The Former CEO and COO of Lucent Polymers have been sentenced to federal prison for concealing critical defects about their company before selling it.
Kevin Kuhnash of Ohio and Jason Jimerson of Alabma were both sentenced to federal prison by U.S. District Judge Richard L. Young on Thursday for charges of securities fraud and money laundering.
Kuhnash received a 36-month prison sentence, and Jimerson received a 24-month sentence.
Both men admitted they concealed critical defects in Lucent’s business when they orchestrated the sale of the company to a private equity firm in late 2013 for over $64 million. Kuhnash and Jimerson claimed that Lucent could produce specialized plastics products that consistently met or exceeded customer specs at very low prices by using low-cost, recycled materials.
Lucent’s internal testing showed that many of its most profitable products often failed to meet specifications. This information was hidden from customers and Lucent shipped the products with a fabricated set of test results that falsely claimed the product was within specifications.
Kuhnash and Jimerson became aware of all of this in the months leading up to the sale of the company. Both men admitted to being aware of an email from a whistleblower employee who disclosed what he described as “ethical/conscience issues” and “a level of dishonesty” at Lucent. The email described the fraud that Lucent was perpetrating on its customers, including the manipulated test results, and lying to customers. Jimerson agreed with Kuhnash to not forward the email or let anyone know they received it.
Kuhnash and Jimerson never disclosed the fraud during their company sales pitches or the due diligence process leading up to Lucent’s sale to the private equity firm. After the company was sold, both Kuhnash and Jimerson lied to the private equity firm’s outside auditor about whether they were aware of any fraud at Lucent.
As executives, both men owned stock in Lucent. From selling the company, Kuhnash personally received approximately $1,393,000 and Jimerson received approximately $632,000.
This investigation was a collaborative effort between the Federal Bureau of Investigation and Internal Revenue Service Criminal Investigation.