Bhopal Liabilities not Revealed / Corporate Veil and Possible Trading Fraud Issues

US  Chemical Multinationals Slice and Dice Toxic Assets – yet Another Attempt to Avoid Liabilities and Indian Court Judgments
After the 2017 merger of the Dow Chemical Company with DuPont Nemours, a vast chemical company, known as DowDuPont, was formed. In September 2018, it filed a Form 10 Registration Statement with the U.S. Securities & Exchange Commission, representing the first step in the process of splitting DowDuPont into three new entities, and in October filed the second.

The first of the Form 10 filings concerns DowDuPont’s combined ‘chemical materials science’ division which will be hived off to become the new Dow and, despite it being a specialist chemical company, the new Dow has dropped any reference to chemicals in its name in what might be an effort to appear a little less toxic.

The second filing submitted on the 18th October, related to the agriculture division of DowDuPont, which comprised the combined agricultural portfolios of Dow and DuPont. This division was to become Corteva Agriscience. The so-called ‘specialty’ products division forms the third new company, which keeps the name DuPont. The new Dow, which separated from DowDuPont on April 1, 2019, was renamed Dow Inc. Corteva and DuPont separated in June 2019.

The Form 10 Statement filed by Dow includes a strategy overview, end-market and financial data, and other information which purports to present a fair representation of the company’s prospects to shareholders. The statement includes a handy proviso(1) explaining how “no such list should be considered to be a complete statement”

The filing document’s ‘Information Statement Summary’ first describes risks associated with Dow’s business and, among the bulleted items is ‘Litigation exposures and costs’, conceding that Dow is a party to a number of claims and lawsuits.(2) The section, ‘Risks Related to Dow’s Business’, outlines what it describes as ‘Dow’s principal business risks’ and the fifth sub-section, entitled ‘Litigation’ (3), explains that various actions remain extant against Dow and, critically, specifically cites the asbestos-related liability of Union Carbide Corporation, along with matters related to the Dow Silicones Corporation. All other claims are dismissed as unlikely to have any “adverse impact on Dow’s consolidated financial statements.”

Dow & Union Carbide’s Bhopal Liabilities
So, what of the various litigation, arising from Union Carbide’s business in Bhopal, in which Dow is embroiled as a named respondent and/ or summoned to appear? (4) Dow claims that a ‘full and final settlement’ (of the Bhopal Disaster) was made in 1989 but that is, at best, disingenuous since criminal cases against Union Carbide and others were revived in 1991 and remain extant. The charges have never been answered by Carbide which cried ‘forum non conveniens’ in the US but has, thus far, refused to accept Indian jurisdiction. Dow, for its part, has been summoned to the Bhopal courts to explain why it should not present Carbide (its wholly-owned subsidiary) and simply fails to attend.

Even the claimed ‘full and final’ 1989 settlement is under review with a ‘curative petition’ in the Delhi Supreme Court, where the Indian Government’s stated aim for the petition is to: ‘cure the gross miscarriage of justice and perpetration of irremediable injustice being suffered by the victims of the Bhopal Gas Tragedy… based on certain factual assumptions which have been found to be completely incorrect and far removed from reality’ Depending on which figures are used to calculate the additional compensation then Dow, along with the other respondents Union Carbide Corporation, Union Carbide India Limited and Eveready Industries, could be liable for anything up to $8.1billion to settle the case(5).

Dow is also a named respondent in public interest litigation in the Madhya Pradesh High Court seeking remediation of the abandoned Union Carbide factory site. But Dow continues to resist the Ministry’s 2006 request for a £16 million deposit towards initial costs and refuses to acknowledge the official position of the Indian government(6) viz: “It is the official position of the Government of India that the previous settlement of claims concerning the 1984 Bhopal Gas Disaster between Union Carbide and Union of India has no legal bearing on or relation whatsoever to the environmental contamination… Pursuant to the ‘polluter pays’ principle recognized by both the United States and India, Union Carbide should bear all the financial burden and cost for the purpose of environmental clean-up and remediation.  The Union of India and the State Government of Madhya Pradesh shall not bear any financial burden for this purpose.”

Bhopal Liabilities Not Revealed in Dow & Union Carbide Merger Documents
At the time of the takeover of Union Carbide, in 2001, the merger agreement dated August 13, 1999,  denied that any Bhopal-related criminal prosecution pending against UCC was of material consequence. Article V of the Merger Agreement 214 stated:

“there are no (i) civil, criminal or administrative actions, suits, claims, hearings, investigations or proceedings pending or, to the actual knowledge of its executive officers, threatened against it or any of its Subsidiaries… except for those that are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect on it.”

But, a Class Action Complaint filed by worried shareholders in May 2000 against Dow, and various officials of the company, had claimed that Dow was violating federal law and called on Dow to cease violating Securities and Exchange Commission regulations by filing an amended Schedule 13D document. Plaintiffs asked that Dow be ordered to reveal details of the Bhopal Gas Disaster, including the facts that:

  • Union Carbide was still subject to criminal prosecution in India, for its part in the disaster, and its status was that of ‘proclaimed absconder’.
  • Investigations into the cause of known environmental contamination present “substantial potential civil and criminal liabilities to which Union Carbide is exposed”.
  • Dow would, upon merger, “assume all of Union Carbide’s costs and potential liabilities associated with these matters”.

But, perhaps most tellingly, the class action asked that Dow be ordered to disclose:

  • “The imminent danger that Dow’s Indian assets and business operations will be interrupted and attached, and Dow’s current plans for conducting and expanding business operations in India in the future would be jeopardised (just as union Carbide India assets were attached and its business prospects in Indian were foreclosed) due to the fact that union Carbide continues to be recognised in a court of India as a proclaimed absconder from existing criminal prosecutions in India

The class action explains that Union Carbide revealed, in its annual statements of 1994 and 1995, some limited disclosure of facts pertaining to Bhopal liabilities including that: it was an accused party in the criminal prosecutions for the Bhopal Disaster; it was not appearing in the court; and, consequently, the Indian court had attached all of its assets in India which, at the time, consisted of $92m in cash.

  • “On April 30, 1992, the Bhopal district court in the criminal proceedings against proclaimed Union Carbide, Union Carbide Eastern, and Anderson as absconders, the Chief Judicial Magistrate, in response to the attachment applications, ‘ordered the seizure of all assets of the Danbury Connecticut chemical company as part of continuing criminal proceedings against (Union) Carbide’”.

It goes on to explain how there was no further mention of these liabilities from 1996 onwards: “Though union carbide also stated its 1994 & 1995 Annual Reports that the pending criminal trial “should not have adverse financial consequences for the corporation outside of India,” the implication is clear that Union Carbide also understands that there is a very high probability that the criminal proceedings would lead to substantial adverse financial consequences if Union Carbide were to appear in India and defend itself against the criminal charges. Indeed Union Carbide appears to have calculated that it was more prudent to forfeit as much as $92 million in cash than to expose itself to the obviously high probability of much greater losses in criminal fines, restitutionary damages, and sanctions.

“Nevertheless despite the fact that its exposure to substantial losses in India did not diminish as long as its legal predicament remained unresolved Union Carbide omitted without comment all such disclosure from its form 10-K Annual Report from 1996 and for each year thereafter. Union Carbide continued to be an absconded criminal defendant whose assets were attached and held in its name in an ongoing effort by the Indian court to compel Union Carbide to appear in criminal court as ordered to face serious charges and the possibility of heavy penalties. However, no mention of these facts was made from 1996 onwards in direct violation of applicable disclosure requirements.”

The class action was dismissed on 29 December 2000. 

Bhopal Liabilities Not Revealed in Dow & DuPont Merger Documents
Before special shareholder meetings for the respective stockholders of Dow Chemical and DuPont in July 2016, a joint proxy statement was issued containing information pertinent to their proposed merger.(7) But Dow appeared, once again, not to be respecting its fiduciary duties, including disclosure of all facts material to the stockholders’ consideration, by not declaring any potential Bhopal-related liabilities. This, despite being urged by campaigners to comply with its legal obligations.

Worse, the shareholders of DuPont stood to inherit a share of these liabilities with no statement from Dow other than their claim that the disaster was fully, and finally, settled in 1989.

Union Carbide and Dow, Stuck in a Complicated Relationship
After Union Carbide’s 2001 merger with Dow, its debts and obligations appeared to become registered charges upon Dow’s consolidated accounts, or at least those pertaining to asbestos claims in the United States did, and on January 9th, 2002, an asbestos-related suit filed against Union Carbide was settled, knocking over $7 billion from Dow’s share price. But, in 2011, when summoned to answer the curative petition, seeking to redress the injustices of the 1989 gas disaster claims case in the Supreme Court of India, Dow complained that the suit had been brought against it due to “an erroneous assumption that UCC has merged into Dow.” Instead, Dow deposes Union Carbide to be an “independent corporate entity”, with Dow itself a mere “shareholder”.

But, if as Dow asserts, Union Carbide is an “independent corporate entity”, and Dow merely a “shareholder” why would it not attend the criminal hearing in Bhopal, to which it has been summoned, and extricate itself from association with the absconding Carbide? The answer may lie in the fall-out from a 2005 case in a Connecticut court against Dow and Union Carbide for violations of anti-trust laws and breach of contract.

An article published by The Independent newspaper on 13 February 2012, at a time when Dow was facing enormous criticism over its sponsorship of the London Olympics, asserted to have obtained legal documents, from the Connecticut case, and claimed to “reveal Dow Chemical sidestepped trading ban after disaster”. This, in reference to the attachment order on Union Carbide, from Bhopal’s Chief Judicial Magistrate, meaning that it would not be able to sell its goods in India for fear of the proceeds being seized.

After the disaster, Union Carbide ceased selling products directly to customers in India and, in 1987,  set up a distinct trading company in Bombay called Megavisa(8) which was the plaintiff in the Connecticut case. From 1987 until 2002, Megavisa distributed UCC products to customers in India in what seems like the means to avoid the attachment order and, in 1999 alone, is believed to have sold $24 million worth of UCC property to Indian customers, including State owned enterprises.

But, documents from the Megavisa lawsuit reveal Dow’s intention to supplant Megavisa at the earliest opportunity as an internal Dow email from two weeks prior to the merger reveals: “…UCC have not sold directly to India since Bhopal and have used Mega Visa to handle their sales of specialty chemicals, some bulk chemicals and wire and cable products. They work across our Dow business and have some several minion (sic) $ sales revenue as I understand it… The businesses will obviously want to address the issue of whether we want to continue with Mega Visa once the 'merger' is complete…”(9)

Another email, post-merger in March 2001, states, in apparently unequivocal terms: Union Carbide Corporation is a wholly owned subsidiary of The Dow Chemical Company… UCC will not be issuing any more press releases, product announcements, price increases, etc. All business activities are done under the umbrella of a Dow business. We face the market as Dow.”(10)

Dow may have been hoping to trade Carbide goods in India, as Megavisa had been doing for many years, but was all too aware of the necessity of maintaining a distinction between Dow and UCC if it was not to be dragged in to the Bhopal criminal suit and, in 2001, the Union Carbide & Dow merger process led to Union Carbide Asia Pacific morphing into Dow Singapore; Union Carbide Eastern (one of the accused in the criminal case) had been dissolved, with its contracts and its directors already transferred to the Singapore company, and this new vehicle gave Dow the opportunity to continue processing orders outside of India but without the need for the intermediary Megavisa and, early in 2002, its services were dispensed with.

Back in the Connecticut courtroom and, after considering internal documents including emails and invoices, the court ruled that the US had jurisdiction over the Asian affiliates of Dow and UCC, which had been set up to "maintain access to the Indian market". The case was later settled out of court.

Union Carbide and Dow, Between a Rock and a Hard Place
After the merger with Dow, Union Carbide has always appeared to exist as a legal entity but, while US financial accounting standards require that the various ‘operating segments’ of a corporation report results separately, Union Carbide’s 2010 year-end SEC filings declare that it is unable to comply since:

‘Union Carbide Corporation's business activities comprise components of Dow's global operations rather than stand-alone operations... there are no separable reportable business segments for UCC.’(11)

So, if Union Carbide is not functionally separate from Dow, what kind of entity is it? The 2001 deal with UCC was termed a ‘merger’ within Dow’s own public statements and shareholders in Dow also became shareholders in UCC and vice versa. The assets and liabilities of both companies were combined into a single, consolidated account. Union Carbide’s pre-existing debts and obligations became registered as charges upon the corporation’s consolidated accounts as demonstrated by the asbestos suit settlement in 2002.

But, as above, in the Indian Supreme Court Dow claimed it to be “an erroneous assumption that UCC has merged into Dow.” And that Union Carbide was an “independent corporate entity”, with Dow only a “shareholder”.

“Since Dow announced the merger with Union Carbide, sales have risen 150% to stand at $57 billion annually. Union Carbide’s annual sales began at $6.5 billion in 2001, and are declared to be $6.9 billion in 2014. Of these sales, 98% are now direct to Dow itself.”(14)(15)

Dow has been summoned to the Bhopal criminal case, where it is required to ‘show cause’ why it should not produce Union Carbide to the court, but if it cannot convince the court that UCC remains a separate entity, then its role in consciously trading its products in India (using affiliated middle-men, in place of Megavisa, rather than distinct third parties) would potentially make it complicit in a fraud attempting to circumvent the attachment order against Carbide.

The risk is that what actually appears to be a functional unity between Dow and Carbide, not only implicates Dow in the potential trading fraud  but gives grounds for a piercing of the corporate veil between them.

Should the Curative Petition receive its long-awaited hearing, then Dow is exposed to a similar risk since the same case has been made in an affidavit to the Supreme Court:

“…(The Dow Chemical Company) TDCC’s control and domination over the current facade of UCC is sufficient to establish its control. 98% (Ninety eight) of UCC’s dealings are solely with TDCC. … UCC shareholders are TDCC’s shareholders. UCC has no independent board of directors. The money in its accounts is de facto TDCC’s. However, it is also demonstrated herein that the TDCC-UCC structures post merger were created for the purpose of the impropriety sought to be set aside here… When Courts are asked to ‘lift the corporate veil’ between companies they apply a number of tests to discern the substantive reality behind the corporate form. One of those tests seeks to establish who benefited from the change in form.” (16)

“…lifting or piercing the corporate veil is done when “associated companies are inextricably connected”… or when corporate entities are used for “unjust or inequitable purposes”… or as a “cloak and dagger for fraud or improper conduct.” (17)

If the corporate veil between the two is lifted, and Carbide is shown not to be the separate entity that Dow had claimed it to be then Dow’s own assets are at risk of being subject to a new attachment order and its Indian trading prospects severely threatened.

Dow cannot, it seems, extricate itself from the criminal proceedings in Bhopal and, although not charged with any crime, its reputation is harmed by not producing the absconding Union Carbide to face trial; it remains a named respondent in both the curative petition and the public interest litigation in Madhya Pradesh and the uncomfortable fact is that Dow remains inextricably linked to the ongoing fallout from the disaster in Bhopal.

Speculation as to how much this might affect its plans for both doing, and expanding, its business in India began as early as the 2000 class action i.e. before it ever acquired the liability and there have been numerous shareholder resolutions(18), along with complaints to the SEC, concerning Dow’s inability, or refusal, to correctly address the Bhopal Disaster. In March 2014, shareholders provided proof that three significant business deals and a broader $5 billion investment plan had been impeded in India thanks to the issue..

Dow was instantly linked to the disaster as soon as it acquired Union Carbide and, if past campaigns are anything to go by, splitting DowDuPont into three will not necessarily see the other new companies (Corteva and DuPont) escape the opprobrium of activists in India. All three new companies may find their Indian operations severely hindered unless the mess in Bhopal is sorted out as it might have been almost 34 years ago.


1:While the list of factors presented here is, considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on DowDuPont’s, Dow’s or DuPont’s consolidated financial condition, results of operations, credit rating or liquidity.”

2: “Litigation exposures and costs —in the ordinary course of its business, Dow is a party to a number of claims and lawsuits, including those related to product liability and patent infringement claims, employment matters, governmental tax and regulatory disputes, and contract and commercial litigation, for which Dow could have significant costs and incur significant liabilities.”

3: Pp 29-30 Litigation: Dow is party to a number of claims and lawsuits arising out of the normal course of business with respect to product liability, patent infringement, employment matters, governmental tax and regulation disputes, contract and commercial litigation, and other actions.

Certain of the claims and lawsuits facing Dow purport to be class actions and seek damages in very large amounts. All such claims are contested. With the exception of the possible effect of the asbestos-related liability of Union Carbide Corporation (“Union Carbide”) and Chapter 11 related matters of Dow Silicones Corporation (“Dow Silicones”) as described below, it is the opinion of Dow’s management that the possibility is remote that the aggregate of all such claims and lawsuits will have a material adverse impact on Dow’s consolidated financial statements.

4: Dow’s Bhopal related Legal Liabilities:

5: GoI is seeking additional compensation, based on higher figures for the dead and injured, of $1- 1.5billion. The Bhopal survivors’ groups have challenged the Government to use its own, previously published, figures (Indian Council of Medical Research, epidemiological report, 2004) for the dead and injured which would require a settlement of $8.1billion. More detail on the Curative petition.

6: as expressed in a letter to the Lower District Court, Manhattan, dated June 8, 2004,


8: The contract with Megavisa was set up by Union Carbide Eastern (UCE), a wholly owned subsidiary of UCC based in Hong Kong also charged with homicide in Bhopal. The first criminal summons was issued in early 1988, followed by arrest warrants for named reps of UCC and UCE. In October 1988, two weeks after the first arrest warrant was issued, UCC registered Union Carbide Asia Pacific (UCAPC) to operate in Singapore. By 1990, UCE Hong Kong had been dissolved. Criminal investigators in India said they were unable to pursue charges against a dissolved company. UCC’s Asian business activities (and its directors) henceforth operated from the new company in Singapore.

In 1993, a dummy Megavisa company was set up in Singapore to give distance between UCC and Megavisa, Bombay. This company was supervised by UCAPC, which took over contracts signed by UCE, thus demonstrating continuity of business. Orders for UCC products in India were now processed through Singapore. Products themselves were taken from UCC plants in the U.S. and given a Megavisa title at the port of shipping (they would otherwise be barred). They were then sent to ports in India and straight onto Indian customers.

9: Dow internal email from Graham Fox, Dow Chemical regional general manager Middle East &Indian subcontinent, to Ravi Muthukrishnan, Country Manager, Dow Chemical International Pvt. Ltd. (Mumbai), January 31, 2001

10: Dow internal email from Catherine Maxey, Business Public Affairs director. Performance Chemicals The Dow Chemical Company, March 14, 2001.

11: “Dow conducts its worldwide operations through global businesses, and the Corporation's business activities comprise components of Dow's global businesses rather than stand-alone operations. Because there are no separable reportable business segments for UCC and no detailed business information is provided to a chief operating decision maker regarding the Corporation's stand-alone operations, the Corporation's results are reported as a single operating segment. In addition, in order to simplify the customer interface process, the Corporation sells substantially all its products to Dow. Products are sold to Dow at market-based prices, in accordance with the terms of Dow's long-standing intercompany pricing policies”. Union Carbide Corporation, Annual report on form 10-K/A year ended Dec 31, 2011, Part 1.

12: Relationship between The Dow Chemical Company (TDCC) and Union Carbide Corporation (UCC)

13: SEC Filings

14: ‘Beyond Belief’, ETHECON, Foundation Ethics & Economics:

15: Annual report to Securities and Exchange Commission, year end December 31, 2017. Union Carbide Corporation and Subsidiaries Consolidated Statements of Income: Total net sales $5.165billion of which $5.022billionNet sales to related companies

16: Affidavit on behalf of petitioners, Curative Petition no.345 in the Supreme Court of India. Sec 6.16

17: Affidavit on behalf of petitioners, Curative Petition no.345 in the Supreme Court of India. Sec 6.4

18: For detail on investment problems for Dow in India and associated shareholder activism:



Scroll to Top