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KEYCODE BAYER #186

May 17, 2005

Former Bayer Exec to Plead Guilty in Price-Fixing Scheme

Former Bayer executive Wolfgang Koch has agreed to plead guilty to colluding in a price-fixing scheme that drove up the cost of rubber chemicals used to make tires, outdoor furniture and shoes in the U.S. during a three-year period, the Department of Justice said Monday.

The plea agreement marks the latest development in a long-running antitrust investigation into an international price-rigging ring formed by some of the world's biggest rubber chemical manufacturers.

The probe, anchored in San Francisco by the Department of Justice, has revealed the dealings of competitors that secretly plotted to raise the prices of their rubber chemicals.

The chemicals improve the elasticity and durability of many rubber products. About $1 billion of the rubber chemicals are sold in the U.S. annually, the Justice Department said.

By conspiring to raise the cost of their rubber chemicals, the manufacturers harmed millions of consumers, said R. Hewitt Pate, who heads the Justice Department's antitrust division. Investigators so far haven't tried to prove that the higher prices for rubber chemicals were passed on to U.S. consumers.

Koch, formerly Bayer's product manager of rubber chemicals, admitted rigging prices from January 1999 through December 2001. He is the fourth industry executive to be swept up in the investigation. Another former Bayer executive, Martin Petersen, previously pleaded guilty, as did two former Crompton Corp. executives, Joseph B. Eisenberg and James J. Conway.

Both Bayer and Crompton also have pleaded guilty for their roles in the conspiracy. Leverkusen, Germany-based Bayer paid a $66-million fine while Middlebury, Conn.-based Crompton paid $50 million.

Koch has agreed to pay a $50,000 fine and serve four months in federal prison. Koch's sentencing agreement still requires court approval.

U.S.-listed shares of Bayer fell 4 cents to $32.85 on the New York Stock Exchange. Shares of Crompton rose 15 cents to $14.70, also on the NYSE.