, civil monetary penalties, and officer-and-director bars.
In a parallel action, the U.S. Attorney’s Office for the Southern District of Indiana today announced related criminal charges against Kevin Kuhnash and Jason Jimerson.
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