the jere beasley report jun. 2005

H e l p i n g t h o s e w h o n e e d i t m o s t f o r o v e r t w e n t y - f i v e y e a r s

THE

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B e a s l e y , A l l e n , C r o w , M e t h v i n , P o r t i s & M i l e s , P . C . , A t t o r n e y s a t L a w

JUNE 2005

A NATIONAL LAW FIRM LOCATED IN MONTGOMERY,ALABAMA

I.CAPITOLOBSERVATIONS

EXXONMOBIL ASKS COURT TO OVERTURNJUDGMENT

Exxon Mobil Corp. has filed its briefin the Alabama Supreme Court in theState of Alabama’s case against thegiant oil company. Two separate jurieshave heard the evidence and eachfound Exxon guilty of a massive fraudagainst the State of Alabama. Not onlywas Exxon guilty of fraud, the evi-dence at trial clearly revealed that thewrongful acts took place at the highestlevels of the company. The appeal isan attempt to strike down the $3.5billion punitive damage judgment asordered by an experienced Mont-gomery County circuit judge. Afterhearing several weeks of testimony, thejury found that ExxonMobil cheatedthe state out of royalties from naturalgas wells drilled in state-owned watersalong the Alabama coast. I wouldencourage any person who doubts thelegitimacy of the state’s case to readJudge McCooey’s order, which can befound by going to our website,www.beasleyallen.com. ExxonMobil’sappeal argues that it had a contractdispute with the State of Alabama overhow to determine the amount of royal-ties. They are saying that punitivedamages can’t be allowed “becausethere was no fraud.”

To refresh the memory of ourreaders, our firm, and Cunningham,Bounds firm from Mobile jointly pre-sented the case on behalf of the Stateof Alabama. Robert Cunningham,Richard Dorman and I tried the casefor the State. In November 2003, aMontgomery Circuit Court juryawarded the State of Alabama $102.8million in compensatory damages and$11.8 billion in punitive damages. Theverdict was supported by the evidenceand was based on Alabama law that iswell-established. The well-respected

trial judge, Tracy McCooey, cut thepunitive damage award to $3.5 billion.The judge left the compensatorydamages untouched.

In effect, Exxon wants the SupremeCourt to let them off the hook bymaking the case one dealing only withthe contractual damages. If that ploywere to work, Exxon would simplyhave to pay the compensatorydamages plus interest and walk awayvery happy. In fact, that was one wayExxon’s big bosses justified taking therisk when they decided to cheat thestate. This was established by the evi-dence at trial. In internal Exxon memosit was stated by company officials thatif the State of Alabama caught Exxon—which the company believed the statewas incapable of doing—Exxon wouldpay the royalties plus interest andpenalties and go on with their busi-ness. To find for Exxon would requirethat a court ignore both the law andevidence in the case.

THE CHRISTIAN COALITION AND GAMBLINGMONEY

It now appears that the groupknown as The Christian Coalition,which is little more than a well-fundedpolitical organization, has been mis-leading the people of Alabama on thegambling issue. They have also beenable to hide the source of theirfunding. We now learn that an$850,000 donation from an anti-taxorganization to the Alabama ChristianCoalition actually came from an Indiantribe that runs a casino in Mississippi.This shocking revelation comes fromGrover Norquist, the president of theorganization, whom I would consider apretty good source. Americans for TaxReform also gave $300,000 to an organ-ization formed to fight the lottery inAlabama during the Siegelman Admin-istration. Alabama Christian CoalitionPresident John Giles has now con-firmed that his organization receivedthe donation from Americans for Tax

Reform in 2000. But, John claims thathe said he was not aware the moneycame from a Mississippi Indian tribeand was connected with the gamblingissue in Alabama. I doubt seriously anygroup would take $850,000 and notknow exactly where it came from andwhy it was being given, but I will giveJohn the benefit of the doubt.

In a story that appeared in theBoston Globe, Norquist said he sentmoney to the two anti-gamblinggroups in Alabama because the tribewanted to block gambling competitionin the state. It’s very clear that the

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IN THIS ISSUE

I. Capitol Observations . . . . . . . . . . . . 2

II. Legislative Happenings . . . . . . . . . . 4

III. Court Watch . . . . . . . . . . . . . . . . . . 5

IV. The National Scene . . . . . . . . . . . . . 8

V. The Corporate World . . . . . . . . . . 12

VI. Campaign Finance Reform . . . . . . 13

VII. Congressional Update . . . . . . . . . . 15

VIII. Product Liability Update . . . . . . . . 17

IX. Mass Torts Update. . . . . . . . . . . . . 22

X. Business Litigation . . . . . . . . . . . . 27

XI. Insurance and Finance Update . . . 31

XII. Predatory Lending Undate. . . . . . . 35

XIII. Premises Liability Update . . . . . . . 35

XIV. Workplace Hazards. . . . . . . . . . . . 35

XV. Transportation . . . . . . . . . . . . . . . 37

XVI. Arbitration Update . . . . . . . . . . . . 40

XVII. Nursing Home Update. . . . . . . . . . 41

XVIII. Healthcare Issues . . . . . . . . . . . . . 42

XIX. Environmental Concerns . . . . . . . . 43

XX. Tobacco Litigation Update. . . . . . . 44

XXI. The Consumer Corner. . . . . . . . . . 44

XXII. Recalls Update . . . . . . . . . . . . . . . 47

XXIII. Firm Activities . . . . . . . . . . . . . . . . 49

XXIV. Some Personal Observations. . . . . 50

XXV. My Parting Words . . . . . . . . . . . . . 51

money came into Alabama for onepurpose and that was to benefit thegambling operations run by the Indiansand to kill off competition. I havealways believed it is best to admit thetruth in the beginning. In fact, thatshould always be the rule and espe-cially for any group that uses “Christ-ian” in its name.

You will recall that questions aboutwhether the Alabama Christian Coali-tion had received Indian gamblingmoney were raised last year after RalphReed, former executive director of theChristian Coalition nationally, said hehad taken money from lobbyists repre-senting four Indian tribes with casinos,including the Mississippi Band ofChoctaw Indians. Reed, who is aboutas “slick” as they come, is back in thenews because of his ties to the Indiansand their money.

The influx of gambling money intoAlabama makes some of the recentantics in the state Senate more clearand understandable. Efforts in theAlabama Legislature during the recentlycompleted session to pass legislation torequire nonprofit groups to disclosethe source of money used to buyadvertising to influence the outcome ofreferendums failed. The bill passed theHouse, but was delayed in the Senateafter a group of Republican Senatorsstaged a four-week filibuster. As aresult, the House bill never came upfor a vote in the Senate. When $1.15million can be slipped into Alabama tobe used solely for political purposes, itis absolutely necessary that the sourceof the funds be identified. The publicshould demand that Giles’ group makea public disclosure of the source of themillions of dollars that pass through hisgroup. In my opinion, those who killedthe disclosure bill in the Senate havesome explaining to do. I hope theGovernor will include this most impor-tant bill in his call for a special session.In fact, he should go back to the origi-nal bill, which covered much morethan just referendums.

ALABAMA IS GOOD FOR BUSINESS

The State of Alabama has been rec-ognized once again for its outstandingefforts in the most important area ofindustrial development. A nationalbusiness publication, Site SelectionMagazine, rated Alabama’s industrialrecruitment agency as the tops in thenation for 2004. The magazine chosethe Alabama Development Office forits annual Competitiveness Award. Thisis quite an accomplishment for ourstate. It tells the world that Alabama isstill very good for business. ADO direc-tor Neal Wade must be given a greatdeal of credit for our state’s industrialdevelopment efforts. It has becomewidely recognized that ADO is now aneffective tool for economic develop-ment. Other states in the magazine’stop 10 were: Michigan, Georgia, Ken-tucky, Indiana, Ohio, Tennessee, NorthCarolina, Texas, and Iowa.

The recognition by Site Selectionmagazine followed Southern Businessand Development magazine havingnamed Alabama as its “State of theYear” for 2003 and 2004. In another bitof good news, Expansion Managementmagazine selected the Alabama Indus-trial Development Training program asthe top work force training program inthe nation for 2004. I must take a littlecredit for helping to establish thisprogram way back in the 1970s when Iwas involved in state government. Ivividly recall traveling to South Car-olina and coming back home with theplan for a workable training programto be set up in our state. In a span of afew weeks the program was startedand the Legislature appropriated fundsfor the first time. Since that time hun-dreds of thousands of Alabama citizenshave received training for specific jobsin industrial plants located in our state.Persons who helped get the programgoing in the beginning were Dr. T.L.Faulkner, Fred Denton, Tom Eden,Jimmy Clark, George Howard, andJohn Mosley. Since its start, theAlabama Industrial Development Train-

ing Program has been a resoundingsuccess story.

ALABAMA’S JOB GROWTH LOOKS GOOD

Alabama has been projected to leadthe Southeast region in job growthover the next two years. The projec-tions made by a leading and well-respected economist was notunexpected. During the Gulf SouthBank Conference held last month,Louisiana State University economistLoren Scott predicted job growth inAlabama would surpass the growth ofall other states in our section of thecountry. It is projected that employ-ment for Alabama will grow by 2.5%through 2006. This is good news forour state and is more evidence thatAlabama is very good for business.

MONTGOMERY CHAMBER RECOGNIZED FORITS EFFORTS

The Montgomery Area Chamber ofCommerce has been named one of theTop 10 Economic Development Orga-nizations in the U.S. by Site Selectionmagazine. Each year the magazine rec-ognizes the 10 non-state economicdevelopment agencies that excelled intheir efforts to attract business expan-sion activity relative to other groups.Representatives from Site Selectionmade the official announcement of theselection with an award presentation atthe Montgomery Chamber Boardroomon May 2nd. I am currently a member ofthe Chamber’s Board of Directors andknow firsthand how hard the groupworks on economic development.Mayor Bobby Bright has worked hardwith the Chamber and should also geta great deal of credit for the progressbeing made in the capitol city.

The Top 10 groups were chosenbased on four objective categories:new jobs, new jobs per 10,000 resi-dents, new investment amount, andnew investment amount per 10,000 res-idents. Other criteria for selection

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include innovative programs, leader-ship, and customer service. The Top 10list was published in the May 2005issue of Site Selection. As you mayknow, Site Selection is the leading pub-lication covering the corporate realestate management and economicdevelopment sectors, and is the officialpublication of the Industrial Asset Man-agement Council.

BASE CLOSINGS AFFECT ALABAMA

While Alabama escaped any majormilitary base closing under the Penta-gon’s strategic review, it appears thatnot all of the news was real good forour state. Redstone Arsenal, FortRucker, and Anniston Army Depot willgain jobs, but Maxwell-Gunter AirForce Base in Montgomery is slated tolose 2,300 jobs in the realignment. Theother three major bases in Alabamaeach gained more than 1,000 jobs, withthe Army air training center at FortRucker gaining the most with 1,888.Eleven small Guard and Reservecenters around the state will be closedunder the Base Closure and Realign-ment proposal, but most involve only asmall number of jobs. The job losses atMaxwell-Gunter will be a major blowto the economy of Montgomery andthe surrounding counties.

It is difficult to understand the gov-ernment’s thinking concerning the partof the realignment that affects Maxwell-Gunter. In fact—based on what I havelearned—the move makes no sense atall. Frankly, it is illogical to move thesejobs, regardless of where they arebeing sent, and especially to this loca-tion. The location in Massachusettsdoesn’t appear to measure up, and Iam told that it is not really a cost-effec-tive move. It would make more senseto move everything to Montgomery.Maxwell-Gunter has been a shininglight in the military complex, and thatis well-established. Moving Alabamajobs to Massachusetts will be hard forPresident Bush to justify to his many

supporters in our state. I hope Gover-nor Riley and the Republican membersof Congress from Alabama will be ableto stop this part of the realignment. It iscertainly something that is worth fight-ing for.

II.LEGISLATIVEHAPPENINGS

THE REGULAR SESSION LEAVES MUCHUNDONE

The regular session of the AlabamaLegislature ended on Monday, May16th, and it won’t be one for anybodyinvolved to write home about. Thefinal meeting day of the sessionbrought about some good things, butas predicted a great deal of bad tookplace and a lot of good didn’t. TheHouse joined the Senate in overridingGovernor Bob Riley’s veto of the stateeducation budget and 6% pay raise forschool workers. The budget and payraise are now law. It didn’t appear thatmany Republican legislators put upmuch of a fight to sustain the Gover-nor’s vetoes.

In any event, the last day in theSenate was one of the weirdest inrecent memory. In spite of the delayingtactics, the Senate did manage to givefinal approval to:

• An $80 million appropriation forexpansion of State Docks in Mobile.

• A bill to require that nonprescriptiondecongestants ephedrine and pseu-doephedrine be kept behind acounter and to require customers toshow identification and sign beforemaking a purchase.

• A bill that gives limited home rule tocounties over issues such as strayanimals and weed abatement, whichisn’t exactly a move toward realhome rule. But, at least it’s a start inthat direction.

The failure of the Senate to pass thegeneral budget—regardless of othergood things that occurred—was ablack mark on the entire session.Allowing that to happen was a majormistake on the part of the leadershipof both political parties. While therehas been lots of finger-pointing, therewill be plenty of blame to go around.There were a tremendous number ofbills that in my opinion should havepassed, but died. Some of the bills,other than general fund budget, thatdidn’t pass and went down the drainare:

• A bill that would have required non-profit organizations to disclose theirsource of funding for buying adver-tising to influence the vote on a ref-erendum.

• A bill to ban the transfer of campaigncontributions from one politicalaction committee to another.

• The bill that would have prohibitedthe practice of “pass-through pork,”which involves hiding money in astate agency so that it can later beused for a project in a legislator’s dis-trict.

• A bill to move Alabama’s presidentialpreference primary from June to thefirst Saturday after the New Hamp-shire primary.

• An important bill that would haverequired every school district in thestate to levy at least a $10 millionproperty tax for education.

• The supplement appropriation billfor the Board of Corrections, whichwould have appropriated $20.55million to Alabama prisons forremainder of current fiscal year tohelp meet payroll.

• The bill to take the racist languageout of the Alabama Constitution.

• A bill to provide $250,000 in lifeinsurance to every member of theAlabama National Guard or reservist


from the state deployed for overseasduty.

• A bill to require convicted sexoffenders to register with the sheriffwithin seven days of moving into acommunity rather than the 30 dayscurrently required.

• A bill to adequately fund theprogram that furnishes defenselawyers for indigent persons in crimi-nal cases. There are currently about1,800 lawyers who provide thisessential service to the state. Failureto pass this bill was a big mistake.

THE SPECIAL SESSION

It is most unfortunate that the Senatefailed to pass the general fund budget.In my opinion, those who killed thisbudget did the people of Alabama areal disservice. It appears that ahandful of Republican senators—aidedby at least one prominent Democrat—were directly responsible for thisfailure. While the last day’s activitiesare being discussed as the culprit, Ibelieve that the killing of the budgetstarted a long time before that infa-mous final day. I have difficultly under-standing the motives of these senatorswho killed the session. Regardless ofwho was really to blame, there will bea special session. The cost of thespecial session, which could be asmuch as $600,000, could have beenput to good use in a number of neededareas. The public can’t be too happywith what happened. The Legislatureshould now come to Montgomerywhen called, pass the budget in theminimum of five days required to passa bill, and then go home. The realproblem—the lack of money to ade-quately fund all of the operations ofstate government and public educationat all levels—won’t be addressedduring the session, and that’s a cryingshame. One of these days a governorand legislature will put “politics” asideand tackle the funding problem, solve

it, and put our governmental and edu-cational funding on a solid and perma-nent basis. In the meanwhile, we willcontinue to struggle along—“patching”as we go.

ALABAMA SILVER HAIRED LEGISLATUREWORKED HARD

There were a number of bills ofgeneral interest to Alabama seniors thatwere introduced during the recentlycompleted session of the Alabama Leg-islature. Reports provided by theAlabama Silver-Haired Legislature keptus posted on how seniors fared duringthe session, and it wasn’t very good.Unfortunately, there were very fewbills passed that will benefit Alabamaseniors and that’s a real shame. Suchbills as the “Seniors Living With DignityAct” died without even being seriouslyconsidered. The Nursing Home Associ-ation was largely responsible for killingthis badly needed legislation, andseniors will suffer as a result. Hope-fully, the Legislature will do a betterjob in the future on legislationdesigned to benefit seniors in our state.Maybe some of the Silver-Haired groupshould run for the Legislature. What doyou think?

III.COURT WATCH

EXXONMOBIL NO STRANGER TO THE COURTS

Alabama’s Supreme Court isn’t theonly appellate court to have hadExxonMobil Corp. to appear before itin the last few years. The giant oilcompany has had a great deal of litiga-tion against it, and many of the casesdealt with alleged fraudulent behavior.ExxonMobil is so politically strong andinfluential that its bosses believe theycan run roughshod over their adver-saries. The following are a few exam-ples of what has been going on.

The Dealers’ Case

The Florida class action, brought byabout 10,000 Exxon service stationdealers against ExxonMobil has been inthe court system for several years. In2001, a jury ruled that the oil companyowed about $500,000,000 to stationowners. The Eleventh Circuit Court ofAppeals’ original decision affirmed thetrial court and upheld the verdict.ExxonMobil then asked for a rehearing,which was granted. Interestingly, theentire Eleventh Circuit heard the caseen banc on rehearing and denied thegiant oil company’s request for a rever-sal. Since the court of appeals ruled,Exxon has paid only the nine dealersspecifically named in the lawsuit. Noneof the other dealers have received adime, but that’s about to change.

The trial judge has now ordered thegiant oil company to start paying therest of the dealers. In the most recentdecision, the trial judge said Exxon hasattempted to make a “judicial trainwreck” of the claims payment processand “wants to prolong the lawsuit,filed 13 years ago.” The judge pointedout that ExxonMobil makes $238million a year from interest on the $1.3billion as long as it keeps the money.He ruled that if ExxonMobil furtherappeals individual claims that havebeen decided, the claimants will earnfunds with an interest rate equal to thecompany’s reported earnings on themoney. That will “eliminate Exxon’sability to earn money on the money itwrongly retains as a result of its badfaith scheme,” the judge wrote. This isa deserved sanction in my opinion.The fact that the judge ordered thecompany to start paying the dealersimmediately is a major victory.However, knowing first hand howExxonMobil operates, I expect thecompany to delay making the legiti-mate payments by appealing again.

Exxon began charging dealers a 3%processing fee on gasoline sales paidby credit cards in 1982. The companypromised to offset the charge bycutting the wholesale cost of the fuel.Exxon did that for six months, reduc-


ing the wholesale price by 1.7 cents agallon. Exxon stopped the offset inMarch 1983, but failed to tell thedealers, who didn’t learn about whatExxon was doing for eight years. Asindicated above, a final judgment wasentered on May 18th against ExxonMo-bil. I am sure that ExxonMobil will sayall of the judges who have reviewedthe evidence and applied the applica-ble law were wrong. It is most signifi-cant that this company has now addedits own dealers to a long list of victims.

The Valdez Saga

I doubt there are many folks in theU.S. who don’t know about the Valdezcase that has been in the court systemsince 1989. A $5 billion punitivedamages verdict has been bouncingaround for almost 16 years, and thegiant oil company hasn’t given up yet.In fact, the company’s method of oper-ation is to wear down its victims andkeep cases in court for as long as pos-sible. The U.S. Supreme Court hadrejected an earlier appeal by ExxonMobil Corp. over the $5 billion punitivedamages verdict against it for the 1989Exxon-Valdez accident, the nation’sworst oil spill. The justices let stand aU.S. appeals court ruling that the awardagainst the oil giant in a civil lawsuitbrought by Alaskan fishermen andother plaintiffs should not be set aside.

In 1989, the Exxon Valdez tankerwas grounded in Prince William Sound,spilling millions of gallons of oil offAlaska’s coast. The accident pollutedmore than 1,000 miles of shoreline, dis-rupted fishing, and damaged the envi-ronment. The case is a prime exampleof how this powerful corporationcommits a wrong that hurts a greatnumber of people and that has no feel-ings whatsoever for its victims. Source: Reuters News

Judge Calls ExxonMobil’s ConductReprehensible

We wrote last month about howExxon Mobil Corp. was ordered onappeal to pay $112 million in punitivedamages and $56 million in compensa-tory damages in connection with a1997 pollution lawsuit in Louisiana.The appeals court judges calledExxon’s actions in the Louisiana case“reprehensible” for allowing people tocontinue cleaning equipment on thepolluted land even though it “posed ahealth risk.” The court found thatExxon knew about equipment that wascontaminated with radioactivity and“the oil company sought to wipe itshands clean and leave ITCO (Exxon’scontractor) with the mess.” This is acompany that obviously believes it isso powerful and politically-connectedit is actually above the law.

Company Ignores Louisiana Governor

ExxonMobil has announced that itwill proceed with its plans to build aliquefied natural gas terminal off thecoast of Louisiana regardless of theconsequences to the environment andthe fishing industry. If this happens,environmentalists say that Exxon willbe using a system that will ruin thefishing industry in that area. TheLouisiana governor opposes the LNGterminal and has notified federal regu-lators to that effect. As I understand it,the “open-loop” system is the one thatExxon wants to use. That systemwould suck in millions of gallons ofwater per day to warm super-cold LNGso it can be transported by pipeline.There is a “closed-loop” system thatcould be used by the company but itcosts more. There are also seriousproblems from a safety perspective thatmust be addressed before this terminalis approved.

GOP SEEKS MORE CURBS ON COURTS

I never cease to be amazed at someof the things that happen in ournation’s capitol. One of the latest hap-penings deals with our court system. Ina shocking move, it appears that HouseRepublican leaders will use budgetary,oversight, and disciplinary authority toassert greater control over the federalcourts before next year’s elections. Inmy opinion, this legislative challenge tothe courts should not be allowed. Wehave a system of checks and balancesin place guaranteed by our Constitu-tion that must be preserved. HouseMajority Leader Tom DeLay (R-TX), hascomplained loudly about an “arrogant,out-of-control, unaccountable judici-ary.” He has friends in and out of Con-gress who want to see the courts madea rubber stamp for right-wing extremistpolitics.

The Constitution specifies that Con-gress will set the jurisdiction andbudgets of the courts. One of the morecontroversial developments is a plan tocreate an office of inspector general forthe federal judiciary, like those thatnow serve as watchdogs of executive-branch agencies, to take complaints,prepare reports, and audit and investi-gate the administration of the courts. Itwould appear that having such an offi-cial, who would likely have an inde-pendent office within the court systembut would prepare periodic reports forCongress and answer its inquiries,would violate the separation-of-powersdoctrine. If we allow our courts to becontrolled by Congress so that theindependence of the courts isdestroyed, our Republic will suffer. Wesimply can’t allow that to happen!Source: The Washington Post

TOP COURT WON’T HEAR REZULIN APPEAL

Pfizer, the world’s largest drugmaker, has lost a U.S. Supreme Courtappeal to overturn a $10 million puni-tive damage award to the family of anOklahoma man who died after taking


the company’s Rezulin anti-diabetesdrug. The justices refused to hearPfizer’s argument that the award wasexcessive and violated limits on puni-tive awards set in a 2003 High Courtruling. Rezulin, a drug taken by about1.9 million diabetics to help regulateinsulin, was pulled from the U.S.market in 2000 after it was linked to atleast 63 deaths from liver failure. AnOklahoma jury awarded $1.55 millionin actual damages and $10 million inpunitive damages to relatives of a 42-year-old man who died after taking thedrug for five weeks.

Pfizer’s appeal had been supportedin court briefs by the industry groupPharmaceutical Research and Manufac-turers of America, the U.S. Chamber ofCommerce, and the Business Round-table. As you know, Rezulin was madeby Pfizer’s Warner-Lambert unit. Theman’s family sued the company wassued in 2000, claiming it sold Rezulinwhile concealing that tests showed thedrug caused liver damage. The Okla-homa Court of Civil Appeals upheldthe punitive award last July, saying itwasn’t “grossly excessive” and didn’tpunish Pfizer for conduct that was legalin other states. The jury’s decision to“make the punishment commensuratewith the wrongdoer’s wealth” didn’tamount to punishing Pfizer for out-of-state conduct. Pfizer took a $975million charge against earnings in thefourth quarter of 2003 to cover settle-ments of all known personal injuryclaims relating to Rezulin, coveringabout 35,000 individuals, according tothe company’s 2004 annual report. Source: Bloomberg News

SETTLEMENTS REACHED IN CADET ABUSESUITS

The parents of cadets who said theywere hazed and severely assaulted atLyman Ward Military Academy havereached settlements in their individuallawsuits against the school. The settle-ment details are confidential. Most

parents are being compensated fortheir sons’ tuition and medical billsreceived after the cadets were treatedfor injuries sustained at the academy.Mediation was held involving eightlawsuits alleging brutal hazing andabuse against the cadets. The separatecases of abuse were allegedly carriedout by senior cadets and school offi-cials at Lyman Ward, which teachesgrades 6-12, in the 2002-2003 or 2003-2004 school years. A condition of theagreement requires the parents to dropany attempts at shutting down thecentury-old school located in CampHill, which is in east Alabama.

AMERICAN MILITARY PERSONNEL AREREJECTED

At a time when we should be sup-porting our military, the Bush Adminis-tration has taken a rather weird standon a most significant case. As a result,American pilots and soldiers, who weretaken prisoner and tortured by theIraqis during the Persian Gulf War of1991, suffered a devastating loss in theU.S. Supreme Court. The High Courtturned away a final appeal by theformer POWs, which means their caseis over. The Bush Administrationopposed the lawsuit that had resultedin a $1 billion verdict in favor of theprisoners-of-war two years ago. Anappeals court had thrown the verdictout. The Supreme Court’s refusal tohear the case spares the Bush Adminis-tration from having to go before thejustices to argue against AmericanPOWs who were tortured. The 17former POWs had sued Iraq and thegovernment of Saddam Hussein underthe terms of a 1996 anti-terrorism lawthat allowed for claims by Americanswho had been injured or tortured atthe hands of “state sponsors of terror.”Unfortunately, few people in thiscountry were even aware of the exis-tence of this lawsuit. During thePersian Gulf War, POWs were beatenand were badly mistreated by Iraqi

captors. Several of the men nearlystarved in the weeks they were held incold, filthy cells in Iraq.

The onetime POWs won their case infederal court in 2003. To the surprise ofthe former U.S. prisoners, the BushAdministration then went to courtseeking to nullify the award they hadwon. The government’s lawyers arguedthat Iraq, now under U.S. occupation,was no longer a state sponsor of terror.Moreover, President Bush had canceledsanctions against Iraq and moved toshield its $1.7 billion in frozen assets.The President said the money wasneeded to “rebuild the nation.” Lastyear, the U.S. Court of Appeals inWashington agreed with the BushAdministration and ruled that “weightyforeign policy interests” called for dis-missing the POWs’ lawsuit. BushAdministration lawyers then urged theSupreme Court justices to dismiss thecase. Now that has happened andthese men are left with no further legalrecourse. I find the stance taken by theBush White House to be most disturb-ing and certainly inconsistent with itspublic stance on war and the militarygenerally.

CASH ADVANCES FOR CLIENTS

There are companies in business thatadvance money to people who havefiled lawsuits and have their personalinjury lawsuits pending. This lending isdesigned for folks with pending caseswho can’t pay their bills as they waitfor the suits to be resolved to get somehelp. These companies are part of anindustry that has grown rapidly acrossthe country in the last decade. Theirvery high fees are legal, primarilybecause the money they provide is notlegally a loan in most states and thus isnot covered by a state’s usury laws.The advances are not deemed loansbecause the recipients must pay themback only if they are awardeddamages. About 100 of these compa-nies are in operation across the


country. LawCash, based in Brooklyn,is one of the largest and is activenationally. That company currently hasmore than $25 million in advances out-standing. The monthly fees charged areusually 2% to 6% of the amountadvanced, or up to 72% on an annualbasis. However, some of these compa-nies have charged much higher fees inthe past and a few may still be charg-ing rates even higher than 72% APR.

I would never recommend that aclient of our firm use one of these com-panies. Our firm pays all expenses of lit-igation as a client’s case progressesthrough the courts. But, because ofAlabama State Bar rules, we are notallowed to provide any money to clientsin advance in a case. While there arerare exceptions to the Bar rule, they arevery limited in application. We mustabide by the rules, and sometimes thatmakes it difficult for our clients. Often-times, clients will have severe financialproblems because their injuries or dis-ability keeps them from work. Thedeath of a breadwinner in the familyalso causes severe financial hardships.In such situations, there should be away to assist clients in that type situa-tion. I hope the bar association will takea look at the present rule. But, I reallydon’t like to see companies takingadvantage of persons who have a needand no way to get relief. There must bea better way to handle the problem.

SUPREME COURT SAYS FARMERS MAY SUE INSTATE COURTS

The U.S. Supreme Court has ruledthat farmers whose crops are damagedby federally approved pesticides orherbicides will be allowed to pursuedamage claims against the manufactur-ers in state court. The 7-to-2 decisionwas one of the Court’s most significantrulings on the preemptive effect offederal statutes. The High Courtrejected the Bush Administration’s posi-tion that lawsuits claiming manufactur-ers negligently designed, tested, or

manufactured their products are pre-empted by the Federal Insecticide,Fungicide and Rodenticide Act. This actis the federal law that governs the reg-istration and labeling of these products.The case began as a threatened lawsuitin the Texas state courts by 29 Texaspeanut farmers whose crops failed fiveyears ago after they applied a newweed killer called Strongarm. The man-ufacturer, Dow AgroSciences, a unit ofthe Dow Chemical Company, filed suitin federal district court seeking a decla-ration that the suit was preempted bythe “uniformity” clause in the statute.This suit was filed as negotiations cameto a halt and was an attempt to beatthe farmers to the courthouse.

A federal district court and the UnitedStates Court of Appeals for the FifthCircuit, in a 2003 ruling, agreed that thecompany was correct and the suit wasbarred. Interestingly, the federal gov-ernment had long taken the positionthat the federal act did not preemptdamage suits in state courts. But theBush Administration reversed that posi-tion and urged the Supreme Court todeny the farmers’ appeal. The justicesagreed to hear the case, and that turnedout to be good news for farmers. Afinding of preemption would havemeant that consumers would have noopportunity to sue manufacturers. Thisdecision is very important for farmersand consumers generally.

A result of the Court’s opinion is thateach statute must be interpreted in itsown context, according not only to thestatutory language but to the history oflitigation involving the regulatedproduct. In this instance, state courtsuits against pesticide manufacturershad previously been common. Thefarmers’ claims for “defective design,defective manufacture, negligenttesting and breach of express warranty”are not preempted. The Supreme Courtdid order the Fifth Circuit to givefurther consideration to whether theclaims for fraud and “failure to warn”could go forward or were preempted. Source: New York Times

VETERAN SUPREME COURT JUSTICE TORETIRE

In a move that came as a surprise toAlabama citizens who keep up withjudicial politics, Justice Robert BernardHarwood, Jr. announced that hewouldn’t seek reelection to theSupreme Court. The veteranTuscaloosa jurist is well respected byAlabama lawyers and has been an out-standing judge throughout his career.Having served as a circuit judge inTuscaloosa County for several terms,Bernie Harwood brought a wealth ofknowledge and experience to theAlabama Supreme Court when he waselected. He is known as a man whohas consistently followed the law andhas been fair and impartial in all of hisrulings. The departure of JusticeHarwood will be a real loss for thecourt. He will be missed.

IV.THE NATIONALSCENE

WAR COSTS NOW OVER $300 BILLION

I really don’t believe the extremelyhigh cost of the war in Iraq has reallysunk in with the American public. Thathas been somewhat of a surprise con-sidering that the total war cost is nowover $300 billion. Last month, the Pres-ident signed into law an $82 billionmeasure for the Iraq and Afghanistanwars and reconstruction. There appearsto be no end in sight for the spending.Most of the current money — $75.9billion — is slated for military opera-tions. Actually, lawmakers providedmore money this time than the presi-dent had requested to protect troops incombat zones. It has become prettyclear that the total cost of the Iraqwar—both in human life and money—is finally beginning to have an effect onhow folks in this country view the war.

There will eventually be some tough


questions asked by the public of ournation’s politicians. The first and tough-est question will simply be: why was itnecessary to wage war in Iraq? Thenext will be: what exactly have weaccomplished, other than kicking out avery bad and corrupt leader, consider-ing the vast cost in human life and tax-payers’ money? Finally it is now time toask: what does the future hold for ourtroops in Iraq? These will be toughquestions for anybody who is currentlyin office in Washington, and theiranswers had best have real substanceand not more political rhetoric. Ifanybody believes that the situation inIraq is under control, they haven’ttalked to anybody who has actuallyhad been there. Personally, I fullysupport our military, always have andalways will. But, I can’t justify the deci-sion-making process that led us intothis war. Nevertheless, as long as wehave forces in Iraq, we must supportthem to the fullest extent possible. But,the time has come for some honestanswers to some tough questions! Source: Associated Press

OUR GOVERNMENT CAN’T ACCOUNT FOR$100 MILLION SPENT IN IRAQ

If the American people really knewhow badly the federal government hasmismanaged assets in Iraq, I suspectthey would be appalled. The reportingof a lack of proper documentation onnearly $100 million in cash is a primeexample. Millions of dollars worth ofequipment designed for use in Iraq isalso unaccounted for. As you mayrecall, billions of dollars in cashbecame available after the U.S. inva-sion over two years ago. Unfortunately,there were few controls over how thatmoney was spent and accounted for.From the $8.8 billion provided to Iraq’sinterim government—to millions pro-vided to U.S. contractors, investigationshave laid out a system that was ripe forabuse. The latest indication of thatcame when investigators released a

report last month saying $96.6 millionin cash could not be properlyaccounted for. The total included morethan $7 million that was simply gone,according to the report from theSpecial Inspector General for IraqReconstruction.

It is mind boggling to even considerthat cash would be used to pay for therebuilding of Iraq or for any otherpurpose. Examples have been exposedof how millions of dollars in cash weregiven to “division level agents” responsi-ble for distributing the money for recon-struction programs in a certain area.Those agents were supposed to keepdetailed, signed receipts and other doc-umentation for the money they spent,but usually did not, according to mediareports. Regardless of how people feelabout the need for the war, no personcan justify not being accountable forfunds being spent in Iraq.

HALLIBURTON LANDS $72 MILLION INBONUSES

The U.S. Army said has announcedthat it has awarded $72 million inbonuses to Halliburton Co. for logisticswork in Iraq. Fortunately, for taxpayersthe government hasn’t decidedwhether to give the Texas companybonuses for disputed dining services totroops. Army Field Support Commandin Rock Island, Illinois, gave Hallibur-ton unit Kellogg Brown & Root ratingsfrom “excellent” to “very good” for sixtask orders for work supporting U.S.troops in Iraq. The Army said its AwardFee Board in Iraq had met in Marchand had agreed to pay KBR bonusesfor work it did in support of U.S. forcesthere. But it said dining facility costsquestioned by auditors from theDefense Contract Audit Agency had notyet been considered by the military’sAward Fee Board. Much of Hallibur-ton’s work for the U.S. military, rangingfrom building bases to delivering mail,is on a cost-plus basis, which meansthe company can earn up to 2% extra

depending on its performance.I understand that bonuses are

awarded based on, among otherfactors, how efficient and responsiblethe company is to requests from theArmy. It’s also said to be an indicatorof how the Army views KBR’s perform-ance in the field. KBR’s logistics dealwith the U.S. military has been in thespotlight from the outset in Iraq.Apparently, all of the allegations byauditors that the politically-connectedcompany overcharged for work,including dining services, have gonelargely unheeded. Investigators are stilllooking into whether the Texas-basedfirm charged too much to supply fuelto Iraqi civilians. As expected, the firmsays those claims are not justified. Hal-liburton, which was run by Vice-Presi-dent Dick Cheney before he joined theBush ticket in the 2000 race for theWhite House, has earned more than $7billion under its 2001 logistics contractwith the U.S. military. I am sure thathaving a voice in Washington hasplayed no part in Halliburton’s suc-cesses. Source: Reuters News

CORRUPTION IN GOVERNMENT CONTRACTINGMUST BE STOPPED

Seven “good government” groups areurging U.S. senators to allow states toenact so-called “pay-to-play” lawsdesigned to stem corruption in statehighway contracting. The groups areurging senators to adopt a measuresponsored by U.S. Senator Jon Corzine(D-NJ) that would explicitly give statesthe right to limit the amount a statecontractor can contribute to politicalcampaigns. The measure, to be addedto the Safe-TEA Act (S. 732), wouldprevent the Federal Highway Adminis-tration (FHWA) from withholdingfederal funds from states that restrictgovernment contractors from makingcampaign contributions to state electedofficials who are ultimately responsiblefor approving the contracts. These con-


tributions have traditionally gone togovernors and state legislators. TheU.S. House of Representatives alreadyhas approved a similar amendment toits version of the highway authorizationbill (H.R. 3). The measure is necessary,the groups said in recent letters to theSenate, because the FHWA pulledfunding from New Jersey after itenacted a pay-to-play law in 2005.Faced with the threat of losing $1billion in highway funds, New Jerseysuspended the portion of its law thatapplies to highway contracts. That stateis challenging the federal government’sintervention in court.

The coalition of groups have sent tothe Senate three separate letters sup-porting the pay-to-play amendment.These groups include Public Citizen,Public Campaign, Common Cause,Democracy 21, Campaign LegalCenter, the Center for Civic Responsi-bility, and the Brennan Center forJustice at the New York UniversitySchool of Law. Joan Claybrook, PublicCitizen’s president, urged that action betaken. She stated:

It is ludicrous that the federal gov-ernment should try to stop statesfrom taking steps to prevent corrup-tion in contracting. It’s well knownthat contractors try to influenceofficials by contributing largeamounts of cash to campaigns.This has taken a serious toll onpublic confidence in state andlocal governments across thenation. States should be applaudedfor trying to stop it.

In addition to New Jersey, Kentucky,Ohio, South Carolina, and West Virginiahave enacted pay-to-play laws, as havelocal jurisdictions in California, Illinois,and New Jersey. Connecticut, whoseformer governor is on his way to prisonfor pay-to-play corruption, is writing asimilar law. The Securities andExchange Commission, led by formerSEC chair Arthur Levitt, has alsoadopted a pay-to-play restriction for

bond traders involved in the municipalbonds market, known as Rule G-37.This Rule has been upheld by the courtsand serves as a useful model for statesattempting to curtail corruption in stategovernment contracting procedures.

“Pay-to-play restrictions are far fromdraconian measures,” the groups wrotein the letter to senators. “They are anarrow remedy that focuses exclu-sively on a specific problem”—toensure that government contracts areawarded on merit rather thanfavoritism. Corzine’s amendment,which the groups urged senators tosupport, contains this language:

Nothing in this section prohibits aState from enacting a law orissuing an order that limits theamount that an individual that isa party to a contract with a Stateagency under this section maycontribute to a political campaign.

In blocking New Jersey’s pay-to-playlaw, the FHWA claimed that it reducedthe pool of competitive bidders forgovernment contracts. The agencymaintains that merely disclosing lobby-ing and political contributions is suffi-cient to deter corruption, even thoughseveral states have concluded that dis-closure alone is not enough to endpay-to-play corruption. Federal inter-vention is unjustified and counterpro-ductive. Congress should give statesthe right to ensure that their contract-ing procedures conform to the highestethical standards. When that finallyoccurs, the winners will be the Ameri-can taxpayers. Source: Public Citizen

GOVERNMENT CONTRACTOR SETTLESFRAUD SUIT

One of the Pentagon’s largest con-tractors has agreed to pay the federalgovernment $2.5 million to settle accu-sations that it illegally overcharged theAir Force for environmental clean-upwork in Texas. The agreement

between the Justice Department andthe Science Applications InternationalCorporation, based in San Diego, wasannounced by the Justice Department.Contractor fraud in government con-tracts is so widespread, it no lonermakes news for a corporation to becaught. The battle isn’t being wonbecause the companies committing thefraud continue to bid on contracts. Thecompany in this case was accused, in awhistle-blower lawsuit joined by thegovernment, of intentionally paddingits estimated expenses during negotia-tions, then taking illegally high profitswhen it completed the work morecheaply. Experts in contract law saythat such techniques are used invarying degrees by many federal con-tractors and that a government victoryin the case will send an importantsignal to corporations. The fraud suitinvolved work that the company per-formed at Kelly Air Force Base in SanAntonio. The contracts, awardedwithout competitive bidding, paid thecompany a negotiated price of $24million. But the company reapedprofits of 30%, the Justice Departmentasserted, when it was legally entitled toprofits of 10%.

In a suit filed in 2002 under the FalseClaims Act, a former project managerfor the company described a systematicpattern of exaggerating costs. In joiningthe case in 2004, the Justice Depart-ment said the company had violatedone law that requires federal contrac-tors to provide accurate data duringpricing negotiations and to reduce feesif costs prove lower than projected,and another law requiring them toexplain their estimating methods fully.In one example cited by the JusticeDepartment, S.A.I.C., while negotiatinga $2 million hazardous-waste project,described to the Air Force a pattern ofexpenses giving it a profit of 10%. Yetinternal company documents at thetime put the “actual profitability” at23%. Company documents alsoshowed that four months into the one-year project, the profit had risen to


29%. By the end of 2000, when thework was completed, the companyfound—and did not disclose to the AirForce—that its profit had jumped to54%. The Air Force told contract offi-cers last December to give specialscrutiny to the company’s cost esti-mates. At that time, S.A.I.C. had $513million in contracts with the Air Force.It continues to be of concern that cor-porations doing business with thefederal government cheat. It is evenmore troubling that these companiesare allowed to obtain government con-tracts after they are caught cheatingand pay a fine. Cheaters should bebanned once they are identified andnot allowed to continue to do businesswith the government. Source: New York Times

MARINES RECALL BODY ARMOR

We have read and heard about toomany abuses in conducting the war inIraq and with the rebuilding effort thatis far from over. However, when thoseabuses put human life at risk, weshould stop and take a real close lookat what is going on. The Marine Corpsissued to nearly 10,000 troops bodyarmor that Army ballistic experts urgedthe Marines to reject after tests revealedlife-threatening flaws in the vests. Thiswas reported after an eight-monthinvestigation by the Marine CorpsTimes was completed. Some disturbingmatters were discovered. In all, theMarines bought about 19,000 Intercep-tor outer tactical vests from Point BlankBody Armor that failed governmenttests due to “multiple complete pene-trations” of 9mm pistol rounds andother ballistic or quality-assurance tests.After being questioned about the safetyflaws, the Marines ordered the recall of5,277 Interceptor vests on May 3rd. TheCorps has not said what it intends todo with more than 4,000 vests still inuse. Army ballistics expert JamesMacKiewicz, in a memorandum reject-ing two lots of vests on July 19, 2004,

said his office “has little confidence inthe performance” of the body armor.

MacKiewicz, who works at the ArmySoldier Systems Center in Natick, Mass-achusetts, is responsible for verifyingthat the vests meets protective require-ments and other quality standards. TheMarine program manager for the vests,Lt. Col. Gabriel Patricio, and PointBlank’s chief operating officer, SandraHatfield, apparently ignored the warn-ings. Instead, they signed waivers thatallowed the Marines to buy and distrib-ute the vests that failed to meet stan-dards. The Marines questioned theaccuracy of the initial tests. It pulledsamples from some of the challengedlots and had them tested at a privatelab. Col. Patricio, who recently retiredfrom the Marines, said the second testsshow that the vests meet safety stan-dards and do not put Marines atincreased risk of injury. If Marines wereput at greater risk by the purchase ofvests that were defective, somebodyneeds to explain how this couldhappen. Apparently, the Marine’sCorps wouldn’t have recalled the vestshad not the media coverage occurred.That is difficult to believe.Source: USA Today

HILLARY IS A TARGET

I have never really understood whymost Republicans dislike Hillary Clintonso strongly. Nevertheless, many of themdo and with a passion. Now a veteranGOP operative has launched an anti-Hillary Rodham Clinton website, com-plete with an unflattering photo and awarning that she and her husband aretrying to “pull the wool over America’seyes once again.” It appears Hillary hasbecome “the Republicans’ number onetarget in 2006.”

Hillary is seeking re-election nextyear to the New York Senate seat shewon in 2000. The Associated Press wastold that the “Stop Her Now” effort wastrying to raise $10 million this year. “Allof America has a tremendous stake in

this effort, especially our courageoussoldiers overseas,” the website said.The man who put all of this togetherhas long been a top adviser to Republi-can politicians. I haven’t agreed withHillary on all of her positions, but I dobelieve she is highly intelligent andpolitically astute. She seems to have apassion for people and has been anadvocate for consumers. For thosereasons, I have to admit she can’t betoo bad. Source: Associated Press

CONGRESS SHOULD GET TOUGH WITH THEBROADCAST INDUSTRY

The Broadcast Decency EnforcementAct—if passed by Congress—will raisethe maximum fine for indecent broad-casts to $500,000 per violation and willrequire the Federal CommunicationsCommission to respond to indecencycomplaints within six months. The leg-islation also makes it clear that inde-cent broadcasts could jeopardize abroadcaster’s license. Once passed, thislegislation will ensure that indecency isno longer an affordable cost of doingbusiness for the mega-conglomeratebroadcasters. The bill will also providefamilies with a serious recourse whenthey encounter programming that iscounter to their community standards.If you agree that we need to comedown hard on radio and televisionindustries, please contact your U.S.Senators and U.S. House members andask them to support this legislation. Wemust protect our children from the filththey are exposed to on a daily basis,and the way to do it is to hit the indus-try with large fines. This Act would bea step in the right direction.

THE ATTACK ON SOCIAL SECURITY

I can’t figure for the life of me whyPresident Bush is trying to destroySocial Security. The advisors whopushed the president into the SocialSecurity fight gave him some very bad


advice. Those advisors should havechecked to see what other Republicanpresidents have had to say about SocialSecurity.

Should any political party attemptto abolish social security, unem-ployment insurance, and eliminatelabor laws and farm programs,you would not hear of that partyagain in our political history.There is a tiny splinter group, ofcourse, that believes that you cando these things. Among them are afew Texas oil millionaires, and anoccasional politician or business-man from other areas. Theirnumber is negligible and they arestupid.

President Dwight D. Eisenhower,1952

There may be a few changes neededin the Social Security system, but playingpolitics with the system isn’t theanswer. Without a doubt, the plan forprivate accounts will go down in historyas one of the worst proposals of all time.We must guarantee that the Social Secu-rity program remains strong and readilyavailable for future generations. Democ-rats and Republicans in Congress have aduty to make this a reality. A bipartisanapproach to problem solving in Wash-ington, however, appears to be a thingof the past.

V.THE CORPORATEWORLD

PETROLEUM INDUSTRY FUNDS CHALLENGE TOBENZENE STUDY

The American Petroleum Institutecollected more than $27 million fromoil companies to challenge a NationalCancer Institute study that suggestsoccupational exposure to benzene ismore dangerous than previouslybelieved. The industry effort, according

to documents found in boxes of evi-dence in an unrelated lawsuit, wasundertaken to give the industry lever-age against any consequences of thestudy, such as tighter regulations orlawsuits from cancer patients. Benzene,long known to be carcinogenic, is achemical used throughout the petro-chemical industry. It is a widespreadcontaminant in the air and groundwa-ter and comes from industrial sources,cigarette smoke, gasoline and automo-bile emissions. It is generally acceptedthat benzene causes leukemia. But,there is a difference of opinion in thescientific community about the level ofrisk at low exposures as well as theother blood-related diseases that couldbe contracted from benzene.

The U.S. Occupational Health andSafety Administration has a permissibleexposure limit for people who workwith benzene of 1 part per million inan 8-hour workday. The documentsobtained by the Associated Press werefound in boxes of evidence thatMarathon Oil Co. provided in a caseagainst Dow Chemical Co. filed by aworker who now has leukemia. Thedeposition of Dr. Gerhard Raabe, wholed the Petroleum Institute’s Health andProducts Stewardship Committee, hasbeen taken. Dr. Raabe was trying toraise money from oil companies for theindustry study. He shouldn’t have areal big problem with this task.

The 1997 National Cancer Institutestudy of workers in Shanghai, China,where benzene exposure is far higherthan in the United States, concludedthat workers with 10 or more years ofbenzene exposure had a risk of devel-oping non-Hodgkins’ lymphoma morethan four times that of the general pop-ulation. Another NCI study of benzeneon Chinese workers, released inDecember, concluded that “these dataprovide evidence that benzene causeshematologic effects (diseases of theblood) at or below 1 ppm, particularlyamong susceptible subpopulations.”Acceptable levels of benzene exposurehave been debated since the late

1940s, but for almost 20 years, 1 ppmhas been considered the acceptableexposure for workers.

OSHA spokesman Albert Belsky saidthe agency and the National CancerInstitute agreed that the changes inwhite blood cell counts among Chineseworkers exposed to 1 ppm or lessneed to be studied further beforeOSHA would consider changing thestandard. The first NCI study promptedthe American Petroleum Institute tocompile a “consortium” of petrochemi-cal companies to pay more than $27million to “establish and fund aresearch program on the lymphohe-matopoietic health risks from occupa-tional exposure to benzene” inShanghai, according to the agreementsigned by the industry study partici-pants. The study began in 2001 and isexpected to be completed in 2007.

The companies funding the studywere BP, ChevronTexaco, Cono-coPhillips, ExxonMobil, and ShellChemical. The oil companies will domost anything to protect themselvesand their profits. The API’s involve-ment in these benzene studies raisesthe same concerns of the fox in thehenhouse as we’ve seen with thetobacco and pharmaceutical industries.Studies of the sort financed by the oilcompanies have to be more than alittle suspect. Source: Ft. Worth Star Telegram

DRUG MAKERS REAP BENEFITS OF TAXBREAK

Corporate America enjoys far toomany tax breaks under our current taxcode. While working men and womenare struggling to make ends meet, bigcorporations are able to avoid payingtheir fair share of taxes. A new taxbreak for corporations is allowing thebiggest American drug makers toreturn as much as $75 billion in profitsfrom international havens to the UnitedStates while paying a fraction of thenormal tax rate. The break was created


by the American Jobs Creation Act,signed into law by President Bush inOctober. It allows companies a one-year window to return foreign profitsto the United States at a 5.25% tax rate,compared with the standard 35% rate.While any company with profits inother countries can take advantage ofthe law, drug makers have been thebiggest beneficiaries.

Many corporations have used legalloopholes in the tax law to aggressivelyshelter their profits from United Statestaxes for years. The drug makers havetold the Internal Revenue Service foryears that their profits come mainlyfrom international sales. Consideringthat the prices of medicines are farhigher in the United States and almost60% of their sales take place inAmerica, I find that hard to swallow.The Wall Street Journal reported that“financial analysts and tax lawyers saythat the drug makers’ claim defiesreality and that their profits comemostly from sales in the United States.”Unfortunately, the IRS lacks theresources to challenge the companieseffectively. As a result, the six majorcompanies—Pfizer, Johnson &Johnson, Merck, Bristol-Myers Squibb,Wyeth, and Lilly—collectively pay afederal tax rate of less than 15% ontheir worldwide profits, with somecompanies paying much less, accord-ing to the Wall Street Journal report.

David Moskowitz, an analyst atFriedman, Billings, Ramsey, estimatedthat at least 60% of the drug industry’sworldwide profits come from theUnited States. Higher American drugprices more than make up for highermarketing costs here, he said. Otheranalysts estimate that as much as 75%of the industry’s worldwide profits aregenerated in the United States. MartinA. Sullivan, contributing editor of TaxNotes, a nonprofit journal that exam-ines tax issues, says companies canhide those profits from the IRS bymoving their drug manufacturing over-seas. Companies transfer drug patentsto their own foreign subsidiaries and

that allows them to avoid paying theirshare of taxes here. The subsidiarythen helps pay for research on thedrug. If the medicine is approved forsale in the United States, the subsidiarymanufactures the drug for a few centsa pill. The pills are then shipped to theUnited States, where they are sold to apharmacy or a wholesale company forseveral dollars each. But the parentcompany claims that almost all theprofit should go to the subsidiary, notto the parent in the United States. Thelaw will encourage drug makers tobecome even more aggressive aboutshifting American profits overseasbecause the companies will assumethat they can lobby Congress foranother tax holiday in a few years. Source: The Wall Street Journal

SWISS BIOTECH COMPANY INDICTED

Last month, a federal grand juryindicted four former top executives insales and marketing for Serono Labora-tories, Inc. The indictments were inconnection with a conspiracy to offerand pay kickbacks to doctors in theform of an all-expense-paid trip for thedoctors and their guests to attend amedical conference in France. It isalleged that this was in return for thedoctors writing prescriptions of a drugmanufactured and sold by thecompany. The biotech giant said that ithas set aside $725 million to settlefederal investigations including itsAID’s drug, Serostim. It was reportedthat the biotech giant was falling shortof its marketing and sales goals andneeded to “dig their way out” of thecompany’s fiscal crisis. Federal officialsallege that the indicted executivesordered regional directors of thecompany to target select doctors toinduce them to write more prescrip-tions related to a sales plan. The plancalled the “$6m-6 Day Plan,” requiredeach regional director to identity thehighest prescribing positions or“thought leaders” in their regions.

Those doctors were to be targeted withfinancial incentives in order to get therequired number of prescriptions toachieve the sales goal of $6 million in 6days. For obvious reasons drug com-panies sending doctors to France andpaying all of their expenses doesn’tmeet the “smell test.”Source: Forbes News

TENET NOTIFIED OF POSSIBLE SEC CIVILACTION

Tenet Healthcare Corp., in Dallas,Texas, was notified recently by theSecurities and Exchange Commission(SEC) that SEC investigators will recom-mend that a civil enforcement actionbe filed against the company, formerChief Executive Officer Jeffrey Bar-bakow, and five other former execu-tives. The SEC has been investigatingthe adequacy of Tenet’s financial dis-closures regarding its Medicare outlierpayments and managed-care stop-lossreimbursements for at least two years.Tenet disclosed the investigation inApril 2003. Tenet, Barbakow, and theother executives each received whatthe SEC calls a “Wells notice.” All of theformer executives had been high-ranking officers with Tenet. Source: Modern Healthcare

VI.CAMPAIGNFINANCE REFORM

MAJOR LOBBYING CAMPAIGN PAYS OFF

Under the guise of providing aid tovictims of asbestos-related illnesses, asmall group of companies has lobbiedfor and won relief from their liabilityworth tens of billions of dollars in theSenate’s asbestos trust fund bill,according to a new Public Citizenreport. Unfortunately, the companies’success in protecting their corporateinterests will sharply reduce the fundsunder the legislation that will be avail-


able to asbestos victims, the reportfinds. Meanwhile, some of the nation’slargest financial investment firms havespent millions of dollars in lobbyingand campaign contributions to positionthemselves to score big rewards shouldthe legislation pass. Joan Claybrook,president of Public Citizen observed:

The Senate legislation that beganas a good-faith effort to help thethousands of victims of asbestos hasturned into a carnival of greed bysome of America’s biggest corporateinterests.

It is extremely difficult to understandhow the victims in this legislative battlehave been short changed and thewrongdoers protected. There appearsto be no support by the public forwhat is being proposed in the Senate.This is a prime example of who runsthe Congress and it surely isn’t con-sumer groups.

The big winners in the legislation (S.852) include a handful of Fortune 500companies—Dow Chemical, Ford,General Electric, General Motors, Hon-eywell, Pfizer, and Viacom—and atleast 10 asbestos makers that have filedfor bankruptcy. An intense Capitol Hilllobbying campaign on behalf of theFortune 500 companies to win thefinancial concession has been spear-headed by a relatively unknown entitycalled the Asbestos Study Group (ASG),which refuses to make its full member-ship list public, Public Citizen found.

Sponsored by Senators Arlen Specter(R-PA) and Patrick Leahy (D-VT), S.852 would create a privately-funded,publicly-run $140 billion trust fund thatwould operate for 30 years to compen-sate hundreds of thousands of Ameri-can workers or their families who havesuffered serious injury or death fromasbestos-related illnesses. Under thebill, asbestos companies with largeexisting liabilities that are in Chapter 11bankruptcy would have those liabilitieserased, in favor of contributions to theproposed national asbestos trust fund.

But the value of contributions to thetrust fund would be substantially lessthan the existing liabilities, providingsignificant windfalls to the companiesinvolved. The Public Citizen reportfound that:

• The total contributions on behalf ofasbestos victims that would be paidby 10 large asbestos firms were theyto complete their bankruptcy pro-ceedings under current law will dropfrom an estimated $25.9 billion to$5.6 billion should S. 852 becomelaw. This represents a savings of$20.3 billion, or 78.5% expressed intoday’s dollars. On an individualbasis, asbestos companies wouldeffectively see their total paymentsover the life of the fund on behalf ofasbestos victims decline by marginsranging from 40.5% to 100%.

• At least eight Fortune 500 companiesare huge winners under S. 852because their annual asbestos pay-ments to the trust fund will becapped at $27.5 million per year for30 years no matter how large theirrevenues or how many asbestoscases they have pending againstthem. In current dollars this meansthat their maximum liability is $378.5million. By comparison, Dow Chemi-cal otherwise projects its future liabil-ity at between $1.6 billion and $2.2billion over the next 15 years from2004 to 2019. Similarly, Honeywellestimates its future liability at $2.75billion from 2004 through 2018. Butthe company would pay only 13.8%of that amount—$378.5 million—over the next 30 years.

• To get the best bill possible, theFortune 500 companies created theAsbestos Study Group, a relativelyunknown coalition. Public Citizenestimates that the ASG, six Tier 1bankrupt asbestos companies, andseven Tier 2 Fortune 500 companiesspent a combined $144.5 million lob-bying Congress from 2003 through2004, the latest figures available. The

amount spent by ASG and the Tier 1companies from 2003 to 2004—$27.9million—was probably almost exclu-sively to pass asbestos bailout legisla-tion.

• Goldman Sachs, a leading Wall Streetinvestment banking firm, has beenproviding critical advice to the ASGand the Senate Judiciary Committeesince at least 2003 regarding twocrucial matters: the feasibility offinancing the proposed trust fund tocompensate victims and at what levelit should be funded. The firm’s roleappears to be highly unusual—if notinappropriate—for an investmentcompany with a big stake in the leg-islation’s outcome via significantholdings in Fortune 500 firms whosestock prices should appreciate con-siderably under S. 852.

• ASG and the 13 companiesemployed 168 individual lobbyistsduring 2003 and 2004 to work onasbestos legislation. Of the 168,Public Citizen counts 94—or 57.7%—who walked through the revolvingdoor from government service to theprivate sector, including eight formermembers of Congress.

Public Citizen has done an outstand-ing job of alerting the American peopleon what is going on. Frank Clemente,director of Public Citizen’s CongressWatch, stated:

The stakes for getting the compen-sation they need and deserve couldnot be higher for the hundreds ofthousands of American workersand their families who have beenstricken by diseases caused byasbestos. The Senate should notallow this legislation to become afeeding frenzy for companies thatfrom all indications care moreabout their bottom lines than forthe lives of the Americans theirproducts harmed and for whomthis legislation was intended.

Source: Public Citizen


ON THE STATE LEVEL

The Alabama Legislature has failedmiserably to strengthen the very weakcampaign finance laws in our state. Allattempts have largely been stalled andultimately killed by a small group ofSenators. The revelations exposing theChristian Coalition may prompt theGovernor, Lt. Governor and key Leg-islative leaders to make campaignfinance reform and the control of thepowerful special interest lobby groupsa priority. If that were to happen, manyof our state’s problems—that requirelegislation—could be solved. A goodtime to start would be the up-comingspecial session. If you agree contactGovernor Bob Riley and urge him toinclude reform in his call.

VII.CONGRESSIONALUPDATE

FEDERAL LEGISLATION UPDATE

The Bush Administration, aided byan army of Big-Business lobbyists, con-tinues to push its pro-business andanti-consumer agenda in Congress. Sofar, they have been able to successfullypass two pieces of legislation that willadversely affect consumers nationwide.The class action bill and the bank-ruptcy bill both passed earlier this year.Neither of these two bills does any-thing to benefit or assist consumers,and each is heavily weighted in favorof the President’s pro-business support-ers. I seriously doubt if we really knowwhat all was contained in these twomeasures, but what we do know isn’tgood for ordinary folks. There are cur-rently three additional bills in Congressthat bear watching at this time.

The Asbestos Bill

The first bill is the Asbestos Bill,which is unique even for Washington-

style politics. Many consumer-friendlyorganizations are in agreement with theinsurance industry and many of thecompanies currently being sued forasbestos liability that this bill is notgood for anyone. On the surface, itwould appear that it would help solvethe asbestos litigation problem. Butmany of the critics point out that thebill fails to address some critical issues.For example, who would fund themoney to be set aside to pay claims?What would happen if the availablefunds weren’t enough? How arepending claims to be addressed?

Energy Bill

Another bill that is currently beingconsidered in the U.S. Senate is the so-called Energy Bill. This legislation ismost troubling because it providesimmunity for MTBE litigation. As manyof you know, MTBE litigation stemsfrom the leakage of the fuel additiveMethyl Tertiary Butyl Ether (MTBE) fromindustrial underground storage tanksthat affects the groundwater supplies inmore than 1,800 communities and in atleast 29 states. Recent reports publishedby two national environmental organi-zations, the Sierra Club and the Environ-mental Working Group, make thisinformation available to the public andto members of Congress. According tothe Sierra Club report, the Federal Gov-ernment registered 130,000 leakingunderground storage tanks, nationwidethat may affect drinking water.

Environmental advocacy groups haveclaimed that the liability protectionafforded in the Energy Bill is anotherblatant handout that allows large gascorporations to escape MTBE clean-upcosts. The total cost for clean-up is esti-mated to reach approximately $29billion dollars. This immunity provisionis obviously an attempt on the part ofthe Bush Administration to repaybuddies in the oil and gas industrywho have helped President Bush getelected twice. There is currently a great

deal of bipartisan opposition to thisproposed immunity provision. It isclear that this portion of the Energy Billwould be very detrimental to the envi-ronment. When the public realizes thatthis granting of immunity to theresponsible companies will shift thecosts to the taxpayers, there will be lotsof political explaining to do.

The Highway Transportation Bill

Another bill in Congress, the HighwayTransportation Bill, seeks to provide yetmore immunity to big businesses. Alittle-known part of this bill would giverental car businesses immunity fromlawsuits for leasing vehicles to peoplewho are not fit to drive an automobile.In fact, this proposed immunity couldgive total immunity to a rental carservice that leased a car to a driver whodid not have a valid driver’s license or avalid insurance policy. Clearly, this billwould benefit the rental car industryand would hurt persons who areinvolved in a motor vehicle accidentwith an unsafe driver who would beuninsured in a rental vehicle.

Congress Needs To Get To Work ForPeople And Not Special Interests

It has been said by many observersthat Congress spends more time pro-viding immunity from lawsuits to thebusinesses that financially support theirelections, than working on such prob-lems as the Iraq situation and the eco-nomic woes that continue to plagueour country. I believe the three billslisted above are clear examples of theBush Administration not being focusedon the thing that really affect hard-working Americans. Unfortunately, thisAdministration has done very little forconsumers and actually has done muchto hurt them. I have been accused ofbeing too harsh in my criticism of Pres-ident Bush’s programs. My answer tothat is simply this: when he starts wor-rying about “little folks” and quits pro-


tecting “big folks” at every turn, I won’thave much to criticize.

THE DRUG COMPANIES USE THEIR POLITICALCLOUT

A recent article in the USA Today byJim Drinkard should have gotten theattention of American citizens who arehaving a hard time paying for their pre-scription drugs or who find themselvesin any type conflict with a drugcompany. The article started with arevelation of how Senator Bill Fristused a Gulfstream corporate jet ownedby Schering-Plough in a number ofpolitical stops last November. Thepowerful Senate leader used the jet fora “victory tour” after the 2004 electionswith stops in Florida, Georgia, NorthCarolina, and South Carolina. Thearticle made this astute observation:

The drug company’s friendlygesture toward the Senate’s mostpowerful member illustrates thepolitical clout of the pharmaceuti-cal industry. It will be needed inthe months ahead as the industryfaces the threat of increasedfederal regulation, brought on bymounting concerns about thesafety of the nation’s drug supply.

According to the USA Today, thedrug companies’ corporate jets havebeen made available to other powerfullawmakers, including the Speaker ofthe House of Representatives. HouseSpeaker Dennis Hastert (R-IL) took atleast four trips to GOP fundraisingevents in the past two years aboardPfizer’s Gulfstream. Drug companiesand their officials contributed at least$17 million to federal candidates in lastyear’s elections.

Since 1998, drug companies havespent $758 million on lobbying activi-ties in our nation’s capital –more thanany other industry. The industry has1,274 lobbyists in Washington—morethan two for every member of Con-gress. At least 18 members of Congress

received more than $100,000 apiece.The industry also liberally funds thinktanks and patient-advocacy groups thatdon’t bear its name but often take itsside. An example is the NationalPatient Advocate Foundation, whichreceives financial support from at least10 drug companies. Dr. David Grahamcan tell us about how the industryplays hardball. Dr. Graham, a FederalFood and Drug Administration scien-tist, got on the industry’s bad sidewhen he exposed how truly bad theindustry is. The industry is so powerfuland influential it believes drug compa-nies are above the law.

Our firm knows from experience thatthe pharmaceutical industry isextremely powerful and tries to runover folks who get in their way. Theyhave pretty much had their way inCongress and with the FDA. A recentGallup poll indicated that 81% of theAmerican people believe that the phar-maceutical companies have too muchinfluence on government and politics.Until Congress puts limitations on cam-paign spending, restricts lobbyingactivities, and beefs up the FDA, theAmerican people will continue to bevictimized by the drug industry.Source: USA Today

FEDERAL LEGISLATION WOULD HELP CURBCORRUPTION IN CONGRESS

Our firm routinely runs into expertwitnesses for defendants in product lia-bility cases that we handle against theautomobile and pharmaceutical indus-tries who in their past lives worked fora federal regulatory agency. It is signifi-cant that these “experts” just monthsbefore facing us in court had the dutyto regulate the very companies theynow are “helping” to avoid liability inproduct liability trials. In these cases,they are defending products that wecontend are defective and unreason-ably dangerous. A bill has been intro-duced in Congress that if passed wouldpromote legislation that would slow

the revolving door between federalofficials serving the public and servingspecial interests. Passage would alsobring much-needed sunshine to theinfluence-peddling business andprevent lobbyists from secretly fundingcongressional junkets. The legislation,introduced by Representatives MartyMeehan (D-MA) and Rahm Emanuel(D-IL), would help significantly curbcorruption in Congress.

The “Lobbying and Ethics Reform Actof 2005” proposes mainstream “good-government” reforms that close manyof the gaping loopholes in the nation’scurrent ethics rules and lobbying dis-closure system. These reforms are notthe property of any one party—just asthe problems they address are not par-ticular to any one party. In fact, bothparties have engaged in these unsavoryactivities. Whoever is the majorityseems to stake their own claim. Thereal fault lies in lax ethics rules, moni-tored by an even weaker disclosureand enforcement system. If enactedinto law, this desperately needed legis-lation would, among other things:

• Strengthen the revolving doorrestriction so members of Congresscould not make direct lobbying con-tacts for two years after leavingoffice, rather than the current one-year cooling off period.

• Enhance the disclosure systemfor lobbyists’ activities so that lob-byists have to reveal their contactswith senior government officials andthe amount they spend on grassrootslobbying, and so that the public hasfull and timely access to lobbyinginformation on the Internet.

• Ensure that congressional traveljunkets are not organized or paidfor by clients of lobbyists, aresubject to reasonable spending limits,and are fully disclosed to the public.

The members of Congress shouldestablish an independent ethics agency.Congress needs to move beyond the


bipartisan bickering and partisan pos-turing over ethics issues. It is abun-dantly clear that self-policing too oftenresults in self-preservation. An inde-pendent ethics agency would removethe conflicts of interest that riddle thecurrent system and would reassure thepublic that the highest ethical standardsare being upheld. I believe that mostAmerican citizens badly want to see allof the partisan political posturing puton the back burner. They expect publicofficials to be honest and hard-workingand to play by the rules. There appearto be some in Washington who reallyneed a good “dose of ethics!”Source: Public Citizen

VIII.PRODUCTLIABILITY UPDATE

NHTSA’S CRASH TEST PROGRAM ISOUT OF DATE

A Government Accountability Office(GAO) report underscores what manyof us already knew—he government’sinnovative crash test program is out ofdate and needs to be revamped andupdated. The New Car AssessmentProgram (NCAP) is run by the NationalHighway Traffic Safety Administration(NHTSA) and was created 25 years ago.In the 1980s the program was consid-ered a huge advance in highway safety.As highlighted in the report, the testsnow fall short in the following ways:

• They don’t consider the propensityof vehicle roofs to crush duringrollover crashes or test vehicle com-patibility.

• The tests use only male crash testdummies, omitting women and chil-dren from test results.

• They don’t test how vehicles respondwhen hitting pedestrians or when thecorner of a vehicle is involved in acrash.

• They don’t take into account thehuge increase in SUVs on the high-ways.

By using a higher and heavier barrierfor crash tests, rather than one that isthe height of a compact vehicle, thetest could accomplish its goals. Insome cases, the four- and five-star testratings mislead consumers. This iscrucial, considering that preliminaryfigures released last week showed thatSUV fatalities increased 4.9% between2003 and 2004. Other countries aremore thorough in analyzing how vehi-cles perform in crash tests, taking intoaccount not only measured test results,but also deadly vehicle intrusion. Thereis no reason we can’t do the samethings in the U.S. Another problem isthat the NCAP ratings are not availableto consumers on a timely basis. By thetime the information for a particularmodel year is made available by theDOT, millions of the tested vehicleshave been sold and are in use.

One way to improve the programwould be to beef up the tests andrequire the auto industry to conductand certify them before any newvehicle is sold. Manufacturers alreadyconduct these tests, but keep theresults secret. NHTSA should thencheck the results through randomtesting. And this information should beavailable to consumers on the windowsticker at the point of sale. That issomething that should be mandated byCongress. Finally, the star system couldbe more meaningful to consumersusing letters “A” through “F.” In anyevent, the crash test program must bebrought up to date without delay. It ismost important for everyone whotravels on highways in the U.S.Source: Public Citizen

BEWARE OF SEAT BELT DANGER

For many years car companies haveknown that two-point seat belts, alsoknown as “lap belts,” may be danger-ous in certain types of crashes. The

original seat belt designs for automo-biles included nothing but a lap seatbelt. As automobiles advanced, thethree-point belt, or lap/shoulder belt,became the seat belt of choice. Foryears, however, car manufacturersretained the lap belt only in the rearseats of passenger cars and in the frontcenter seat position of certain vehicles.Even today, some vehicles are manu-factured with lap belts in the centerseat positions. If not properly designed,lap belts may cause serious or evenfatal injuries in frontal crashes.

In a frontal crash, the person in a lapbelt may “jackknife” over the lap belt.The lap belt may ride up over thepelvic bone. This is called “submarin-ing”. When this happens, the belt maysqueeze through the soft intestinaltissue of the abdomen, exerting asudden force on the spine. As a result,the occupant is exposed to the poten-tial of serious spinal and intestinalinjury. In addition, the upper torso,including the head and neck, isexposed to a danger as the body jack-knives over the lap belt. Rear centerseated occupants sometimes strike theirheads on the center console or on therear of the front seatback, causing neckfractures and/or brain damage. Lapbelts are responsible for many paralyz-ing injuries, instances of brain damage,and deaths in crashes that would notbe considered serious for personsusing three-point belts.

The knowledge of this danger goesback for decades. Car companies origi-nally resisted putting lap/shoulder beltsin the rear seats, even though numer-ous studies showed that lap beltinjuries were occurring frequently.Finally, the National Highway TrafficSafety Administration (NHTSA) passeda rule on December 11, 1989, mandat-ing lap/shoulder belts in the rear seatsof vehicles. But the rule exempted thecenter seat position. Car manufacturershave justified not placing a lap/shoul-der belt in the center seat position byarguing that the center seat is seldomused. The primary motivation is cost,


but it is hard to justify to someone whois facing a lifetime in a wheelchair thatthe car company needed to save a fewdollars. The technology for puttinglap/shoulder belts in the center seatposition has been available for manyyears, even in cars that have fold-downrear seats. There is simply no economicjustification for not having lap/shoulderharnesses in every seating position inevery vehicle.

In 1984 the National TransportationSafety Board (NTSB) performed a studyon frontal crashes. The NTSB madeseveral conclusions, including the fol-lowing:

• In frontal collisions, persons usinglap-only belts may not be adequatelyprotected against injury and maysustain additional injuries, inducedby the lap belt itself.

• Lap belts may induce injury, rangingin severity from minor to fatal, to thehead; spine; abdomen; intra-abdomi-nal viscera, connecting tissue, andblood vessels; and intra-thoracicviscera, connecting tissue, and bloodvessels. Such injuries may occursingly or in combination.

• The relative inadequacy of lap beltsto provide crash protection, and theirability to induce serious injury, havebeen known for many years toresearchers, some parts of themedical profession, and to othersconcerned with occupant crash pro-tection.

• Lap/shoulder belts provide superiorcrash protection to that of lap beltsalone, and present a significantlylesser risk of induced injury; suchsystems appear to work even forchildren, and they can be used withchild safety seats and booster seats.

In another report issued by theNational Highway Traffic Safety Admin-istration in March of 1987, the federalagency estimated that if 70% of all rearseat occupants wore their safety beltsin passenger cars, lap/shoulder belts

could prevent 76 fatalities and 2,430moderate to critical injuries annually. A70% usage rate in light trucks andMPVs would prevent 8 fatalities and280 moderate to critical injuries annu-ally. In that same report, the NHTSAestimated that as of 1987, installinglap/shoulder belts in the rear outboardseats of passenger cars would increasethe per vehicle cost by $12.00.Installing lap/shoulder belts in thecenter seating position would increasethe cost by an additional $20.00.

There are also ways of making a lapbelt safer, but some manufacturershave ignored the existing technology.As examples, vehicles can be designedwith “anti-submarining” seat pans,which will lessen the likelihood of thehips submarining under the belt in afrontal crash. It has also been knownfor years that if a lap belt is placed at aparticular angle, it is less likely to rideup over the pelvis and cause visceralinjuries. Retractors are available toassure adequate belt tension while inuse. These designs are used in some,but not all, current designs. Theaverage consumer has no way ofknowing whether the lap belt is thebest design available. Persons whomay be using a lap belt need to beinformed of the need for keeping thebelt low on the hips and sufficientlysnug. The best advice is to use thelap/shoulder harness unless there areno other options available. Hopefully,car manufacturers will one day beforced by the federal government torequire lap/shoulder harnesses in allseated positions in every vehicle.

FORD AND VOLVO IN CONFLICT OVERROOF DESIGN

The National Highway Traffic SafetyAdministration (NHTSA) has taken theunusual step of removing documentson vehicle roof design from a govern-ment website at the request of FordMotor Co. The material includes inter-nal reports from Ford and its Volvo sub-

sidiary that suggest the Swedishautomaker views sturdy roofs as animportant safety feature, a stance atodds with that of its parent company.NHTSA removed the documents from awebsite of public comments on pro-posed changes in the federal standardfor roof strength in passenger vehicles.Ford requested the material beremoved, saying that a court order in awrongful death case in Florida barredtheir release and that the disclosurewould cause “irreparable” harm byrevealing trade secrets. In a significantmove, the trial judge in the Florida caseentered an order on May 17th sealingthe documents, which will keep thepublic from seeing these important doc-uments. Another hearing was set on the“sealing” issue for later this month.

NHTSA had said it would reviewFord’s confidentiality claim and decidewhat to do with the papers. Thefederal regulatory agency is engaged inan effort to craft a tougher vehicle roofstrength standard. Ford and othermajor automakers are opposing anychanges, claiming that roof strengthhas little effect on occupant injuries inrollover accidents. This makes thetiming of NHTSA’s actions suspect. Theepisode highlights a sensitive issue forFord—difference in design approachbetween Ford and the Swedishautomaker that Ford acquired in 1999.

It is said that roof collapse in vehiclerollovers may cause or contribute to asmany as 6,900 serious to fatal injuriesper year. Safety advocates believe thecurrent roof crush standard, adopted in1971, was too weak then and is grosslyinadequate now given the popularityof top-heavy pickups and SUVs.NHTSA recently sent a draft of a pro-posed new roof standard to the Officeof Management and Budget, whichreviews major federal regulations. Todate the proposal has not been madepublic. The Ford and Volvo documentshad been posted for about 24 hours onthe NHTSA site when Ford requestedtheir removal. I suspect now that thedocuments have been sealed, NHTSA


will follow that lead and do asrequested by Ford.

The documents submitted to NHTSAcame from a lawsuit in Duval County,Florida, where they were exhibits in awrongful death case involving a FordExplorer. A Jacksonville jury on March18 ordered Ford to pay damages of$10.2 million to the husband of ClaireDuncan, 26, who died after her 2000Ford Explorer rolled and the roof col-lapsed. The Duncan family sought toprove with the documents that Fordskimped on safety and that its publicposition on roof strength was inconsis-tent with and thereby undercut byVolvo’s. Ford had produced the docu-ments under a protective order thatbarred them from publicly releasing thedocuments. After the trial the paperswere stored in court files. Ford filed amotion on April 22nd to enforce theprotective order. Court clerks hadmade copies of the documents for theDetroit News, which publicized someof the documents in an article in lateMarch. The documents include testdata suggesting that roofs on FordExplorers were made progressivelyweaker during the 1990s to the pointwhere they were barely more robustthan required by the federal standard.A Ford engineer had indicated in an e-mail in October 1999 that the Explorerroofs have a “less than desirable safetymargin. The Volvo documents reflectits concern about increasing roofstrength for the new Volvo XC90 SUV,along with improving seat belts to holdpassengers firmly in place in a rollover.The documents discussed the develop-ment of more advanced tests to seehow roofs actually perform inrollovers. “Improvements in this areawill increase the passengers’ rolloverprotection,” one Volvo report said.

The roof of the Volvo SUV is morethan twice as strong as required by thefederal standard, the Swedish companyhas previously said. Ford told NHTSAin a letter that the documents couldexpose trade secrets, such as “thestrategies by which new technological

advancements are introduced.” Volvo’ssafety philosophy, which is entirelycontrary to its parent (Ford), is aproblem for Ford. Automakers havelong contended that roof strength is oflittle consequence, because vehicleoccupants typically strike the roofwhen a vehicle flips over. According tothis argument, an injury will result fromthe force of a body pressing down onthe head and neck, whether or not thevehicle’s roof holds up. Safety advo-cates dispute that claim, and it’s veryclear that the automakers’ claim won’tstand up. This incident is a primeexample of why protective orders onsafety issues should be banned by leg-islation or by court rules. Hopefully,the Ford documents will eventually bereleased from the protective order bythe Florida court. The full light of dayneeds to shine on these documents. Source: Los Angeles Times

MORE FORDS HAVE SUSPECT SWITCH

In March, the National HighwayTraffic Safety Administration (NHTSA)began investigating 3.7 million Ford (F)pickups and SUVs because the cruise-control switch was linked to enginefires. Now we learn that these switchesare on at least 6 million additional Fordvehicles. There are seven additionalmodels, including the 1997-2002Explorer and the 2001-02 Escape, thathave these switches. Currently, NHTSAis monitoring reports of fires in thosevehicles. Clearly, the agency shouldexpand its investigation to include theadditional models. Models in additionto the Explorer and Escape, are: the1997-2002 Mercury Mountaineer, FordRanger, Econoline, Windstar, andExplorer Sport Trac. The NHTSAinquiry is focused on a cruise-controldeactivation switch that can overheat.That switch has been linked to enginefires on Ford F-150 pickups and FordExpedition and Lincoln NavigatorSUVs. NHTSA has been investigating atleast 218 reports of fires in 3.7 million

1995-99 and 2001-02 F-150s and 1997-99 and 2001-02 Expeditions and Navi-gators. Interestingly, all of these firesoccurred while the vehicles wereparked. Thus far, no injuries or deathshave been reported by Ford. But therehave been reports of homes, garages,and sheds catching fire, with the originbeing a vehicle fire.

Ford recalled 750,000 2000 model-year F-150s, Expeditions, and Naviga-tors in January. The cruise-controlswitch, made by Texas Instruments,was discontinued midway through the2002 model year. Ford reports that itwas replaced with one made by Hi-Stat. Texas Instruments denies thatthere is a safety defect. A Fordspokesperson told the USA Today thatthe change was made before Fordreceived reports of increased inci-dences of fires in the pickups andSUVs. But NHTSA records reveal thatthe company had already receivedcomplaints of engine compartmentfires in 1992-97 Lincoln Town Cars,Ford Crown Victorias, and MercuryGrand Marquis models that had analmost identical switch. Ford recalledthe 1992 and 1993 models in 1999.Some vehicles with the switch seemmore prone to catching fire. Report-edly, Ford is looking into “dozens offactors,” including whether the risk offire varies depending on the switch’slocation in a particular vehicle and itsproximity to such components as themaster cylinder. With all theirresources, Ford should be able to comeup with the cause and then remedy it.In any event, NHTSA should expand itscurrent investigation.Source: USA Today

LANDMARK GUN SAFETY SETTLEMENT WITHSMITH & WESSON

Trial Lawyers for Public Justice hasreached a landmark settlement of acase against Smith & Wesson for defec-tively designing and failing to child-proof a nine-millimeter semiautomatic


pistol. This is the first time ever a gunmaker has paid to settle a claim forfailing to childproof a gun. An 8-year-old child was accidentally shot in theface by another boy. The children wereplaying with what they believed to bean “unloaded gun.”

The suit was filed in a Pennsylvaniastate court in Philadelphia, seekingdamages for the injured child. The childsuffered serious injuries including sig-nificant brain damage, speech andhearing loss, and left-side facial paraly-sis. The terms of the settlement are con-fidential. The suit charged that theshooting would never have taken placeif the gun, a Smith & Wesson Model915, had been properly designed.Among other things, the suit alleged—and the evidence at trial showed—thatthe Model 915 had a faulty safetydevice, lacked an indicator that wouldhave shown it was loaded, wasn’t child-proofed in any way, and came withoutinstructions warning parents of thismodel’s specific dangers for children.

The settlement demonstrates that gunmanufacturers—like the manufacturersof all potentially dangerous products—can and should be held accountable ifthey don’t act responsibly. Smith &Wesson knew that accidental shootingslike this one were taking place allacross America. But the company neg-lected to make the simple, inexpensivedesign fixes that would have preventedthe child’s injuries—and that, if adoptedby others, could spare the lives of thou-sands of injury victims nationwide.According to a U.S. General AccountingOffice report, about one in every threeaccidental shooting deaths in the U.S.could be prevented with simple child-proofing devices.Source: Trial Lawyers For Public Justice

ELECTRONIC STABILITY CONTROLSAVES LIVES

For the last 50 years auto safetyadvocates have concentrated most oftheir efforts on making auto accidents

more survivable for vehicle occupants.As a result, we have such safetyadvances as airbags, auto body “crushzones,” and the greatest safety advanceof the era, the simple seat belt. Whileno one can doubt the efficacy of theseadvances, there is another area ofresearch and development that prom-ises equally startling advances to thecause of safety, and it revolves aroundvehicle systems that help keep acci-dents from occurring in the first place.Auto engineers call it “active safety,”while referring to things like airbags as“passive safety systems.” The ultimateactive safety system would be an acci-dent-avoidance system—technologythat now seems like something from aJules Verne science fiction novel. Actu-ally, though, this type system is comingcloser and closer to reality. Such asystem would have the ability to taketotal control of the vehicle from thedriver in critically dangerous condi-tions, slowing the engine, applying thebrakes, and even steering the vehicleout of danger.

We’re not there yet, but current tech-nology includes a system that comesclose. Today’s Electronic StabilityControl (or ESC) doesn’t take oversteering control from the driver, but itdoes enhance the driver’s ability to stayin control of his or her car and steer itout of danger. By combining the tech-nologies of anti-lock brakes, tractioncontrol, and enhanced lateral stability,ESC detects when a driver is about tolose control of a vehicle and automati-cally intervenes to provide stability andhelp the driver stay on course. In arecent study, ESC was shown toincrease a driver’s control over his orher vehicle by 34%, making the tech-nology a milestone on the path to safercars. Available in many new cars, thistechnology helps drivers maintaincontrol of their vehicle during extremesteering maneuvers by keeping thevehicle headed in the driver’s intendeddirection, even when the vehicle nearsor exceeds the limits of road traction.When drivers attempt an extreme

maneuver (for example, to avoid acrash or because a curve’s severity hasbeen misjudged), they may experienceunfamiliar vehicle handling characteris-tics as the vehicle nears the limits ofroad traction. The result is a loss ofcontrol. This loss of control usuallyresults in either the rear of the vehicle“spinning out,” or the front of thevehicle “plowing out.”

A professional driver, with sufficientroad traction, could maintain control inan extreme maneuver by using varioustechniques, such as countersteering(momentarily turning away from theintended direction). It would beunlikely, however, for an averagedriver to properly apply countersteer-ing techniques in a panic situation toregain vehicle control. ESC uses auto-matic braking of individual wheels toprevent the heading from changing tooquickly (spinning out) or not quicklyenough (plowing out). ESC cannotincrease the available traction, but doesmaximize the possibility of keeping thevehicle under control and on the roadduring extreme maneuvers by usingthe driver’s natural reaction of steeringin the intended direction. ESC happensso quickly that drivers do not perceivethe need for steering corrections. Ifdrivers do brake because the curve ismore or less sharp than anticipated, thesystem is still capable of generatinguneven braking if necessary to correctthe heading.

ESC systems exist under many tradenames, including Vehicle StabilityControl (VSC), Vehicle DynamicControl (VDC), Electronic StabilityProgram (ESP), and Vehicle StabilityEnhancement (VSE). While loss ofcontrol can lead to various types ofcrashes, rollovers are among the dead-liest. Rollovers are dangerous incidentsand have a higher fatality rate thanother kinds of crashes. Of the nearly 11million passenger car, SUV, pickup,and van crashes in 2002, only 3%involved a rollover. However, rolloversaccounted for nearly 33% of all deathsfrom passenger vehicle crashes. In


2002 alone, more than 10,000 peopledied in rollover crashes. SUVs aremuch more likely to experience an“on-road” rollover as a result of anemergency avoidance maneuver thanare passenger cars.

It’s no wonder that results of aNational Highway Traffic Safety Admin-istration study released in Septembershow that cars with ESC were involvedin 30% fewer fatal single-vehiclecrashes than those without. Astonish-ingly, SUVs with ESC were involved in63% fewer fatal single-vehicle crashes.An Insurance Institute for HighwaySafety (IIHS) study released in October2004 found that cars and SUVs withESC were involved in 56% fewer fatalsingle-vehicle crashes than comparablemodels without ESC. The IIHS esti-mates that ESC could save some 7,000lives annually if all vehicles on U.S.roads had the feature.

Early ESC introductions were limitedto luxury and sport cars. BMW, Mer-cedes, and Toyota all introduced carswith ESC systems in 1995. In overseasmarkets, Toyota installed ESC onsedans in 1995. Mitsubishi followed in1996, and Nissan and Honda in 1997.Daihatsu, Subaru, Mazda, Hyundai, andSuzuki all added ESC in 1998 and 1999models. One has to wonder why ESCwas not added to high risk SUVs first.This question will haunt vehicle manu-facturers as they face litigation relatedto loss of control and rollover crashesinvolving SUVs and trucks. Theautomakers want us to believe ESC is anew scientific break-through. However,today’s ESC technology varies little fromthe systems first introduced in 1995 byBMW, Mercedes, and Toyota. Theautomakers have no excuse for nothaving made ESC standard equipmenton all SUVs when ESC was first intro-duced in the mid-1990s. If ESC is avail-able on vehicles you’re considering,order it. If you’re considering two oth-erwise closely matched vehicles—espe-cially SUVs—opt for the one with ESC.Don’t let a salesperson talk you out ofESC. If necessary, special order it.

SURVIVAL ODDS IMPROVE IN CAR-SUVCRASHES

A new study by the Insurance Insti-tute for Highway Safety (IIHS), whichis the research arm of auto insurers,appears to indicate that cars are doinga better job of protecting occupants incrashes with sport-utility vehicles andpickup trucks. In cars that collided withmidweight SUVs, the death rate fell39%—to 42 deaths per million regis-tered SUVs in 2000 to 2003, comparedwith 69 deaths per million registeredSUVs a decade earlier. The death ratefell even more in collisions involvingheavier SUVs—to 49 deaths per millionregistered SUVs from 86 a decadeearlier. IIHS specifically looked at thedifferences in height and weight ofvehicles and how that mismatch affectsdeath rates in crashes. The Institutefound that, while incompatibility is stillan issue, it’s less of a problem than itwas a decade ago. Incompatibility—theconcept that people in cars are more atrisk in collisions with SUVs and trucksbecause those vehicles are bigger—hasbeen a focus of recent efforts to makevehicles safer. That includes themillion-plus dollars the Institute hasput into a crash-test program thatmimics an SUV slamming into the sidesof other vehicles. The federal govern-ment says this is a top auto-safety pri-ority. I hope that is true, because of theterrific numbers of SUVs now in useand the affection the driving public hasfor these vehicles.

Automakers have agreed to makevoluntary changes to vehicles toaddress the mismatch issue. My experi-ence with voluntary compliance onsafety issues by the auto industry,however, is that it simply doesn’t work.The Institute points to some basicsafety measures to explain theimprovement over the past decade:better vehicle designs; improved seat-belt use; and half of all registered carsnow equipped with driver airbags,compared with 3% in 1990. SUVs havealso changed during that time period,

going from heavier, more aggressivetruck underbodies to SUVs built on carframes that inflict less harm in a crash.While cars have gotten safer in crasheswith SUVs, the safety of the SUVs haschanged very little, if at all, over thesame time period. In crashes with cars,the death rates for people in both SUVsand pickup trucks generally improvedonly slightly in most weight categories.The death rates were slightly worse forthe lightest and heaviest SUVs. Still, thedeath rates for SUV occupants are sub-stantially lower than for car occupantswhen the two vehicles collide. As theSUVs get heavier, they get safer fortheir own occupants, but deadlier forthe cars involved in the crash. It shouldbe noted that this study looked at onlytwo-vehicle crashes. Thus theincreased rollover risk of SUVs would-n’t be included, and nothing containedhere should give anybody the idea thatSUVs are safe. The rollover situation isa totally different safety risk and onethat is still a major problem.

Death rates are 59% higher for caroccupants than SUV occupants incrashes involving the lightest SUVS.But in the heaviest SUVs, the cardeath rates are nine times as high asthose of SUV occupants. Death rateswere 50% higher for occupants of acar that collided with an SUV, than foroccupants of the same car when it col-lided with a four-door car of the sameweight as the SUV. The study lookedat deaths in 2000 to 2003 in modelyear 1999 to 2002 vehicles comparedwith 1990 to 1993 deaths in 1989-1992model-year vehicles. SUVs clearlypresent a major problem for car occu-pants in collisions between any sizeSUV and a passenger car. In anyevent, Institute President Brian O’Neillsays that he is encouraged by theimprovements referred to above.Source: The Wall Street Journal


IX.MASS TORTSUPDATE

OUR CLAY COUNTY CASE CONTINUED

Our Vioxx case, scheduled to betried in Clay County, Alabama, lastmonth, was continued and will berescheduled for a trial at a later date.Both sides agreed to the postpone-ment, which was subsequently orderedby Judge John Rochester. While itwould have been good to be the firstlawyers to try a Vioxx case, we felt itwas in our client’s interest to try thecase at a later date. We fully intend totry this case and believe it will result ina substantial verdict against Merck forthe widow of Brad Rogers. However,the additional time will allow us tocomplete expert discovery and gothrough about 2 million new docu-ments that Merck is being ordered toturn over to us. Previously, we hadreviewed over 5 million Merck docu-ments and during that lengthy processfound a number of documents that areextremely bad news for Merck. Muchof what we have in our possession issubject to protective order, however,and can’t be shown to the public. Ihope the court will remove the protec-tive order at an early date so that folkscan see how truly bad Merck has been.We expect the Rogers case to berescheduled for a trial date very soonand hope to try the case around thefirst of next year.

TENS OF THOUSANDS OF CASES SEENOVER VIOXX

U.S. District Court Judge EldonFallon, the federal judge who hascontrol over the federal Vioxx cases,told lawyers who attended a monthlystatus conference there could ulti-mately be up to 100,000 cases filedagainst Merck & Co. So far, there havebeen over 2,000 cases filed against thedrug maker. Analysts have estimated

that Merck’s potential liability couldreach $18 billion. As previouslyreported, all of the pretrial issues forfederal cases are being handled byJudge Fallon. Lawyers from both sideswere in court in New Orleans on May23rd for the status conference. I havebeen impressed with how organizedJudge Fallon and his staff are, and thatwill assist greatly as this phase of theVioxx litigation progresses. There is agreat deal of work to do and both sideshave recognized that to be the case.Our firm is currently evaluating over10,000 potential cases and will likelyfile a good number of them. We arebeing contacted by clients and referrallawyers on a daily basis. Source: Associated Press

MERCK SHAREHOLDERS CRITICIZEEXECUTIVES AND THE AFTERMATH

Merck shareholders don’t appear tobe very happy with the performance ofthe giant drug company’s bosses. A callfor new top management at thecompany was expressed at Merck’smost recent annual meeting. About 900shareholders gathered for that meeting,which featured some lively debate,leaving no doubt that Merck is facing arocky road. Not surprising was thestrong criticism over the company’shandling of the Vioxx problems. Infact, the more we learn about Merck,the worse things look for the company.When the shareholders get the com-plete picture, they will really be upset.In any event, the company’s stockhold-ers seem to be greatly concerned withwhat they have learned so far. It isapparent that the bosses at Merck havelots of answering to do both to theirstockholders and to the consumingpublic.

Shortly after the annual meeting,Merck shocked the nation when its bigboss stepped down. Richard Clarkreplaced CEO Raymond Gilmartin,who had been under the gun, as thenew boss at Merck. Interestingly, the

company chose an insider without abackground in medicine at a timewhen observers believe that thecompany desperately needs to focuson developing new drugs. Based onwhat I have learned about the newCEO, Clark is certainly no master ofdrug research or product development.Instead, he has spent his 33 years atMerck concentrating on such areas asmanufacturing and information tech-nology. The fact that Gilmartin cut andran with the company in turmoil could-n’t be good news for Merck. It couldbe just a coincidence that Gilmartin,who made $38 million last year,resigned unexpectedly as the congres-sional hearings got underway concern-ing the questionable marketing tacticsof Vioxx. On the other hand, however,it could be that some of the mattersdiscussed at the hearings played a rolein the departure.

The public has started to questionhow companies manage to gain regula-tory approval of drugs like Vioxx andthen turn them into wildly profitableblockbusters in such a short span.People are also finding out about theindustry’s incredible influence overdrug development, approval, and evenconsumption. Part of the problem isthat we have a system of regulationthat allows the drug companies:

• to design the drug trials;

• select the subjects for the study;

• maintain and interpret the data fromthe trials;

• select which parts of the studies getpublished;

• choose who will become the review-ers in the prestigious medical jour-nals; and

• pick “key opinion leaders,” whomthey pay big bucks to promote thedrugs.

How many industries have such agreat arrangement—with so little regu-lation? The public is finally beginning


to question how the drug companiesand FDA operate. What they are learn-ing can’t be very reassuring about thesafety of prescription drugs.

The recent congressional committeehearings revealed to the public infor-mation that we have had access to formonths. It is now becoming knownthat Merck had gone to great lengths topromote a drug it knew would causeheart attacks and strokes. Merck misledthe FDA, withheld known safety risksfrom the medical community, and actu-ally deliberately lied to the publicabout Vioxx’s safety. Merck usedproject code-names such as “Offense”and “XXceleration” to train its salesrepresentatives on how to deflectdoctors’ questions about the safety ofVioxx. A 2001 Merck memo stated, “Donot initiate discussions” on a study thatraised cardiovascular safety concerns ofVioxx. Other training materials forMerck’s sales representatives termedaddressing physicians’ safety concernsas “obstacle handling.” It is quite clearbased on our discovery efforts thatMerck lied to the FDA, the medicalcommunity, and the public about thesafety concerns over the drug. Repre-sentative Henry Waxman (D-CA) wasright on track when he observed:

When it comes to the one thingdoctors most needed to know aboutVioxx—its health risks—Merck’sanswer seems to be disinformationand censorship.

During the hearings, RepresentativeWaxman focused on training and activ-ities of the sales representatives,arguing, “the goal was sales, not educa-tion.” Dr. Michael Wilkes, vice dean formedical education at the University ofCalifornia-Davis, agreed and made thisdisturbing comment: “Doctors don’tread the medical literature, they oftenrely on the salesman they meet in theiroffice.” We have known for monthsthat Merck was guilty of misleading themedical community. We simply didn’trealize how easy the task was to

accomplish. When doctors asked aboutVioxx safety concerns associated withthe heart, Merck sales representativeswere told to provide a “cardiovascularcard” with data suggesting that Vioxxcould be eight to eleven times saferthan other anti-inflammatory drugs.FDA officials have said that comparisonwas clearly inappropriate. In fact, thestatement was totally false and Merckhad to know it. In fact, there is evenstronger evidence that will eventuallycome out about how Merck deliber-ately misled doctors and the FDA andhow the public softened as a result.

Clearly, Merck withheld informationfrom doctors and misled them aboutthe health risks of Vioxx after researchlinked the pain reliever to increasedheart attack risks over five years ago.The committee hearing provided aninside look at how Merck trained its3,000-person sales force to persuadedoctors to prescribe Vioxx and otherMerck products. When concerns aboutVioxx’s safety arose, Merck used thishighly trained force to present a mis-leading picture to physicians about thedrug’s cardiovascular risks. The reportprepared for the committee said thedocuments show Merck instructed itssale force not to address negativeresearch findings in dealings withdoctors, but to “emphasize outdatedand misleading data that indicatedVioxx was safer than alternatives.” Aspointed out above, Merck’s own docu-ments are extremely damaging on theVioxx issue.

Representative Tom Davis (R-VA), thechairman of the committee, said theinquiry raises serious questions aboutMerck’s conduct and candor regardingVioxx. All drug companies have anobligation to convey truthful informa-tion that is up to date concerning drugsput on the market. Documents in ourpossession paint a grim picture forMerck concerning its marketing tactics.This company has to be greatly con-cerned since both Congress and theFDA have to be hearing from peopleon this issue.

Without a doubt, Merck knew thatthere were serious “cardiovascularobstacles” relating to Vioxx sales. Thecommittee staff report said that aftereach negative development regardingVioxx, Merck sent bulletins or specialmessages to its salespersons “directingthem to use highly questionable infor-mation to assuage any physician con-cerns.” The committee said thedocuments show:

• After a company study in March2000, known as VIGOR, reportedincreased heart attack risks, Merckdirected its sales force to show physi-cians a “cardiovascular card” thatmade it appear Vioxx could be eightto 11 times safer than other anti-inflammatory drugs. The cardomitted any reference to VIGOR andwas based on data the FDA consid-ered to be inappropriate for a safetyanalysis.

• After an FDA advisory committeeagreed in a 2001 vote that physiciansshould be informed of the risksfound in the VIGOR study, Mercksent a bulletin to its sales force thatadvised: “Do not initiate discussionsof the FDA Arthritis Committee ... orthe results of the ... VIGOR study.” Ifphysicians asked about the study,Merck representatives were told torespond, “I cannot discuss the studywith you.”

• After the New York Times reportedon the cardiovascular danger ofVioxx in May 2001, Merck instructedits field staff to tell physicians thatpatients on other anti- inflammatorymedications were eight times morelikely to die from cardiovascularcauses than patients on Vioxx.

• After extensive negotiations with theFDA, Merck agreed to a label changefor Vioxx in April 2002 that men-tioned the cardiovascular risks foundin the VIGOR study, but it included astatement that the significance of thefindings was “unknown.” The com-


mittee said Merck then instructed itssales force to emphasize the uncer-tainty of the VIGOR study to counterphysician’s concerns.

Merck also issued news releases tothe media that contained false state-ments relating to the safety of Vioxx.

The public has now had a closelook—for the first time—at the shock-ing world of drug marketing. Sales rep-resentatives for Merck were offered$2,000 bonuses for meeting sales goals.They worked in campaigns with code-names to try to boost sales even as reg-ulators were about to increase warningson the drug’s label. “Don’t bring up theheart risks,” warns a February 9, 2001,internal Merck memo. And whendoctors asked about those risks, theMerck sales force was instructed toactually lie to the doctors concerningthe safety of Vioxx. Merck had a $2.5billion market for Vioxx by 2003 andthat really gives the reason for Merck’sactions. At that time the company knewabout the problems with heart attacksand strokes. Unfortunately, the bossesat Merck ignored the bad informationand kept Vioxx on the market. Source: Wall Street Journal, USA Today and Associ-ated Press

OTHER COUNTRIES DO A BETTER JOB OFREGULATION

Other countries are tougher on thedrug companies than is the U.S. gov-ernment. For example, governmentofficials, particularly in the U.K., havestepped up their scrutiny of the indus-try. During a recent in-depth study,U.K. leaders uncovered a great dealthat troubled them. For starters, theyfound that drug companies can specifi-cally design clinical trials to deliverfavorable—but possibly misleading—outcomes. Richard Nicholson, editor ofthe Bulletin of Medical Ethics, cited aMerck trial of Vioxx as a primeexample. Drug companies often runnumerous trials in an attempt to yieldsome favorable results that they can

publicize. But the companies thenshare only their positive findings andclassify the rest of the trials, rather thanthe drugs themselves, as failures. Sofar, they have gotten away with his sortof thing in this country. That hasn’tbeen the case in foreign countrieswhere the drugs are not only cheaper,but safer for the consuming public.Bad drugs are pulled from the marketmuch more often and much quicker.

ITALIANS FILE LAWSUITS AGAINST MERCK

A group of Italians have filed a classaction lawsuit in the United States,seeking damages after suffering heartattacks and strokes they say werecaused by the Vioxx painkiller. In thelawsuit, filed in Louisiana, 18 Italiansare seeking damages from Merck & Co.The Italian complaint was submitted toU.S. District Judge Eldon E. Fallon, theNew Orleans judge, who is overseeingall the federal Vioxx cases in the U.S.The complaint will have to be certifiedas a class action before it can proceed.One of the group of Italians, a 68-year-old cardiologist Giovanni Scibilia, toldreporters in Rome that he took Vioxxfor almost a month and suffered twoheart attacks. He stated: “The reason Ilink the attacks to Vioxx is the timing. Iused to jog and swim before I was pre-scribed the drug, and after four days oftreatment I had the first heart attack.”

If certified as a class action, thelawsuit will allow other Italians whoclaim to have suffered illness aftertaking Vioxx to join the case withouthaving to file separate lawsuits. Vioxxwas first introduced in the Italianmarket during the summer of 2000.You will recall it was approved by theFDA in May of 1999.Source: Associated Press

BLACK-BOX WARNINGS MAY NOT BE ENOUGH

We are told that when the Food andDrug Administration (FDA) wants toget its message across about a prescrip-

tion drug’s risk, it tells the manufactureto add a “black-box warning” to thelabel. As you will recall, several high-profile drugs have been given newblack-box warnings in recent months.For the uninformed, a black boxwarning is simply a rectangle that sur-rounds the bold face text of a message,which is placed in the warning sectionof the drug’s label. There are severaldrugs that currently have a black-boxwarning. The following are a few thathave had these warnings addedrecently by the FDA:

• Anti-depressants – warns of thepossible link to suicidal behavior.

• Prescription Non-Steroidal Anti-Depressant Anti-Inflammatorydrugs (NSAIDs) – the group of painrelievers that includes Ibuprofen andnaproxen. This warning is due to theincreased risk of heart attack, stokesand bleeding of the digestive track.

• Lotronex – the drug prescribed forirritable bowel syndrome. You willrecall that manufacturers stoppedselling this drug, but the FDA laterallowed it back on the market with ablack-box warning and a risk-man-agement program to increase doctorawareness.

As we went to the printer with thisissue, the FDA was working on ablack-box warning for Celebrex (theCox2 inhibitor) and for Elidel and Pro-topic (the two eczema creams linked tocancer in animals). The effectiveness ofthe black-box warning approach hasbeen debated and for good reason.Many consumer groups believe thatthese warnings aren’t that effective.Interestingly, even some FDA officialshave questioned the effectiveness.When you consider the fact that themanufacturers of prescription drugsadvertise their products heavily andstudies reveal that consumers respondto the ads, I doubt seriously that manypeople really pay much attention to theproduct labels. But a strong black-boxwarning is superior to the weak warn-


ings currently used with many drugsnow on the market.

PPA LITIGATION UPDATE

In a victory for PPA plaintiffs, Middle-sex County, New Jersey, Superior CourtJudge Bryan Garruto found the 2004epidemiological study by the KoreanPharmaceutical Manufacturers Associa-tion linking PPA with hemorrhagicstrokes to be reliable. The study foundan association between PPA use andhemorrhagic stroke. The defendantshad moved to preclude the studybased upon numerous perceivedweaknesses in the study design, includ-ing a lack of “clear, pre-specified aims”and the lack of an independent panelto review cases. Judge Garruto ruledthat the study flaws “do not outweighthe Korean Study’s many strengths.”

Adding to the growing list of victoriesfor the defendants, a Utah jury found infavor of Bayer in a February trial involv-ing a 65-year-old woman who suffereda hemorrhagic stroke from PPA-contain-ing Alka Seltzer Plus. Since the FDApulled PPA from the market in Novem-ber 2000, there has been only one juryverdict in favor of a plaintiff. A statecourt jury in El Paso, Texas, awarded $400,000. in compensatory damages to a25 year old who suffered a hemorrhagicstroke hours after ingesting PPA-con-taining Alka Seltzer Plus.

We still have several PPA casespending in state courts in New Jersey,Pennsylvania, as well as a number offederal cases in the MDL court.Because of the growing number ofdefense verdicts in the PPA litigation, itis not surprising that the defendants arereluctant to discuss resolution of anycase where a plaintiff’s medical historyreveals risk factors for stroke. Basedupon this history of defense verdicts,we feel fortunate for our clients to haveresolved numerous PPA injury cases,including two of the largest PPA casesettlements in late 2003.

DRUG COMPANIES LEARNED WELL

Several years ago, the drug compa-nies learned how to get the consumingpublic to “take their drugs,” and theyhaven’t slowed down since. Direct-to-consumer (DTC) advertising soaredafter the U.S. Food and Drug Adminis-tration FDA allowed drug promotionson television for the first time in 1997.Supreme Court rulings protecting com-mercial speech have aided the drugcompanies, but their best ally has beenthe FDA. The ads are regulated by theFDA’s Division of Drug Marketing,Advertising and Communications, anoffice with less than three dozenemployees. These employees have toreview 30,000 to 40,000 ads a year.Obviously, that is an impossible task.Since 1997, the drug companies haveintensified their efforts and that hasbeen paid off beyond any expectations.

A recent study has now confirmedwhat the pharmaceutical industry hasknown for a good while, and that is,physicians are more likely to prescribea particular drug if a patient asks for itby name. According to a new studypublished in the Journal of the Ameri-can Medical Association, patientsasking for a specific brand name drugare far more likely to get that drugregardless of the severity of theircondition. The study, which was notthe normal kind, was carried out by Dr.Richard L. Kravitz, director of theCenter for Health Services Research inPrimary Care at the University of Cali-fornia.

Actors trained by Dr. Davis went to152 doctors in three cities. These actorsexhibited symptoms associated withclinical depression (for whom antide-pressant drugs are appropriate) orposed as patients with job loss anddepressed mood (whom antidepressantdrugs are unlikely to help). Some ofthe actor-patients requested Paxil (anantidepressant drug), that is a heavilyadvertised brand name drug. Otherseither asked in general terms whetherantidepressant drugs might help them

or they made no request at all. Thestudy found that patients with minorsymptoms were more likely to get aquestionable prescription if they askedfor a brand name drug.

Things really changed relating tomass media advertising for prescriptiondrugs in 1997. The big break for phar-maceutical companies came in a 1997decision by the FDA to relax the rulesgoverning this type of advertising. This1997 ruling has had a significant effecton the way drugs are distributed in thiscountry. Pharmaceutical companiesnow spend $3.2 billion per year ondirect-to-consumer advertising of phar-maceutical drugs in an effort to con-vince consumers that they have theanswer to their problems. Slick adver-tising campaigns have really paid off. Ihave had Alabama pharmacists tell methat people came into their store with aprescription for “Drug A” and try to getit changed to “Drug B.” Those personsgot their information from TV ads andwere convinced “Drug B” was exactlywhat they needed to solve theirmedical problem.

Drug manufacturers realize that theirfinancial success depends heavily upontheir ability to persuade physicians toprescribe their drugs instead of theircompetitor’s. Accordingly, pharmaceu-tical sales representatives are paid hun-dreds of millions of dollars per year toconvince doctors to prescribe theircompanies’ drugs. They also spentanother hundred million dollars ofindustry money in their efforts topromote the drugs for their companies.When patients make requests for spe-cific prescription drugs, that is proofthat the ads are working. When youcombine the sales efforts by the salesrepresentatives with the massive DTCadvertising, it gives the industry a bigone-two punch. Survey data suggestthat over 8.5 million consumers annu-ally, prompted by DTC advertising,request and receive an advertised drug.A comparison between Canada, whichprohibits DTC advertising, and theUnited States, which does not, found


that patients in the United States weretwice as likely to request advertiseddrugs and that those who requestedDTC advertised drugs were nearly 17times as likely to receive a new pre-scription.

If you aren’t convinced, take a lookat the recent debacle involving Vioxx,Bextra, and Celebrex. Vioxx was themost heavily advertised drug to con-sumers in 2000 ($160 million), andretail sales quadrupled from 1999 to2000. In 2003, Pfizer spent $87.6million on ads for Celebrex. As a result,the number of COX-2 prescriptionsskyrocketed. But when reports ofserious safety issues with the drugsbegan to surface, Merck and Pfizerpulled back on DTC advertising forthese medications.

To its credit, even though it’s just adrop in the bucket, the FDA hasmoved against scores of ads that itfound to be inaccurate or misleading.In 2001, it warned Merck and Co. thatits ads for the arthritis drug Vioxx weremisleading and did not adequatelywarn viewers of cardiovascular risks.After Merck took Vioxx off the marketlast September, Pfizer Inc. aggressivelyincreased advertising for its competingpainkiller, Celebrex. Subsequently, thatcompany got a warning from the FDA.

Experts say it’s unlikely that thefederal government will further restrictDTC advertising anytime soon. This istrue even though opponents say theFDA should prohibit pharmaceuticaldrug companies from advertising theirproducts directly to consumers. If NewZealand passes a ban on DTC advertis-ing in 2005, which is anticipated, theUnited States will be the only industri-alized country in the world that permitsthe practice. In my opinion, there is noway to justify DTC advertising by thedrug industry. I hope there will beenough members of Congress who willdo the right thing and ban DTC ads. Source: JAMA and Dow Jones Newswire

LIPITOR CLASS CERTIFICATION DENIED

A Philadelphia judge has declined tocertify as a nationwide class those RiteAid customers who purchased whatmay have been counterfeit Lipitor in2003. The proposed class would haveincluded as many as 330,000 people, inevery state except Louisiana, who in2003 received recall notices from RiteAid informing them that a portion ofthe cholesterol-reducer the pharmacygiant purchased from H.D. SmithWholesale Drug Co. in spring 2003might have been counterfeit. Accordingto the court’s opinion, no more than20% of the 10-milligram Lipitor tabletsand no more than 6% of the 20-mil-ligram tablets Rite Aid purchased fromH.D. Smith between April 22, 2003,and May 23, 2003, were in fact counter-feit. The plaintiff, a Michigan resident,had purchased a 20-milligram Lipitortablet from Rite Aid in late April 2003.The court noted that no Rite Aid cus-tomers who purchased Lipitor in 2003suffered any known related ailments.The bottom line was that the courtfound the “Plaintiff has created a classwhich is detrimentally over-inclusive.As a result, neither plaintiff nor thecourt can ever determine class identityor size.” I really believe this decisionwas a good one.

JUDGE REVERSES $1.4 MILLION FEN-PHENVERDICT

A Philadelphia judge has reversed averdict against Wyeth, in which thedrug maker had been ordered to paythree Utah women a total of almost$1.4 million for alleged harm from oneof the company’s recalled “fen-phen”diet drugs. Judge Mark Bernstein of theCourt of Common Pleas ruled that thesole expert witness for the women hadsystematically provided “questionable”or “illogical” scientific testimony. JudgeBernstein ordered a new trial in thecases for the three women, who wontheir favorable verdict last November.You will recall that the judge had over-

turned a verdict in favor of a fourthfemale Utah plaintiff in the same trialwho had been awarded $780,000 incompensatory damages. All four plain-tiffs alleged they suffered heart valvedamage as a result of taking Pondimin,one of the drugs commonly used in thefen-phen slimming cocktail.

Pondimin and another Wyethappetite suppressant, Redux, wererecalled in 1997 after being linked toheart valve problems and a highly fatallung condition called primary pul-monary hypertension. Wyeth has takencharges of over $21 billion since therecall to satisfy claims from formerusers of the medicines, but still facesabout 60,000 lawsuits in the UnitedStates. An estimated 6 million Ameri-cans took Wyeth’s two drugs beforethey were recalled.Source: Reuters News

CRESTOR SIDE EFFECTS ARE MADE WORSETHAN PREVIOUSLY REPORTED

A recent study can’t be good news forthe maker of Crestor, the cholesterol-lowering drug. Contrary to governmentclaims, side effects happen more oftenwith Crestor than with other statins.Consumer advocates have been tryingto get Crestor off the market for months.The study was published online on May23rd by the American Heart Association’sjournal Circulation. Researchers hadanalyzed reports of side effects sent tothe FDA for Crestor and compared themto the rates during the same time periodfor Lipitor, Zocor and Pravachol, threeother statin drugs. The latest researchchallenges a decision by FDA related tothe drug’s safety. In March, the FDA hadcontended Crestor’s risks were nogreater than its competitors. The agencyrejected consumer efforts to have thedrug, made by AstraZeneca PLC, pulledfrom the market.

Instead of pulling the drug, the FDAordered a warning on the label, sayingCrestor could cause serious muscleproblems and kidney damage, espe-


cially among Asians. Dr. Sidney Wolfe,medical director of Public Citizen, hadthis comment after the study resultswere released: “This will be furtherreason to take the drug off the market.”It is good to know that Public Citizenwill try again to get Crestor off themarket. An estimated 20 million Ameri-cans are believed to be taking statins.Researchers say these drugs are still thebest drugs for lowering high choles-terol and reducing the risk of heartdisease and stroke. In my opinion, thejury is still out on Crestor. The black-box warning is a pretty good indicationthat a considerable risk exists if youtake Crestor. Anybody taking anystatin, including Crestor, should consultwith their personal doctor and weighthe risks and the benefits. Crestorclearly appears to be the worst of thelot. There will certainly be morewritten on this drug as time passes. Weare evulating a good number of poten-tial claims and already have pendinglitigation. We anticipate filing a numberof cases in the near future. Source: Associated Press

DRUG FIRMS FAIL TO DISCLOSE ALL THEYKNOW

The editor-in-chief of the NewEngland Journal of Medicine hasaccused three of the largest drug com-panies of “making a mockery” ofefforts to create transparency in clinicaltrials. Dr. Jeffrey M. Drazen, the editor,said that Pfizer Inc., GlaxoSmithKlinePLC, and Merck & Co. are not provid-ing enough useful information on clini-cal trials they register with thegovernment. Interestingly, Dr. Drazensays that some important medical pub-lications might not publish the compa-nies’ studies in the future and that ismost significant. It is pretty obviousthat the journals will require moreinformation from pharmaceutical com-panies before accepting articles forpublication.

A review of the information from 10

drug companies was posted onwww.clinicaltrials.gov., which is run bythe U.S. National Institutes of Health.The review was conducted by Dr.Deborah Zarin of the NIH at the requestof the Internal Committee of MedicalJournal Editors. I believe that requiringdrug companies to disclose all theyknow about a drug—good and bad—issomething that will benefit all citizens. Itwill help medical doctors make gooddecisions relating to medicine and willallow them to believe what they read ascomplete and accurate.

DEFIBRILLATOR MAKER DIDN’T REVEALPROBLEM

The maker of an internal heart defib-rillator has now admitted it waitedthree years before telling some 24,000patients and their doctors about anelectrical problem that caused some ofthe implanted devices in use to short-circuit. The admission by Indianapolis-based Guidant Corp., first reported onMay 24th by The New York Times, cameabout after a Minnesota college studentdied on a spring break bicycling trip inMarch. The death of the 21-year-oldstudent, who had a genetic heartdisease, is the only fatality known thusfar. Guidant disclosed the flaw in itsVentak Prizm 2 Model 1861 to thestudent’s doctors and told them about25 other cases in which the defibrillatorhad malfunctioned, the Times reported.Interestingly, the company did notissue an alert to physicians until itlearned the Times was preparing astory on the defibrillator.

Electrical malfunctions involving themodel occurred in units producedduring a two-year period before mid-2002, when the company fixed theproblem, the Times reported. Appar-ently, the problem has not happened inany devices made since. In February,Medtronic Inc. told doctors that thebattery used in one of its defibrillatorswas draining too fast. No deaths orinjuries have been associated with the

Medtronic model. Implanted defibrilla-tors shock the heart back into a normalrhythm when it starts beating irregularly.

In my opinion, Guidant had a dutyto disclose the problem to doctors andpatients as soon as the information wasavailable to the company. There can beno justifiable excuse for any delay –especially one of three years—when adefective medical device is involved.Had the Times not gotten involved, wemay not have known about the prob-lems, even at this writing. Guidant isone of the largest makers of medicaldevices, with $3.8 billion in sales lastyear, almost half coming fromimplantable defibrillators.Sources: Associated Press and The New York Times

X.BUSINESSLITIGATION

VERDICT IN PERELMAN CASE AGAINSTMORGAN STANLEY

The suit filed by Ronald Perelman,the 1980s corporate raider, againstMorgan Stanley has resulted in amassive verdict against the investmentbank. The suit, claiming fraudulentconduct by the investment banks, wastried and resulted in a most interestingverdict. In 1998, Mr. Perelman decidedto sell his stake in Coleman, Inc., thecamping gear maker, to Sunbeam. Heclaimed that in 1997, Morgan Stanleysuggested he do the deal withSunbeam. Perelman contended that hesaw the firm’s stamp of approval onthe appliance maker as being very sig-nificant. In trial, the wealthy plaintifftestified that the Morgan Stanley firmprided itself on being of the highestintegrity, quality, and character. Perel-man said he never expected MorganStanley to lie to him and said furtherthat Morgan Stanley hid from him andother investors Sunbeam’s accountingproblems in pursuit of big investment-banking fees. Not long after Mr. Perel-


man sold his stake in Coleman forapproximately $1.5 billion dollars,including $680,000 in stock, Sunbeambecame engulfed in an accountingscandal, driving down the value of hisstock.

On May 16th the jury returned averdict in Perelman’s favor in theamount of $604.3 million in compensa-tory damages. The jury then consideredwhether to award punitive damagesand in a subsequent verdict awarded$850,000 in punitive damages.

The claim by Mr. Perelman involveda critical issue on Wall Street today:what is the responsibility of an invest-ment banker in identifying problems ata client, and to whom is the under-writer responsible? This case will beappealed and perhaps a more clearpicture will emerge. Based on what Ihave learned, the jury’s verdict appearsto be a good one. We must continue tohope that one day average investorscan have access to a jury trial whenthey are mistreated rather than beingrestricted to arbitration. An interestingdevelopment in the Perelman suitinvolved a default judgment entered bythe trial judge on liability. There hadbeen an abuse of the discovery processand the defendant paid for it big time.As a result, the jury only had to deter-mine whether the wrongdoing“caused” Perelman to lose money, andif so, how much. The jury obviously,did just that—returning a verdict forboth compensatory and punitivedamages. We will watch the appeal inthis case with interest.

What I find most interesting—inaddition to the judge’s ruling and theamounts awarded—is that when aperson who is a billionaire has aproblem with an investment bank,such as Morgan Stanley, he is able totake his case to a jury to have the dif-ferences with his banker resolved.When an average investor buys a stockor is misled by a broker, however, thatinvestor must go through an expensivearbitration procedure that is in partfinanced by the brokerage industry.

That person can’t get a trial before ajury of his peers. For some reason, thatjust doesn’t seem right.Sources: The Wall Street Journal and AssociatedPress

DOCTORS SETTLE THEIR CLAIMS FOR $80MILLION

Health Net Inc. and Prudential Insur-ance Co. of America have agreed to paymore than $80 million to settle claimsthat they routinely skimped on pay-ments to more than 700,000 doctors.Health Net will contribute $60 millionto pay claims from doctors and for legalfees. The company will also create abetter definition of “medical necessity”for procedures that doctors performand a streamlined system for physiciancomplaints and payments as a part ofthe settlement. Prudential will con-tribute $22.2 million to pay for efforts tomonitor and improve compliance byhealth maintenance organizations.

The doctors allege in their lawsuitthat the HMOs conspired from 1990 to2002 to program their computers tosystematically underpay doctors fortheir services. Health Net and Pruden-tial were two of eight original defen-dants. Aetna and Cigna have alreadysettled. The doctors will continue topursue their claims against Anthem,Coventry, United Health and Wellpoint,the companies that haven’t settled sofar, and are very likely to prevail.Source: Associated Press and Forbes News

WORLDCOM LITIGATION UPDATE

The total WorldCom class action set-tlement has now reached approxi-mately $6.1 billion. The remainingdefendant Arthur Andersen, World-Com’s former accounting firm, settledrecently for $65 million during trial.According to court documents, the set-tlement funds from each defendant willbe allocated based upon liability toeach class of investor. The vast majorityof settlement funds appear to be ear-marked for investors in the May 2000

and May 2001 bond offerings. Despitethe record size of the settlement, share-holders of the roughly 3 billion sharesof WorldCom will recoup little of themoney they lost.

At press time, the Securities andExchange Commission was preparingto disburse its WorldCom Victim TrustFund to investors who bought World-Com after April 29, 1999 and still heldit as of June 25, 2002. The fund, con-sisting of $500 million in cash and 10million shares of common stock ofreorganized MCI, Inc, was obtained bythe SEC as a result of its enforcementaction against WorldCom. It should benoted that the deadline for investors tofile Proof of Claims Forms to the SEC isthe 25th of this month. Investors canobtain the forms at one of these web-sites: www.worldcomvictimtrust.com,www.mci.com or www.sec.gov.

Anderson has been involved in aseries of accounting scandals includingWorldCom, Enron Corp. and GlobalCrossing Ltd. Andersen, based inChicago, is now a shell of its formerself. The firm had 24,000 employeesbefore the Enron scandal broke andnow has only about 200. The fate ofAnderson is a good example of whatcan happen to an audit firm when itallows greed to cloud its vision. Thereis no way for an accounting firm to bea real auditor and a highly paid con-sultant for the company being auditedat the same time. The conflict isobvious.

ADELPHIA TO PAY $715 MILLION IN FRAUDPROBE

Bankrupt Adelphia CommunicationsCorp. has agreed to pay the govern-ment $715 million to settle a federalfraud investigation. Adelphia willdeposit the money in a fund that thegovernment will use to compensateinvestors hurt by the fraud, making thesettlement one of the largest of its kind.As part of the settlement, members ofthe Rigas family, the company’s


founders, have agreed to forfeit morethan 95% of their assets. Adelphia, thenation’s fifth-largest cable televisionprovider, filed for bankruptcy afterfounder John W. Rigas and others wereaccused of using the company as their“private piggy bank” and cheatinginvestors out of billions of dollars. Rigasand other officers were convicted ofconspiracy, bank fraud, and securitiesfraud last year. Adelphia is seeking $3.2billion from the Rigas family. TheJustice Department had been seeking$2.5 billion in damages from the family.Time Warner Inc. and Comcast Corp.,the two largest cable TV companies inthe country reached an agreement tobuy Adelphia’s assets, a deal valued at$17.6 billion in cash and stock. Source: Associated Press

DYNEGY TO PAY $468 MILLION TO SETTLESHAREHOLDER LAWSUIT

Dynegy Inc. has agreed to pay $468million in cash and stock to settle ashareholder lawsuit that accused it ofmisrepresenting its financial results andviolating securities laws through a secret2001 transaction. The company alsoagreed to let the lead plaintiff in theclass action litigation, the University ofCalifornia regents, pick two new direc-tors for Dynegy’s board. The settlementcaps a three-year effort by Dynegy tosettle claims stemming from a group oftransactions called “Project Alpha,”which involved a $300 million loanfrom a syndicate led by Citigroup Inc.that was disguised as a five-year natural-gas contract. The transaction artificiallyboosted cash flow at Dynegy andcreated nearly $79 million in tax breaksthat flowed to the bottom line as profits.

Dynegy’s stock was trading foraround $28 a share in April 2002,before details about Project Alpha werepublished in The Wall Street Journal.By late July 2002, the shares wereselling for less than a dollar. This issueto be decided by a jury would be todetermine what part of the share loss

stemmed from company actions andwhat portion was caused by largermarket forces. Dynegy continues tooperate a power-generation businessand a natural gas business, but hasshed other enterprises, including anelectric utility, an energy trading busi-ness, and a telecommunications busi-ness. An article in The Wall StreetJournal had raised questions about thecompany’s performance in view of agap between its cash flow and its earn-ings. Liability insurance carriers forDynegy will cover $150 million of theUniversity of California settlement.Dynegy will pay $250 million in cash,and the remaining $68 million will bein the form of Dynegy’s Class Acommon stock issuance. The companywill take a $155 million after-tax chargein the first quarter. In September 2002,Dynegy paid $3 million to the federalgovernment to settle civil chargesbrought by the Securities and Ex-change Commission that focused onProject Alpha, whose profit Dynegywas forced to reverse.Source: The Wall Street Journal

STEEL COMPANIES SUE SUPPLIERS

Two steel companies have filed suitagainst their raw-material suppliers inseparate suits, alleging the suppliersjacked up prices and refused shipmentson hundreds of thousands of tons ofcritical steel making ingredients to takeadvantage of the commodity boom.One of the companies, Wheeling-Pitts-burgh Steel Corporation, filed suit inWest Virginia against a subsidiary ofMassey Energy Company, a Richmond,Virginia coal company, alleging that thecompany breached a long-term metal-lurgical-coal supply agreement by notshipping contracted amounts andforcing the company to buy theproduct on the spot market at higherprices. Wheeling-Pittsburgh Steel says itsustained millions in dollars ofdamages to its business and dramati-cally increased the cost of their coke-

oven repair program.Separately, Mittal Steel Company’s

International Steel Group filed suit inPennsylvania against coke supplierShenco Limited. The International SteelGroup has claimed that Shencobreached a coke supply contract valuedat more than $100 million for 730 tonsof coke that were supposed to be sup-plied during 2004 and 2005 to its steelplant in Cleveland. There is a disputeover whether a contract was everentered into. International Steel Groupclaims that a legally binding agreementwas formed between ISG and Shenco in2003, when it signed and faxed an e-mail offer from Shenco to sell coke for$138 per ton. However, Shenco claims itdid not pick up a copy of the fax untilafter it got a better offer from A. K. SteelHolding Corp. for $145 per ton. As aresult, Shenco sold the material to A. K.Steel instead. ISG claims it was forced tobuy coke on the spot market at higherprices, leading to damages between $5million and $20 million dollars.Source: Wall Street Journal

FARMERS INSURANCE ORDERED TO PAY$52.5 MILLION IN SUIT

A federal judge has told FarmersInsurance Group Inc., the third-largestU.S. home and auto insurer, to pay$52.5 million to claims adjusters whosay they were denied overtime pay.U.S. District Judge Robert E. Jones inPortland, Ore., ruled that Farmers, aunit of Zurich Financial Services ofZurich, Switzerland, must pay damagesaveraging about $50,000 to each of the1,039 adjusters in seven states. Thiscase arose out of a California lawsuit inwhich Farmers agreed in September topay about $200 million to settle claimsthat it denied overtime to more than2,000 workers. After success in thatcase, workers filed similar suits invarious states, which were consoli-dated in the Portland court. Farmerscontended that the adjusters wereexempt from overtime laws on the


basis that they were administrativeemployees, and the adjusters claimedthey were white-collar productionworkers.

Farmers says the damages phase ofthe case was a “cooperative effortbetween the parties” to calculate theamount of overtime due. The companyis going to appeal Judge Jones’ determi-nation last year that Farmers was legallyresponsible. After trial, Judge Jonesruled that under federal and state laws,insurance adjusters who handle realestate and auto damages must be paidovertime, while adjusters who processpersonal injury claims are exempt fromovertime pay. The ruling, which coversunpaid overtime from 1999 to July2004, involves adjusters in Colorado,Illinois, Washington, Michigan, Min-nesota, New Mexico and Oregon. Source: Bloomberg News

AT&T AND COMCAST TO SETTLE AT HOMECORP. CLAIMS

AT&T Corp. and Comcast Corp. willjointly pay $340 million to settle claimsrelated to the bankruptcy of At HomeCorp., an Internet access company pre-viously controlled by AT&T. The agree-ment calls for $340 million to be paidto a bondholders liquidating trust thatwas pursuing claims on behalf of theAt Home estate. Comcast, as part of theterms of its 2002 purchase of AT&T’sbroadband assets, will pay $170 millionof the settlement. In addition, bothcompanies will relinquish claims toabout $60 million held in reserve bythe At Home estate, bringing bond-holders a total of $400 million.

AT&T bought a controlling stake inAt Home Corp., or Excite@home, in2000, before the high-flying Internetcompany crumbled under a cashcrunch. Holders of At Home bondsfiled the lawsuit against AT&T in 2002,alleging the phone company breachedits fiduciary duties related to itsdesignees to the At Home board, AtHome’s bankruptcy claims, and AT&T’s

attempt to dispose of some of AtHome’s assets. The bondholders alsofiled a patent infringement claim relat-ing to AT&T’s broadband distributionand high-speed Internet backbone net-works and equipment. The settlement,subject to bankruptcy court approval,clears AT&T of all claims filed onbehalf of the trust, the patent infringe-ment case, and other claims filedagainst AT&T and AT&T Broadband inthe bankruptcy court. The At Homebondholders still have claims outstand-ing against Comcast and Cox Commu-nications Inc., which also held astake in the company.Source: Dow Jones Newswire

MORGAN STANLEY ALLEGEDLY FAILED TODISCLOSE KEY DOCUMENTS

The Perelman case, referred toabove, seems to have had anothereffect that relates to Morgan Stanley. Aclass action lawsuit has been filed inFlorida against the investment bankseeking damages for the firm’s failingto provide clients who brought claimsagainst them with evidence that mayhave been relevant in hundreds of pastarbitration cases. The suit comes in thewake of Morgan Stanley’s recentacknowledgement that it has foundelectronic tapes that potentially couldcontain documents that would havebeen of interest to plaintiffs who claimthey received faulty stock research andinvestment advice from MorganStanley. The suit also seeks to reopencases that the New York StockExchange and NASD arbitration panelshave ruled on regarding the investmentbank since 1999. Morgan Stanley hassaid it recently discovered the potentialevidence as it reviewed its e-mailretention policies as part of the Perel-man fraud suit.

Many lawyers who representinvestors have long suspected thatMorgan Stanley was not being forth-coming with disclosures. It is allegedby the plaintiffs in this lawsuit that

“Morgan Stanley’s actions demonstratea history of discovery abuse preventingplaintiffs from obtaining a full and fairhearing.” The arbitration processmakes it very easy for a corporatedefendant to hide documents thatwould be easily accessible in a civillawsuit filed in either a state or federalcourt. Frankly, I am not surprised thatMorgan Stanley had to turn their inter-nal documents over in the Perelmansuit. But, it took a judge to get all of it,as pointed out above. That wouldnever have happened in an arbitrationproceeding.

H&R BLOCK SETTLES SUIT TARGETING LOANPROGRAM

H&R Block Inc. has reached a tenta-tive settlement in a class action lawsuitover its tax-refund loans. The nation’slargest tax preparer and its bankingpartner, HSBC Taxpayer Financial Ser-vices Inc., were accused of illegallygouging customers by providing“refund anticipation loans” at interestrates frequently exceeding 100%. Thelawsuit was over a license fee paid toH&R Block for facilitating the loans.The license fee should have been dis-closed, but the company and the bankdidn’t disclose it. They claimed it wasbecause it did not affect the cost of theloan or the cost of the tax-preparationservice. The fee was disclosed begin-ning in 1997 and was discontinued in2003. The proposed settlement wasfiled in an action pending in the U.S.District Court for the Northern Districtof Illinois. It would cover more than 28million customers involving more than55 million transactions.

The settlement, consisting of $110million cash and $250 million incoupons, would go to class memberswho provide a “timely proof of claim.”The settlement, if approved, would endall class action lawsuits related to theloans that were filed against thecompany. The coupons, worth $6each, could be used for various H&R


Block tax preparation services over thenext three years. Class members willalso receive a cash settlement afterplaintiffs’ attorney fees are awarded bythe judge, with the amount dependenton how many class members file aclaim. H&R Block would record anafter-tax charge of about $38 million.The proposed settlement must beapproved by a federal district judge inChicago. Interestingly, this same judgerejected an earlier proposed settlementby H&R Block in 2003.

Under the refund anticipation loanprogram, customers owed a tax refundcould receive most of the money intwo to three business days by paying afee to file the return electronically anda loan-processing fee. The loans vic-timize low-income households, immi-grants, and financially unsophisticatedtaxpayers who aren’t adequatelyinformed about the high interest rates.The settlement provides for “disclosureguidelines” to help customers under-stand tax-refund options. It will beinteresting to see whether the judgeapproves this settlement. Source: Associated Press

INSURANCE COMPANIES SUE PAXIL MAKERGLAXOSMITHKLINE OVER GENERICS

Blue Cross and Blue Shield of Min-nesota and 18 other insurers in Min-nesota are suing GlaxoSmithKline,alleging manipulation of the federalpatent system to keep cheaper genericalternatives to its anti-depressant Paxiloff the market. The lawsuit, filed lastmonth in U.S. District Court in Min-neapolis, alleges that GlaxoSmithKlineviolated federal and state antitrust lawsand fraud laws and engaged in decep-tive trade practices. I understand thateach insurer will review its claims datato determine how much money theyare due from GlaxoSmithKline. BlueCross did note that a generic equiva-lent to Paxil came onto the market-place in late 2003 and a month’ssupply sold for $63. The insurer said a

month’s supply of Paxil at that timewas $93. The lawsuit claims that gener-ics could have been available as earlyas 1998 if GlaxoSmithKline hadn’ttaken illegal actions that allowed it tomaintain a monopoly for Paxil.

According to the lawsuit, Glaxo-SmithKline claimed to hold patents onscientific procedures that already werein the public domain and listed invalidpatents with the Food and Drug Admin-istration that kept other pharmaceuticalmanufacturers from making genericequivalents. It is also alleged that Glax-oSmithKline “harassed” other manufac-turers by filing frivolous lawsuits. Thoselawsuits prevented manufacturers frommarketing a generic to Paxil and causeda federal law to be invoked that gaveGlaxoSmithKline an automatic 30-month extension on its patents.Source: Associated Press

UTILITY’S DAMAGE AWARD IN FRAUD CASELIMITED

A federal court jury in Decatur,Alabama, returned a $33.5 millionverdict in a case brought by Huntsvilleutilities against ProLiance Energy Corp.However, U.S. District Judge Virginia E.Hopkins turned down Huntsville Utili-ties’ request to triple the $8.2 millionaward for compensatory damagesagainst the Indiana-based natural gasprovider. The verdict included $25million in punitive damages againstProLiance in the fraud case. The city-owned utility had sued ProLiance inMadison County Circuit Court in May2002, accusing it of breach of contract,negligence and making false represen-tations about cheap gas to win theutility’s business. Huntsville Utilitiessought to recover about $10 million inoverbillings and lost gas reserves. Thecase was removed to federal court bythe defendant. After the removal,Huntsville Utilities amended its com-plaint, claiming ProLiance violated thefederal Racketeer Influenced andCorrupt Organizations Act (RICO).

Under RICO, the utility argued, itshould be entitled to triple damages.Judge Hopkins denied the utility’sclaim for triple damages because aportion of the $8.2 million verdictincludes damages that were not sus-tained under RICO. Those damagesarose out of the utility’s claim of inten-tional interference with contractual orbusiness relations. The judge ruled thatthe court had no authority to triple thedamages since they weren’t related tothe RICO violation.

There were other defendants in thiscase. The ProLiance salesman, whowas a central figure in the case, wasordered to pay Huntsville Utilities$35,000 in compensatory damages and$165,0000 in punitive damages. Thejury also ordered a ProLiance lawyer topay $25,000 in compensatory damagesand $10,000 in punitive damages.Judge Hopkins did order the salesmanto pay triple his compensatorydamages, because all of the allegationsagainst him did arise under RICO.Since the lawyer wasn’t named in theRICO action, he was not ordered topay triple damages. My lawschoolclassmate, Gary Huckaby, was one ofthe lawyers representing the plaintiff inthis case and obviously did a good job. Source: The Huntsville Times

XI.INSURANCE ANDFINANCE UPDATE

REPORT BY STATE DEPARTMENT OFINSURANCE

I have contended for years that thefunding and staffing for the AlabamaInsurance Department should be signif-icantly increased. If that ever happens,it would allow the Department to do abetter job of regulating the insurancecompanies that do business inAlabama. There are some very good,dedicated employees in the InsuranceDepartment who do an outstanding


job. They could do even better withadditional staffing and funds. Thesefolks simply need help.

On April 18th Commissioner Walter A.Bell filed the department’s quarterlyreport with the Alabama Legislature.This gives us an indication of what theDepartment has been doing. Duringthe months of January 2005 throughMarch 2005 the Alabama Departmentof Insurance had the following activity:

• The Department investigated 2,874consumer complaints

• There were 1,893 consumer inquiriesto the Department concerning com-panies doing business in Alabama

• Disciplinary actions taken againstinsurance agents were as follows:

•• Orders placing agents on proba-tion – 43;

•• Continuing education orders foragents – 49; and

•• Cease and desist orders issued –4.

• The following actions were takenagainst companies:

•• Orders to show cause – 20;

•• Orders of suspension – 9; and

•• Other agent and company orders– 23.

FBI PROBE OF INSURANCE FIRMS MAY BEEXPANDED

We have learned that the FederalBureau of Investigation’s wide-ranginginquiry into the insurance industry maynow be extended to banking and otherfinancial sectors. This probe wasprompted by the accounting scandal atAmerican International Group Inc.,which has shaken the entire insuranceindustry. The FBI has assigned between50 and 75 agents to the probe within itsFinancial Crimes Section. It is prettyevident that the vast number of prob-lems at AIG has caused the FBI towiden its net and get involved in a

much larger scope. As we know, AIG isunder investigation by the New Yorkattorney general, the Securities andExchange Commission (SEC), the JusticeDepartment and the New York Insur-ance Department. The inquiry is exam-ining whether the AIG used complexinsurance products and offshore affili-ates, thus artificially enhancing its finan-cial results, to mislead investors.

I don’t expect this new developmentto end quickly. It will likely be a longand drawn-out affair. The FBI has beenheavily involved in the corporate fraudcrackdown, working with the SEC andother federal and state agencies, andthe public has been shocked at howwidespread the corporate fraud actuallyis. Currently, the FBI Financial CrimesSection has 405 corporate fraud casesopen. It is unknown how many ofthose relate to the insurance industry.Interestingly, the 405 cases represent adoubling of the number of pendingcases at the end of fiscal year 2003. Inrecent years, the SEC, which has civilauthority, has begun referring morecases to criminal prosecutors in recentyears as part of a broader effort to crackdown on corporate fraud and levystiffer penalties. The American public isdemanding that corporate criminals betreated like all other criminals. Whenthose running the show in CorporateAmerica come to realize that “crimedoesn’t pay,” and that “corporate crime”is still a crime, it will be good news forour nation’s economic future. Source: The Wall Street Journal

DOCTORS ACCUSE INSURANCE COMPANIES OFFRAUD, EXTORTION AND COLLUSION

Recently, about 2000 physicians inKansas City, Missouri, filed several classaction lawsuits charging insuranceproviders with extortion, fraud and col-lusion. In the lawsuits, doctors allegethe insurance providers are conspiringtogether with elaborate schemes tomake it difficult to care for patients,such as constantly rejecting medical

claims. Among the insurance companiesinvolved in these lawsuits are Humanaand Blue Cross Blue Shield. These law-suits were brought on in large partbecause of the insurance companies’denial of claims on the basis that thetreatments prescribed by the physicianswere not “medically necessary.”

The doctors who are involved inthese lawsuits say they are fed up withthe insurance companies “practicingmedicine.” These doctors feel thatphysicians—not insurance companies—should determine what treatment is oris not medically necessary for theirpatients. I have often wondered whythe medical community in every statewasn’t taking a strong stand against“bean-counters” working for insurancecompanies being allowed to take overmuch of the practice of medicine.

It is most significant that in theirlawsuit, the doctors allege the insur-ance companies “are obstructing careby putting profits above patienthealth.” Studies show that insurancecompanies have doubled profits in justfour years. Dr. William Soper, with Mid-America Medical Affiliates, made thisinteresting observation: “We have abarrier between doctors and patients,and it’s the insurance companies.” Thatis a real problem for both doctors andtheir patients. It is high time for thedoctors to stand up and be counted onthis most important issue. Source: The Kansas City Channel

ERISA STATUTES USED BY INSURANCECOMPANIES TO INCREASE CORPORATEPROFITS

The Employee Retirement IncomeSecurity Act of 1974 (“ERISA”), 29 U.S.C§ 1001, et. seq., was enacted by Con-gress in 1974 to protect employeesfrom improper interference with theirretirement and/or employment benefitplans by their employers. The ERISAstatutes are federal statutes that providefor specific penalties for any improperinterference with an employee’s retire-ment and/or benefit plans. These


statutes preempt all other penaltiesand/or remedies available to anemployee under state law. But, thepenalties and remedies available to anemployee under the ERISA statutes arenot punitive in nature and do not serveas a deterrent for an employer fromcontinuing the improper conduct com-plained of by the employee. Over theyears, the ERISA statutes’ applicationhas been broadened by federal courtsand applied not only to employers’improper conduct, but also to improperconduct by outside insurance compa-nies that related to an employer spon-sored insurance benefit plan purchasedby an employee. However, this broad-ened application by federal courts hasnot served as a benefit to America’semployees as was intended by Con-gress, but has instead actually served asa detriment because of its limitations ofavailable penalties and liabilities. Insur-ance companies are well aware of theirlimited exposure to liability under theERISA statutes and have taken advan-tage of these limitations in an effort toincrease corporate profits. Our firm hasuncovered a scheme employed by aparticular insurance company underwhich it has initiated efforts to have allemployee insurance policies fall underthe ERISA statutes so it could denyclaims for benefits to save the insurancecompany money and increase corpo-rate profits. The following is directlyfrom the insurance company’s internalmemorandum sent to its claim manage-ment group:

A task force has recently been estab-lished to promote the identificationof policies covered by ERISA and toinitiate active measures to get newand existing policies covered byERISA. The advantages of ERISAcoverages in litigious situations areenormous: state law is preempted byfederal law, there are no jury trials,there are no compensatory or puni-tive damages, relief is usuallylimited to the amount of benefit inquestion, and claims administrators

may receive a deferential standardof review. The economic impact on[this insurance company] by havingpolicies covered by ERISA could besignificant. As an example, [wehave] identified 12 claim situationswhere we settled for $7.8 million inthe aggregate. If these 12 cases hadbeen covered by ERISA, our liabilitywould have been between zero and$0.5 million.

In order to take advantage of ERISAprotection, we need to be diligentand thorough in determiningwhether a policy is covered.Accordingly, I have attached arough draft of questions that shouldbe asked in our claim investigationprocess. I recommend that it beused for all claims. The key fordetermining the applicability ofERISA is whether or not theemployer ‘sponsors’ or ‘endorses’ theplan. If the employer pays thepremium, the policy would usually,but not always, be considered to begoverned by ERISA. Salary allot-ment or payroll deduction arrange-ments, by themselves, do notnecessarily mean that a policy issubject to ERISA. While our objec-tive is to pay all valid claims anddeny all invalid claims, there aregray areas, and ERISA applicabilitymay influence our course of action.

Another requirement needed inorder to take advantage of the pro-jection offered by ERISA, is to estab-lish a formal appeal process forERISA situations. When we deny aclaim, we must include languagein our letter that informs theclaimant of the right to appeal ourdecision within 60 days. I haveattached a copy of sample lan-guage. The appeal must be inwriting and should be reviewed bya panel specifically established toreview ERISA appeals. I recom-mend that the panel be composedof Chris Kinback, Bob Parsk, BeckyAbsher, Tom Timpanaro and me.

We will be modifying the salaryallotment agreement used at thepoint of sale to include endorse-ment language.

I am interested in any comment orfeedback you may have on thisissue.

As you can see from this internalmemorandum, insurance companiesview ERISA as an asset and a way toincrease corporate profits, not as pro-tection for employees as Congress orig-inally intended when it enacted thislegislation back in 1974. The ERISAstatutes need to either be amended toprovide punitive damage liability expo-sure to insurance companies thatwrongfully deny claims for benefits, orthe courts need to more narrowly con-strue ERISA applicability. Insurancecompanies should not be allowed touse ERISA as a tool to hurt folks whowere supposed to be protected whenCongress enacted the legislation.

186 INSURERS STILL HAVE 57,830 CLAIMSOPEN FROM STORMS IN FLORIDA

Kevin McCarty, Florida Office ofInsurance Regulation Commissioner,reported to the Florida Cabinet that 186insurers have reported they still have57,830 claims open. This is down frommore than 140,000 open storm claimsin April. To spur action on settlingthese claims, the Commissionerbrought a rule before Governor JebBush and the Cabinet requiring insur-ance companies to settle all outstand-ing claims by April 18th with areporting deadline of April 28th. Thatappears to have had a good effect. TheState Commission is now trying to getthe 57,830 remaining claims resolved.

FLORIDA LEGISLATURE TAKES A STAND

Anybody who has kept up with thehandling of insurance claims in coastalcountries in Florida and Alabamaknows that insurance companies


haven’t done their job. The Florida Leg-islature passed SB 1486, which willmake major changes in how hurricaneclaims will be handled, starting withthe next storm. Among the keychanges brought about by the legisla-tion are the following:

• Consumers will get cash up front fortheir damages. Insurers will nolonger be allowed to withhold partof the check until repairs are com-plete.

• Insurers won an exemption frompaying policy limits when floodingor storm surge—normally coveredunder federal flood insurance—con-tributes to the destruction of a home.Hundreds of 2004 hurricane victimswith current claims are protectedfrom the exemption. They’ll have tocontinue to fight for those contestedpayments in court, a venue thatincludes class action lawsuits againstfour of Florida’s largest insurers.

• Policy content changes includinglarge-type warnings about the floodgap, itemized lists of what’s covered,policy discounts, and the dollar valueof their hurricane deductible.

• A rate cap on the state-sponsoredinsurer of last resort, Citizens Prop-erty Insurance, was removed. So wasa provision requiring insurers payuncontested claims in 30 days.

• A checklist to explain clearly what’scovered and what’s not in their insur-ance policies.

• A low-interest loan program to helppay for retrofitting property to meetstronger building codes.

• More choices for hurricane deduct-ibles.

Policyholders are promised they canstill seek policy limits if they provewind would have destroyed theirhomes even without flood. Insurers areguaranteed that when consumers dothat, they don’t collect more than it

costs to rebuild. It also means theinsurance industry will see changes tothe Florida Hurricane CatastropheFund, from which insurance companiesnow buy coverage from this fund tohelp them pay claims after a hurricane.In the future, companies will now beable to draw from the fund for smallerstorms that resulted in $1 billion ormore in losses, provided the two worststorms of the season caused at least$4.5 billion apiece in damage. The newlaw has been criticized by the insur-ance industry. That probably means itwill be fair to policyholders who obvi-ously need help with storm claims.Source: The Insurance Journal

JURY FINDS AGAINST HEALTH INSURER INLOUISIANA

A health insurance company hasbeen ordered to pay a Louisianawoman more than $2 million for delay-ing the discovery of a spinal tumor.Christaine Hymel, of Mandeville,Louisiana, had to delay an MRI for threemonths to raise part of the $4,000 feeon her own after Blue Cross BlueShield of Louisiana refused to pay forthe test. The delay allowed a previouslyundetected spinal tumor to grow to apoint that left the lady debilitated andrequired immediate surgery. Only afterextensive physical therapy will she beable to walk again, although still suffer-ing nerve damage and irreparablenumbness from the chest down.

Blue Cross will have to pay Ms.Hymel $2 million for mental anguishand loss of enjoyment of life, $50,000for pain and suffering, $69,830 for pastmedical expenses, and $15,000 forfuture medical expenses. Thecompany also must pay $101,600 forher legal fees. The verdict is notsubject to the state’s $500,000 cap onmalpractice awards. During the trial,Blue Cross alleged that Ms. Hymel mis-represented her medical history, delet-ing references to leg and back pain inher application for coverage. BlueCross had refused to pay on the

grounds that back pain and numbnessthat Ms. Hymel suffered was a pre-existing condition. Ms. Hymel said shedid not go to court for the money,stating: “It’s more about doing it forthe next set of people that are going tobe coming through and fighting theinsurance company, just to show themthat what they did was wrong.”Source: Insurance Journal

JURY REACHES PARTIAL VERDICT INEXECUTIVE LIFE

Last month, a federal judge reportedthat a jury has voted on seven of eightverdict forms in a case against a groupof French investors in connection withthe illegal takeover of failed insurerExecutive Life. In 1999, the CaliforniaDepartment of Insurance sued theFrench investors, claiming they hadconspired all along to effectively giveCredit Lyonnais, then owned by theFrench government, control over all ofExecutive Life’s assets, thereby violat-ing California law at the time prohibit-ing foreign governments from owninginsurers in the state. The lawsuit alsoaccused French billionaire FrancoisPinault and his holding company,Artemis SA, of later buying ExecutiveLife’s insurance business and some ofthe bonds as part of a scheme to helpCredit Lyonnais and the other investorsshield themselves from an investigationby U.S. authorities.

Most of the original parties named asdefendants, including Credit Lyonnais,reached a $600 million out of court set-tlement in February. MAAF Assurancesdeclined to offer a defense in the case.Pinault and his company were theremaining defendants. Policyholders ofthe former Executive Life InsuranceCompany have to be pleased with theresult so far. According to reports, thejury “found that Artemis, Credit Lyon-nais and others engaged in a conspir-acy to fraudulently obtain assets fromthe Executive Life estate.” To date,lawyers representing the CaliforniaDepartment of Insurance have recov-


ered $715 million in settlements withCredit Lyonnais, CDR Enterprises,Aurora, and others. The Frenchinvestors who bought Executive Lifeand its assets did so illegally by hidingthe true controlling ownership of theirgroup. No company should be allowedto profit from fraud regardless of whothey are or where they are located. Source: The Insurance Journal

XII.PREDATORYLENDING UPDATE

PAYDAY LOANS ARE A PUBLIC MENACE

Payday loans are among the fastestgrowing financial services in America.This is now a $40 billion-a-year indus-try. Ten years ago payday loans didn’texist, but today there are more paydaystores in America than there areMcDonald’s restaurants. Payday lendersmake millions of loans each year, butfor most all customers, the fees end upcosting more than the actual loan. Ihave great difficulty in comprehendinghow our political lenders allow thepayday lenders, who are the worst ofthe predatory lenders, to operate asthey do.

The FDIC, the federal agency thatregulates the banking industry, recentlytightened its guidelines to warn banksthat essentially they shouldn’t give aconsumer more than six payday loansa year. A few states have even tried toclose the payday stores down, but thelenders have managed to stay openand operate full bore. North Carolina,for example, has a consumer protec-tion law limiting interest on small loansto 36%, but payday stores there stillmanage to charge annual fees of 400%without breaking the law. Alabama’slaws on payday lenders are so weakthat new payday loan outlets arepopping up all over the place. At onetime, Florida lenders were moving overthe state line to get the benefit of

Alabama law. I believe the paydaylenders are a public menace andshould be subject to strong controls.

XIII.PREMISESLIABILITY UPDATE

LAWSUIT CLAIMS PLANT WAS POORLYSTAFFED

A lawsuit has been filed arising outof the deadly blast at the BP Texas Cityrefinery. It is alleged that the disasterwas caused partly by understaffing in acritical control room. It is also claimedthat other workers on duty in the areathat exploded were either inexperi-enced, undertrained, or not adequatelydoing their jobs. The supervisor of therefinery’s isomerization unit, which wasbeing restarted at the time of the blast,wasn’t even at the unit “during a criti-cal time period” during the start-up, thelawsuit alleges. It also claims that aqualified substitute was not left incharge, other key operators wereallowed to leave the refinery at thetime, and only one board operator wasassigned to the control room.

The U.S. Chemical Safety and HazardInvestigation Board (CSB) is lookingclosely at staffing issues. The start-upof a unit is considered one of the mostdangerous times in refinery operations.Fifteen people died and more than 100were injured in the March 23rd explo-sion. There appears to have been asystematic breakdown in communica-tions, operator training, and manage-ment supervision of the start-upprocedures.

Dozens of injured workers and rela-tives of those killed are suing the refin-ery operator in a Texas state court.Workers had just finished eating lunchand were getting back to work whenseveral noticed a flammable liquid andvapors spewing from a vent stack onthe isomerization unit’s raffinate split-ter. The splitter makes products used to

boost the octane of gasoline. Witnessessaid the liquid and vapors gathered onthe ground and were ignited by avehicle or other source, causing aseries of blasts heard and felt up to fivemiles away. CSB officials have said oneof the blasts happened underneath adoublewide construction trailer locatedwithin 150 feet of the isomerizationunit. Most of those killed were attend-ing a meeting or working in the trailer.

The employees didn’t know the start-up was taking place and heard noalarms as the liquid was accumulating.They have questioned why the trailerwas placed so close to the isomeriza-tion unit, as well as why they and othernon-essential workers were allowed tobe at the site during the start-up. Inaddition, industry experts and othershave questioned why the vent stackwas not equipped with a flare system,which likely would have safely burnedaway the materials before they over-flowed. Such flare systems arecommon in the industry, and the CSBhas said repeatedly that the vent stackis a major focus of its investigation.

Source: Houston Chronicle

IX.WORKPLACEHAZARDS

JURY AWARDS $6 MILLION TO WOMANALLEGEDLY RAPED BY PASTOR

A Missouri jury has awarded a $6million judgment to a former choirdirector who claimed the MethodistChurch didn’t protect her from a pastorwho allegedly raped her seven yearsago. The jury heard two weeks of testi-mony before returning their verdict,awarding $4 million in punitivedamages. The jury, which already hadawarded $2 million in compensatorydamages to the lady, ruled that theWest Missouri Conference of the UnitedMethodist Church should pay punitivedamages for its wrongdoing.


Several people from a UnitedMethodist Church in Springfield hadfiled complaints about the pastor, whoserved the church from 1995 to 1998.The victim testified that she was rapedon March 25, 1998. The alleged attackby the pastor took place at the churchin the choir director’s office. Witnessestestified that as early as 1996 theybrought complaints against the pastorabout inappropriate comments andsexual innuendoes to the Bishop andto a former District Superintendent,each of whom was named in the suit.The conference did not follow throughwith plans in March 1998 to monitorthe pastor and have him undergo train-ing regarding sexual misconduct,according to testimony. A civil lawsuithas also been filed against the pastor,who accepted a three-year suspension,then left the Methodist Church. Inter-estingly, this man is now a pastor of aBaptist Church in Kansas.

OSHA FINES ALABAMA FOUNDRY FORSAFETY VIOLATIONS

The U.S. Labor Department’s Occu-pational Safety and Health Administra-tion has cited United States Pipe andFoundry Company and proposedpenalties totaling $71,000 followinginspections at the company’s Bessemer,Alabama plant in response to a fatalaccident last fall. In October, dislodgedcrane cables struck and killed afoundry employee. Although thecompany is a molten metal industryhealth “partner” with OSHA, theagency began a fatality investigationOctober 28th, and initiated plant-widesafety and health inspections onNovember 4th. Partnerships, in general,have proven to be an effective tool inreducing worker fatalities, injuries andillnesses. OSHA says the companyfocused on reducing employee expo-sure to noise, silica, and lead, but failedto address other serious hazards notspecified in the partnership agreement.The company received two serious

citations directly related to the fatality,with proposed penalties of $9,500, forfailing to have a safety latch on agantry crane hook and failing to ensurethat employees used personal protec-tive equipment, such as hard hats.

OSHA also issued 20 additionalserious citations, with proposed penaltiesof $61,500, alleging other deficiencies:

• in gantry and overhead cranes;

• inadequate personal protectiveequipment and eye wash stations foremployees working with corrosivematerials;

• improper labeling and storage ofhazardous chemicals;

• failing to provide employees withsafety and health training;

• lack of fall protection; failing toprotect workers from electricalhazards;

• exposing employees to injuries fromunguarded machinery; and,

• not properly locking and taggingmachinery to prevent start-up duringmaintenance or repair.

OSHA CITES 5 COMPANIES IN FATALACCIDENT AT UNIVERSITY OF MISSISSIPPI

The federal Occupational Safety andHealth Administration has cited fivecontractors for a November 2004 con-struction accident that killed tworoofers and injured two others at theUniversity of Mississippi. OSHA hasproposed penalties totaling more than$152,000 for Harvey C. Green Con-struction Co.; B&G Electrical Contrac-tors Inc.; Tri-Star Mechanical Inc.;Mississippi Sheet Metal Inc.; and StevenPatrick Nance, a roofing contractor.Clyde Payne, OSHA’s Jackson areadirector, said the companies have 15days to contest the citations and pro-posed penalties before the independ-ent Occupational Safety and HealthReview Commission. The accidentoccurred November 11, 2004, as

workers were installing a roof onScruggs Hall. They were riding in a liftcrane that toppled about 35 feet at therenovation site. The two employeeswho were killed died as a result ofmassive head trauma. Source: Associated Press

JURY VERDICT IN TRENCH CAVE IN CASE

Two men were awarded $6.2 millionfor injuries from a construction acci-dent that occurred seven years ago.The men sued Konover ConstructionCorp., the general contractor on theproject, claiming that the companyfailed to adopt safe procedures as thegeneral contractor for a B.J.’s Whole-sale Club located in a shopping center.The two men were injured when atrench caved in on them on October30, 1998. A Connecticut jury awardedthe two men verdicts of $3.4 millionand $2.8 million respectively. One ofthe men was excavating a water linewhen a trench caved in, buryinganother worker. The two men wholater sued jumped in to save theirfriend, and the trench caved in asecond time, burying them. All three ofthe men were rescued, but the twomen who tried to rescue their friendsuffered permanent injuries.

ELECTROLUX SETTLES WRONGFUL-DEATHCASE

The family of a man who blamed hiscancer on years of working at a centralIllinois vacuum maker has reached a$3.25 million settlement in a wrongful-death case. The agreement ended acivil trial in the case of John Maxwell,who spent about 25 years working forThe Eureka Co., which is now knownas Electrolux Home Products. Mr.Maxwell died in 2001, after sufferingfrom laryngeal cancer and leukemiathat his family attributed to chemicalexposure. The lawsuit claimed Eurekaconcealed dangerous working condi-tions, and chemical makers and suppli-


ers failed to adequately warn workersabout health risks. The company attor-neys contended that the man gotcancer from smoking. I have to wonderif they really believed that consideringthe amount of the settlement. Eureka,which changed its name to Electroluxin 2004, produced vacuum cleanersand other products in central Illinoisfor more than 50 years before closingits Normal, Illinois, plant in 2000. Whileits company headquarters remain inBloomington, manufacturing jobs wentto Texas and Mexico.

Source: Associated Press

SMITH BARNEY SUED FOR DISCRIMINATINGAGAINST WOMEN

Four financial consultants have suedCitigroup’s Smith Barney division alleg-ing gender discrimination. Specifically,the suit alleges that Smith Barney sys-tematically discriminates against itsfemale employees by distributingaccounts and business opportunitiesdisproportionately to men regardless ofqualifications. The plaintiffs also allegein their lawsuit that women brokers areoften deprived of new business oppor-tunities because women brokers arerarely allowed to partner with otherbrokers. While this case is in the earlystages, it has to be considered a majorproblem for not only the defendant,but others in the industry.

The lawsuit, which seeks class actionstatus, asks for injunctive relief to endgender discrimination, back pay, and anundisclosed amount of related damages.As you may know, the current litigationis not the first high profile accusationagainst Smith Barney in cases of thissort. The financial consulting firm wassued in 1996 by hundreds of womenwho alleged sex discrimination in theworkplace. That suit, which includedlurid and wild details of basementparties on Smith Barney’s premises, wassettled in 1998. I wouldn’t be surprisedto see Smith Barney try to resolve thiscase at an early date.

XV.TRANSPORTATION

DANGEROUS ROADS KILLING FOLKS

Every year, about 5,000 pedestriansdie in traffic accidents, 17,000 peopledie in alcohol-related traffic accidentsand 13,000 people die in speeding-related traffic accidents. More than halfof the nation’s accidents, are on two-lane, rural roads. According to reports,undivided rural two-lane roads—thosewith no median—account for two outof every five fatal accidents. This data-base, sorted by state, county, and road,is a summary from 1999-2003 of:

• Fatal accidents in which at least onepedestrian died. The list includespedestrians, bicyclists, someone in awheelchair, and others not in motorvehicles who were killed in accidentswith motor vehicles.

• Drinking drivers who were involvedin fatal crashes.

• Speeding drivers who were involvedin fatal crashes. The list includesdrivers that investigators reported asexceeding the posted speed limit,were ticketed for excess speed orracing, and also cases in whichinvestigators noted that excessspeeding was a contributing factor toa fatal accident.

• Accidents on two-lane, undividedroads.

Note that roads may be listed underdifferent names, depending on howpolice reported the incidents. Also,studies caution that local investigatorstend to underreport alcohol-relatedcrashes. The U.S. Department of Trans-portation’s National Highway TrafficSafety Administration asks the states toreport each traffic fatality. Thosereports are compiled into a database,the Fatality Analysis Reporting System(FARS), which is the source for thesefatalities. You can learn more about

FARS by going to their website athttp://www-fars.nhtsa.dot.gov/. Source: NBC News

THE ALABAMA HIGHWAY DEATH REPORT

The number of deaths on Alabamahighways rose 15% last year over 2003,according to preliminary reports fromthe state Department of Public Safety.There were 1,007 highway deaths in2003, and reports indicate there were1,155 fatalities on Alabama highways in2004. State troopers report there were362 speed-related crashes and 255DUI-related fatalities in 2004. Accord-ing to the Department of Public Safety,speed is gaining each year as a causeof highway deaths. The number ofdeaths caused by DUI is holdingsteady. Unfortunately, each year thenumber of speed-related deaths hasincreased. At one time during the1980s, more than half the highwaydeaths were DUI related. According topreliminary statistics, most 2004highway deaths in Alabama did notoccur on interstates. Thirty-one percenthappened on county roads, 22% onstate highways, 22% on U.S. highways,and 12% on interstates. This pretty wellfollows the pattern in other states. Theremaining victims were killed on bicy-cles or all-terrain vehicles. DPS officialsblame the increase in highway deathson the lack of state troopers. Clearly,that has led to excess speed being therule rather than the exception onAlabama highways.Source: Associated Press

FEDERAL RULE ON TRUCK AND BUS DRIVERTRAINING IS VERY WEAK

A federal rule establishing trainingrequirements for truck and bus driversis grossly inadequate because it doesn’trequire that entry-level drivers receiveany training in how to operate a com-mercial motor vehicle. Public Citizenfiled a brief on behalf of Advocates forHighway and Auto Safety in the U.S.


Court of Appeals for the District ofColumbia. Public Citizen is asking thecourt to overturn a rule issued in May2004 by the Federal Motor CarrierSafety Administration (FMCSA). Therule was supposed to set minimumtraining requirements for commercialvehicle operators, including drivers oftrucks and buses. Instead of requiringthat drivers have on-the-road trainingin such things as backing, driving insevere weather, controlling skids andpassing other vehicles, the rule merelyrequires training in driver wellness,driver qualifications, hours of service,and whistleblower protection. JudithLee Stone, president of Advocates forHighway and Auto Safety, stated:

The federal government justreleased preliminary highwayfatality data for 2004 showing analarming increase in truck crashdeaths. More than 5,100 peopledied in truck crashes last year. Weare suing FMCSA because it issueda driver training rule for new truckdrivers that did not require anyon-the-road or behind-the-wheeltraining. It is inconceivable thatthis agency would allow someoneto start driving an 18-wheeler forlong distances at high speedswithout adequate behind-the-wheel training. The agency isplaying Russian roulette with thesafety of truck drivers and Ameri-can families on our highways.

Concerned about the number oftruck crashes caused by inadequatelytrained drivers, Congress in 1991directed the Secretary of Transportationto begin a formal process investigatingthe need for minimum training require-ments for entry-level truck and busdrivers. The agency was to issue a ruleby December 1993 or submit a reportto Congress explaining why a rule wasnot necessary. The Federal HighwayAdministration’s Office of Motor Carri-ers (now FMCSA) had previously pub-lished a model curriculum for

tractor-trailer drivers requiring at least320 hours of instruction. In anotherstudy published in 1995, the HighwayAdministration called the model cur-riculum a starting point and found thatcommercial vehicle drivers were notbeing adequately trained. In fact, itfound that only 8.1% of heavy truckcarriers and 18.5% of bus operatorsprovided entry-level drivers with ade-quate training—statistics that indicate aneed for minimum training require-ments. The agency held a publichearing in 1996 on the issue, but thendid nothing for seven years. In Novem-ber 2002, Public Citizen, Citizens forReliable and Safe Highways, ParentsAgainst Tired Truckers, and Teamstersfor a Democratic Union filed a petitionin court seeking an order directing thegovernment to fulfill Congress’mandate and issue a rule. As part of asettlement, the U.S. Department ofTransportation agreed to issue a ruleby May 31, 2004.

But, when FMCSA produced the ruleon May 21, 2004, it appeared to giveno consideration to the reams of infor-mation it had gathered documentingthe inadequacies of driver training andthe need for on-the-road training forentry-level commercial drivers. Its finalrule calls for just 10 hours of training,none of it on the road. Adina Rosen-baum, the Public Citizen attorneyworking on the case, stated:

The agency seems to have ignoredall the data it collected showing thegreat need for minimum trainingstandards for truck and bus drivers.It is absurd that after 14 years, therule doesn’t require drivers to getbehind the wheel of a truck or busas part of their training.

In the brief, Advocates for Highwayand Auto Safety’s petition was consoli-dated with petitions filed by theOwner-Operator Independent DriversAssociation and the United MotorcoachAssociation. The organizations areasking the court to declare FMCSA’s

rule arbitrary and capricious and toorder the agency to rewrite it to ensurethat entry-level drivers receive thetraining they need to operate a largetruck or bus.Source: Public Citizen

BACK-OVER DEATHS ARE A MAJORPROBLEM

Nearly 100 children under age 4were hit and killed while walking orriding bikes on U.S. roadways last year.Almost the same number died inparking lots and driveways when rela-tives or family friends accidentallybacked over them, but those deathswent uncounted by federal regulators.The government agency that ensurestraffic safety doesn’t track victims ofback-over accidents, usually small chil-dren run over by family members whodon’t see them behind minivans andSUVs with limited rear visibility. Thenumber of such deaths nationwide hasaveraged at least two a week for thepast couple of years, according to achildren’s safety group that compilesnumbers from media coverage. Anunexplained spike in the incidents tookplace last month, according to JanetteFennell, founder of the advocacy groupKids and Cars. Fennell has registered14 back-over deaths in the past threeweeks, most involving very young chil-dren who died from their injuries: a 17-month-old Wisconsin boy backed overby his uncle during a family birthdayparty, a 14-month-old Texas girlbacked over by her grandmother in thedriveway, a 2-year-old South Carolinagirl backed over by her father.

Safety advocates say there are rela-tively simple and inexpensive ways tosolve the problem, including placingsmall cameras on rear bumpers. Legis-lation before Congress would requirethe government to study the issue andthe auto industry to take steps toaddress it. Sally Greenberg of Con-sumers Union, which publishes Con-sumer Reports magazine, said: “This is


fixable. Every year, year in and yearout, we’re going to see many, manychildren backed over and killed unlesswe do something.” Cases such as thatof Adrianna Clemens, a 2-year-oldTexas girl run over in October by herfather as he backed his SUV out of thegarage. Her mother, Rachel Clemens,has started a campaign to push for leg-islation requiring rear visibility stan-dards in the auto industry. “We havegot to save the lives of these children.It has become an epidemic and it hasto be stopped,” she says. A ConsumerReports study last year found that somevehicles have rear blind spots as deepas 50 feet, with larger trucks and vansgenerally worse than cars. Automakerssay they are constantly working to min-imize blind spots and gradually intro-ducing technology such as sensors andrear-viewing cameras to give driversmore information, but they oppose leg-islation to make such steps mandatory.

Nearly 900,000 new vehicles sold inthe United States last year, out ofalmost 17 million total, included somekind of “parking sensor” that beeps towarn of obstacles to the rear, accordingto Ward’s Communications, an automo-tive statistics clearinghouse. A few 2005models, including some by Lexus,Acura, Infiniti, Toyota and Honda, offerrear-viewing cameras with displays onthe dashboard, often as standardequipment, according toEdmunds.com. As optional equipment,such cameras can cost $1,000 to$2,000. The National Highway TrafficSafety Administration (NHTSA), whichcompiles statistics about traffic fatali-ties, doesn’t really know how wide thescope of the back-over problem isbecause there is no central repositoryof information about the incidents.Nevertheless, it clearly is a majorproblem.

A recent NHTSA study of 1998 deathcertificates from selected states esti-mated that 120 people die annuallyfrom accidental back-overs, mostlyyoung children or the very elderly.

NHTSA is preparing a regulation thatwould set back-up safety standards for large, commercial-sized trucks.However, NHTSA isn’t prepared torequire changes from the auto industry.I believe that the government shouldaddress this problem. Too many livesare at stake for further delay. If NHTSAfails to act, Congress should legislate inthis area of concern. Source: The Washington Post

JURY VERDICT IN DEATH OF SOLDIER

A Texas jury awarded $17.5 millionto the family of a soldier killed in aMarch 2002 accident near Texarkana.Jurors learned, during the trial, that atrucker repaired a leak in an air brakehose with a toothpick and electricaltape. About 100 miles after the tooth-pick repair, the hose failed and thebrakes locked, bringing the truck to anabrupt stop. A car driven by Lt.Matthew Giuliano slammed into therear of the truck. The soldier later diedfrom injuries suffered in the accident.Lt. Giuliano, 23, of Ellington, Conn.,had been driving from Fort Knox, Ken-tucky, where he had just graduatedfrom officer training school, to FortHood for his first posting as an officer.As part of a settlement to avoid anappeal of the verdict, Giuliano’s familyagreed to accept $1.25 million. Thefamily accepted the smaller amountbecause of caps placed on jury verdictsin Texas. Celadon Trucking Services,the company that owned the truck,would have only had to pay $200,000of the $15.5 million in punitivedamages. With conduct of the sortexhibited in this case, a $200,000 capon punitive damages is absurd. Wrong-doers should be punished, and a paton the hand doesn’t do the job. Thefamily of a Lt. Giuliano deserve better!The jury had also awarded $2 millionin compensatory damages.

CHARTER AIRLINE MUST PAY $27 MILLION

A jury has ordered a charter airlinecompany to pay $27 million to awoman for failing to keep her ex-husband from taking her children outof the country. A Massachusetts womansued Cincinnati-based Executive JetManagement after her ex-husband paidthe company $160,000 to fly him andthe couple’s two children to Egypt onshort notice. The plaintiff alleged thatExecutive Jet Management failed tomaintain adequate safeguards againstabductions, such as asking bothparents to sign consent forms beforeflying children abroad. The case washeard in Connecticut because the flighttook off from Bradley InternationalAirport in August 2001. The plaintiffand her children were reunited in June2003. Executive Jet Management willappeal the judgment. Jurors awarded$10 million for negligence and aidingcustodial interference and $17 millionfor the 22 months the plaintiffs spentapart from her children.

The lawsuit also named the ex-husband as a defendant, but that casewill be heard separately. The couplewas entangled in a custody battle whenthe ex-husband took the children toEgypt. He later demanded millions ofdollars from his ex-wife in exchangefor the children’s safe return. Theplaintiff hired a private investigator andlearned the children and their fatherwere living on a yacht off Havana.Cuban authorities arrested the ex-husband and returned the children totheir mother. This was a very interest-ing case and will be followed closelyon appeal. Source: Associated Press

INTERSTATE HIGHWAY CRASH

The parents of a 17-year-old girl killedin a motor vehicle accident in 2004 havesued the Utah Department of Trans-portation (UDOT), alleging its negli-gence caused their daughter’s death.


The teenager died instantly when hercar slammed into a concrete post on anInterstate highway. The parents allege intheir complaint that the freeway was “ina defective, unsafe, and dangerous con-dition.” They also claim that UDOT andits employees were negligent in themanner in which they maintained thehighway in the area of the accident,permitting water to accumulate. A stormhad just passed through the area beforethe accident, leaving standing water onthe roadway, according to the UtahHighway Patrol. The decedent, whowas traveling below the posted speedlimit, at a speed appropriate for the con-ditions, drove into the standing water.This caused her to lose control of thevehicle and strike the concrete barrier inthe median. In most highway construc-tion projects, specific responsibilities areplaced on private contractors. In thiscase the state department had that duty.However, maintenance of an area ofroadway is generally the contractor’sresponsibility. It is extremely importantto have proper drainage at highwayconstruction sites, and in this case theresponsibility to maintain the site is anissue to be determined. Source: Salt Lake Tribune

CALLS FOR SEAT BELTS ON SCHOOL BUSES

I have contended for years thatschool buses should be required tohave seat belts for children. There havebeen a number of recent accidents thathave caused a renewed call to put seatbelts on the nation’s 585,000 schoolbuses. School buses are the safest wayto travel to school. Nonetheless, anaverage of 20 students are killed everyyear—five while riding the bus and 15run over by buses while getting on oroff them. The following are some ofthe recent bus accidents:

• Twenty-three students were injuredin Montana last month.

• Two students were killed April 28thin Arlington, Virginia, when a school

bus collided with a garbage truck.

• A school bus equipped with seatbelts in New York City flipped April26th. The 44 sixth-graders on boardsuffered minor injuries.

• A 16-year-old high school sopho-more died March 29th in Ripley,Oklahoma, when a bus struck aflatbed truck. The driver of the truckalso died. The bus driver facescharges of negligent homicide.

Alan Ross, president of the NationalCoalition for School Bus Safety told theUSA Today: “School buses are old-fash-ioned, out-dated and don’t give chil-dren the benefit of current safetytechniques.” Ross told USA Today thatschool buses should have seat beltsand be redesigned so they are not sotop-heavy and prone to rolling over.New York, New Jersey and Floridarequire new buses to have seat belts,but only New Jersey, and Floridarequire students to use them, which israther difficult to understand. I believethat all states should require seat beltsfor school buses and require all pas-sengers to wear them. Source: USA Today

XVI.ARBITRATIONUPDATE

THINGS YOU CAN DO TO PROTECT YOURLEGAL RIGHTS

It is now well documented that con-sumers don’t like mandatory, bindingarbitration. However, folks throughoutthe country are being forced to dealwith this anti-consumer tool, which isused against them on a regular basis,and the results aren’t good. Until thecourts or legislative bodies see fit togive consumers some badly neededrelief, there are some things folks cando that will give them some protectionagainst the evils of arbitration:

• Be aware – Without even knowingit, you have already signed dozens ofthese arbitration clauses. They areeverywhere….car contracts, creditcard contracts, leases, loans, mort-gages, nursing home admittances,building contracts, and many more.

• Read the fine print & cross it out–Be sure to carefully read all the pro-visions in a contract or service agree-ment. You should look for words like“dispute resolution” or “settlingclaims.” You have the power tonullify mandatory arbitration clausessimply by crossing them out beforeyou sign the agreements or by optingout under set procedures. In mostcases, the company you are dealingwill require you to agree to manda-tory arbitration in order to receiveservices. With any luck there will beother service providers in the areathat may fit your needs.

• Shop around – Some serviceproviders do not require mandatoryarbitration. When comparing pricesand services, be sure to check theirarbitration policies. Shop for con-sumer-friendly companies that refuseto be involved in mandatory arbitra-tion. Don’t be afraid to challenge anycompany that demands that you signan arbitration agreement.

• Read mail stuffers – You shouldread thoroughly any paper thatcomes with your monthly statementsto be sure they don’t include newprovisions to your contracts, includ-ing mandatory arbitration clauses.

• Join a credit union – Many creditunions don’t put mandatory arbitra-tion clauses in their loan or creditcard contracts. Some credit unionsdo have mandatory arbitrationclauses for other services, however,so you should read the fine print tobe sure.

• Always Ask – When you are askedto sign any type agreement or signfor repairs or the receipt of any type


goods or services, always ask if thedocument contains an arbitrationagreement.

• Modify Arbitration Clauses – Somefolks have taken some interestingsteps in an attempt to avoid arbitra-tion. For example, in one case, it wastyped in on the back of the con-sumer’s check: “By endorsing andcashing this check, the payee agreesto avoid any arbitration agreementinvolving the payor.” After the checkwas endorsed and cashed, there wasno more arbitration agreement. Inanother case, the consumer wrotethe company and said “we didn’tagree to an arbitration agreementwhen we signed our loan documentsand are not bound by the enclosedarbitration clause. We are herebyrescinding the arbitration agreement,but no other part of the agreement.”

NASD TRYING TO LEVEL PLAYING FIELD

The National Association of Securi-ties Dealers is planning to change theway it defines a public arbitrator,making it more difficult for people withties to Wall Street to fill that role. TheNASD proposal is a rule that willexclude employees who work at com-panies that control or are controlled bysecurities firms from serving as publicarbitrators. Spouses and immediatefamily members of these individualsalso would be prohibited from servingas public arbitrators. The rule is aimedin large part at prohibiting employeesof asset-management firms that are notregistered with the NASD, but are con-trolled by a registered firm, fromwearing the hat of a public arbitrator.This rule would require approval bythe Securities and Exchange Commis-sion. It has been reported in the media,and specifically in the Wall StreetJournal, that a number of public arbi-trators have long ties to Wall Street. Inone instance, a public arbitratorworked for a Prudential Financial, Inc.money-management unit. This change

certainly would appear to be a step inthe right direction. The proposed rulechange, which may not make itthrough the SEC, is long overdue in myopinion. It is tough enough forinvestors to have a panel, one-third ofwhich is made up of a Wall Streetregular. The other two certainly do notneed to be controlled by brokeragefirms as well.Source: Wall Street Journal

XVII.NURSING HOMEUPDATE

NURSING HOME SHUT DOWN AFTERVIOLATIONS FOUND

More than 40 residents of a Cleve-land County, Oklahoma, nursing homeare being relocated after numerous vio-lations prompted regulators to shutdown the facility. Among the violationsat the Noble Residential Care Homewere rodent droppings, urine onkitchen plates and bowls, and cock-roaches “too numerous to count”crawling on a resident’s clothes andbeds. Noble Residential Care Homehad beds for 34 residents. A separate,unlicensed building housed eight addi-tional residents. The home was citedfor numerous health and safety viola-tions that threatened residents’ welfare.

Health Department inspectors foundsinks with faucet handles that didn’twork; cold water in showers and bath-tubs; uninvestigated allegations of aresident’s personal property stolen by astaff member; and an employee whohad been convicted of a misdemeanorassault-and-battery charge. One employeedidn’t have required criminal back-ground checks conducted on him fortwo years. Because one toilet regularlyclogged, residents were told not toflush toilet paper. Because of that,inspectors found a bathroom wastebas-ket “filled with toilet paper smearedwith feces.” In one bathroom, the win-

dowsill “was covered with dust, deadbugs and empty bottles,” according toa Health Department inspection. In thehome’s kitchen, rodent droppings anddead weevils were found on storageshelves containing open cereal boxes,sugar, pancake mix, cookies, andbeans. Chew marks from rodents werefound on a bag of instant gelatin.Besides cockroaches, spider webs withlive spiders were observed over thehanger rack in one resident’s closet.Source: Associated Press

NON-PROFIT NURSING HOMES MAYPROVIDE BETTER CARE

A University of Toronto study sug-gests that non-profit nursing homes inthe United States generally providebetter care than for-profit homes.The study examined about forty casesin which non-profit nursing homeswere compared to for-profit homesduring the time period of 1993 to 2002.In those comparisons it was found thatnon-profit homes generally had betterresults in the areas of use of restraintsand pressure ulcers. The study indi-cated that residents living in for-profitnursing homes had higher rates ofdevelopment of pressure ulcers, weresubjected to a greater use of psychoac-tive medications, and were more fre-quently placed in physical restraints.The lead author of the study, MichaelHillmer, said “We really don’t knowwhat it is about non-profit homes thatallows them to perform better…itcould be as simple as them beingrequired to put any profits back intothe homes.” I would caution readers,however, that there are many nursinghomes out there that call themselves“non-profits,” but in some cases thatcouldn’t be farther from the truth.Many of the “non-profit” nursinghomes we run into pay out huge sumsof money to individuals with an own-ership interest in the homes.


SEX OFFENDERS LIVING IN FLORIDA NURSINGHOMES

There have been numerous reportsof sex offenders living in nursinghomes around the country. We havelearned that there are currently at leastnineteen registered sex offenders inFlorida who are living in nursinghomes. It is difficult to comprehendhow convicted sex offenders could beallowed to live in facilities where amost vulnerable group, the elderly, areliving. There have been numerous inci-dents in nursing homes in whichelderly residents were raped. Some ofthe victims of the sex offenders whoare in the Florida facilities were chil-dren.

ARKANSAS “GRANNY CAM” BILL

We have learned that the “GrannyCam” bill in the Arkansas Legislaturehas failed to pass. Had the bill passed,it would have made Arkansas only thethird state to pass such legislation.After the Arkansas bill was introducedseveral changes were made, promptedby the nursing-home industry, thatcaused several groups to withdrawtheir support for the bill, including theArkansas Advocates for Nursing HomeResidents and the Arkansas AARP.

XVIII.HEALTHCAREISSUES

HOSPITAL SERVICES PERFORMED OVERSEAS

There is a current trend affecting oureconomy that should be of concern toall American citizens. We are sendingall sorts of jobs and services to foreigncountries, and the number is increasingby leaps and bounds. This has nowfound its way into the medical commu-nity. I really didn’t know that medicalservices were being sent oversees.However, hospital services are now

being out-sourced to foreign countries,which probably are not widely knownin this country. For example, havingradiologists read images from such U.S.hospitals in such places as Hawaii,India, Australia, Switzerland, Israel andBrazil is not uncommon. The compa-nies, and the doctors and hospitalsusing them, say the trend is improvingcare by guaranteeing that well-restedradiologists are always available, evenin the middle of the night, even for thesmallest hospitals and in the most ruralareas. Skeptics, however, say the prac-tice raises a host of concerns. Theobvious question is: Are the radiolo-gists qualified? There are others: Iscommunication as good when the radi-ologists are so far away? Can an over-seas doctor be held accountable whensomething goes wrong? Is anyoneensuring that properly trained andlicensed radiologists are actually doingthe work? Is patient privacy being pro-tected?

Both sides see the trend as theleading edge of a movement towardgreater use of telemedicine, which iswidening the spectrum of care doctorscan provide from afar and enablingmore outsourcing of medical servicesoverseas. Some say teleradiology isreally just the beginning and that otherthings such as pathology are also beingoutsourced. The trend has sparked aflurry of regulatory initiatives, includingproposed state and federal legislationdesigned to ensure that doctors per-forming the work are properly trainedand licensed, and that patients are noti-fied whenever information about themis transmitted elsewhere, especiallyoverseas.

Representative Edward J. Markey (D-MA) and Senator Hillary RodhamClinton (D-NY) recently introducedlegislation that would require patientconsent in advance. RepresentativeMarkey says: “Patients have the right toknow, and the right to say no, beforetheir X-rays or other private healthinformation is offshored to countriesthat lack strong privacy safeguards.”

The advent of remote radiology serv-ices was prompted by various factors,including a shortage of radiologists andrapid advances in imaging technology,which has caused a sharp increase inthe number of tests. As a result, manyhospital radiologists have a hard timekeeping up with the demand, espe-cially at night. In response, St. Mary’sand hundreds of other hospitals andradiology practices have begun out-sourcing, allowing their staff radiolo-gists to come to work fresh eachmorning. But skeptics worry thatremote radiology operations may bestaffed with one or two U.S.-certifiedradiologists who approve reports pre-pared by less-qualified technicians, apractice known as “ghosting.” “Becauseof the ease of moving this stuff around,the problem of being able to authenti-cate who is doing the work is anissue,” said Robert Wise of the JointCommission on Accreditation of HealthCare Organizations, which is upgradingits standards for accrediting hospitals inresponse to the trend.Source: Washington Post

STUDY URGES MORE CARE FOR LEADEXPOSURE

A recent study confirmed what ourfirm has known for a good while. Chil-dren who are poor often don’t get themedical follow-up they need for leadexposure. Unfortunately, those athighest risk for lead poisoning are theleast likely to get additional testing, astudy in Michigan found. The studyinvolved 3,682 children in the Medicaidprogram whose blood tests showedlevels of lead that could harm mentalfunction. Only about half the chil-dren—54%—had follow-up testingwithin six months, the researchers said.Follow-up screening to see whetherinitial blood-lead levels have changedis a key step in monitoring cases,according to lead author Dr. AlexKemper, an assistant pediatrics profes-sor at the University of Michigan. Treat-


ment typically follows such testing.Although the research focused onMichigan children, similar results likelywould be found elsewhere. The chil-dren in the study generally live inhomes built before lead-based paintwas outlawed, or they live in areasnear factories and other sources oflead. This puts them at risk for leadpoisoning. Obviously, children wholive in the suburbs or in new homesaren’t at risk as a general rule.

Medicaid children with other riskfactors for lead exposure—minoritiesand those in urban areas—were themost likely in the study not to receivefollow-up testing. These children fallthrough the cracks for several reasons:

• Parents might not always be notifiedwhen their children have higher leadlevels or they may not know theyshould seek additional screening.

• Some doctors might not pursuefollow-up testing for low-incomepatients, figuring that remedies,including paint removal, might beimpossible for patients with fewresources.

Dr. Bruce Lanphear, a researcher atCincinnati Children’s Hospital, whowrote an editorial accompanying thestudy in the Journal of the AmericanMedical Association last month, stated:“There’s probably enough blame to goaround.” Lead can interfere with devel-opment of the central nervous systemand severe lead poisoning can causeseizures and even death. Lead-linkeddeclines in mental functioning may bepermanent. We should treat lead-poi-soning as the serious threat that it isand get to work solving the problem.Lead abatement has been delayed for anumber of reasons. Even in more afflu-ent areas, public health officials lackresources or legal muscle for leadabatement. Source: Associated Press

XIX.ENVIRONMENTALCONCERNS

LEAD CLEANUP IN ANNISTON AREA COULDCOST UP TO $100 MILLION

The Environmental ProtectionAgency has sent a proposed settlementagreement to 11 companies responsi-ble for lead contamination in theAnniston area, including parts ofOxford and Hobson City. Franklin Hill,deputy director of the waste manage-ment division for EPA Region IV, esti-mated the agreement could addressmore than 14,000 properties and costthe companies up to $100 million overa span of at least three years. The EPAhas already spent $11 million on leadcleanup in Anniston, a portion ofwhich would be recovered by theagreement. The companies involvedeither own or formerly owned one of23 industrial operations in Anniston.The parties identified have been askedto commit to the cleanup as a groupinstead of singling out liabilities. Thecompanies, which will decide amongstthemselves how to divide the costs andmanage the cleanup, have formed theFoothills Community Partnership tostreamline the process. I expect anumber of civil lawsuits to be filed, pri-marily for property damages. There ispresently pending a class action lawsuitseeking damages for propertydamages. There will likely be individ-ual cases filed for claims based ondamages to property. Personal injurylawsuits will be much more difficult, aswas the case in the PCB cases. Source: Associated Press

A HOT SPOT FOR MERCURY POLLUTION

An internal Environmental Protec-tion Agency report estimates the south-eastern area of the country alone couldreap up to $2 billion a year in benefitsfrom reducing mercury pollution—40times more than the $50 million in ben-

efits the agency projected publicly forthe entire nation. The report shows theBush Administration sought to mini-mize the benefits of reducing mercurypollution in order to justify not requir-ing power plant owners to buy themost effective technology for loweringmercury emissions. A separate EPA-commissioned study released in Febru-ary by the Harvard Center for RiskAnalysis estimated there could be $5billion a year in public health benefitsfrom a 62.5% cut in the mercuryreleased by power plants. That studytoo was excluded from considerationin the new rule EPA released in March.The report on Southeast benefits, acopy of which was obtained by theAssociated Press, looked at reducingmercury concentrations in marine fishand shellfish. While it didn’t estimatethe cost of achieving this reduction, itdid say that reducing national mercuryemissions by 30% to 100% wouldproduce benefits to the southeast ofbetween $600 million to more than $2billion.

This report also found mercury “hotspot” deposits of the toxic metalstretching across 50,000 square miles inthe South Atlantic from North Carolinato South Florida. The existence of sucha large mercury concentration makesextremely suspect assertions by EPAofficials that their new rule wouldprevent such hot spots. Mercury con-centrations accumulate in fish and goup the food chain, posing the greatestrisk of nerve damage to pregnantwomen, women of childbearing ages,and young children. EPA officials alsohad said mercury-contaminated fishfrom abroad posed the biggest threat.But, the unreleased EPA report “paintsa different picture—that in certain partsof the country you have a lot of Ameri-cans eating fish caught locally.” Do youwonder why it is hard to believe thatthe EPA is really a protector of theenvironment and public health?

The EPA commissioned the studytwo years ago. Interestingly, a “final”version is dated January 2004, 14


months before EPA released itsmercury rule for power plants. Agencyofficials said that report is still being“internally peer reviewed,” which iswhy it wasn’t considered for EPA’s rule.The March rule ordered steps it esti-mated would cut mercury pollutionfrom power plants in half by 2020,from 48 tons a year now to 24.3 tons.Environmental and health groups saidEPA could achieve quicker cleanupsand fewer hot spots if it ordered thenation’s 600 coal-burning power plantsto install new pollution controls, andimposed a firm deadline. It comesdown to a question of the costs versusbenefits of a nationwide cleanupprogram, and one of power and influ-ence. Forty percent of all U.S. mercurypollution comes from coal-fired powerplants, and those releases have neverbefore been regulated. The utilities arepolitically well-connected and verypowerful.

In sort of a stop-gap fashion, theFood and Drug Administration and theEPA have come up with these guide-lines for fish eaters:

• Do not eat shark, swordfish, kingmackerel, or tilefish because theycontain high levels of mercury.

• Eat up to 12 ounces (2 averagemeals) a week of fish and shellfishthat are lower in mercury, such ascanned light tuna, salmon, pollock,and catfish. Only 6 ounces of Alba-core (“white”) tuna is advisedbecause it has more mercury thancanned light tuna.

• Check local fish advisories formercury and other pollution alerts. Anational database is online atepa.gov/waterscience/fish/states.htm.

Source: Associated Press

XX.TOBACCOLITIGATIONUPDATE

JURY REJECTS FLIGHT ATTENDANT SMOKECLAIMS

A jury has rejected claims by aformer flight attendant that her healthproblems were caused by exposure tosecond-hand cigarette smoke aboardairliners. The Miami-Dade Circuit Courtjury rejected claims by Lorraine Swatythat her chronic sinusitis was caused bysmoke during her 20 years as an atten-dant for US Airways Group Inc. Thelawsuit was filed as part of 1997 classaction settlement allowing individualflight attendants to claim compensatorydamages against cigarette companiesfor health problems they say arerelated to smoke exposure aboard air-craft. About 2,800 such lawsuits havebeen filed. The verdict marked thesixth time in seven such cases thathave gone to a jury since 2001 inwhich cigarette companies have pre-vailed. Another case ended in a mistrialin May 2002 and was later dismissed. Source: Forbes News

XXI.THE CONSUMERCORNER

CHILDREN ARE MORE SAFE IN CARBACK SEAT

Studies have shown that children aresafer in car crashes when they sit in theback seat. They are also less likely tobe injured when safety seats and seatbelts are used. A recent study wassponsored by The Children’s Hospitalof Philadelphia, the American Academyof Pediatrics, and the world’s largestinsurer, State Farm Insurance Co.,which confirms that children shouldride in the back seat. “The single most

important lifesaving decision parentscan make for their child is to use therear seat and age- and size-appropriaterestraints during every car ride, everytime,” said Dr. Flaura Winston, a pedia-trician and chief investigator of thestudy, which was released last month.The findings are based on informationfrom more than 370,000 State Farmpolicyholders involved in car crashes.Researchers say the combination ofsitting in the back seat and using safetyrestraints would have prevented morethan 1,000 of the 3,665 serious injuriesto children under 16 in the crashes.The study also notes that almost a thirdof the nearly 1,800 children who diedin car crashes in 2003 were riding inthe front seat, and more than halfweren’t restrained.

The study found children were 40%safer in the back seat than the front incar crashes. The risk of injury droppedto less than 2% when safety seats andseat belts were used. Dr. Winston saidtoo many parents give in to childrenwho have grown out of safety seatsand want to ride up front. There aremore things in the front compartmentthat can cause injury to children, suchas dashboards, windshields andairbags. There can be no negotiationswhen it comes to safety and children.Adults have to make safety decisionsfor children. The report also concludedthat minivans and large cars and sport-utility vehicles were the safest for chil-dren, while smaller vehicles had higherinjury rates. Safety improvements andincreased safety seat and seat belt usehave reduced child fatality rates to 1.5per 100 million miles driven in 2003from 2.3 per 100 million miles in 1988,according to the study.Source: Associated Press

SETTLEMENT IN RICO SUITS INVOLVINGLUPRON

A pair of settlements totaling $150million received final court approval lastmonth. The settlements were reached in


RICO suits brought by consumers andinsurance companies over allegedlyillegal sales tactics that drove up theprice of Lupron, the prostate cancerdrug. U.S. District Judge Richard G.Stearns of the District of Massachusettsrejected all objections to the settlement,but put off deciding whether to approvea request for legal fees. The judge wrotea 50-page opinion explaining the basisfor his approval of the settlement.

The civil suit stemmed from a crimi-nal case in which TAP PharmaceuticalProducts Inc.—a joint venture of AbbottLaboratories of Illinois and TakedaPharmaceuticals Co. of Japan—pleadedguilty to charges that it had encourageddoctors to fraudulently bill the Medicareprogram for free samples of Lupron aspart of a “‘brand loyalty’” scheme. Pros-ecutors had argued that the intent ofthe scheme was to provide incentivesto doctors to prescribe Lupron insteadof cheaper, similarly effective drugs,such as Zoladex, manufactured byAstraZeneca. At the heart of the schemewas TAP’s overt or tacit encouragementof doctors to bill Medicare for Lupron atan imaginary average wholesale price(AWP) provided by TAP to the “RedBook,” an industry publication used byMedicare and other third-party payors,to establish payment schedules forreimbursable prescription drugs. Prose-cutors argued that TAP knew it could“raise” the AWP of Lupron at any timeby simply forwarding to the Red Booka new and higher average wholesaleprice. This allowed TAP to control themaximum Medicare reimbursementpaid to a doctor for prescribing Lupron.

According to the plaintiffs in the civilsuit, the AWP reported by TAP forLupron bore no resemblance to theactual prices being charged to doctors,nor did it bear any relationship to areasonable interpretation of the terms“average” or “wholesale.” Instead, thesuit alleged that the AWP was inflatedat the expense of consumers and insur-ers in order to funnel hidden profits todoctors. Under its plea agreement, TAPpaid a $290 million criminal fine and

nearly $560 million in restitution. Thelargest beneficiary was the Medicareprogram. Ordinarily, prescription drugsare not covered by Medicare, butLupron, which is injected in thedoctor’s office, is covered as a cancertreatment. Lupron has been a majorsuccess, enjoying an 85% market share.There is a very good reason forpatients wanting Lupron. Lupron isinjected into the buttocks, but Zoladexis injected with a larger needle into theabdomen (a much more sensitivespot), and that has to be appealing topeople. Both drugs serve as alterna-tives to surgery.

Prosecutors alleged that TAP hadgone to extreme lengths to protect itsdominant market share by routinelygiving doctors free samples of Lupronif they agreed to stop using Zoladex.The company then encouraged thedoctors to reap huge profits from thefree samples by billing the govern-ment, according to the prosecutors. Inthe court’s opinion, Judge Stearns out-lined the terms of the settlement,which consisted of two separate agree-ments:

• In the first agreement, the defendantswill pay $55 million to settle claimsbrought by a consortium of insur-ance companies and health plansthat provide prescription drug bene-fits and together represent 70% of the198 million Americans covered byinsurance.

• In the second settlement, the defen-dants will pay $40 million to coverclaims of individual consumers and$55 million to settle the claims of aclass of third-party payors.

Judge Stearns noted that consumer-purchasers are entitled to recovereither 30% of their total out-of-pocketpayments for Lupron or $100,whichever is greater, unless the totalamount of claims exceeds the amountallotted to the consumer pool. It is esti-mated that, after payment of expensesand lawyers’ fees, $27.5 million will be

available to the consumer-purchaserclass. It is believed that this amountwill be adequate to pay all claims infull. Judge Stearns concluded that thesettlement was fair in part because theallocation of the settlement funds was“deliberately weighted to favor theconsumer-purchaser class” over insur-ers and third-party payors. If the casehad not settled, Judge Stearns statedthat it would be in the courts for years.He also stated that the plaintiffs facedsignificant risks at every turn in estab-lishing liability and proving damages. Source: The Legal Intelligencer

DRUG CHAINS LIMIT ACCESS TO COLDMEDICINE

Three of the nation’s largest drug-store chains will move certain nonpre-scription cold and allergy medicinesbehind pharmacy counters. This comesafter a string of retailers have limitedaccess to drugs whose ingredients canbe used to make the illegal drugmethamphetamine. CVS Corp. and RiteAid Corp. will move medications con-taining pseudoephedrine behind coun-ters at their stores this summer.Walgreen Co. spokeswoman said thechain—the nation’s largest by sales—also plans to put the drugs under apharmacist’s control, but has not yet seta timetable for the change. Pseu-doephedrine, an active ingredient ofPfizer Inc.’s Sudafed and Schering-Plough Corp.’s Claritin-D, can also beused to manufacture methampheta-mine, a highly addictive drug. Cus-tomers should have to ask pharmacistsfor the medications rather than beingable to pick them off a store shelf. Wal-green and CVS only plan to restrictaccess “single ingredient” pseu-doephedrine products, while Rite Aidsaid it will also pull combination prod-ucts off shelves.

Target Corp., Albertson’s Inc., andWal-Mart Stores Inc. have all recentlylimited access to medications contain-ing the drug. I understand that Pfizer is


in the process of reformulating itsSudafed products to remove pseu-doephedrine. A number of states haveimposed restrictions on the sale ofpseudoephedrine products in anattempt to curb a proliferation of so-called meth labs across the country.Alabama’s Legislature failed to pass abill during the last session. Six statesonly allow pharmacies to sell drugswith the ingredient, and seven restrictaccess to pseudoephedrine products.Woonsocket, Rhode Island-based CVSsaid the change will take effect at its5,400 stores by July 1st, and Rite Aid,which operates about 3,400 drugstoresnationwide, set a deadline of August 1st.

MORE WEB THREATS ON THE HORIZON

Many consumers at least are aware ofthe identity theft problem known as“phishing.” That one uses fake emailsthat appear to come from banks andother businesses seeking personal data.Now there are two more scams thathave damaging potential, and those arenot so well known or understood.These are called “evil twins” and“pharming.” Evil twins are wireless net-works that pretend to offer legitimateWi-Fi connections to the Internet. Inpharming, identity thieves redirect aconsumer to an imposter webpageeven when the individual types thecorrect address into his browser. Fortu-nately, pharming and evil twins aren’tas widespread as phishing at this point.But, they have tremendous potential forharm. Clearly, Internet security is essen-tial for all persons who use the Internet. Source: Wall Street Journal

LAWSUIT SAYS SWEEPSTAKES WAS SCAM

A lawsuit filed by the Texas AttorneyGeneral’s office is aimed at a sweep-stakes scam. As we have previouslyreported, the sale of personal informa-tion is the fastest-growing crime andconsumer problem that is facingAmerica today. The lawsuit charges

that two individuals and their compa-nies violated the Texas DeceptiveTrade Practices Act by tricking thou-sands of Texans into providing theirpersonal information, which was thensold without their knowledge. Thesedefendants are being sued for $20,000per alleged violation of the act. Accord-ing to the lawsuit, displays were set upat movie theaters, malls, boat shows,and other events in and around Austinand San Antonio to encourage peopleto fill out sweepstakes entry forms thatincluded contact information, maritalstatus, and annual income.

The company would then pass alongthe information to the two individualdefendants, according to the lawsuit.The individuals then solicited the con-sumers to attend sales presentations byvacation timeshare companies, whichpaid them for the telemarketing serv-ices. Records show that these twodefendants made more than $1.5million between 2003 and 2004 for thepersonal consumer information theyprovided to the timeshare companies.The lawsuit seeks an injunction requir-ing the companies to clearly disclosethat the information may be used bytelemarketers. According to the lawsuit,which resulted from an investigationinitiated in January 2004, people whowere married or widowed, were underthe age of 70, and had incomes ofmore than $35,000 were targeted. Thisis just another example of how con-sumers are being cheated and wind uplosing large sums of money. Govern-ment must do everything possible tocurb this new form of criminal activity. Source: The American Statesman

CDC PUSHING NEW MOSQUITO REPELLENTS

For years the federal government haspromoted the chemical DEET as thebest defense against West Nile-bearingmosquitoes. Now the government, forthe first time, is recommending twoother insect repellents as safe andeffective enough for use. The Centers

for Disease Control and Preventionsays repellents containing the chemicalpicaridin or the oil of lemon eucalyptusalso offer long-lasting protectionagainst mosquito bites. It’s an about-face for the federal health agency,which maintained for years that non-DEET repellents were not likely tooffer the same degree of protectionfrom mosquito bites. DEET has beenthe “go-to” chemical for health officialstrying to control the spread of the WestNile virus in the United States.

BACKYARD PLAY SETS CAN BE HAZARDOUS

Every year, playground accidentsleave thousands of children withserious, sometimes permanent injuries.Most folks school or park playgroundsare the most dangerous. Actually morethan half of playground deaths occuron play sets in backyards. Falls are acommon cause of injuries in backyardplay sets. Strangulation is anotherhazard. Strangulation of children canhappen when they have drawstrings intheir hoods and clothing. Children canbecome entrapped in the stairs andother parts of backyard play sets.

These are some safety tips forparents and other adults who supervisechildren:

• Make sure the play set has space.Don’t put it too close to trees, thehouse, the fence, or the driveway.And find a nice level spot.

• Put down mulch or wood chips orshredded rubber—about a footdeep—under the play set, to breakany falls.

• Make sure the child’s head and bodycan fit through ladder rungs so thechild can’t get stuck and strangle. Atthe top near the slide, make sure theslats or guard rails are less than 3 1/2inches apart, so a child can’t stick hisor her head through and get stuck.

• Do a weekly inspection of the playset, looking for rotting wood, nails


that are sticking out, loose screws,and rough edges.

• To lessen the chance of strangulation,never hang a rope to the play set,and never tie a dog leash to the set.

SALMONELLA OUTBREAK LINKED TO POULTRY

Nine people from New Mexico andfour other states have been reported tosuffer salmonella infections in the pasttwo months. Six of those cases arelinked to young poultry from a NewMexico hatchery. The state HealthDepartment had not named the hatch-ery pending the completion of itsinvestigation. The department is collab-orating with the Colorado Health andEnvironment Departments to investi-gate salmonella cases that have beenreported in New Mexico, Colorado,Kansas, Oklahoma, and Texas. Sevenof the nine cases in March and Aprilwere in children age one year oryounger.

Symptoms of salmonella, whichbegin 12 to 72 hours after exposure,include diarrhea, fever, and abdominalcramps that usually last four days to aweek. Most people recover withoutmedication or treatment, but youngchildren can suffer from more severesymptoms. Human salmonella infec-tions occur when contaminated food,hands, or other objects are placed inthe mouth. Health officials recommendthat young children avoid contact withpoultry and that people who handlebaby chicks, ducks, or other poultrythoroughly wash their hands with soupand water afterward. Poultry alsoshould be kept outdoors in an areaseparate from young children orsources of food.Source: Associated Press

FUNERAL INDUSTRY IS HIT WITH CASKET-PRICING SUIT

Consumer advocates have filed suitagainst three of the biggest funeral-

home chains and the leading U.S.casket maker, alleging they conspiredto keep prices high and shut out com-panies that engage in selling caskets ata discount. Some of them are the onlineretailers that have sprung up in recentyears. The lawsuit, filed in federal courtin San Francisco, charges that the com-panies engage in price-fixing and sellcaskets for as much as six times theirwholesale cost. Consumers have beencomplaining about high funeral costsfor a long time. This lawsuit could be asignificant new challenge to the indus-try. The suit, filed on behalf of a con-sumer group and six families who saythey were overcharged for caskets,seeks to be certified as a class action,representing millions of casket buyers.If the court grants class action status,under current antitrust law, the compa-nies could face huge potential damagesfor overcharges going back to 2001.Casket sales in the U.S. totaled about $3billion last year. Funeral costs havebeen rising in recent years, and nowaverage about $6,000.

Named in the suit are the top threechains, controlling more than 2,100funeral homes, including industryleader Service Corporation Interna-tional; Alderwoods Group Inc.; andStewart Enterprises Inc. The suit alsonames as a co-conspirator HillenbrandIndustries Inc.’s Batesville Casket Co.unit, which is by far the nation’s largestcasket maker, with nearly half the U.S.market. The suit also charges that thefuneral-home chains are able to avoidfederal rules designed to protect con-sumers. The rules permit people to buycaskets from anyone, but funeral direc-tors are prohibited from charging extrato customers who buy from anothersource. The suit alleges that funeralhomes discourage the outside pur-chases by offering “sham discounts” forpackage deals that include caskets,while boosting prices for individualservices, such as embalming, if a cus-tomer decides to buy a casket else-where. The funeral directors have

formed powerful trade groups thatlobby in Washington and state capitals.In the years since the Federal TradeCommission imposed rules on theindustry, these lobbies have succeededin getting some state Legislatures tolimit casket sales to licensed funeraldirectors. These laws have repeatedlybeen opposed by the FTC and over-turned by the courts in recent years. Itwill be interesting to watch this case asit travels through the system. If classaction status is granted, it should bebad news for industry and good newsfor consumers. Source: The Wall Street Journal

XXII.RECALLS UPDATE

GM ANNOUNCES RECALL OF MORE THAN 2MILLION VEHICLES

General Motors Corp. has recalledmore than 2 million vehicles to fix avariety of potential safety defects, mostof them on cars and trucks sold in theUnited States. The largest of the safetyactions included nearly 1.5 million full-size pickup trucks and sport utilityvehicles from the 2003 to 2005 modelyears with second-row seat belts thatmay be difficult to properly positionacross passengers’ hips. GM, which ledthe auto industry in U.S. recalls lastyear, said it voluntarily conducted thatrecall. The company claims to havehad no reports that the belts caused orcontributed to any injuries.

The recall includes some of GM’stop-selling pickup trucks and SUVs,including the model year 2003 to 2005Chevrolet Suburban, Chevrolet Tahoe,Hummer H2, Cadillac Escalade, GMCYukon, GMC Yukon XL, and the crewcab versions of the Chevrolet Silveradoand the GMC Sierra. The recall is oneof the largest for GM since March oflast year, when it recalled more than 4million full-size pickup trucks toreplace tailgate support cables that may


corrode and fracture. That led to arecord year in recalls for GM, whichran counter to claims it had improvedthe quality of its cars and trucks.

OTHER GM RECALLS

GM announced five separate recallson May 3rd. They include a recall of332,202 of the 1500 Series ChevroletSuburban and Yukon XL SUVs from the2000 and 2001 model years for possibleoverheating of fuel pump wires thatcould lead to engine stalling, failure tostart, a possible fuel leak, and inaccu-rate fuel-level readings. Also recalledwere 142,585 1500 Series Silverado andSierra pickups from the 1999-2002model years and 2500 and 3500 Seriespickups from the 2001-2004 modelyears with manual transmissions. Theparking brakes could wear out, allow-ing the vehicles to move unexpectedly.GM also recalled 69,037 of its 2005model year Buick Lacrosse and BuickAllure sedans, which went on sale lastyear, for a potential problem with abrake part that could lead to brake loss.

Also recalled were 39,078 2004-model year Buick Rendezvous andPontiac Aztek SUVs, which could stallor fail to start due to a faulty ignitionrelay. Finally, GM recalled 22,115Saturn L Series wagons from the 2002to 2004 model years because they werebuilt with center and passenger-siderear seat belt anchors that fail tocomply with U.S. and Canadian safetystandards. GM is notifying owners ofthe recalled vehicles, and dealers willrepair the parts for free.

TOYOTA RECALLING MORE THAN 750,000TRUCKS AND SUVS

Toyota Motor Corp., in one of itslargest safety recalls ever, is recallingmore than 750,000 pickup trucks andsport utility vehicles because of prob-lems with the front suspension thatcould hinder steering. The companysaid the recall covers 774,856 vehicles

in the United States, including the2001-2004 model years of the Tacoma,the 2001-2002 versions of the 4Runner,and the 2002-2004 model years of theTundra and Sequoia. Toyota said thesurface of a ball joint that connects tothe front suspension may have beenscratched when it was manufactured,which could lead to wear and tear overtime. Any excessive wear or loosenessin the joint could force drivers to exertmore effort when steering, allow thevehicle to drift, and increase theamount of noise from the suspension.Toyota says the company had con-firmed six cases in which the conditionexisted in the suspension. Toyota plansto conduct a similar recall of theaffected vehicles in Canada, Japan,Australia and other countries. This isclearly one of the largest recalls incompany history.

In 1992, Toyota recalled about550,000 Camrys from the 1987-1990model years because of the potentialfor power door locks to malfunctionand lock passengers out of or insidethe vehicles. In 2002, the companyrecalled nearly 400,000 subcompactand minicar vehicles exported to theUnited States, Europe and Canadabecause of improperly designed brakefluid pipes. In this latest recall of trucksand SUVs, owners will be notifiedbeginning in July and will be able tohave the problem fixed at no cost.

RECALLED CHILDREN’S CHAIRS BLAMED FORFINGER AMPUTATIONS

A Florida company is recalling about1.5 million children’s folding chairs thatcan suddenly collapse and have causedfingertip amputations of four children.Seven other children suffered fingerlacerations, according to the recallannounced by the U.S. ConsumerProduct Safety Commission (CPSC) andAtico International USA Inc. of FortLauderdale. The CPSC said defectivesafety locks can cause the chairs to col-lapse or fold unexpectedly, trapping a

child’s fingers in the hinges. Therecalled folding chairs are made ofmetal tubing with a padded seat. Theywere sold in red, blue, yellow andgreen colors either individually or aspart of a set consisting of a table andfour chairs. Hardware, discount depart-ment, toy, grocery and drug storesnationwide sold the chairs from Sep-tember 2002 through April 2005 forabout $10 individually and for about$30 for a set. Consumers should stopusing the chairs and contact Atico for afull refund. Consumers can call Atico at(877) 546-4835 or visit the company’swebsite at www.aticousa.com for morerecall information.

DOLLAR GENERAL RECALLS METAL HEART-SHAPED PENDANTS

Dollar General recalled about 80,000heart-shaped pendants last monthbecause the items contain high levelsof lead. Goodlettsville, Tennessee-based Dollar General agreed with theU.S. Consumer Product Safety Commis-sion to recall the pendants, which aresilver-colored, ribbed on the front, andhollow on the back, and hang on apink suede cord with a silver-coloredclasp. The pendants were sold atDollar General stores nationwide fromMay 2003 through April 2005 for about$1. Consumers should take these neck-laces away from children immediatelyand return them to Dollar Generalstores for a refund. The pendants posea serious risk to children. Lead poison-ing in children is associated withbehavioral problems, learning disabili-ties, hearing problems, and retardation.Dollar General has set up a toll-freenumber, 800-678-9258, for consumerswith questions. Information is alsoavailable at the company’s website,www.dollargeneral.com.

22 CAR-SEAT MODELS FACE RECALL

The National Highway Traffic SafetyAdministration (NHTSA) announced


last month that the Dorel JuvenileGroup, a child safety seat manufacturerthat produces gear for several brandnames, is recalling about 190,000 rear-facing seats. The recall of productsincludes Eddie Bauer, Safety 1st, andCosco brand seats. Dorel has receivedcomplaints that the harnesses on seatscan loosen after a child has beenbuckled in, according to NHTSA. Themodels involved in the recall are:

• Eddie Bauer – 22-625 AFD GB1B,22-625 GLC GB1B, 22-625 EDGGB1B, and 22-625 MAC GB1B

• Safety 1st – 22-325 CMB GB1B, 22-325 VIN GB1B, 22-325 DTA GB1B,and 22-325 TST GB1B

• Cosco – 22-300 JOS GB1B Only those seats manufactured

between August 19, 2003, and October20, 2004, are affected. Dorel will mail afree repair kit with two harness clipsand instructions to owners who returntheir registration cards. Other ownerscan call Dorel at (800) 881-0570Monday through Friday from 8 a.m. to4:30 p.m. EDT or e-mail [email protected]. NHTSA said thatparents should get the repair kit assoon as possible. If the seats are usedbefore being repaired, parents shouldcheck the harness after putting thechild in the seat.

WOODEN PUSH TOYS POSE CHOKING HAZARD

A California company is recallingabout 7,000 Lemon Meringue WoodenPush Toys because of a potentialchoking hazard. Pamela Drake Inc.says small parts on the toys can breakoff, posing a choking hazard to youngchildren. No injuries have beenreported. The recall includes six differ-ent multi-colored, solid wooden pushtoys, including an airplane, tractor,dump truck, fire truck, a two-piececircus train with train cars, and a towtruck with family van. The vehicles areconstructed with a bendable flap thatallows the toys to “wiggle” back and

forth. The dump truck, circus train withtrain cars, and tow truck with familyvan have white magnets on the frontand back to hold the push toystogether. All the toys have rubber ringson the tires. The recalled push toys areintended for children 12 months andolder. There is no writing on the pushtoys. The recalled toys were sold at toyand hobby stores nationwide from Feb-ruary 2005 through March 2005 forbetween $15 and $24. Consumersshould return the toys to Pamela DrakeInc., or their local retailer, for a fullrefund. Consumers can call PamelaDrake at (800) 966-3762 or visit the company’s website at www.woodkins.com for more recall information.

XXIII.FIRM ACTIVITIES

EMPLOYEE SPOTLIGHTS

Dana TauntonDana Taunton came to work at our

firm in 1998. She is a shareholder inour firm and currently works in thePersonal Injury/Product LiabilitySection. Dana received her law degreein 1993 from the University ofAlabama. She has spoken at severallegal seminars on various topics relatedto personal injury law and has givenupdates on tort law on numerous occa-sions. Before coming to work for thefirm in 1998, Dana worked for a promi-nent defense firm and had a brief stintwith the Alabama Attorney General’sOffice. She also clerked for the Honor-able Ira DeMent, United States DistrictJudge for the Middle District ofAlabama. Working for Judge DeMenthas to be great training for any younglawyer. Since coming to work for thefirm, Dana has handled complex busi-ness and commercial litigation, prod-ucts liability and personal injurylitigation. She is married to DerrickTaunton and they have two daughters,Betsie and Abigail. The Taunton family

attends Frazier Memorial MethodistChurch in Montgomery. Dana hasbecome an excellent product liabilitylawyer and does an outstanding job forher clients.

Jason MinorJason Minor has been with us since

October of 2004. In his current job,Jason is one of the employees respon-sible for making hand-deliveries for thefirm. These include numerous court-house runs in several counties. Jasonalso serves subpoenas for trial wit-nesses on a regular basis. Keeping upthe inventory of supplies is also part ofhis workload. Jason also assists thelawyers and legal assistants duringtrials by making sure that all equip-ment, trial boxes and supplies are inplace when the trial starts. Jason is theson of Floyd and Lynn Minor. Floyd isa prominent Montgomery lawyer andLynn keeps things in order for thefamily at home. They have done agood job with Jason. Jason attendsTSUM where he is majoring in busi-ness. He is doing a very good job forus and is staying very busy. We havereally enjoyed having Jason with thefirm.

April WorleyApril Worley came to the firm as a

Staff Assistant for the Rezulin Litigationin June of 2001. She now serves as aLegal Assistant for the Vioxx Litigation.Since Vioxx was taken off the marketin September 2004, April’s caseloadhas changed significantly, as we arepresently evaluating more than 15,000Vioxx cases. April’s position entailsdrafting and filing pleadings and dis-covery and communicating with thelawyers in regards to screening andinvestigating Vioxx cases. April hasalso previously worked on litigationregarding Rezulin, Serzone, Vioxx andCelebrex. Because our firm has such aprominent role in the Vioxx litigation,April is extremely busy. She has aBachelor’s degree from AUM in Justice& Public Safety and a Master’s from


AUM in Judicial Administration. Shehas also recently earned a secondMaster’s in Public Administration fromAUM. April’s five-year-old son, MicahWorley, attends Green Gate School. Weare fortunate to have April, who doesan excellent job, as an employee of thefirm.

Beth WarrenBeth Warren, who has been with the

firm for over three years, currentlyworks as a Legal Assistant to LanceGould in our Fraud Section. Bethworks mostly with mass predatorylending cases. Beth had previouslyworked in the Toxic Torts Section. Shegraduated in May of 2000 with a B.S.degree in Criminal Justice and inDecember 2002 with an A.S. degree inLegal Studies. Beth passed the NationalAssociation of Legal Assistants’ NationalCertification Exam in January, 2003.She enjoys playing softball, cookingand visiting her family in Pensacola.Beth does an outstanding job for thefirm and is a valuable employee.

Kimberly VaughnKimberly Vaughn, who was one of

our employees, had to resign recentlybecause her husband was being movedto an assignment in another state. Kim-berly worked as a legal secretary inCole Portis’ section. On her last daywith the firm, Kimberly sent me amessage that really made me realizehow important a good place to work isfor our employees. Her message saidthat our firm was “the only place shehad ever worked” where she “lookedforward to coming to work everysingle day.” That was not only good tohear, it made me realize that we havegood employees who are dedicated tothe firm’s mission and that a goodwork place is critically important forthem. We will miss Kimberly and wishher well in her new location.

XXiV.SOME PERSONALOBSERVATIONS

THE MAYOR’S ANNUAL PRAYER BREAKFAST

Montgomery Mayor Bobby Brightsponsored the second annual Mayor’sPrayer Breakfast, which was held onMay 4th, and it was a huge success.Almost 1000 people from numerousdenominations and from all walks oflife gathered for this special event.Interestingly, no politicians or businessleaders were featured or even intro-duced, and that was most refreshing.Instead, the program consisted ofprayer, singing, praising God, and avery good breakfast prepared by JohnSullivan and his staff. It was a movingspiritual experience for all whoattended and participated. I commendMayor Bright for having the courage totake a leadership role and for beingwilling to stand up for our Lord andSavior—Jesus Christ. Anybody whoattended this program had to leavewith a good feeling about the City ofMontgomery and its leadership. It isgood to know where the Mayor andhis family stand on spiritual matters.The event also made many of us, whodeal with difficult issues on a dailybasis, put things in a much better per-spective. I sincerely believe the City ofMontgomery’s government is in goodhands.

MICKEY DEBELLIS

Mickey DeBellis and I have beenvery good friends for about 36 years.Mickey has been fighting an illnessover the past several months, but isnow recovering well. He is back on hisfeet, which is good news. Mickey andhis wife Sue are still residing inGreenville, where they have lived foryears. Mickey served as InsuranceCommissioner under two Governors(George Wallace and Fob James) and

did an outstanding job. In fact, MickeyDeBellis will go down in history as areal consumer advocate and a manwho worked hard to protect insurancepolicyholders and regulate insurancecompanies fairly and effectively. Hewas a real friend of consumers and thatactually caused Mickey to retire earlyduring Fob James’ second Administra-tion. At that time, Mickey wasinstructed in his capacity as Commis-sioner to allow insurance companies toput arbitration clauses in their policies.He knew that wasn’t good and resisted.But, rather than disobey an order fromhis boss, Mickey elected to resign hisposition as Commissioner.

I commend him for that decision.After leaving the department, Mickeycontinued to fight for Alabama con-sumers. He observed at a mass meetingin Montgomery during the SiegelmanAdministration, attended by over 1,000people, that “arbitration was the worstthing that could happen to a con-sumer.” I have tremendous respect andadmiration for Mickey. He has been myfriend for years and I appreciate thatfriendship today more than ever.Mickey is a good man and I only wishwe had more like him in this world.God has blessed Mickey and SueDeBellis with a long and happy mar-riage. I wish for them many more yearsof happiness together.

THE MIRACLE LEAGUE

The Montgomery Miracle League isan organized baseball program forphysically and mentally challengedchildren. For children facing physicaland mental disabilities, playing organ-ized sports is most difficult, and mostnever even get that opportunity. But,the Miracle League gives these childrenan opportunity of a lifetime. Baseballfields aren’t designed with wheelchairs,walkers and crutches in mind. TheMiracle League removes those barriersand lets players with special needsexperience the joy of “America’s


favorite pastime.” I am told that the firstMiracle League field opened inConyers, Georgia in April 2000. Sincethat time, fields have opened in SouthCarolina, West Virginia, Chicago, Cali-fornia and one other in Alabama. Thereare some 14 completed rubberized turffields, with another 62 fields undersome phase of construction at thistime. The City of Montgomery Parksand Recreations Department has con-verted an existing field to this speciallydesigned need. A barrier-free facilitywith knowledgeable and qualified per-sonnel in charge will provide anopportunity for lots of special childrento really play baseball for the very firsttime. I am convinced God will bless allof those persons who have made theMiracle Leagues a reality. I hoe and

pray this movement will spread likekudzu!

XXV.MY PARTINGWORDS

I learned something during a recentSunday school class taught by Mrs.Dean Albritton at St. James UnitedMethodist Church that made a realimpression on me. The WashingtonMonument, which towers over all otherstructures in our nation’s capitol, hasan aluminum dome at the very top. Inever knew what was inscribed on thatdome. I now know—thanks to Dean,

who is one of the best teachers around.The words in Latin “Laus Deo,” whichmean “Praise be to God,” are inscribedon this monument. I believe this ismost significant. The inscription canonly be seen from above. Most folks—like me—don’t even know the wordsare there. Somebody had their priori-ties in order when those words wereplaced in such a prominent and com-pelling location in our nation’s capitol.I believe that God is still looking downon our country—just as He was whenour country was founded and whenthe Washington Monument was put inplace—and He can’t be too pleasedover much of what He sees today. Wehad better straighten up and fly right asa nation—before it’s too late.


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