Two former executives of a plastics manufacturer in Evansville have been sentenced to prison after pleading guilty to charges of securities fraud and money laundering. Acting U.S. Attorney John Childress’ office says Kevin Kuhnash and Jason Jimerson admitted to concealing “critical defects” in their business, Lucent Polymers Inc., when they orchestrated the sale of the company in 2013.
The pair sold the company to a private equity firm for more than $64 million.
Childress’ office says they claimed the company could produce specialized plastics products that “consistently met or exceeded customer specifications at very low prices.” However, the company’s internal testing showed many of its products failed to meet those specifications, information that was hidden from customers.
Both Kuhnash and Jimerson say they were aware of the issue, as well as an email from a whistleblower employee, but continued to intentionally fail to disclose their knowledge.
The private equity firm that bought Lucent later sold it to a publicly-traded company, which discovered the fraud and saw its stock price drop by more than 20% after disclosing the fraud to investors.
“These two men knew of the fraudulent practices at the company they led, but chose to let it continue out of sheer greed, going even further by remaining silent as the company was sold for the sole purpose of enriching themselves,” FBI Indianapolis Special Agent in Charge Paul Keenan said in a news release. “This case demonstrates the strong partnerships the FBI has and the diligent work of all involved to combat significant fraud schemes such as this.”
In addition to the securities fraud and money laundering charges for both men, Jimerson also pleaded guilty to a charge of lying to federal agents.
Jimerson was sentenced to two years in federal prison with two years of supervised release and must pay a $10,000 fine. Kuhnash received a three-year sentence with one year of supervised release and a $10,000 fine.