Did alleged grifter Dina Wein-Reis' actions lead to the sale of Tom's of Maine? Or prompt Unilever NV (NYSE:UN) and Procter & Gamble Co. (NYSE:PG) to auction off assets involved in her 15-year-long scam? It would certainly be a stretch to believe the alleged scam that netted Wein-Reis about $12 million to $15 million a year prompted the massive multinationals to sell detergent and shampoo businesses; nonetheless, these assets landed on the auction block shortly after the parent's realized the scam.
A new investigative report from Fortune sheds light on the year-old story about Wein-Reis, a so-called "diverter" in the gray market for consumer goods. Prosecutors allege that Wein-Reis defrauded P&G, Unilever, Hershey Co. (NYSE:HSY), Roche Holdings AG and other consumer products companies over 15 years time by promising she had exclusive distribution channels to schools, military bases, Native American reservations and others that didn't exist. She would persuade midlevel executives to sell her products (usually at steep discounts) for distribution to these hard-to-reach markets, but instead would resell them to other distributors -- hence the fraud.
Some of the marks included Unilever, which asserts it lost $2.23 million in a deal involving detergent; and Procter & Gamble claims it lost several million dollars' worth of shampoo. Unilever, which uncovered the scam in 2005, offloaded its laundry detergent business to buyout firm Vestar Capital Partners for $1.45 billion last year, and in 2006 P&G also sold the Pert brand of shampoo for an undisclosed sum to privately held Najafi Cos. Other marks that also sold off assets include Campbell Soup Co. (NYSE:CPB), Eastman Kodak Co. (NYSE:EK), Kraft Foods Inc. (NYSE:KFT), Nestle SA, Roche and Sara Lee Corp. (NYSE:SLE).
While in the grand scheme of things the multinationals probably did not suffer greatly at her hands, the same may not be said of far smaller Tom's of Maine, which was sold in 2006 (a year after it realized Wein-Reis' alleged scam) to Colgate-Palmolive Co. (NYSE:CP) for $100 million. Similarly, Balance Bar Co., another mark, was sold to Kraft in 2000 for $268 million. - Matthew Wurtzel
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