CLEVELAND, Ohio - The current head of Cleveland-Cliffs, a multi-billion-dollar mineral extraction company with mining operations throughout Minnesota's Iron Range, was named in a 2005 sexual harassment lawsuit in Texas that cost his then-company more than $300,000 in a settlement, according to court documents.
A judge in 2006 sealed the records of the case, including the settlement agreement between Houston-based Metals USA and an employee who said then-chairman and CEO C. Lourenco Goncalves pulled her onto his lap, groped her and sucked on her ear inside his office suite.
But copies of several documents, including the employee's complaint and a copy of the settlement agreement, are exhibits filed in a subsequent legal battle between Metals USA and its insurance company, which refused to cover the claim.
The case went largely unnoticed until earlier this year when a user uploaded images of several documents from the case on Cleveland-Cliffs's Wikipedia page.
Cleveland-Cliffs owns and operates Northshore Mining, United Taconite and Hibbing Taconite in Minnesota and is trying to mine at the former Essar site in Nashwauk, which is currently owned by rival company Mesabi Metallics.
Goncalves has in recent years carved out an area in the public space as an expert in the natural resources industry, through numerous appearances on business news networks such as CNBC. The same time period has brought higher public scrutiny to current and past cases in which CEOs, artists and other public figures were accused of sexual impropriety in cases that settled out of court with terms that prevent the accuser of discussing the accusations publicly.
Goncalves, a native of Brazil and longtime titan in the metals industry, most recently made headlines in October when he publicly berated financial analysts on a conference call.
James Graham, Cleveland-Cliffs' executive vice president and chief legal officer, said in a phone interview with cleveland.com that Goncalves declined to weigh in for this story because the 2005 settlement required both Goncalves and his accuser to refrain from making public comments about the lawsuit.
Cleveland-Cliffs executives had known of the allegations for several years prior to the Wikipedia posting, Graham said. He pointed to an internal investigation by Metals USA that turned up no evidence to corroborate the employee's accusation.
Goncalves did not admit wrongdoing as part of the settlement, which Graham characterized as a "nuisance value."
"Lourenco's been with our company for nearly five years. There have been no suggestions of any kind of improper conduct during that time," Graham said. "We clearly take allegations of any kind of workplace misconduct seriously, but we don't really feel a 14-year-old story should tarnish all the good work Lourenco has done to turn Cliffs around."
Metals USA closed its Houston office and in 2013 merged with Reliance Steel & Aluminum. Representatives at that company could not be reached for comment.
What the employee says happened
The employee says in her complaint that she was working late on March 7, 2005, at Metals USA's office. She often stayed late and started early and worked her way from Goncalves' assistant to a manager, according to the complaint. She no longer reported Goncalves, the complaint said.
Goncalves was also at the office that night, and he came down to the employee's office while she was on the phone, the complaint says. He beckoned her to come to his office, a suite separated from the rest of the office by a set of glass doors that were always closed, the complaint says.
The employee ended her conversation and went to his office. Goncalves at first talked business, but eventually his voice changed, and his comments turned sexual, the complaint says. Goncalves grabbed the employee by the wrist and pulled her to his body, then ran his arm and hand over her breasts and said "ummm, feels good," the complaint says.
He pressed his face against her breasts and moaned, the complaint says. The employee pulled away from Goncalves and said she had to go because she was expecting a delivery person to come to the office, the complaint says. Goncalves told her she didn't have to go and pulled her back to him, the complaint says.
He continued to grope her and moved his hands beneath her sweater, the complaint says. She twice more tried to pull away from him, the complaint said. Goncalves pulled her onto his lap, said to be quiet because "somebody will hear you" and told her to lock the door, the complaint says.
She again mentioned the delivery person and tried to get up again. Goncalves again pulled her back onto his lap, and continued fondling her body, the complaint says.
She finally pulled away, stood up, said she was married and held up her finger to show Goncalves her wedding ring. Goncalves said he was under the impression "it was over," and she turned to walk out of his office, according to the complaint.
Goncalves called out her name, but she didn't stop, the complaint says.
The employee reported the incident to her boss three days later. This triggered an internal investigation.
The employee filed a lawsuit a little over a month later, before the internal investigation concluded. She accused Goncalves and Metals USA of "sexual battery and assault." The complaint says that the company took no action against Goncalves over the incident, and that she suffered "disgrace, shame, embarrassment and humiliation," as well as mental and physical anguish, over the attack.
The filing also sought punitive damages against Goncalves and the company to "set an example for the community," the suit said.
Lawyers for Goncalves, the company and for the employee spent several months exchanging documents as part of discovery before reaching a settlement agreement, signed by both Goncalves and the employee on Nov. 12, 2005, in which Metals USA agreed to pay $300,000 to the employee and her lawyers, plus reimburse her for her attorneys' fees up to $15,000 and pay for her monthly health benefits for 18 months or until she obtained insurance through another employer.
The employee accepted the settlement and resigned her position at the company, according to the agreement.
In exchange, she signed a non-disclosure agreement that barred her from discussing "the existence, facts or terms of this agreement, the amounts reflected in this agreement, or the substance of the negotiations leading to this agreement" to anyone other than her lawyers, accountants, tax preparers or medical professionals, and only if those people agree to keep the information confidential, the agreement says.
The employee also signed a non-disparagement clause that prevented her from saying anything about the lawsuit she filed or say anything negative about Metals USA or Goncalves, the agreement says.
If anyone asked her what the status of the lawsuit or her employment at Metals USA, the agreement ordered the employee to only say, "The Company and I amicably resolved the litigation. I dismissed the lawsuit and resigned my position with the Company," the agreement says.
The agreement also limited Metals USA and Goncalves to making a nearly identical statement if asked about the lawsuit.
The employee also gave up her right to bring any further claims against Metals USA or Goncalves for any actions that occurred before the signing of the agreement.
Lawyers for both the employee and the company filed a joint motion in early 2006 asking the judge overseeing the case to seal the records containing details of the allegations against Goncalves, according to court records. The judge granted the motion and sealed the documents in an order dated May 30, 2006.
The insurance fight
By the time the judge ordered the records sealed, Metals USA had already filed a lawsuit against its insurers, National Union Fire Insurance Co. of Pittsburgh and AIG Domestic Claims, after agents at the insurance companies refused to cover the $300,000-plus payout.
AIG claims adjusters determined the employee's lawsuit did not fall under a workplace sexual harassment claim, which would have been covered under the policy, because she accused Goncalves of committing "sexual battery" and "assault," according to court records. The company's policy did not cover claims of bodily injury, so AIG denied the request for coverage, lawyers for National Union wrote in court filings.
Metals USA and the insurance companies couldn't agree, and Metals USA filed the lawsuit shortly after entering the settlement agreement with the employee.
Less than two months after a lawyer representing Metals USA had asked the judge to seal records of the complaint and the settlement agreement, a different lawyer representing the company in the insurance fight attached the same documents to a July 21, 2006, court filing in order to convince the judge the claims should have been covered.
Metals USA and the insurance companies settled out of court and the lawsuit was dismissed before the judge had a chance to rule on its merits, court records show.
The internal investigation
One of the documents sealed in the harassment case but publicly filed in the insurance fight was a report presented to the company's board of directors detailing the company's investigation of the woman's claims.
The report was dated May 5, 2005, a little more than a week after the employee filed the lawsuit.
The company's then-human resources director interviewed the employee and other employees, including male and female employees. None said that Goncalves had ever acted inappropriately around them, the report said. The human resources director also interviewed Goncalves, who denied the employee's allegations, the report said.
The company hired an outside lawyer to conduct an independent probe, and Goncalves was cooperative with her, the report said.
In the end, the investigation concluded that the incident was "a classic she said-he said scenario."
The report also said that the company received a letter from an attorney representing the woman in which the lawyer demanded $4.25 million to resolve the issue, the report said. The company offered $200,000 and did not respond when the lawyer lowered the demand to $3 million, the report said.
The employee, the report stated, had confided to a co-worker that she had been the victim of sexual impropriety by men before. The report's author placed the word victim in quotation marks.
"In short, there is no evidence of which the Company is aware to substantiate the Employee's allegations, but there is evidence that she has a history of claiming to be a victim of men," the report said.
The board did not discipline Goncalves, the employee's lawsuit says.
The negotiations took place at a critical time for Goncalves and Metals USA.
After the company's stocks had declined between the end of 2004 and the beginning of 2005, Metals USA announced that a New York-based private investment firm agreed to buy the company's stocks, the Houston Chronicle reported. Goncalves was a member of the group that bought the company and remained CEO under the deal, the paper reported.
The deal was worth $450 million, or $22 per share, the price before the recent downturn, according to the Chronicle.
The newspaper quoted an analyst praising Goncalves, who took the helm of the company in 2003 and helped catapult the fledgling maker of steel products to a $104 million profit in 2004, a nearly 14-fold increase over its profits the previous year.
Charles Bradford, a metal analyst at Soleil Securities, told the paper that Goncalves has been good at taking a previously mismanaged company and "putting all the pieces together and organizing it," according to the Chronicle.
The company announced the deal had been finalized in a Nov. 30, 2005, news release, less than three weeks after it had agreed to the $300,000 payout.
"We are extremely pleased to have delivered such great value to our existing stockholders while at the same time attracting a sophisticated investor such as Apollo Management," Goncalves said in the news release. "This transaction is a clear endorsement of our business model and industry leadership."
Goncalves stayed on at Metals USA through 2011.
Goncalves in 2014 led a group of activist shareholders in a corporate take-over of Cleveland-Cliffs, which bills itself on its website as "the largest iron ore producer of pellets in North America." The group gained control of the majority of the seats on the company's board of directors and voted to name Goncalves the new CEO and board chairman, the same position he held at Metals USA.
Goncalves's time in Cleveland has not been free of controversy.
He sued a financial analyst in 2017 after the analyst, Axiom's Gordon Johnson, recommended that investors sell stock in Cleveland-Cliffs after Goncalves purchased 200,000 shares with his own money, a move Johnson said was a ploy to inflate the company's stock price.
The case settled out of court in August, and Axiom published a correction in which it admitted that it had omitted several other major stock purchases from its report.
Goncalves made national headlines in October when he berated several analysts on a quarterly conference call.
Goncalves said his company was looking at rewarding longtime shareholders with stock buybacks, which he said "are going to screw this guy so badly that ... they will have to commit suicide," and told one analyst on the call who earlier recommended investors hold their stock on the company, "you can run but you can't hide," CNBC reported.
Goncalves stood by his comments in an interview with CNBC later that day, saying he was calling out "bad math."
In that interview, Goncalves called other CEOs "cookie-cutter people."
"I'm different. You like it great, you don't like it, great," he said.