Seal of the U.S. SEC on building exterior.

A plastics manufacturer falsely claimed recycled-content products were made from virgin resin as part of a wider scheme to defraud customers and investors, federal regulators said this week.

Two former executives of Evansville, Ind.-headquartered Lucent Polymers were indicted on federal fraud charges and arrested last week, Plastics News reported. The Department of Justice charged the former executives with conspiracy, fraud and money laundering. The U.S. Securities and Exchange Commission (SEC) this week filed a civil suit against the executives, Jason Jimerson and Kevin Kuhnash, claiming they violated federal law.

According to the SEC, one aspect of the alleged fraud involved Lucent claiming it could use recycled feedstock and process it into high-quality plastics meeting “stringent standards on critical features like flame resistance and tensile strength.” Using cheaper feedstock than competitors would allow the company to gain a market advantage. But the product quality was being misrepresented, according to the federal filing.

“In reality, Lucent’s plastics routinely flunked its own internal performance tests,” the SEC alleged.

Products made from recycled plastic receive greater scrutiny for quality during the testing and auditing process, according to the SEC. To avoid detection of the quality problems, Lucent falsely marked its recycled products as containing prime plastic instead of recycled, the SEC alleged.

According to the SEC, the case was part of a plan to sell the company “while hiding from potential buyers the fact that Lucent’s core business model was a sham.” Plastics News first reported on the SEC filing and published an extensive look at the fraud case. The company is currently owned by LyondellBasell Industries subsidiary A. Schulman, which purchased Lucent in 2015.

According to Plastics News, Lucent sold its plastics to companies producing automotive air bags, cars, ceiling fans, electrical boxes, kitchen appliances and heating and air conditioning units.

Photo credit: Mark Van Scyoc/Shutterstock

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