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Dow Chemical
As hotel project went far over budget, insiders pointed to role of CEOs wife

By Brian Grow and Joshua Schneyer

Filed Oct. 13, 2015, 2 p.m. GMT

Part 3: Dow Chemical asked Paula Liveris to advise on the renovation of a companyowned hotel. Then a $13 million cost overrun spurred delicate questions about how the
project was run.
POWER COUPLE: Dow CEO Andrew Liveris and wife Paula at a
charity dinner in 2006. Paula Liveris served as her husbands
representative during renovations of the H
Hotel. REUTERS/Washington Life Magazine/Handout
MIDLAND, Michigan When Dow Chemical Co began
renovating the hotel it owns here, the industrial giant spared little
expense.
From 2006 through 2008, Dow turned the former Ashman Court
Hotel into a luxury destination. Out went the tile in the lobby. In
the rebranded H Hotel, guests walk on Crema Marfil marble from
southeast Spain.
Also gone are the old restaurant and its $9.95 lunch buffet with
dessert bar. Now the hotel boasts a fine-dining establishment
where, planning documents show, prices would be 2 notches up from what the market will bear.
The H has a private dining room with bullet-proof glass, where CEO Andrew Liveris, a regular visitor
to the White House, can entertain VIPs.
By most accounts, the H Hotel is a source of pride here in Dows hometown of Midland, population
42,000.
The remodeling didnt go off without a hitch, though. At completion, it exceeded its $25 million
budget by an estimated $13 million. This year, the company settled a lawsuit by one of its former
investigators, Kimberly Wood. She alleged she was fired years after she investigated the H Hotel
and other spending issues relating to CEO Liveris, according to documents filed in her case.
Wood was assigned to scrutinize the renovation after a senior manager complained about the role of
a person who figured large in the project, but was neither an employee of Dow nor its contractors:
the wife of Andrew Liveris, Dows chief executive.
In a whistleblower-retaliation complaint filed last year, Wood claimed that the H Hotel cost overrun
was the direct result of the meddling by the CEOs wife, Paula Liveris.
That view is rejected by Dow and by an outside law firm it hired to examine the matter in late 2009.
After a three-week inquiry, the lawyers cleared the company of violating any of its own policies.

The firm disputed the notion that Paula Liveris exercised undue influence on spending decisions.
Rather, its report concluded there were misperceptions by some Dow employees about the role and
authority of Ms. Liveris.
Other project participants, including the chief architect, offer a different perspective.
Once Paula became involved, the budget was taken off the table and we didnt really talk about it
anymore, said David Greusel, a former principal at a unit of global architecture firm HOK, which
headed up the renovation. There was clearly a difference in the design direction. Paula Liveris
definitely made choices that we had not made at the outset.
A former Dow executive involved in the project kept for his own use a timeline that he said he
created to chart cost increases. By his accounting, decisions advocated by Paula Liveris and a friend
who assisted her, local artist Maria Mica Jones, led to cost increases totaling about $5.8 million.
Dows former top auditor, Doug Anderson, testified in Woods wrongful-termination lawsuit against
the company that he grew concerned about the hotel project in 2009. That year, Wood and a
supervisor reported at the time, a Dow manager involved in the hotel came forward to voice concern
about the role Paula Liveris had played. He claimed that two employees had been pulled off the
project and later left Dow, Wood reported, one after trying to limit the role of Paula Liveris and the
other for proving ineffective in dealing with her.
Dows external report concluded that no employees were retaliated against. One of the two
employees removed from the project provided Reuters with a statement saying he retired voluntarily.
The external report also said that Ms. Liveris did not exercise any authority, implied or actual, over
the project budget, and that any perception to the contrary is erroneous and is not supported by the
evidence.
COMPLETELY FALSE
The H project provides insight into the way the Dow CEOs personal life has intersected with his role
as head of the company. Liveris, 61 years old, has led Dow for 11 years.
Cost overruns are common in construction, and the Hs were readily absorbed by Dow, with $58
billion in annual revenue in 2014. Still, governance specialists said it is rare for the CEO of a large
publicly traded company to let a spouse play a prominent part in a deca-million-dollar capital project.
I cant think of a similar example, said Robert Daines, co-director of the Rock Center on Corporate
Governance at Stanford University. The governance concern is whether she was picked for her
expertise, or as sort of a perk for the CEO to give his wife a position of prominence.
Former auditor Anderson said in his deposition that he believed the presence of Paula Liveris put
other participants in a predicament. Who is going to tell the CEOs wife you dont belong here, get
out of here, Im not going to do what you say, when by all appearances and everything else, shes
there with the blessing of the CEO? he testified.
Anderson, who left Dow in 2013, said he was barred by a confidentiality agreement from
commenting about the company.

UPGRADING MAIN STREET: H Hotel planners chose to upgrade the Main Street facade with brick
and stonework encompassing two restaurants, a bar and an enclosed clock tower an integration of
the former Ashman Court Hotel into Midland's downtown business district. REUTERS/Rebecca Cook

Once Paula became involved, the budget was taken off the table and we didn't
really talk about it anymore. There was clearly a difference in the design
direction.
David Greusel, lead architect on H Hotel project
Dow says the company has a tradition of inviting executive spouses to pitch in on community
projects. Members of the planning group that handled the renovation say Paula Liveris herself never
signed off on expenditures. Those were submitted by the project team and approved by David
Kepler, the Dow executive who was supervising the project.
Kepler, now retired, told Reuters that blame for going over budget rested with others, including two
of his subordinates and outside architects.
Any notion that there was significant overspending and that it was due to interior design choices
made by Paula Liveris and Mica Jones is completely false, Kepler said.
Documents detailing Dows handling of the renovation are among thousands of pages of records
subpoenaed by the U.S. Securities and Exchange Commission. Reuters reported in June that the
SEC is investigating allegations that CEO Liveris may have misused company funds for personal
benefit.
Previously, Reuters reported about disputes Liveris had with Anderson and Wood over his spending,
including Super Bowl getaways with family and friends.

Dow disclosed in 2011 that Liveris reimbursed the company $719,923 for expenses described as
not primarily business related, without detailing them.
According to two people familiar with the matter, the SEC has sought information regarding the
CEOs spending. It has also inquired in recent months about the terms of confidential severance
agreements that Dow has required former employees to sign. The agency, the people said, has
asked whether these agreements contain provisions which could impede potential whistleblowers
from bringing concerns to the SEC.
Dow declined to comment on the SEC investigation.
ADVISORY TEAM
About 130 miles northwest of Detroit, Midland is a prosperous community, thanks primarily to Dow,
its largest employer.
But the city is served mainly by chain hotels and casual restaurants. Andrew and Paula Liveris,
according to planning documents and interviews, wanted to create a first-class facility in line with
Dows global stature and the couples exacting standards.
MULTINATIONAL: Dow
headquarters in Midland,
Michigan. The renovation of
the H Hotel was meant in part
to offer a more cosmopolitan
experience for visitors to the
global company.
REUTERS/Rebecca Cook

Ms. Liveris did not

exercise any authority,
implied or actual, over
the project budget, and
any perception to the contrary is erroneous and is not supported by the
evidence.
Report by the Cadwalader law firm for Dow on the H Hotel project
The H would aid in revitalizing downtown Midland, wooing hires to the area and entertaining Dow
clients and employees from around the world. The renovation also would accommodate a leadership
training facility Dow wanted. That facility now occupies a wing of the H.
The initial scope was relatively modest. After architects were solicited to bid in January 2006, the
estimated cost was less than $16 million. The proposal focused on Dows training academy and one
fine dining restaurant.
Ahead of the first design meeting in February 2006, Liveris told project managers that his wife would
act as his representative.
Her appointment wasnt the CEOs idea, according to the outside attorneys review. It was suggested
by Dows former head of human resources, Julie Fasone-Holder, who felt Liveris would be too busy
to keep close watch over the project. In his stead, she recommended that Paula Liveris volunteer her
time and talents.

The CEO endorsed the idea. A friend of the couple, Mica Jones, described by Dow as a well-known
local artist, also joined the effort.
Paula Liveris attended the initial design session for the H in February 2006, meeting minutes show.
In one early 2006 memo, she and Jones are listed as members of the Design Advisory Team.
Kepler told top architects and designers to feed design information to Paula and Mica who will
provide their perspective and counsel, according to minutes from a June meeting. Paula wants two
to three options for the restaurant along the lines of the best restaurants from Chicago or New York.
A NEW DESIGNER
That summer, Paula Liveris and Mica Jones recommended hiring a new design architect, according
to Greusel: Mark Johnson, based in suburban Detroit.
Once Mark Johnson was on the job, the design just became very different, said Greusel, the lead
architect. To my impressions and tastes, we had gone up a notch from upscale. And it still went
higher.
The hiring of Johnson alone, according to the project timeline kept by the former Dow executive, cost
an estimated $300,000 more in design fees. Johnson took on the key role of designing the
restaurants and executive dining areas, per Paula Liveriss request, the former executive wrote in
an August 2006 entry in his timeline.
The former executive provided the information to Reuters on condition of anonymity, saying the
severance agreement he signed contains a clause that bars him from discussing his experience at
Dow.
Johnson declined to comment.
Dow says it concluded that more design expertise was needed because HOKs team specialized in
sports facilities.

BUFFET BUSTERS: Buffets were banned at the H Hotel's restaurant and cafe, according to
brainstorming documents. Gone is the $9.95 lunch buffet, which included a dessert bar, that was at
the hotels former restaurant.

Who is going to tell the CEOs wife you don't belong here, get out of here, Im
not going to do what you say, when by all appearances shes there with the
blessing of the CEO?
Doug Anderson, Dows former top auditor
By late 2006, the project was bigger and fancier. The finishes would be luxe, obtained from around
the world, says the website of a construction firm that helped run the project. Millwork species
include cherry, bamboo, walnut, rift white oak (some of which was fumed), maple, makore fiddleback
and wenge.
Jonathan Schiller, a lawyer for Dow, responded to Reuters questions about the added luxuries by
saying the renovation balanced high-end items with frugal materials, including the pervasive use of
cement floors, pavers from Michigan, and normal carpeting.
Costs swelled. By July 2007, the Hs projected budget rose from $25 million to $30 million. Part of
that increase, the Dow executive who kept the private timeline wrote, was $2.5 million for selecting
higher end products by Mrs. Liveris and Jones.
The budget rose again in December to $33 million. In the timeline, the former Dow executive
attributes that bump to $3 million for a ballroom and public corridors. The designs by another
company Dow hired, the Anderson/Miller firm, used higher end material specified by Mrs. Liveris
and Jones, the former Dow executive wrote in his private timeline.
Anderson/Miller declined to comment.
The CEOs wife held great sway over many details, say six people who worked on the project.
For instance, an early planning document called for the lobby and vestibule to be floored in
limestone tile and carpet. Paula Liveris wanted marble, say three participants. Project and
construction managers warned that the hard polished marble could pose a risk of guests slipping.
The marble prevailed.
Dow spokeswoman Rebecca Bentley said the marble used in the H Hotel lobby meets all applicable
building codes, and she cited the hotel's excellent safety record.
As the renovation wound down in late 2008, Dow incurred at least one more expense. Jones
received two first class tickets to anywhere in the world, according to a report written by Dows
external lawyers. Jones and her husband ended up going to the Maldives, the Indian Ocean
archipelago known for its beaches and lagoons.
Kepler said the gift was his idea, and he found it appropriate, given the time Mica spent on the
project.
The cost was at least $67,000: about $40,000 for first-class airfare, plus $27,000 to cover the
couples income taxes.
In an interview, Kepler said he couldnt recall the final cost of the project. Dow spokeswoman
Bentley didnt provide an exact figure.
But the internal report written by former fraud investigator Wood and her supervisor, dated Nov. 17,
2009 and marked preliminary, says that the project went $13 million over budget.
Kepler said around 90 percent of the increases stemmed from structural alterations unrelated to
interior design. The CEOs wife and her friend had no impact on those costs, he said.
CORKAGE FEE

Located on Main Street, the chemical companys hotel has sleek white interiors and eating
establishments whose names evoke the Periodic Table of Elements. Theres Bar Oxygen, Caf Zinc,
and Table its main restaurant. Tables menu is pricey for a small city in the Midwest: The Premium
Black Angus Petite Filet goes for $40. Cook
Index cards from planning meetings that Paula Liveris attended show the thinking that
helped shape the restaurant. One mentions New Yorks renowned French restaurant Le
Bernardin noting that Andrew likes the atmosphere.
The CEO became an important customer. After Table opened, according to a separate June
14, 2010 report by Wood, Dow sent to the H two cases of wine the company had purchased.
It was Penfolds Grange Shiraz, valued at $354 a bottle, and Liveris wanted to be served
the wine at the hotels restaurants, the report said. Hotel managers thought wait staff would
lose out on tips if the CEO drank from this stock. So, they imposed a corkage fee of $30 a
bottle.
When Liveris was told by email, he wrote that the fee was outrageous, Wood reported.
The hotel cut the personal-use fee for Liveris to $15 a bottle. Dow declined to comment.
In many ways, Table was the success its planners envisioned. Reviews on websites such as
OpenTable rate the restaurant highly. But Table struggled financially, too.
The Hs former general manager, Lynne Luongo, said Table didnt turn a profit or struggled
to break even during her tenure. Kepler said the H is meeting its revenue targets ahead of
plan.
TIME FOR RETIREMENT
In the spring of 2008, Dow began assigning blame for the busted budget.
On May 22, 2008, according to the external report Dow later commissioned, Kepler told
Liveris that an extra $15 million to $18 million was needed to finish the hotel. When Liveris
asked what went wrong, Kepler replied that there is some significant coaching still needed
on some of the folks involved, and then wrote, I will take accountability.
While Kepler kept his job, two of his subordinates on the project didnt: Mike Hayes, a Dow
vice president supervising the project, and Peyman Zand, a Dow director handling
construction. Both worked closely with Paula Liveris.
On May 24, according to Wood, Liveris messaged Kepler and two other executives that it
was time for retirement for Hayes, without saying why. In the email, subject-lined Hayes,
Liveris suggested another executive who could take over the H project. The email is cited in
a complaint Wood filed with the U.S. Occupational Safety and Health Administration.

Dow gave a thank-you gift to a friend of the Liverises who volunteered on

the project: a trip for herself and her husband to the Maldives. The cost to
Dow: at least $67,000.
The next day, Kepler forwarded the CEOs email to Dows general counsel and its HR chief
and wrote: I agree with the position to have (Hayes) retire I have a call with Andrew on
Tuesday, let me talk to him on this subject and then we can develop a plan.
Asked about the emails, Kepler said he couldnt recall them.
A week later, Dows external report shows, Kepler informed Liveris that he was removing
Zand and Hayes from the project.

Hayes decided to retire voluntarily and amicably about a month after the email exchange, he
wrote in a statement made in response to Woods OSHA complaint. Hayes also wrote that
Paula Liveris bore no responsibility for cost overruns. Hayes shared his statement with
Reuters, but declined to talk for this article.
Zand was moved to a new job, according to the external report commissioned by Dow. His
new boss found Zand unable to perform, according to the external report, and Dow
eliminated his position later that fall. The report said Zand made no claim of retaliation.
Dows internal investigation into the hotel matter began after Zands successor on the H
project raised concerns, according to the report Wood co-authored. She and her supervisor
wrote that the successor, Paul De Pree, said he had accepted the position on one condition
that Kepler back him when he said no to Paula.
According to their report, Hayes told Paula Liveris in April 2008 that she could continue
working on areas such as the hotels restaurants, but not on other parts of the hotel. De
Pree, Wood and her boss wrote, stated that Mike Hayes told him that he said no to Paula
and this is why he was no longer in that position.
De Pree also claimed that Zand became ineffective in dealing with Paula and Mica and was
terminated because the project was out of control, Wood reported.
Dow, in its response to Woods OSHA complaint, said that nothing in the May 2008 email
chain about Mike Hayes links Mr. Hayess fate to, or even references, any disagreements
with Ms. Liveris regarding the H Hotel. Hayes later sent CEO Liveris an email of thanks for
handling his retirement in such a thoughtful manner. He added: I will depart as one of the
strongest ambassadors for the company that you could ever hope to have. Hayes provided
the email to Reuters.
De Pree still works at Dow and could not be reached for comment. Zand, asked to comment,
said he signed a confidentiality agreement and has moved on from Dow.
In their report, Wood and her boss recommended that Dow investigate further. The next
month, in December 2009, Anderson told the boards audit committee about the Hs budget
problems and the concerns about the CEOs wife.
The audit committee decided to hire Michael Horowitz, a top lawyer who now serves as
inspector general of the U.S. Department of Justice, to handle an external inquiry. His law
firm, Cadwalader, Wickersham & Taft, submitted its report in January 2010. Dow shared the
report with Reuters.
Cadwalader wrote that it interviewed three Dow employees: Kepler, the companys
controller, and the executive who fired Zand. The report also noted interviews that Woods
team conducted with four employees: Kepler, Hayes, a Dow staff lawyer, and De Pree,
referred to in the external report not by name but as the complainant. The external report
said that De Pree also expressed concern about possible retaliation against him/her for
having come forward with this information, and asked that his/her identity not be disclosed.
A number of key players the Liverises, Jones, Zand, De Pree, Anderson, architect Greusel
and designer Johnson arent among the people listed in the report as having been
interviewed by the Cadwalader lawyers.
Horowitz declined to comment. Dow spokeswoman Bentley called the external probe
exhaustive. She said Cadwalader concluded unequivocally that Hayes was not retaliated
against by the company. Nor was Zand, Bentley said, citing the report.
While absolving Dow of the concerns raised in its internal investigation, Horowitz did offer a
recommendation: that the chemical giant consider creating new guidelines to handle the

participation of non-employee spouses in projects to avoid similar misperceptions in the

future.
Dow declined to say whether it followed the attorneys advice