Esmark sues Slovakian businessman for $100M, alleges sabotaged deal
Esmark Inc. is seeking more than $100 million in damages from a Slovakian businessman it accuses of sabotaging the company's deal to take over a former U.S. Steel Corp. mill in Serbia.
A lawsuit Esmark filed Wednesday in federal court in Pittsburgh alleges that Peter Kamarás — a former member of Esmark's European investment subsidiary — undermined the deal to protect his business with the money-losing Zelezara Smederevo Steelworks.
The Edgeworth-based steel processor and distributor alleged in the suit that Kamarás had been supplying Zelezara Smederevo with substandard iron ore and other materials at above-market prices.
“Kamarás' above-market-price and/or inferior-quality supply arrangements with Zelezara Smederevo would thus be impossible if Esmark Europe was successful in its efforts to privatize the Serbian steel company. Kamarás could not permit this to happen,” the suit states.
“Kamarás set out on a course of conduct with the singular goal of sabotaging Esmark Europe,” the suit states. “Kamarás' scheme of self-dealing and treachery worked.”
Kamarás could not be reached for comment. No lawyer was listed for him with the court.
Kamarás, who lives in Kosice, Slovakia, is part of a management team that may take over Zelezara, according to reports from that country.
Last month, Esmark said it was pulling out of the deal to buy the mill from the Serbian government, which has been losing about $100 million a year from the operation. Esmark CEO James Bouchard said at the time that Serbian officials tried to change the deal at the last minute after about 10 months of talks and successful negotiations in Pittsburgh.
The damages sought by Esmark are the projected profits that Zelezara would have made over five years under Esmark's control, according to the suit.
Esmark's suit states that Bouchard knew Kamarás through his previous work for U.S. Steel in Slovakia, “and considered Kamarás a friend, even hosting Kamarás' daughter for the last year so that she could attend high school in the United States.”
In addition to trying to acquire Zelezara, Bouchard has been rebuilding his steel holdings after selling the original Esmark Inc. in 2008 to Russian steelmaker OAO Severstal for $775 million. In 2010, he repurchased three plants in Illinois and Ohio that were part of the Severstal deal.
U.S. Steel acquired Zelezara in March 2003 for $23 million, then sold it to the Serbian government in January 2012, for $1, at a loss of $399 million, including money spent on improvements. U.S. Steel lost more than $200 million in Serbia in 2011, the company has said.
The mill is one of the biggest of 500 money-losing companies Serbia needs to sell or close to narrow a budget gap and rein in public debt. The country, threatened with a second year of recession, is trying to reduce the $1 billion a year that unprofitable state-owned companies cost taxpayers.
Esmark submitted the only valid bid for an 80 percent stake in Zelezara. It had committed to spend $400 million in upgrades along with other investments at the plant, including fixing a second blast furnace that would allow the facility to run at full capacity.
Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.
