The Jere Beasley Report Jan. 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

JANUARY 2005

A NATIONAL LAW FIRM LOCATED IN MONTGOMERY,ALABAMA

I.CAPITOLOBSERVATIONS

CHANNEL ONE HAS NO PLACE IN OURSCHOOLS

Although I have written aboutChannel One in previous issues, I nowfeel that it is necessary to bring thismatter to your attention once again. AsI understand it, on each school day inmore than 400 Alabama public andprivate schools, thousands of students—ages 11 to 18—watch a 12-minutenewscast designed for children calledChannel One News. In return forshowing the program in classes,Channel One allows schools to use tel-evision sets and other equipment.Actually, Channel One is nothing morethan a medium for junk food andmovie advertisements that in myopinion are unsuitable for children.Obviously, this takes valuable schooltime away from children. Advertise-ments are shown during the daily 12-to 13-minute segments that I don’tbelieve have any place in our schools.

Channel One runs ads for “junk”foods and “junk” movies that influencechildren in the wrong way. Studentsaged 11 to 18 have seen ads for suchmovies as “Dude, Where’s My Car?”and “Starsky and Hutch.” No smallchild has any business watching thistype movie. I certainly don’t want mygrandchildren watching ads for unsuit-able movies. Neither should ourschools be pushing fast food chains. Ihope I am not in the minority on thismatter. My friend, Jim Metrock, who ispresident and founder of ObligationInc., has led the fight against ChannelOne and has done a very good job. Hehas been ably assisted by several folkswho want Channel One out of ourclassrooms. Mrs. Pat Ellis, who servesas Education Director of Obligation,Inc., has been a stalwart in the fight.

In the event some of our readersaren’t familiar with Channel One, I willgive a thumbnail sketch. Channel One isthe name of both a marketing company

in New York City and the TV show theyproduce in Hollywood, CA. Interest-ingly, the New York State Board ofRegents has never allowed ChannelOne in any public school in their state.Channel One was created by WhittleCommunications in 1989, with its mainpurpose being to place commercialmessages in classrooms. The companyis now owned by Kohlberg Kravis andRoberts, who own it through an invest-ment arm called Primedia. Here is theway the Channel One deal works:school boards are loaned a TV networkfor each 6-12th grade school, but only ifthe board agrees to show the 12-13-minute in-school TV show called“Channel One News.” Channel Oneimposes some pretty strong timerequirements for showing the program.In effect, they are guaranteed so muchtime every day during the entire schoolyear. In Alabama, I believe the require-ments equate to 31 hours of school timeturned over to this company—or oneinstructional week of school each year.

Each school is loaned a satellite dishthat can only pick up Channel One’ssignals, two VCRs, and a 19” TV set foreach room. The schools receive, byway of satellite, the daily “news” showand also can receive several hours ofdocumentaries that contain no com-mercials. This is called the ClassroomChannel. School boards have to sign acontract before they receive ChannelOne. The contract is for three yearsand renews automatically. I am toldschools can end a contract at any timewithout any extra penalty beingincurred. Many educational organiza-tions have expressed opposition to thepresence of TV commercials in a class-room. Other groups have objected toChannel One from a moral perspective.

Channel One has advertised violentand sexually provocative movies tochildren on the in-school TV show.Channel One’s website, channelone.com,actually put children in danger and atrisk of harm. This site was heavily pro-moted to children during school. Thechildren saw reviews of R-rated moviesand sexually explicit CDs. I wasshocked to learn children were given

opportunities to post their pictures onthe Internet, using a “Personal Ads”section that allowed children toexchange personal information withanonymous Internet users. There was achat room that was poorly monitored,if at all. Fortunately, the website wascleaned up after Senator RichardShelby called for U.S. Senate hearingson Channel One in April of 1998.

I strongly believe that Channel Oneshould be taken out of our schools.Unfortunately, few parents even knowwhat Channel One is or what it does. Ifyou agree that Channel One is bad for

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IN THIS ISSUE

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

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

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

IV. The National Scene . . . . . . . . . . . . . 7

V. The Corporate World . . . . . . . . . . 10

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

VII. Congressional Update . . . . . . . . . . 14

VIII. Product Liability Update . . . . . . . . 14

IX. Mass Torts Update. . . . . . . . . . . . . 20

X. Business Litigation . . . . . . . . . . . . 25

XI. Insurance and Finance Update . . . 26

XII. Premises Liability Update . . . . . . . 27

XIII. Workplace Hazards. . . . . . . . . . . . 28

XIV. Transportation . . . . . . . . . . . . . . . 29

XV. Arbitration Update . . . . . . . . . . . . 29

XVI. Nursing Home Update. . . . . . . . . . 30

XVII. Healthcare Issues . . . . . . . . . . . . . 31

XVIII. Environmental Concerns . . . . . . . . 32

XIX. The Consumer Corner. . . . . . . . . . 33

XX. Recalls Update . . . . . . . . . . . . . . . 36

XXI. Special Projects . . . . . . . . . . . . . . 37

XXII. Firm Activities . . . . . . . . . . . . . . . . 38

XXIII. Some Parting Words . . . . . . . . . . . 38

children, please contact Governor BobRiley, Lt. Governor Lucy Baxley, Attor-ney General Troy King, State SchoolSuperintendent Joe Morton, and yourlocal legislators and tell them how youfeel. I can see nothing good that comesfrom this commercial venture. If youwant more information on ChannelOne, you can go to http://www.obliga-tion.org/.

ATTORNEY GENERAL GOES AFTER GAMBLING

Alabama Attorney General Troy Kingwants to shut down some forms of gam-bling in Alabama. The AttorneyGeneral’s announcement, made lastmonth, came after a five-month reviewof electronic gambling in Alabama. TheAttorney General opposes gambling andsays it “creates more social ills than canbe cured by the revenue it generates.”Because I am totally against gambling inany form, I tend to agree with Troy’sassessment. I have never felt that gam-bling should be utilized as a revenuesource for government at any level. Itwould make much more sense toreform our tax structure than to dependon revenue from gambling operationsto fund governmental functions.

However, one thing sort of botheredme concerning the gambling issue. Iunderstand that the Christian Coalitiontook credit for having prompted theAttorney General’s investigation of thegambling halls. Interestingly, JohnGiles, who heads up this politicalgroup, made an attack on trial lawyerswho he claimed were representing thegambling industry. While I am not surewho Giles was talking about when hereferred to trial lawyers, I do know thatmy firm has never represented or takenany money from any gambling inter-ests. I am not so sure, however, thatGiles or his group can make that state-ment based on news reports.

ANTI-SMOKING CASH NOT SPENT ASEXPECTED

To date, the states are still receivingfunds from national tobacco settle-

ments. But, only three states — Maine,Delaware and Mississippi — are spend-ing money on anti-smoking efforts atthe minimum levels recommended byfederal health officials. This informa-tion comes from a report issued by acoalition of public health groups. Alto-gether, the states have set aside $538million for smoking prevention forfiscal 2005, which began in Octoberand runs through September. That isjust a third of the $1.6 billion minimumthe Centers for Disease Control andPrevention say should be spent nation-wide, according to the report. As Iunderstand it, the CDC’s minimumfunding recommendations for eachstate are based on population andother factors. The states are expectedto receive an estimated $7.1 billion thisyear from the tobacco industry fromthe settlement reached with cigarettemakers. The members of the coalitionare the Campaign for Tobacco-FreeKids, American Heart Association,American Cancer Society and AmericanLung Association. As you may recall,the settlements were meant to help thestates recoup the cost of treating sicksmokers, and the states pledged tofund tobacco prevention programs.

It appears that more young peopleare smoking now than ever before.This is a very bad trend and one thatmust be reversed. Matthew Myers,President of the Campaign forTobacco-Free Kids, says: “The statesare receiving more and more revenuerelated to tobacco but doing far toolittle to fund programs to reducetobacco use, particularly among chil-dren. They’re using the money to fillshort-term budget shortfalls, buildroads and every other conceivablepolitical purpose.” According to thereport, states that have allocated nosignificant funding for tobacco preven-tion are Michigan, Missouri, NewHampshire, South Carolina and Ten-nessee. The District of Columbia alsohas not set aside money for thatpurpose, the report stated. Alabamaappears to be doing some good thingswith the money, but not enough in theprevention programs. At least, based

on the report, we weren’t the worst ofthe lot.

ATTORNEY GENERAL ENTERS TENCOMMANDMENTS CASES

Attorney General Troy King hasjoined Attorneys General from severalother states in the Ten Commandmentsfight. Troy is asking the U.S. SupremeCourt to uphold Ten Commandmentsdisplays in Kentucky and Texas. Youwill recall that the Supreme Courtagreed to hear cases from those twostates. The arguments likely will beheard next month. The AttorneyGeneral’s brief, which was joined byattorneys general from 14 other states,was filed on December 7th. Their argu-ment is that the Ten Commandmentsdisplays in two Kentucky courthousesare legal. Hopefully, this will providethe opportunity for the Supreme Courtto allow a public display of the TenCommandments. You will recall thatthe displays in Kentucky were sur-rounded with other documents, includ-ing the Declaration of Independenceand Mayflower Compact. I believemuch of this was done after the Ameri-can Civil Liberties Union filed suit.

At last count Attorneys General from18 states, now including Alabama, haveasked the nation’s Highest Court touphold Texas’ display of a Ten Com-mandments monument on its Capitolgrounds. Because President Bush cam-paigned on family values and moralissues, I would anticipate that hewould get involved in this fight. Isuspect most of his supporters expectthe President to take a strong stand. Sofar, there has been no word from theWhite House.

JUDGE MOORE CONTINUES HIS FIGHT

Judge Roy Moore is lending hissupport to the Ten Commandmentsfight, a move that has received mixedreviews. Without a doubt, Judge Moorewill go down in history as the TenCommandments Judge. Although hisopponents are very vocal, his support-

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ers appear to greatly outnumber thedetractors. If nothing else, he hasbrought the issue relating to the publicplacement of the Ten Commandmentsinto the spotlight of public opinion.Polls run in Alabama reveal that mostAlabamians agree with Judge Moore’sposition in this fight. However, manystill believe that the former chief justicewas motivated by politics and that heused the issue to foster a personalpolitical agenda. Frankly, I don’tbelieve that politics or personal gainplayed any part in Judge Moore’s TenCommandments fight. I am firmly con-vinced that the man is sincere in hisbeliefs and that he felt that his actionswere both lawful and justified.

In any event, Judge Moore has had adefinite impact on the political scene,and I predict we will see his name onthe ballot in the future. Many of hissupporters are encouraging him to runfor governor, while others want theJudge to run for chief justice again. Inmy opinion, he would be a real factorin either race. According to mysources, however, Judge Moore willlikely run for Governor and it could beon a third-party ticket. But, running asa Republican would probably be theeasier route. In any event, his involve-ment will make things much moreinteresting.

AARP SELECTS RAY WARREN

J. Ray Warren has been named AARPAlabama’s new state president. Ray,who resides in Montgomery, replacesDr. Gloria Walker, who ended a suc-cessful six-year term in office onDecember 31st. As state president, Raywill work in conjunction with the statestaff in Montgomery and hundreds ofvolunteers throughout Alabama. Hewill provide leadership and guidance,and will work to achieve AARP’smission of improving the lives ofseniors in Alabama. Ray brings to theposition decades of experience in man-agement and administration, as well as37 years of military service. He is cur-rently self-employed as a lawyer and

insurance consultant. Prior to that Raywas a claims manager with theAlabama Department of Finance,where he oversaw the resolution ofproperty and other insurance claimsfiled against the state.

Early in his career, Ray taught socialstudies at Slocomb High School. Mostof his career, however, was spent as anemployee of State Farm InsuranceCompany. At State Farm, he was aclaims representative for 10 years.Later, Ray was named claims superin-tendent, a position he held for 15years. Ray has had an extensive back-ground of public service. At one pointin his career, Ray served as chairman ofthe State Ethics Commission, and didan outstanding job. He was twiceelected to a seat on the state PersonnelBoard and provided state employees areal voice for a change. Ray spent 33years as a member of the NationalGuard, and upon his retirement as afull Colonel, he was awarded theLegion of Merit, the Army’s highestpeacetime award. The Eclectic native isa graduate of Auburn University, wherehe earned his B.S. in Economics. Rayholds a masters degree from Troy StateUniversity, and was awarded a lawdegree from Jones School of Law. Rayand his wife JoAnn have three adultchildren: Neva Webb, Joe Warren andLee Warren.

I commend AARP for selecting RayWarren to serve as its state president.In my opinion, Ray will do an out-standing job. In fact, I can’t think of abetter person to fill this most importantposition. Alabama consumers will havea real friend in Ray and he will fight toprotect their rights. Having Ray onboard will give AARP, an organizationthat really works hard for consumers,an even stronger presence in Alabama.

II.LEGISLATIVEHAPPENINGS

THE REGULAR SESSION

The regular session of the AlabamaLegislature, which will begin on Febru-ary 1st, is expected to be one filledwith a combination of problems,opportunity and controversy. Themoney problems haunting state gov-ernment and public education, simplyput, have been carried over to thissession. Unfortunately, that has beenour method of handling problems foryears and it has finally caught up withus. I am convinced that the fiscal short-fall is real and will have to be dealtwith. But, I’m not sure many folksshare my views on this.

The governor and legislators willface extremely tough issues in Febru-ary and have a real challenge waitingfor them when the session kicks off. Ireally don’t believe that our state canafford to dodge the money issues anylonger. Our state is faced with a situa-tion where we badly need funds forprograms people want, but, unfortu-nately, most folks simply don’t wantto pay for them. So, we must eitherraise revenues or cut programs andservices. That, in a nutshell, definesour problem. The problems are veryeasy to spot, but finding permanentsolutions has proved to be extremelydifficult.

POLITICAL AGENDAS WON’T BE SCARCE

A good number of candidates arealready lining up for next year’s elec-tions. As a result, this session will befilled with political games and postur-ing. Even though the session may beunproductive (which I hope won’t bethe case), at least it should be interest-ing and highly entertaining. The specialinterest groups always have a “fieldday” during a “political” session, andthis one won’t be any different. Maybewe could broadcast the session’s activi-


ties live on public television. Thatmight be a good way to get folks backhome more involved. In fact, it mightalso help solve some of our lingeringproblems!

III.COURT WATCH

VICTIMS OF WRONGDOING ARE IGNORED BYTORT REFORMERS

The tort reform movement has neverexhibited any real feelings for thehuman suffering that takes place whena person is badly injured and impairedfor life because of some type of wrong-doing. It has been very clear that theplight of the victim is totally ignored bythe champions of tort reform. But,there is one thing for certain: caps orlimits on damages never take into con-sideration the victim—Instead only thewrongdoer—and that’s very sad. Capsare simply unfair, and that shouldn’t besubject to serious debate. The logicbehind putting limits on the amountthat can be received as damages forpain-and-suffering is simple: Caps limitthe payouts by insurers, which in turnshould enable the companies to reducewhat individuals and companies payfor liability insurance. Recent studieshave shown only the first part of thetheory holds true. A 2003 study byWeiss Ratings, Inc., which monitors theinsurance industry’s financial health, isa good source of information on thissubject. Weiss analyzed medical mal-practice premiums and payouts from1991 to 2002 and found that not onlydid caps fail to reduce malpractice pre-miums, they had the opposite effect.Among the study’s findings which sur-prised many were:

• Insurers in states with caps raisedtheir premiums at a significantlyfaster pace than those in stateswithout caps—48% compared with36%.

• Despite the imposition of caps, insur-ers in nearly nine of 10 states contin-

ued to raise rates, while insurers instates without caps were actuallymore likely to hold or cut their pre-miums.

• In states with caps, insurers are morelikely to charge premiums exceedingthe national median than those instates without caps.

Let’s take a look at California, whichwas the first state to impose a liabilitylimit and the one that tort reformerslike to feature as a model for a pro-posed federal cap on damages. Formore than a decade after the Californialaw took effect, liability insurance pre-miums continued to rise faster than theinflation rate. It wasn’t until 1988,however, when voters passed a corre-sponding cap on insurance rates thatrates leveled off. In fact, the steepesthike in premiums occurred the yearafter the Supreme Court ruled that thecaps were constitutional. As is usuallythe case, the tort reformers use medicalmalpractice as the “gasoline” to fuel the“tort reform fire.” The authors of theWeiss study observed:

These counterintuitive findings canlead to only one conclusion. Thereare other, far more importantfactors driving the rise in med malpremiums than caps or med malpayouts - factors that have more todo with the ups and downs of theeconomy and the cyclical natureof the insurance industry.

As we wrote last month, even thenation’s largest medical malpracticeinsurer, GE Medical Protective, admit-ted in a Texas regulatory filing that“noneconomic damages are a smallpercentage of total losses paid,” andthat capping them would save thecompany only 1%. The experiencewith premiums for doctors holds truefor other fields of liability insurance.Caps simply don’t work!

RSA SUIT ENDS IN MISTRIAL

A mistrial was declared in the lawsuitbrought by the Retirement Systems of

Alabama against Bear Stearns Cos. TheMontgomery County jury deliberatedthree days before telling Circuit JudgeCharles Price that it could not agree ona verdict. The judge finally had todeclare a mistrial, but promptlyordered a new trial to start on January10th. I understand that the jury wassplit six for RSA and seven for BearStearns, which came as a surprise tomost observers. As you may recall fromlast month, RSA, the pension fund forstate employees and educationworkers, had sued two former World-Com executives, four investment firms,and WorldCom’s accountant, allegingthat they were responsible for $124.7million in losses from WorldCom secu-rities. Three securities firms and ArthurAndersen settled and agreed to pay$111 million to RSA to cover part of itslosses. However, Bear Stearns refusedto settle, which led to this trial. RSAclaimed that the New York investmentfirm knew about financial concerns atWorldCom when Bear Stearns soldWorldCom bonds to the retirementsystems in October 2001, but failed todisclose that information.

ABUSE CASES SETTLED

The Roman Catholic Diocese ofOrange, which is located in California,has agreed to settle claims by 87victims who were sexually abused bypriests and other church employeesover the years. The total settlementwill exceed the $85 million recordpayment by an American diocese. Thespecifics of the settlement can’t be dis-closed under the terms of a court-imposed gag order. In fact, somedetails relating to the settlement muststill be worked out. This settlementresolves allegations of molestationagainst 30 clergymen and about adozen other church employees, withsome of the cases dating back as far asthe 1930s. The previous record amountwas paid in 2003 by the Archdioceseof Boston to settle more than 500abuse cases. The amount of that settle-ment was restricted by a Massachusettslaw that strictly limits the amount of


damages a charitable organization,such as a church, can be required topay in a lawsuit. There is no similarlimit in California.

The California cases were filed lastyear under a special state law thatopened the way for litigation againstthe Catholic Church and other institu-tions that allegedly had failed to protectchildren from those they had reason tobelieve were predators. The law gavealleged victims of childhood sexualabuse one year to sue no matter howold the case. Under the terms of thesettlement, the Diocese of Orange willshare the cost of the settlement witheight insurance companies. Individualawards to the victims were determinedbased on the facts of each case. Inter-estingly, according to its financial state-ments the diocese in California had a$171-million investment portfolio and$23.4 million in cash reserves at the endof the 2003 fiscal year.

It is shocking that conduct of thissort within any church organizationcould have existed at all. The natureand duration of the misconduct inthese cases is even more shocking.When you consider the numbers ofvictims and wrongdoers involved it is atragedy of monumental proportions. Ihope the entire book on this mostserious matter will soon be closed andwill never be opened again. The mis-treatment of children can never be tol-erated in any society. In my opinion,sexual predators, who operate insidethe church, must be dealt with asharshly as the law allows. Precautionsmust be put in place so that this typeactivity is stopped once and for all.

HALLIBURTON ASBESTOS SETTLEMENTAPPROVED

The settlement agreements involvingasbestos claims against Halliburtonwere approved recently in two sepa-rate November orders by the bank-ruptcy court overseeing the Halliburtonbankruptcy case. The settlement con-cerns asbestos related claims againstDII Industries, Kellogg Brown & Root,and other affected Halliburton sub-

sidiaries and all appealing insurancecarriers. These settlements, togetherwith other previously announced insur-ance settlements, provide a global res-olution to the debtors’ insurancedisputes. This will result in thepayment of over $1.5 billion in cashand winds up a successful conclusionof the bankruptcy proceedings for it.

The agreements also involved settle-ments with over one hundred solventand insolvent London-based insurancecompanies, over fifty domestic insur-ance companies and other companieswith which DII Industries shares insur-ance coverage. Two of the settlementagreements involve matters relevant toHarbison-Walker Refractories Companyand Federal-Mogul Products, Inc., bothdebtors in their own bankruptcy pro-ceedings. The bankruptcy courts inthose proceedings also have enteredorders approving these settlements.The Halliburton court’s approval ordersare now final and the settling insurersare obligated immediately to dismisstheir appeals to the bankruptcy court’sconfirmation order and their motion tovacate the district court’s affirmationorder. It was projected that the bank-ruptcy would be over by the end ofthis year. Funding of the trusts shouldbe done by the end of this month.

Source: The Insurance Journal

$156 MILLION AWARDED IN DEATH CASE

Three Islamic charities and analleged fund-raiser for the Palestinianmilitant group Hamas have beenordered to pay $156 million to theparents of an American teenager whowas shot and killed by terrorists onIsrael’s West Bank. A federal juryawarded $52 million in damages to theparents of a teenager, shot down at abus stop outside Jerusalem eight yearsago. A U.S. magistrate judge thentripled the damages. Before the trialstarted, the judge had found the Texas-based Holy Land Foundation for Reliefand Development, the Islamic Associa-tion for Palestine and alleged Hamasfund-raiser Mohammed Salah legally

responsible for the death. The juryfound that the Quranic Literacy Insti-tute of suburban Oak Lawn, a groupthat translates Islamic religious texts,was also responsible for the shooting.The family, Americans who moved toIsrael in 1985, sued under a U.S. lawthat allows victims of terrorism abroadto collect damages in American courtsfrom organizations that furnish moneyto terrorist groups.

SUPREME COURT LIMITS POLLUTIONCLEANUP LAWSUITS

In a recent decision, the U.S.Supreme Court put restrictions on com-panies that want to voluntarily cleanup their polluted land and sue formerowners to share the costs. The Courtruled 7-2 against a company thatbought Texas land and later filed suitin an effort to recover some of the $5million it spent cleaning up pollutionon the property. The Justices said thecompany’s attempted use of the Super-fund law was improper. But, the Courtleft open the possibility that anotherpart of the Superfund law could permitsuch lawsuits. It will be interesting tosee what develops on that point.

A NEEDED CORRECTION

We mentioned a case last month thatwas tried by the Prince Law Firm inTuscaloosa. I made the mistake ofsaying that Josh Wright tried the casewith Bob Prince, and that was notcorrect. Actually, Matt Glover was thelawyer involved, and I understand hedid an outstanding job. I apologize forthis mistake and wanted to set therecord straight.


IV.THE NATIONALSCENE

PRESIDENT BUSH ATTACKS THE U.S. LEGALSYSTEM

President Bush—at the direction ofKarl Rove and his key financial sup-porters from Corporate America—isdetermined to destroy the legal systemin this country. The president wants totake away or severely restrict the legalrights of victims of corporate wrongdo-ing. The Rove agenda was establishedyears ago and comes as no surprise.Consumers have never had a seat atthe Rove table and never will. Cer-tainly, the scheme to undermine con-sumers’ legal rights didn’t just comeabout overnight. The planning andexecution has been a model of timingand efficacy. Terms such as “frivolouslawsuits,” “jack pot justice” and“lawsuit abuse” were coined to propelthe tort reform movement. These termshad no factual basis but caught on withthe media and have been largelyaccepted by the public. The president’sagenda was revealed during a two-day“economic” conference last month,which was carefully orchestrated anddesigned to give the appearance of sol-idarity in the business community.

Interestingly, the people who mosttake advantage of the legal system arethe business interests who are nowlobbying to curtail the legal rights ofcitizens. U.S. businesses file lawsuitsfour times more often than individuals.This is according to an analysis ofstates and counties that keep suchdata. Moreover, as has been well docu-mented, businesses are 69% morelikely to be sanctioned by federaljudges for filing frivolous lawsuits thanare tort plaintiffs and their lawyers,according to an analysis of the 100most recent cases in which such sanc-tions were imposed. Tort lawsuit filingshave decreased 9% overall from 1992through 2001, according to informationfrom a joint tracking project of theConference of State Court Administra-

tors, the Bureau of Justice Statistics,and the National Center for StateCourts. The filing data from 30 statesrepresent a total of 74% of the U.S.population. When adjusted for popula-tion growth, tort filings declined by15%, from 269 to 228 per 100,000 overthat period.

Joan Claybrook, President of PublicCitizen, made this observation concern-ing the White House’s agenda: “Presi-dent Bush doesn’t let facts get in theway when it comes to his political goalof dismantling the legal system. Heprefers to coddle campaign contribu-tors, rather than protect consumers andpatients.” It is significant that there hasnever been a serious debate amongreasonable people over the legalsystem. Instead, we have seen amassive campaign of distortions carriedout by the Bush Administration inleague with its business allies. Werethere to be a debate over the legalsystem in this country, the tort reform-ers would lose and they know that tobe a fact. That’s why there has been nopublic discussion where each side hasthe opportunity to lay out their respec-tive positions and where the true factscan be ascertained.

Source: Public Citizen

SOME INTERESTING POLL RESULTS

To say that Merck & Co. has had aseries of bad weeks in the media maybe a gross understatement. Not onlyhave a number of lawsuits been filed inthe wake of Merck’s recall of Vioxx,the company’s reputation has been tar-nished and its credit rating impaired. Ithas been estimated in news stories thatMerck’s liability relating to Vioxx couldbe over $38 billion. This bad news forthe pharmaceutical giant comes at atime when Americans already had avery low opinion of the prescriptiondrug industry. A Gallup survey, con-ducted August 9th-11th, measured publicperceptions of 25 industries. Thesurvey found that the pharmaceuticalindustry ranked next to last. Interest-ingly, only the oil and gas industry

rated lower. It should be pointed outthat these ratings came well before theannouncement of the Vioxx recall andthe problems with Celebrex andBextra. It was considerably lower thanlast year’s rating of the pharmaceuticalindustry. At that time, 43% of Ameri-cans gave the industry a positive ratingand 38% a negative rating.

It should also be pointed out that theFederal Food and Drug Administrationdidn’t issue the recall of Vioxx. Thisprompted many critics to suggest thatthe FDA was at fault for not taking amore aggressive strategy in dealingwith the potential dangers of prescrip-tion drugs. On November 5th, the FDAannounced that it would hire a top sci-entific review body to determinewhether its drug safety system is ade-quate. Interestingly, a more recentGallup survey found that Americans stillfeel fairly positive about the FDA.However, more people indicate theirconfidence has declined over the pastseveral years than say it has increased.The poll, conducted November 19th-21st, reflected a belief by the public thatthe FDA works to “make sure prescrip-tion drugs for sale in the United Statesare safe.” The poll findings lead me toconclude that most folks really didn’thave a clue what the FDA was actuallydoing, but assumed that FDA–approveddrugs had to be safe. How wrong theywere! I believe a poll today would indi-cate that the FDA has been ineffectiveas a protector of the public.

MERCK TAKES CARE OF IT’S OWN

Everybody in this country who haswatched any TV news programs oreven read a daily newspaper is wellaware of the Vioxx debacle. Now itappears that Merck, the companyresponsible for putting a very bad drugon the market, has much more concernfor its top executives than it has shownfor its customers thus far. The companyhas adopted a plan that could give itstop executives big bonuses if thecompany is taken over. Clearly, andwith justification, Merck has really beenunder the gun since it withdrew Vioxx,


and most of the focus has been onfolks who have taken Vioxx. Mercksaid, in a federal security filing, that itsboard has decided to give its top 230managers the opportunity for a one-time payment of up to three years ofsalary and bonus if another companybought Merck—or even merely boughtover 20% of the company’s shares—and that came as a shock to manyobservers. Interestingly, any executivewho is fired or resigns for “good cause”will be eligible to receive the payment.

Although many large corporationshave golden parachute plans to protectexecutives in the event of takeoversand to keep them from leaving if atakeover is on the horizon, this one isquite different. It clearly appears thatMerck’s decision to adopt their plancould not have come at a worse time.The public perception is that Merck’sboard is rewarding company execu-tives for Vioxx problems and for thecompany’s present inability to bringnew drugs to market. Merck didn’t dis-close how much the executivepayment plan would cost, but I suspectpayments could total hundreds of mil-lions of dollars based on the number ofpersons involved and their presentsalary structure.

To say the least, the plan devised byMerck’s board is rather unusual. Merckhas structured the compensation planso that executives can receive the pay-ments as soon as another companybuys 20% of Merck’s stock. This meansthe payments will take place even ifthe stock purchase doesn’t actuallycomplete a takeover. That provisioncreates the possibility that executivescould receive a windfall by leavingeven if Merck remained independent. Ionly wish Merck had the same concernfor the families who have been hurtbecause of Vioxx.

NEW WORRIES ABOUT DRUG SAFETY

An internal survey conducted by theFood and Drug Administration indi-cates that 66% of FDA scientists lackedconfidence that the agency adequatelymonitors the safety of prescription

drugs that are already on the market.The survey was obtained by two non-profit advocacy groups, the Union ofConcerned Scientists and PublicEmployees for Environmental Respon-sibility, under the Freedom of Informa-tion Act. The survey definitely helpsthe case. Dr. David Graham, the FDAwhistleblower, has warned about thecurrent system for insuring drug safety.As previously reported, Dr. Graham, aproponent of drug safety, told a U.S.Senate committee that the current drugsafety monitoring system could notprevent another case like the with-drawal of Vioxx. Interestingly, whilethat drug had been on the market forfive years, and even with all the avail-able information, the FDA had doneabsolutely nothing. Dr. Graham said inhis testimony: “Vioxx is a terribletragedy and a profound regulatoryfailure. I would argue that the FDA, ascurrently configured, is incapable ofprotecting America against anotherVioxx. We are virtually defenseless.”

Dr. Graham has been involved in thedecision to pull ten drugs from themarket, including Abbott Laborato-ries’ Omniflox, Wyeth’s Fen-Phen andRedux, and Pfizer’s Rezulin. In previ-ous interviews, Dr. Graham had out-lined a number of problems with thesystem. For example, doctors reportside effects voluntarily, and the FDAonly finds out about a small fraction—at most one-tenth—of these side effectcases. Obviously, this makes it incredi-bly difficult to figure out how often aproblem is occurring. With Vioxx, therewas an added problem. Because heartattacks and strokes are common in thesame arthritis patients who took thedrug for pain, it’s highly probable agood number could have slipped underthe radar entirely and were missed.

It is undisputed that the issue of drugsafety has become increasingly promi-nent. We now know that the FDA’ssafety reporting system hasn’t workedvery well. The concerns of Dr. Grahamand of public advocacy organizationsand medical journals that called intoquestion the safety of a number ofdrugs are now being given added cred-

ibility. The debate on drug safety in theU.S. is getting hotter. It is becomingincreasingly clear that the FDA hasn’tdone its job very well and for the firsttime the public is demanding answers.The survey can be found athttp://www.peer.org/12_14_04_FDA_survey.pdf. An internal report regardingthe results from the Department ofHealth and Human Services, the U.S.government agency under which theFDA falls, can be found athttp://www.oig.hhs.gov/oei/reports/oei-01-01-00590.pdf.

ACCESS STILL HAS ITS PRICE

It appears the inauguration of Bush IIwill be another costly affair. In fact, thetotal costs will set a new record. Ticketsfor all official inaugural events, includ-ing an “elegant” candlelight dinner witha special appearance by PresidentBush, are going for $100,000. If youreally want to be involved, however, trythis on for size: Tickets to all officialinaugural events, two additional ticketsto an “exclusive” lunch with Mr. Bushand Vice-President Cheney, plus an all-access pass to any inaugural ball willcost you $250,000. Mr. Bush’s inauguralcommittee will raise more than $40million. At a time of war, with morethan 138,000 American troops servingin Iraq, it would seem to be a bad timefor wild spending and party-going. Theinaugural celebration this year will godown in history as the most lavish andcostly. The war certainly had no notice-able effect on those who planned thefestivities.

You shouldn’t be surprised to learnthat corporations will account for mostof the $250,000 contributions. Unlikecampaign contributions, there are nolegal limits on the amount that an indi-vidual or corporation can donate to theinauguration. For example, in 2001, theEnron Corporation furnished $100,000for the Bush inauguration. Interest-ingly, the company’s chairman at thetime, Kenneth (“Kenny Boy”) Lay, gavean additional $100,000. I wouldn’texpect either Enron or Mr. Lay to con-tribute much this time. But, there will


be plenty of others eager to take theirplace.

VIDEO GAMES CITED FOR VIOLENCE AND SEX

Some of the video games that ouryoung children are watching thesedays are a source of concern to manyconsumer groups. Unfortunately, Idoubt some parents even know whattheir children have access to from thisindustry. Sexual content and violencehave certainly been a part of the videogame culture, and it is getting worse.For example, some of the gamesfeature players shooting rival gangmembers. Others feature half-nakedwomen and other activities that arecertainly unsavory. Now even theassassination of President JohnKennedy is on a video game.

Advocacy groups are taking the posi-tion that these video games, at the veryleast, should be kept away from chil-dren. In issuing its annual report cardon video games, The National Instituteon Media and the Family has urged theindustry to educate parents betterabout ratings and asked retailers not tosell such games to younger teenagers.David Walsh, the Institute’s president,stated at a recent news conference:

This segment of games keeps gettingmore realistic, and they keeppushing the envelope. The problemis that these games are the onesthat are particularly popular withkids, particularly teenagers.

The Interfaith Center on CorporateResponsibility, a group of church andcivic leaders, has also urged videogame makers to place tighter restric-tions on the sale of violent videogames to children, including havingretailers place them in locations lessaccessible to children. As expected, thevideo game trade association claimsthat its games carry appropriate ratings.They recommend that parents policethe activities of their children.

Among those listed as the worstvideo games of the year was “GrandTheft Auto: San Andreas.” This is a

game in which the hero vows toavenge his mother’s murder andrestore glory to his neighborhoodgang. Players rack up points bygunning down police, committing car-jackings, burglarizing homes anddealing in other underworld activities.The game came to the market inOctober and instantly became theyear’s bestseller. This was part of aseries of “Grand Theft Auto” gamesthat has sold more than $32 millionover the past few years. The Institute’slist of bad games also includes “TheGuy Game,” which features video ofwomen exposing their breasts. Likeothers on the group’s list, the gamesare rated “M” for mature, which meansretailers are not supposed to sell themto people under 17. Advocacy groupswant the games to be rated “AO” or“adults only,” which would limit pur-chase to those 18 and over. Manystores will not carry games with thatrating, which means the “M” rating willcontinue to be used by the industry.

A recent survey found that half ofunderage boys and 8% of girls wereable to buy M-rated games. The Inter-active Entertainment Merchants Associ-ation, a trade group, had pledged tocreate tougher standards by Decemberto forbid the sale of mature games tochildren. These were to have gone intoeffect this month, but I am not surethey did. How a corporation couldcome out with a video game that fea-tures the assassination of a President ofthe United States is impossible tojustify. How this could ever becomethe subject of a video game is beyondcomprehension. American citizens hadbetter wake up and demand that ourpolitical leaders address this problemand others of a like nature. If we fail toget involved, our society will continueto sink further into a sea of immorality.Actually, our churches should beleading the charge to protect our chil-dren and grandchildren. I hope theyare and I just don’t know it. If all of thechurches nationwide got involved inthis fight, I believe that we would seesome positive changes and soon fromthis industry. If there is anything they

understand, it is money and profits.Only when those are affected in thewrong economic direction, will theindustry respond.

VIACOM TO PAY $3.5 MILLION OVERINDECENCY

Viacom, Inc., has agreed to pay arecord $3.5 million to settle complaintsthat it broadcast indecent material onits radio stations. The U.S. FederalCommunications Commissionannounced the settlement on Novem-ber 23rd, but it received only scantmedia attention. The agreement coversseveral incidents dating as far back as1999, in which radio personalities,including Howard Stern and Opie &Anthony, discussed sexual and scato-logical topics on stations owned byViacom’s Infinity Broadcasting radionetwork. It’s not surprising thatViacom’s 20 CBS stations have chal-lenged the FCC’s proposed $550,000fine. In addition to paying $3.5 million,a record in indecency settlements,Viacom admitted that some of thematerial in question was obscene orindecent. The company now says itwill use tape delays and take othersteps to make sure that such incidentsdo not occur in the future.

Interestingly, in return, the FCC willnot take these incidents into accountwhen considering whether to renewlicenses for Infinity radio stations in thefuture. Frankly, I find that difficult tounderstand. It seems to me that areview of the broadcaster’s recordshould be considered, when a renewalcomes up. In the wake of the JanetJackson incident, which was not a partof this settlement, Congress has beenconsidering measures that wouldincrease the maximum fine from$27,500 to as much as $500,000.However, no action is likely this year.Personally, I believe the governmenthas a strong duty to protect children.Parents also have an obligation to keepthe objectionable materials out of thehands of their children. However, thatis extremely difficult in these times. Allchurches and even the political groups,


such as The Christian Coalition, shouldalso be actively involved. If folks suchas Dr. James Dobson, Pat Robertsonand Jerry Falwell would make this fightpart of their political agenda, maybewe would get some help from theBush White House.

INTERESTING LAWSUIT IN MASSACHUSETTS

Most of us have heard of the publicworks project in Boston referred to as“Big Dig.” The Massachusetts TurnpikeAuthority, the independent agencycharged with overseeing the $14.6billion highway project, has filed suitagainst the consortium that managedthe venture. The agency will try torecover as much as $100 million incosts for design errors and constructionmistakes. A team uncovered project-wide errors by Bechtel/Parsons Brinck-erhoff that is the basis of the lawsuit. Acost recovery team has been reviewingall Big Dig construction contracts forevidence of mismanagement. To date,the cost recovery team has recouped$3.5 million from contractors.

Actually, this lawsuit is the second tobe brought by the State of Massachu-setts against Bechtel/Parsons Brincker-hoff. The first, filed in March of 2003,accused the firm of concealing the BigDig’s spiraling price tag from lawmak-ers. This project — the most expensivehighway project in U.S. history —buried Interstate 93 in tunnels under-neath downtown Boston, and con-nected the Massachusetts Turnpike toLogan Airport. It appears to have beena financial nightmare for taxpayers.

THE BUSH WHITEHOUSE MUST SUPPORT OURTROOPS

Several months ago, I wrote about theplight of our soldiers and marines whowere not being properly equipped forbattle in Iraq. My information camefrom having talked to a number ofAlabama soldiers returning from Iraq. Ifelt at the time that if that informationwas correct, we weren’t really support-ing our troops very well. It now appears

that to have been the case. Rep. MikeRogers recently has now asked militaryleaders to explain why armor manufac-tured at Anniston Army Depot wasn’tbeing installed on M113 personnel carri-ers in Iraq. It has become very clear thatthe armor was needed and hadn’t beenmade available. Rep. Rogers delivered aletter, cosigned by RepresentativeDuncan Hunter of California (whochairs the House Armed Services Com-mittee), to Army Chief of Staff GeneralPeter Schoomaker. The controversy sur-faced when a Tennessee NationalGuardsman asked Defense SecretaryDonald Rumsfeld about the lack ofarmor on military vehicles in Iraq. Rep.Rogers says armor produced at thedepot is ready for installation. Regard-less of where the armor comes from, itis inexcusable to put our troops in vehi-cles that have no armor in a war zone.

The more we learn about how poorlythis war was planned the more apparentit becomes that all of the talk from theBush White House about supportingour troops has been largely that—justtalk. After the lack of armor story broke,we see that $4 billion is now beingspent to send armored vehicles to Iraq.This belated move comes only after atremendous loss of life and a publicoutcry against the Secretary of Defense.How many of these deaths could havebeen avoided had the armor been avail-able may never be known. Nevertheless,men such as Donald Rumsfield shouldhave to account for their actions andtheir obvious failures. The Americanpeople are demanding that our govern-ment fully support the troops who arefighting a very tough and confusing warin Iraq. We need some real action fromthe Secretary of Defense and not just talk!

V.THE CORPORATEWORLD

HEALTHSOUTH SETTLES U.S. CIVIL CHARGES

HealthSouth Corp. will pay $325million over the next two years under a

settlement of False Claims Act chargeswith the U.S. Justice Department andHHS’ inspector general’s office. Theglobal settlement resolves civil chargesstemming from several whistleblowerlawsuits against the company.However, it does not resolve a Securi-ties and Exchange Commission investi-gation into securities fraud atHealthSouth or criminal charges againstHealthSouth personnel. The chargesagainst founder and former Chief Exec-utive Officer Richard Scrushy are stillpending. There are also a number ofcivil actions pending that aren’taffected by this settlement.

The civil allegations against Health-South include billing for unnecessaryservices, for services provided byuncredentialed providers and for indi-vidual physical therapy when grouptherapy was provided. HealthSouthalso allegedly failed to report a $19.3million gain from a 2001 sale of Care-mark stock and allegedly falsifiedMedicare cost reports. The SEC, mean-while, has accused HealthSouth ofinflating earnings by $2.7 billion.Scrushy is scheduled to go to trial thismonth on a 58-count criminal indict-ment alleging that he directed thefraud. Scrushy pleaded not guilty andhas hired a battery of criminal defenselawyers in an attempt to stay out of jail.

TIME WARNER, AOL SETTLE FRAUDCHARGES WITH THE SEC

Time Warner, Inc., the world’sbiggest media company, will pay a$510 million fine to settle securitiesfraud charges brought by the Securitiesand Exchange Commission. Thecompany’s America Online unit wascharged with improperly inflating itsadvertising revenue and engaging inother accounting tricks. New York-based Time Warner’s operationsinclude magazines, books, cable TVsystems, the WB television networkand the Warner Bros. film studios. Thecompany also faces several shareholderlawsuits that contend Time Warnershareholders were cheated in thecompany’s 2001 merger because of


AOL’s accounting practices and inflatedrevenue claims. The alleged accountingirregularities occurred before and afterthe companies’ 2001 merger. Thecompany has since ousted former AOLChairman Steve Case from his execu-tive role at the merged company anderased AOL from its corporate name.

Under terms of the settlement withthe Justice Department, prosecution oncharges of aiding and abetting securi-ties fraud will be deferred providedthat AOL and Time Warner cooperatein an ongoing investigation intowhether AOL improperly helpedsmaller Internet companies artificiallyinflate their earnings. An independentmonitor will be chosen to overseeAOL’s compliance, and the companymust agree to a number of changes inits internal practices. The Securities andExchange Commission continues toinvestigate accounting irregularities atAOL. The SEC probe involves themanner in which Time Warneraccounted for a $400 million paymentfrom the German media company Ber-telsmann AG and whether that wasused to inflate America Online profits.Time Warner had set aside $500 millionto cover the cost of settling the SECand Justice Department investigations.Of the $210 million called for in theJustice Department settlement, $60million will go to the federal govern-ment in fines and about $150 millionwill go into a compensation fund topay for settlements of civil lawsuits orother government actions arising fromthe alleged fraud. The criminal casehas already resulted in guilty pleasfrom executives at two companies thatare now defunct, namely, Purchase-pro.com of Las Vegas and Homestore,Inc., of Westlake Village, California.

FORMER BOEING EXECUTIVE PLEADS GUILTY

Former Boeing CFO Michael Searshas entered a guilty plea to illegallyhiring Darleen Druyun, a top Air Forceprocurement officer who has admittedshe gave the company preferentialtreatment on a $23 billion refuelingtanker deal and other contracts. Sears

pled guilty to one count of aiding andabetting illegal employment negotia-tions. It appears that Mr. Sears isgetting off easy with one count. I haveto assume that Sears agreed to provideprosecutors with useful informationregarding Boeing’s conduct over theyears. Druyun’s improper financial tiesto Boeing were first exposed by theNational Legal and Policy Center(NLPC), which filed a complaint withthe Defense Department InspectorGeneral in October 2003.

It was alleged by NLPC that Druyunhad improperly sought a Boeing jobfor her daughter and sold her house toa Boeing executive while she wasnegotiating billions of dollars worth ofcontracts for the Air Force by Boeing.The complaint also specifically askedwhether Sears and Druyun had negoti-ated employment before Druyun leftthe government. Boeing launched aninternal investigation and concludedthat the two had. Sears and Druyunwere fired in November 2003. Druyunwas sentenced to nine months inprison on October 1st. This is the sortof conduct that can’t be tolerated. Tax-payers should be able to believe thatthe corporate world will be honest andupright in dealings with the federalgovernment. Unfortunately, thatdoesn’t appear to have been the casein all too many instances. We havebeen much too soft on this type crimeand the wrongdoers know that to befactual. I suspect we have only seenthe tip of this iceberg!

Source: Corporate Crime Reporter

SEC FILES MORE FRAUD CHARGES

Federal regulators have filed civilfraud charges against three formerKmart Corp. executives and fivecurrent and former managers of bigvendor companies. The claim is thatthese folks engineered a $24 millionaccounting fraud by the retailing giant.The Securities and Exchange Commis-sion, which has been investigatingKmart’s decline into bankruptcy, con-tends that the retailer inflated earnings

by improperly booking millions ofdollars of payments from the vendors -Eastman Kodak Co., Coca Cola Enter-prises, Inc., and PepsiCo, Inc., and itsFrito-Lay division. Five of the formerKmart and vendor company executivessettled the SEC’s charges by agreeing topay civil fines totaling $160,000 and torefrain from future violations of securi-ties laws. In one case, a former Kmartvice president was prohibited for fiveyears from serving as an officer ordirector of a public company.

Cases are still pending against threeother executives. It should be notedthat neither Kmart nor the vendor com-panies have been charged in eithercriminal or civil courts. Last year,federal prosecutors dropped their fraudcase against two other former Kmartexecutives in the middle of their trial oncharges they conspired to inflate theretail giant’s earnings. In a civil lawsuitfiled in federal court in Detroit, the SECaccused the eight Kmart and vendorexecutives of causing Kmart to issuefalse financial statements by improperlyaccounting for millions of dollars worthof vendor “allowances” prior to thecompany’s bankruptcy in January 2002.According to the SEC, the vendors paidKmart the fees for promotional andmarketing activities. Kmart came out ofbankruptcy in 2003 as Kmart HoldingCorp. The deceptive scheme causedKmart to significantly overstate its earn-ings. According to the SEC, the execu-tives caused Kmart to prematurely bookthe vendor payments on the basis offalse information provided to thecompany’s accounting department. Itsaid several vendor company managerstook part in the fraud by signing falseand misleading accounting documents.

Source: Associated Press

MORE BRIBE PROBES BY THE SEC

The Securities and Exchange Com-mission has opened corrupt practicesinvestigations into three multinationalcorporations—Bristol-Myers Squibb,DaimlerChrysler, and Lucent Technolo-gies. Recently, Bristol-Myers Squibb


revealed that the SEC and a Munichstate prosecutor were looking at possi-ble bribes paid by a German unit.Lucent said the SEC is investigatingformer CEO Richard McGinn and twoex-employees for their alleged role in abribery scheme to win contracts for thecompany in Saudi Arabia. Lucent saidthe SEC sent Wells notices to McGinn,John Heindel, the former head ofLucent’s Saudi Arabian operation, andan unnamed third person. Wells noticesoutline potential charges and allowrecipients to respond before a suit isfiled. DaimlerChrysler reported that theSEC was looking at secret bankaccounts it allegedly maintained to paybribes. The investigation apparentlyhas focused on allegations raised byformer Chrysler auditor David Bazzettawho charges in a lawsuit that helearned of the bank accounts during aJuly 2001 meeting in Stuttgart,Germany, where DaimlerChrysler isheadquartered. Bazzetta said that thecompany was aware that the accountsviolated U.S. securities laws but contin-ued to maintain them.


CARLYLE GROUP PROFITS FROMGOVERNMENT AND CONFLICT

The Carlyle Group, a Washington,D.C.-based private equity firm thatemploys numerous former high-ranking government officials with tiesto both political parties, was the ninthlargest Pentagon contractor between1998 and 2003, an ongoing Center forPublic Integrity investigation intoDepartment of Defense contractsfound. A dozen companies in whichCarlyle had a controlling interest nettedmore than $9.3 billion in contracts.Overall, six private investment firms,including Carlyle, received nearly $14billion in Pentagon deals between 1998and 2003. From its founding in 1987,the Carlyle Group has pioneeredinvesting in the defense and nationalsecurity markets, and through itstakeover of companies with billions ofdollars in defense contracts became

one of the U.S. military’s top vendors,ranking among better known defensefirms like Lockheed Martin, Boeing Co.,Raytheon Co., Northrop Grumman andGeneral Dynamics.

Unlike those firms, however, theCarlyle Group itself is not a manufac-turer. It offers no services directly tothe Pentagon, and has no defense con-tracts. Carlyle manages investments—some $18.4 billion from 600 individualsand entities in 55 countries, accordingto its website. The firm’s business ismaking money for these investors, thevast majority of whose identities arenot disclosed to the Securities andExchange Commission or other gov-ernment bodies. Even though Carlyleitself has won no contracts, the compa-nies it has owned or controlled havedone billions of dollars worth of busi-ness with the Pentagon. The reportfound that the Carlyle unit that broughtin the largest share—$5.8 billion—wasUnited Defense Inc., which manufac-tures combat vehicles, artillery, navalguns, missile launchers and precisionmunitions. United Defense also ownsUnited States Marine Repair Inc., thecountry’s largest non-nuclear shiprepair, modernization, overhaul andconversion company.

The report found that UnitedDefense brought in more than 60% ofCarlyle’s defense business. Carlyle tookUnited Defense public in 2001, by April2004 it had sold all its shares in thecompany. Lear Siegler Services, aleading contractor in aircraft logisticssupport, maintenance, pilot trainingand ground support, received contractsworth more than $1 billion. Carlylesold the company in August 2002.Southwest Marine Inc. also receivedcontracts worth more than $1 billionsince 1998, and Norfolk Shipbuilding &Drydock received contracts worth $827million. In 1998, Carlyle merged thesetwo companies into United StatesMarine Repair.

Vought Aircraft Industries, a largesubcontractor doing work for militarycargo planes, bombers, and fighters,received contracts worth $85 million.Vought is among the few defense con-

tractors that the Carlyle Group has notsold. Among other private equity firms,New York-based Veritas Capital Man-agement firm, which employs manyformer high-ranking military officials,received Pentagon contracts to the tuneof more than $2.2 billion. It appearsthat Veritas is the 41st ranked defensecontractor. Companies under the own-ership of Vectura Holding Co., anotherNew York-based group, got deals tothe tune of $1 billion, while companiescontrolled by Berkshire Hathaway, ledby billionaire investor Warren Buffett,won contracts worth $688 million.


29 SECURITIES FIRMS FINED BY NASD

The NASD has fined 29 securitiesfirms a total of $9.2 million for late dis-closure of required broker information.The NASD, formerly the National Asso-ciation of Securities Dealers, suspendedtwo of the firms, Merrill Lynch andWachovia Securities, from registeringnew brokers for five business daysbecause of excessive violations andprior regulatory filing problems. MerrillLynch, the largest U.S. brokerage, washit with the biggest fine, $1.6 million.American Express Financial Advisorswas fined $700,000, Wachovia $650,000and Prudential Equity Group $550,000.The NASD said the firms failed to makeat least 25% of required disclosures ontime between January 2002 and March2004. ING Financial Partners had thehighest failure rate at 77% and wasfined $200,000. In July, Morgan Stanleywas fined $2.2 million and bannedfrom registering brokers for five days ina settlement from the same probe. Allfirms will conduct internal audits tomonitor reporting and ensure timelydisclosures.

SECURITIES PROBE WIDENS

Around a dozen major brokeragefirms are being investigated by the SECfor failing to obtain the best price forstocks they traded for customers.Brokers have a “best execution” obliga-


tion under the law, which requiresthem to secure the best price forinvestors. Among the firms implicatedare Morgan Stanley, Merrill Lynch,Ameritrade, Charles Schwab andE*Trade. The issue centers on howcompanies executed trades of Nasdaq-listed securities at market open in themorning. Every morning there is heavytrading from the backlog of ordersfrom market close the previous day.The investigation has found that tradeswere often processed in a manner thatfavored the firms over their clients. Ifthe investigation concludes that thesetrading practices were widespread, thecost to individual investors would beminimal—perhaps no more thanpennies a share traded—but that couldrepresent major profit to the brokers.

TENET TO PAY $395 MILLION

Tenet Healthcare will pay $395million to settle lawsuits filed by formerpatients who had received unnecessaryheart surgeries. The settlement fundwas established for more than 750people who filed lawsuits over heartbypass operations and cardiac cauteri-zations at Redding Medical Center inCalifornia. Individual payments willvary based on the scope of the injuriesor medical complications suffered byeach former patient. It is extremely dif-ficult to understand how anybody inthe healthcare field could have so littleregard for human beings.

Separate lawsuits against the doctorswho performed the surgeries weren’tincluded in the settlements. The agree-ment is subject to approval by individualplaintiffs and procedural court require-ments. Tenet has sold the ReddingMedical Center to Hospital Partners ofAmerica, which is located in North Car-olina. Tenet had agreed in August to paya $54 million settlement of federal andstate investigations into the heart surger-ies. As we went to the printer, Tenet wason trial in a case pending in California.The company’s executives were accusedthere of paying millions of dollars inbribes to doctors to steer patients to aTenet hospital in San Diego.

VI.CAMPAIGNFINANCE REFORM

HIGH COURT DODGES CAMPAIGN SPENDINGCASE

The U.S. Supreme Court has passedup a real chance to deal with the con-stitutionality of campaign spendinglimits. In a closely watched case fromNew Mexico, the justices, withoutcomment, let stand a lower ruling strik-ing down the City of Albuquerque’sspending limits as a violation of freespeech rights. The High Court declinedto consider whether a 28-year-old land-mark decision barring caps should bereassessed due to skyrocketing cam-paign costs that critics say promotescorruption. Without question, theunlimited spending in political cam-paigns over the years has led to thetotal dominance of special interests.Two candidates for city council andmayor had challenged the spendinglimits on First Amendment grounds.

The spending limits at issue werepassed in 1974—two years before theSupreme Court ruling that struck downcaps in congressional campaigns. Albu-querque capped spending in themayoral race at twice the salary of themayor—$174,720 for the 2001 election,$17,056 in a council race—twice acouncilor’s salary. Albuquerque offi-cials argued that the Supreme Courthas not prohibited all spending limits,just those that are unreasonable. Thecity felt their caps were justified byimportant governmental reasons. Butthe U.S. Court of Appeals for the TenthCircuit disagreed. That court cited theHigh Court’s 1976 ruling and declaredthe spending limits unconstitutional.

The city’s appeal had drawn thesupport of 11 states, eight U.S. sena-tors, 15 current and former judges, andseveral civil rights groups who pointedto what they called a troubling trend ofincreasingly expensive campaigns anda need for laws to stem the perniciousinfluence of money in elections. From1986 to 2000, the average cost of a U.S.

House race jumped 151% from$359,577 to $848,296 and a Senate raceincreased 154% from $3.07 million to$7.39 million, according to a friend-of-the-court filing from former SenatorsBill Bradley (D-N.J.) and Alan Simpson(R-Wyo.). The High Court could havedone our country a great favor byupholding this law. Unfortunately, theydodged the issue!

CAMPAIGNS LEFT WITH MILLIONS

Both the Bush and Kerry campaignsraised record amounts of campaignmoney and interestingly, each cam-paign wound up with large amountson hand when the race was over. Presi-dent Bush and the Republican NationalCommittee spent a combined $707million this election cycle. The presi-dent’s campaign finished the Novem-ber 2nd election with $4.4 million leftin his general election campaign fund.Bush also had $15 million in a legalcompliance fund that he could havetapped in the event of a recount fight,according to reports filed with theFederal Election Commission. Thepresident also detailed the moneyraised and spent by his record-break-ing primary campaign fund. He endedhis private fund raising with $273million collected, close to triple thethen-record $106 million he raised forhis 2000 primary campaign. The cost oftelevision ads consumed much ofBush’s money. Bush was not allowedto use private contributions on hiscampaign after he was nominated Sep-tember 2nd at the Republican NationalConvention in New York. That accounthad $2 million left as of late Novemberafter Bush gave nearly $11.3 million tothe RNC and $1,680 to the WhiteHouse Historical Association. The RNCraised $385 million this election cycleand spent $369 million, according tofigures it released. Obviously, its toppriority was Bush’s re-election. JohnKerry’s campaign had over $15 millionleftover after the race.

Source: Associated Press


VII.CONGRESSIONALUPDATE

REPRESENTATIVE TAUZIN FINDS A NEW HOME

Billy Tauzin, who is retiring fromCongress after 24 years of service, isgoing to work for the drug industry.The Louisiana Republican will becomehead of the industry’s top lobbyinggroup this month. If you wonder whyTauzin is going to work for the drugindustry, maybe it would be good toconsider his role while in Congress.Tauzin led the House committee thatregulated drug makers. Now he will bepresident of the PharmaceuticalResearch and Manufacturers ofAmerica. For obvious reasons, thismove just doesn’t meet the “smell test.”Any political leader who does favorsfor an industry while in office shouldn’tbe allowed to work for that sameindustry when he or she leaves office.

SHAME ON CONGRESS FOR SNEAKING INSOME BAD LANGUAGE

In a behind-closed-doors moveduring recent budget negotiations, con-gressional conferees inserted languageinto the massive appropriations billstating that the Federal Energy Regula-tory Commission can now preemptstates on the permitting and siting ofliquefied natural gas (LNG) facilities.This will restrict the ability of states andlocal communities to have adequatecontrol over these controversial proj-ects. The new language in the billclearly states that the federal act pre-empts the states on matters of approv-ing and siting natural gas infrastructure.

The LNG projects are particularlycontroversial because liquefied naturalgas is extremely volatile and danger-ous. The new language is also trou-bling because companies areproposing to build 19 new LNG marineterminal facilities throughout theUnited States in the next few years.Currently there are just four LNGmarine terminals in the United States.

Communities are leery of LNG facilitiesbecause of security reasons. LNGtankers and marine terminals make sig-nificant terrorist targets because of theenormous quantities of fuel carried bythe tankers, the risk of fires, and thehazards associated with the heating ofthe LNG at the marine terminals. States’officials have raised serious questionsabout the adequacy of FERC’s securityassessments. You will recall the situa-tion in Mobile where Exxon had pro-posed a facility.

Liquefied natural gas is not environ-mentally sustainable and that createsproblems. Natural gas used as fuel forelectricity pollutes, and the explorationand drilling for natural gas can causeenvironmental damage. More alarmingis the way in which this language wasinserted into the conference committeereport. Rather than hold public hear-ings where the public and other law-makers have an opportunity tocomment, this provision - which was inneither the House nor Senate bill - wasslipped into a massive appropriationsbill at the last minute. Many senatorswere surprised to learn later that it hadbeen added. By executing this shadymaneuver, Congress has created aculture of unaccountability that robsthe public—and in this case, wholestates—of the notion that our laws andAmerica’s policies are deliberated in afair and open manner.

Source: Public Citizen

REPUBLICAN CONGRESS SET TO RAISE DEBTLIMIT

By the time this issue is received,Congress will have passed an $800billion dollar increase in the federaldebt limit. The debt increase is thethird in successive years, and estab-lishes a new debt ceiling of $8.34 tril-lion dollars. I have to wonder how myRepublican friends can feel good abouta debt limit that exceeds $8 trilliondollars. Some people, myself included,have trouble putting that figure intoperspective. To even begin to get ahandle on this figure, one must con-

sider that it takes 1,000 million dollarsto equal $1 billion dollars. The U.S.Treasury hit the current ceiling over amonth ago, and has been forced totake extraordinary steps to manage thenation’s balances. Republicans hopethat the expanded borrowing authoritywill carry the government at leastthrough September 30th, the end ofthis fiscal year. The rapid escalation ofthe federal debt should be alarming toeveryone. The debt limit has increased37% since President Bush took office in2001. I am told that the new federalborrowing related to Social Securitywill be in the trillions. Estimates as highas $2 trillion are circulating in Con-gress. I believe that our governmentmust reverse the debt trends as soon aspossible. Failure in this area, in myopinion, will greatly weaken our nationfor years to come.

Source: The Wall Street Journal

VIII.PRODUCTLIABILITY UPDATE

UNDERRIDE CRASH CASE SETTLED

Our firm recently settled a tragic casewhere three generations were wipedout in a single crash that occurred onan Alabama interstate highway. GregAllen was the lead lawyer in this case.The case was settled, with the amountbeing confidential, after a mediationsession in which retired circuit judgeClaude Neilson served as mediator.Greg did his usual good job in thiscase. Actually, the pretrial discoverywas the key to getting the case settled.Our clients’ vehicle was traveling northon Interstate 65 in a Cadillac Escalade.There was a car stalled in the medianand a wrecker was attempting towench the car out of the median. Thewrecker driver parked his rollbackwrecker at an angle on the edge of theinterstate with part of the rollbackhanging into the traveled portion of theroad by approximately thirty inches.The accident happened right at dark,


which, according to many experts, isthe worst time for human vision. Thehusband of one of our clients, who wasdriving the vehicle, apparently saw thewrecker, but believed that it was off theroad. As the driver approached thewrecker in the left-hand lane, helooked back over his right shoulder tosee whether the right lane was clear.Unfortunately, at about the time thedriver checked the right lane, the edgeof the rollback became visible. Heattempted to avoid the crash by steer-ing hard to the right. Unfortunately, thefront of the Cadillac underrode the rearof the wrecker and the sharp rollbackportion of the wrecker intruded into theEscalade and clipped the A, B and Cpillar on the driver’s side of the vehicle.All three people on the driver’s side ofthe Escalade were killed instantly. Ourclient lost her husband of 36 years, heronly son, and her mother in that crash.She and the other occupant in theEscalade survived, but were injured.

Claims were brought against NissanDiesel Motor Company of Japan andNissan Diesel America for putting achassis cab on the market without anyform of underride protection or reflec-tive tape. During discovery, it wasdetermined that in Japan, chassis cabswere shipped by Nissan with tempo-rary underride guards so that the bodybuilders could install underride guardsif necessary. For vehicles destined forthe United States no such safetydevices were supplied. There was noinformation provided to the bodybuilders or anyone else of the need forthese safety devices. The studies areclear that reflective tape is especiallyeffective at the time of day that thiscrash occurred. Had the vehicle beensold in Japan it would have beenequipped with reflective plates fromthe Nissan factory. Again, U.S. boundvehicles have no such protection. Oneof the more interesting aspects of thecase is that during discovery welearned that one of the accident recon-structionists hired by Nissan as anexpert witness charged $288,000.00 forhis accident reconstruction. Obviously,an expert who charges this much for

one case loses credibility. Truck manufacturers have lobbied

for years against rules and regulationsthat will provide underride guards forstraight-line trucks. Unfortunately, thisis the third major underride guardingcase with tragic consequences that ourfirm has handled in the last severalyears. It is time that this simple devicebe mandated on all commercial vehi-cles in this country. The truck manufac-turers will not do it voluntarily. Wepreviously represented a family wherea young pregnant lady was involved inan underride collision. Her child wasborn, but unfortunately suffered severebrain damage as a result of the under-ride crash. He will suffer severe disabil-ity for the rest of his life. Even moretragic, his mother died from herinjuries. That case was settled beforetrial for a confidential amount.

Underride guard cases go back manyyears. A most famous underride caseinvolved the death of actress JaneWyman in the 1950s. The primarydanger involved in underride crashes isthat the fronts of automobiles aredesigned with a crush zone that pro-tects the occupants by absorbingenergy in a frontal crash and slowingthe vehicle down over the length of thecrash pulse. Unfortunately, in anunderride case, the crush zone isbypassed and the vehicle that is struck,usually a large truck, moves into thepassenger compartment, causing verysevere injury or death. That is exactlywhat happened in this case. Underrideguards are designed to make contactwith the crush zone and allow thevehicle to slow over the duration of thecrash pulse and, hopefully, preventingpassenger compartment intrusion.Underride guards are very effectivewhen designed properly.

LAWSUIT FILED AGAINST FORD AND TIREMANUFACTURER

Our firm has filed a lawsuit on behalfof Carolyne Thorne, a Montgomerybusiness owner, against Ford MotorCompany and Continental-General Tireof North America. In April 2004, our

client was driving her 2000 Ford Expe-dition on an interstate highway, whenthe left rear tire, which appeared to bein excellent condition, detreaded. Thiscaused the driver to lose control of thevehicle. The Expedition began to rollover, crossed the median and went intothe opposite lanes of travel. Ms.Thorne suffered severe, lifethreateningand permanent injuries that have lefther paralyzed. As a result, she is nowpermanently and totally disabled. Wewill prove at trial that the Expedition’sroof, restraint system and windowswere all defectively designed and man-ufactured by Ford.

The proof will be that the 2000 Expe-dition is uncrashworthy and unreason-ably dangerous and defective bydesign. The vehicle has an unreason-ably high center of gravity and anarrow track width, which in combina-tion predispose the vehicle to instabil-ity and an unreasonable risk ofrollover. Significantly, the ContinentalGeneral Grabber tire that detreadedhad been recalled. We believe eachcompany has legal responsibility forwhat happened to our client. GregAllen and LaBarron Boone will handleour client’s case.

2005 CRASH TEST RESULTS ARE IN

The National Highway Traffic SafetyAdministration is testing 2005 modelsas they come on the market. The 2005Acura RL was the only one of 18 vehi-cles tested to earn the government’shighest rating, five stars, for front andside-impact crash tests and rolloverprevention. The Jeep Grand Cherokee4x2, Ford Explorer 4x2, Mercury Moun-taineer 4x2, Chevrolet Tahoe 4x4 andGMC Yukon 4x4 were the worst per-formers in the rollover test, earningthree stars. That rating means thechance of rollover in a single-vehiclecrash is 20 to 30 percent. The FordMustang had the lowest chance ofrollover, at 8.7%. The best-performingsport utility vehicles in the rollover testwere the Lincoln Navigator and theToyota Highlander, which earned fourstars and had a 17% chance of rolling


over. The Nissan Altima, Pontiac G6,Pontiac Vibe and Toyota Matrix werethe worst performers in the driver’sside-impact test, earning three stars.That means there is an 11 to 20 percentchance of serious injury in a similar,38.5 mph crash. No vehicle got fewerthan four stars in the frontal crash test,which is a 35 mph test.

Source: NHTSA

FRONTAL CRASH TEST RESULTS NOT GOODFOR SOME COMPANIES

The Kia Spectra is the first vehiclesince 2001 to get the insurance indus-try’s worst safety rating in a frontalcrash test. The Spectra, a small, four-door sedan, got the Insurance Institutefor Highway Safety’s lowest rating ofpoor after a crash test dummy’s head,chest and legs were injured in the 40mph crash test. Vehicles can bedesigned to do a good job protectingpeople in frontal crashes. Kia MotorsAmerica, Inc., has met with Instituteofficials to determine how to improvethe vehicle’s performance.

Only two small cars—the Mazda 3and the Hyundai Elantra—earned theInstitute’s highest rating of good in thisround of testing. The Suzuki Forenzaand the Saturn ION were rated accept-able, the Institute’s second highestrating. The Institute tests vehicles in a40 mph crash and rates them based onthree criteria: the amount the vehiclecrumples into the driver’s space,injuries to the crash test dummy and aslow-motion analysis of how well theseat belt worked.

A good rating means a driverwearing a seat belt probably wouldsuffer only minor injuries in a similarcrash. A poor rating means a risk ofsevere injury exists. Besides the Mazda3 and the Hyundai Elantra, the Volk-swagen New Beetle and Jetta, theSubaru Impreza, the Suzuki Aerio, theMini Cooper, the Toyota Corolla, theFord Focus, the Mitsubishi Lancer andthe Honda Civic received good ratingsin the test. Most of those cars weretested earlier by the Insurance Institute,

which tests vehicles as they areredesigned. Consumers should take alook at the crash test performance ofthe vehicles before purchasing a newcar. This is especially true for smallcars. Those are at a disadvantagebecause the vehicle doesn’t weigh asmuch and is not as large as other vehi-cles. It is important to make sure thatyour new car performs as well as pos-sible in a frontal crash. For additionalinformation on test results go tohttp://www.iihs.org/.

Source: The Institute for Highway Safety

A DEFECTIVE SUV STAYS ON THE MARKET

The Saturn Vue, a small sport utilityvehicle, has been in the news latelyand the news isn’t good for consumers.A rather unusual event occurred duringNHTSA testing of the Vue. The car’ssuspension system collapsed duringthe rollover testing. Obviously, this wasnot a good development for GeneralMotors and certainly not good for con-sumers. The company promptly said itwould voluntarily recall all of theroughly 250,000 Saturn Vues on theroad in the United States and Canada.Everybody applauded the swift actionby GM, which, by the way, was inAugust, and expected the vehicles tobe recalled. However, the recall nevertook place and the automaker has con-tinued to sell 2004 models of the Vuefrom its dealer lots. The New YorkTimes reports that more than 10,000units had been sold through Novemberof 2004. Unfortunately for consumers,most of these SUVs were not fixedbefore they were sold. To date, accord-ing to the Times’ report, GM has fixedonly a few thousand of the quarter-million existing Vue models because ittakes time to procure new suspensionparts for so many vehicles. Reportersindicate that the 2005 models werefixed before they left the factories.

Unfortunately, that’s not the end ofthis story. For some reason, the federalgovernment has permitted GM to con-tinue selling the defective Vues.NHTSA has determined that the highly

unusual failure during its new rollovertest didn’t rise to the level of a safetydefect. It should be noted that the Vueis not actually the subject of a formalrecall, but a less-stringent voluntarymeasure known as a service cam-paign that permits GM to keep sellingthe vehicle without fixing it. Consumergroups say the government’s decisionraises questions about how seriouslyNHTSA takes their own rollover tests.Consumers have been buying vehiclesthat have not been fixed without beingtold about the problem. Also, theredoesn’t appear to have been any direc-tive from GM to its dealers requiringthem to discuss the problem withpotential buyers. A spokesman forNHTSA told the Times that there is nosafety risk. However, Clarence Ditlow,director of the Center for Auto Safety, awell-respected consumer group, says,“It’s preposterous they’re still sellingthe vehicle. It’s even more dismayingto learn that the government is permit-ting GM to sell the vehicle by notdoing a safety recall.”

As you may know, rollover testing ofnew vehicles was forced on NHTSA byCongress after nearly 300 rolloverdeaths occurred in the late 1990s inFord Explorers equipped with Fire-stone tires. Consumer groups havebecome increasingly concerned thatregulators are not giving the results ofthe tests enough weight in computingthe star ratings they assign vehicles forrollover performance. For example,even an SUV that tips up on twowheels during the testing can earn asmany as three out of five stars. HowNHTSA could allow GM to continue tosell a vehicle that actually broke duringthe government’s test is difficult toexplain. Joan Claybrook, the presidentof Public Citizen, made this astuteobservation: “I think it’s irresponsible.For NHTSA not to recall these vehicleson something as serious as this isentirely wrong and completely under-cuts the agency’s authority. How canthey say it’s not serious when it failstheir own test?” Joan served as head ofNHTSA during the Carter Administra-tion and has been a real champion for


consumers over the past two decades. NHTSA says there is no safety defect.

Let’s take a look at what actually tookplace. The left rear wheel of both thetwo- and four-wheel-drive versions ofthe Vue collapsed during separaterollover tests. In the tests, the vehiclesare driven through as many as 10maneuvers known as fishhooks thatinclude unusually sharp turns. The fail-ures occurred at 45 mph, which is cer-tainly not a high or excessive rate ofspeed. The testing was halted. Mr.Ditlow, at the Center for Auto Safety,who believes the tests deal with realworld driving experiences, told theTimes:

This maneuver was designed toreplicate what a consumer mightdo in an emergency situation. Isthis an ordinary maneuver? No.But it’s an emergency avoidancemaneuver that might happen inreal life. How many other vehiclesthat ran through this test had theirsuspension fail? Zero.

During the last decade, NHTSA hasallowed automakers to use servicecampaigns instead of recalls to resolvesome safety-related issues. In the caseof the Vue the regulatory agency deter-mined after its own investigation thatthere was no defect presenting a safetyrisk and claims no additional actionwas needed beyond GM’s commitmentto fix all of the vehicles, free of charge,as parts become available over severalmonths. I hope this type response byNHTSA will prompt consumers todemand that Congress get involvedand fix the real problem—the weakregulatory system itself. Sources: The New York Times, Public Citizen and theCenter for Auto Safety

DAIMLER TO APPEAL $101.75 MILLIONVERDICT

Last month we reported on anextremely important trial taking placein Nashville, Tennessee. The plaintiffwon that case and received a $101.75million verdict. Now DaimlerChryslersays it will appeal. The Tennessee jury

correctly ruled against the company fora seat design that was cited in thedeath of an 8-month-old child. The juryawarded the parents of the child $98million in punitive damages and $7.5million in compensation for wrongfuldeath and emotional distress. Theverdict broke down as follows: $101.75million against DaimlerChrysler and$3.75 million against the driver of thepickup truck, for a total of $105.5million.

As previously reported, the 8-month-old child was riding in the back seat ofa 1998 Dodge Caravan in Nashville in2001 when the vehicle was rear-ended,causing the front passenger seat to col-lapse and the infant passenger to strikeit, fracturing the infant’s skull. WhileDaimler has known for over 20 yearsthat these seats are extremely danger-ous, it has never seen fit to warn thepublic. The company to this day claimsthere’s nothing wrong with the seats.The public should be shocked to learnthat the company has concealed hun-dreds of accidents in which the faultyseats played a role in serious injuriesand deaths. Although consumer advo-cates, such as Public Citizen, have triedto get DaimlerChrysler to improve itsseats, their efforts have largely beenignored. Hopefully, this verdict will getthe automaker’s attention. It shouldalso get the attention of the federalgovernment and specifically NHTSA.

THE AUTOMOBILE INDUSTRY PUTS COMFORTOVER SAFETY

How many times have you, as a frontseat passenger of a car, reclined yourseat while wearing your seat belt totake a short nap? I suspect each of youhave done this more than once.Although this is a very common prac-tice, it is also extremely dangerous. If aseatback is reclined, the common seatbelt becomes much less effective—ifnot completely useless—because theshoulder harness of the belt movesaway from the body. Folks don’trealize or understand that the morespace between the seat belt and anoccupant’s chest, the greater risk of

death or serious injury in an accident. Automobile manufacturers have been

well aware of the dangers of recliningseats for nearly four decades. At a 1964Stapp Car Crash Conference, twosafety-equipment engineers presenteda report analyzing the effect lap beltshave on reclined-seat occupants. Thereport discussed sled testing in whichthe seatback was reclined almost fully.When the sled stopped suddenly, thetest dummy submarined under the lapbelt almost 10 inches, driving the beltinto the dummy’s abdominal cavity. In1988, the National TransportationSafety Board (NTSB) conducted asafety study where one of the issueswas the effect of reclining seatbacks.The NTSB examined 167 collisionsinvolving passengers who had wornthree-point restraints. The resultshowed that three-point restraintsoffered good protection only if wornproperly. An occupant who wears aseat belt while his seat is reclined is not“centered” in the belt, rendering thebelt ineffective for spreading crashforces over the body. The NTSB statedthat the protection offered by any typeof seat belt is compromised when theseat is reclined, presenting a “poten-tially dangerous combination in amoving vehicle.” The NTSB noted that,“since vehicles had been marketedwith reclining seats, most adults andchildren were tempted to combine beltuse with a reclined seat.” The studyconcluded that, “at best, lap/shoulderbelts, indeed, any type of seat belt,offered reduced effectiveness whenused with a reclined seat. At worst, alap/shoulder belt in a reclined seat maybe a potentially dangerous combina-tion in a moving vehicle—proper fit isimpossible.” Although some vehicleowner’s manuals warn of the dangersof reclined seatbacks in moving vehi-cles, the warnings do not state specifi-cally what degree of recline isdangerous. Further, the NTSB pointedout that, before the manufacturersadvertised their cars by showing a pas-senger in a reclined seat, whilewearing a seat belt, these advertise-ments undermine the already limited


effectiveness of owner’s manuals warn-ings. This is especially true if the warn-ings are unclear, as in advertising notto recline the seat “any more than asneeded for comfort.

The NTSB submitted safety recom-mendations to NHTSA based on thefindings in the study. The report rec-ommended that manufacturers limit theangle of inclination allowable in areclining seat to no greater than themaximum angle that can safely be usedin combination with a seat belt. Thereport further requested that NHTSAdetermine to what degree a seatbackcan be reclined and still allow an occu-pant to be properly and safelyrestrained by a lap/shoulder belt com-bination. In March 1989, the NTSBstated that:

• Warnings and owner’s manuals arenot effective for preventing passen-gers from misusing lap/shoulderbelts and reclining seats;

• It is not known at what point thelap/shoulder belt becomes danger-ous with reclined seats; and

• Testing is required to determine thesafe limits of reclined seats.

NHTSA also noted that “it is likelythat most people who ride with theseatback reclined are not aware of theassociated risks; they are simply usingthe added comfort the reclining seat-back affords.” In response to NHTSA’sinitial position and NTSB’s findings, theauto manufacturers claim that theowner’s manuals effectively “discour-age” the use of reclined seats while avehicle is in motion, and that “commonsense” indicates that an upright seat issafer than a reclined one. Clearly, theindustry’s response was to blame themotoring public and ignore theproblem.

It is shameful that the automobileindustry has taken this position. Thereare ways for the industry to addressthis dangerous problem. A simplewarning that points out the danger ofreclining seats can be inexpensivelyincorporated into a vehicle design, andyet, it would convey the needed infor-

mation to alert the passengers of thedanger. A warning label can be the firststep towards educating the public.However, a warning would be unnec-essary if the industry would startdesigning its restraint system in such amanner as to alleviate the problem. Forexample, GM has incorporated intosome of its current vehicles, such asthe Trailblazer, a seat design thatmounts the seat belt system within theseat itself. Known as the “all belts toseat” method, this design allows theshoulder harness to stay in positioneven when the occupant reclines theseat. Another design incorporates aninterlock within a vehicle’s gearshift,preventing the driver from putting thecar in gear if a seatback is reclined.Interlocks are not yet used in any vehi-cles. Automakers could also add adevice that would warn the vehiclepassengers of the hazards of reclinedseats. In fact, years ago, a major manu-facturer of seat belts patented a devicethat would give a visual or audiblewarning if a passenger were to reclinehis seat to a dangerous degree.Emison, Kent J., “Reclining Seats TradeSafety for Comfort,” TRIAL, Vol. 39 No.2 (February 2003).

People are being needlessly injuredand killed as a result of the automobileindustry’s inaction on this subject. Theindustry knows full well that themotoring public does not understandor recognize the danger of recliningthe seat while a vehicle is in motion.The industry knows that millions offamilies drive millions of miles on theroad every year. The industry knowsthat the occupants in their vehicles willrecline their seats to take naps, and bydoing so, the occupants will all facegreat risk of serious injury or death inan accident. Yet, even with this knowl-edge, the automobile manufacturersturn a blind eye to this danger eventhough there are simple approachesthey could take to educate the publicand prevent such needless injuries anddeaths each year.

CARGO—THE OVERLOOKED HAZARD—IS ASERIOUS PROBLEM

We are currently investigating anautomobile collision in which the rightrear occupant in a Ford vehicle wasfatally injured when the rear seat andseat belt system failed. Although theexact cause of the belt system’s failureis unknown at this time, one potentialcause of the failure of the belt systemand definitely the seat’s failure wasshifting cargo. In this case, the cargowas groceries, weighing approximatelyone hundred pounds, that were storedin the trunk of the vehicle. As a resultof the collision, the groceries shiftedforward into the seat causing the rearseat to break. We believe this led to thepassenger’s death. All the groceries thatbroke the rear seat completely enteredthe occupant compartment of thevehicle. Had there been a steel parti-tion or structure between the seat andtrunk, which was once provided inmost passenger vehicles, the grocerieswould have been retained and the seatand seat belt system would have beensecure. Had that been the case, theFord passenger would most likely bewith us today.

The auto industry, for the better part,continues to ignore its responsibility toprotect occupants from potential cargorelated injuries despite the industry’sknowledge of and ability to preventcargo-caused injuries. In the late 1960s,the automobile manufacturers began toprovide and test a steel dividerbetween the trunk and rear seat ofmost of their passenger vehicles. Themanufacturers tested the steel dividerto make sure it was an adequate cargobarrier to prevent items that the indus-try could foresee people placing intheir trunk from penetrating the pas-senger area in frontal collisions. In fact,one manufacturer called the cargobarrier, “safety features.” In addition,this domestic manufacturer providedsecuring devices in some of thesetrunks, to which people could securecargo as well. Between 1968 and 1974,the manufacturer tested almost everypassenger vehicle it sold to assure that


the cargo barrier and steel partitionbetween the trunk and rear seat wouldretain items, such as spare tires, in 30mph collisions.

During the late 1980s and early 1990s,auto manufacturers in cost-cuttingefforts began to eliminate the steelbarrier between the trunk and rear seat,leaving the seatback completelyexposed. They justified this action byclaiming that the injuries caused bycargo were insignificant. However,according to the National HighwayTransportation Safety Administration(NHTSA), there are over 250 cargorelated injuries and fatalities every year.Items stored in vehicle trunks are notthe only cargo hazard. Vehicles in whichthe occupant and the cargo share thesame space, such as hatchbacks, SUVsand vans, pose increased cargo hazards.Items such as coolers, recreationalequipment and tools become dangerousprojectiles in collisions. This is espe-cially so in cargo vans.

Cargo vans are used by plumbers,painters, and delivery companies tocarry tools and other items. They aremanufactured and sold as a completevehicle with just a driver seat, frontpassenger seat, and a large payloadarea. As acknowledged by the industry,cargo vans are designed, manufac-tured, and sold with one primarypurpose: to transport cargo. In fact,most utility vans are designed to carrybetween 1,500 and 3,000 pounds ofcargo in the cargo area, which isdirectly behind the driver and frontpassenger seat. Remarkably, these vansare designed and manufacturedwithout any means to retain cargo soas to protect occupants from moving orshifting cargo in a foreseeable collisionor sudden stop. The only protectionprovided for the driver of a cargo vantransporting an item such as a refriger-ator in a frontal collision is the seatitself. However, even manufacturerswill admit that the seats in cargo vansare inadequate to act as a guard or toprevent serious and fatal injuries tooccupants in very minor frontal colli-sions caused by the forces from a 200-pound object, such as a refrigerator,

much less the entire payload. Antici-pated cargo loads shifting or movingforward in collisions can crush anoccupant between their seat and steer-ing wheel, even in collisions fromwhich one should walk away. In cargovans, it’s the “second collision” that canbe more dangerous than the first.

In accidents in which cargo vanoccupants are seriously or fatallyinjured by moving or shifting cargo, theautomobile industry has been aware ofalternative designs to protect occupantsfrom cargo-related injuries for years.Since the 1960s, cargo partitions havebeen designed and manufactured byvarious companies, termed by theindustry as “upfitters,” to divide theoccupant area from the cargo area andto prevent cargo-related injuries incargo vans. In fact, one automobilemanufacturer even designed and testedpartitions in the 1960s and 1970s intheir vans to ensure they would retainanticipated cargo loads from enteringthe occupant area and injuring theoccupants. Nevertheless, for no reasonother than cost, that automobile manu-facturer chose not to provide partitionsas safety features or options.

In the mid-1980s, GM’s EuropeanOpel engineers noted, “Cargo-relatedinjuries … are one of the major con-tributors to total harm in traffic acci-dents” and began designing and testingsteel partitions and anchor tie-downs toretain cargo in accidents to protectoccupants. By 1990, GM’s Opel beganmanufacturing its delivery vans with acargo retention system, which includeda cargo partition and cargo tie-downs.Another means to retain cargo arecargo tie-downs. Tie-downs are simplyfixed anchor points to which a con-sumer can secure cargo. While cargotie-downs are not incorporated into thedesign of cargo vans, several passengervehicles have been equipped withcargo tie-downs since the early 1980s.In addition, some of General Motors’safety engineers recommended in themid-980s that GM provide, at aminimum, cargo tie-downs in cargovans because no cargo barrier was pro-vided to protect occupants from cargo

that might shift and injure occupants infrontal collisions.

We handled a case a few years backin which a gentleman from southeastAlabama lost his wife in a survivablecollision, when flea market material shewas transporting in a Chevrolet cargovan shifted, fatally injuring her. Duringour investigation and prosecution ofthat case, we were surprised to discoverhow, in this country, the hazard posedby unrestrained cargo and the means toeliminate that hazard through knownsafety devices have, for the better part,been ignored by the automobile manu-facturers. This is particularly true withvans, which are intended to haul cargo.In fact, most lawyers we spoke withwhile investigating other claims oftenoverlooked holding the automobilemanufacturers responsible for cargo-related injuries and deaths. There is nojustification for the driver, particularly ofa cargo van, to ever suffer a cargo-related injury or fatality. The industrycontinues to ignore its responsibility tomake safe a vehicle that is haulingcargo in a rear compartment. Until theindustry begins to accept its responsi-bility and protect occupants from cargo-related injuries, drivers and occupantswill remain to be at risk.

SIGNIFICANT RESULT IN ROLLOVER CASE

An appellate court in Florida hasruled that a mother and two children,who were involved in a blowout-rollover accident caused by the failureof their Bridgestone/Firestone tires, hasthe legal right to sue the company forpunitive damages. The court ruled evi-dence offered by the plaintiffs showedthat Firestone knew about defects in itstires but delayed warning the public inorder to protect its own financial inter-ests. Florida law limits punitive damageawards for each claimant to three timescompensatory damages or $500,000,whichever is greater. If the injuryresults from wrongful conduct moti-vated by economic gain, the award canbe four times compensatory damagesor $2 million, whichever is greater.There is no cap, however, where a


defendant is found to have acted withintent to harm. There have been hun-dreds of cases brought against thecompany in state and federal courtsthat have been settled for confidentialamounts. There are still an unknownnumber of cases around the countrypresently being litigated in state courts.

Firestone delayed recall of the tires,covered up the defects, and endan-gered or killed a host of people whoselives might have been saved. In the1990s there were numerous rolloverincidents involving three types of Fire-stone tires—the Wilderness AT, ATXand ATX2—on Ford Explorers. Therollover accidents, which resulted indeath and severe injuries in somecases, sparked a public outrage thatresulted in Firestone recalling the tiresin August 2000. It was the second-largest tire recall in U.S. history. Fire-stone has argued that its tires are notdefective and that the recall in 2000was for public safety purposes becausethere had been so many accidents.Firestone has attributed the rollovers tothe design of the Ford Explorer sportutility vehicle rather than its tires.

The evidence in the Florida caseconsisted of information from thewebsite of Washington, D.C.-basedconsumer advocate Public Citizen. Itconsisted largely of extracts frommemos and letters from Firestone andFord Motor Co., as well as governmentdocuments, showing clearly that Fire-stone knew of its tires’ defects longbefore they were recalled in August2000. Public Citizen’s president, JoanClaybrook, stated, when commentingon the case: “Our evidence left nodoubt Firestone was in reckless disre-gard of public safety. Punitive damageswere definitely warranted.”

U.S.TO REQUIRE LAP BELTS IN REAR SEAT

All passenger vehicles sold in theUnited States must have shoulder andlap belts in the rear center seat by the2008 model year under a new federalrule issued on December 8th. Threeout of four new passenger cars alreadyhave these seat belts, but only half of

pickups and sport utility vehicles do.The new rule from the NationalHighway Traffic Safety Administration(NHTSA) requires 80% of vehicles tohave shoulder belts by the 2007 modelyear with all vehicles to have them by2008. NHTSA estimates the rule willsave up to 23 lives and prevent up to495 injuries each year. Interestingly,automakers now say they support therule. I have to wonder why it tookthem so long to recognize this need.Vehicles have been required to haveshoulder belts in rear window seatssince 1989. A law passed by Congressin 2002 required NHTSA to issue a rulerequiring shoulder and lap belts in themiddle back seat, where small childrenoften ride. NHTSA Administrator Dr.Jeffrey Runge says that because shoul-der and lap belts can be used withbooster seats, the new rule will makethe rear center seat “the safest place forchildren.” It will be 6 years from thedate Congress mandated this safetychange for the change to take place.Safety advocates had been calling foraction even further back.

JURY ORDERS FORD TO PAY $8.7 MILLION

A federal jury in San Antonioawarded more than $8.7 million lastmonth to a former Army major leftparaplegic after a 1999 rollover crash inSaudi Arabia. The jury determined FordMotor Co. was responsible for a defectin the roof design of a 1996 FordCrown Victoria. The jury further foundthat the bad design contributed tospinal injuries sustained by the plaintiff,who was a front-seat passenger in aCrown Victoria. The vehicle hit a con-crete median divider, straddled it, andthen fell into the opposite lanes andended up on its roof. The jury saw thevehicle, which was towed to theparking lot of the federal courthouse,and were able to understand the testi-mony on the defect. The roof crumpled12 inches, slamming into the plaintiff’shead. Experts for the plaintiff saidadding safety improvements that cost$9 to $31 would have significantlyreduced how much the roof caved in

and would have saved the plaintifffrom serious injury. Ford denied thecar was defective, saying it met federalsafety guidelines. For a minimum of $9or $31, the roof could have been madesafe. This is a good example of howweak federal guidelines and acompany putting profits over safety, incombination, allow a vehicle with adefective roof to be put on the market.

IX.MASS TORTSUPDATE

CELEBREX HAS HEART ATTACK RISK

An increased risk of heart attackswith patients taking Celebrex, which isthe top-selling painkiller for Pfizer Inc.,was being reported as we went to theprinter with this issue. Celebrex is adrug that is in the same class as Vioxx.At this point, it doesn’t appear thatPfizer has any plans to remove Cele-brex from the market. The increasedrisk of heart attacks was found in oneof two long-term cancer preventiontrials. The National Cancer Institute,which was conducting the study forPfizer, suspended the use of Celebrexafter discovering that patients taking400mg to 800mg of the drug daily hada 2.5 times greater risk of experiencingmajor heart problems than those whowere not. However, a separate cancerstudy found no increased heart riskwith patients taking 400mg of Celebrexper day. Pfizer was conducting thetrials as part of an effort to find a newuse for the drug.

Both Celebrex and Vioxx are a typeof drug called Cox-2 inhibitors. Thenew findings on Celebrex have tocause concern in the medical commu-nity. It now appears that all these Cox-2 drugs have similar risks. Celebrex isthe most-prescribed drug for treatingarthritis. In the nine months ending inSeptember, worldwide sales of Cele-brex more than doubled from the sameperiod a year earlier to $2.29 billion.This accounts for 6% of Pfizer’s total


sales of $37.59 billion. At least threetimes since Merck recalled Vioxx,Pfizer issued statements affirming thecardiovascular safety of Celebrex in anapparent attempt to assure patients itwas not like Vioxx. When our firmstarted filing Vioxx cases back in 2000,we also were taking Celebrex cases.We are currently involved in about 60Celebrex cases that are filed andpending against Pfizer. We will con-tinue to investigate claims involvingserious injury and death involvingCelebrex, as well as other drugs andsee that as an important part of ourfirm’s mission.

Andy Birchfield, head of our firm’sMass Torts Section, has called on Pfizerto recall Celebrex. We have beenwatching the Celebrex situation unfoldover the past four years. In light ofrecent findings, which undeniably linkCelebrex to greater heart attack risks, itis time for Pfizer to act responsibly andpull the drug from the market. In ouropinion, there can be no justificationfor keeping Celebrex on the marketsince the findings on Celebrex arequite similar to the recent results fromthe Vioxx study. The Food and DrugAdministration says that it is consider-ing regulatory measures that couldinclude severe label warnings or evenrequiring that the drug be withdrawnin the United States. I believe Pfizerwill inevitably have to recall Celebrex.The company has pulled all of itsadvertising on the drug. The companyis making a reckless decision in failingto pull the drug immediately.

PUBLIC CITIZEN CALLS ON THE FDA TO BANBOTH CELEBREX AND BEXTRA

Public Citizen’s Health ResearchGroup has filed a petition with the U.S.Food and Drug Administration (FDA)asking that both Celebrex and Bextrabe banned. As far back as 2001, PublicCitizen was telling the FDA about thecardiac risks associated with Celebrexand Vioxx. Public Citizen demanded ablack box warning for both drugs. Inthe April 2001 issue of the newsletterWorst Pills, Best Pills News, Public

Citizen urged patients not to use eitherdrug because there are safer alterna-tives. Public Citizen now has asked theFDA to immediately remove Celebrexand Bextra from the market. That, inmy opinion, is the proper course ofaction for the government to take. OnDecember 24th, the FDA finally orderedreviews of the ongoing patient studiesof both Celebrex and Bextra. Theagency also issued an advisory onover-the-counter anti-inflammatorypain medications. The advisory “urged”doctors to be highly selective in pre-scribing Celebrex and Bextra. Thisbelated action by the FDA falls farshort of the mark. Hopefully, theagency will ban both drugs asrequested by Public Citizen.

THE FDA MUST DO ITS JOB

Most folks are now asking how couldthe Food and Drug Administration(FDA) have done such a poor job ofregulating the drug industry? We knowthat the FDA is underfunded andunderstaffed and that’s a major part ofthe problem. We also know that thedrug industry has tremendous politicalclout, which makes for a bad situationfor any government agency chargedwith protecting consumers, and that’san even greater concern. But, there isanother factor to consider. Twelve yearsago, the White House and Congressmade an agreement with the pharma-ceutical industry that seemed to be agood idea at the time. The industrywould supply substantial sums—reach-ing $200 million a year at latest count—to help the FDA hire more reviewers tospeed the approval process for newdrugs that might otherwise be held upsolely by administrative logjams. Thegovernment was having to meet tightdeadlines for reviewing drugs at thattime. The agency also had to keepsteady its own financing for new-drugreviews, adjusted for inflation. Theagreement, at that time, seemed to be areasonable way to ensure that the gov-ernment didn’t have to cut back on itsown funds. Instead, it would the indus-try money to pay for reviewers already

on the staff. This 1992 deal—negotiated under

the first President George Bush andupdated under President Bill Clintonand again under the current PresidentBush—has grievously distorted theagency’s drug safety programs inunforeseen ways. Even though thecurrent Administration is very friendlyto the drug industry, the blame actuallyhas to go back to successive Adminis-trations and Congresses that failed toprovide funds to the FDA for pharma-ceutical programs. As a result, theagency has had to take money fromprograms designed to monitor thesafety of drugs after they are on themarket so as to keep up its reviews ofnew drugs before they are allowed onthe market. This is referred to as “can-nibalizing” the monitoring program tomake up a shortfall in another impor-tant area of responsibility.

Clearly, there has been a marked shiftin emphasis at the FDA. In 1993, theagency’s Center for Drug Evaluation andResearch spent 53% of its budget onnew-drug reviews, with most of the restused for programs to ensure that drugsalready on the market were safe. By2003, 79% of the agency’s budget wentfor new-drug reviews. Almost every-thing else has been cut back. Half of thescientists in the drug center’s labs aregone, reducing the agency’s ability toconduct independent testing of suspectdrugs. Collaborations with respectedacademic groups that assess drug sideeffects have ended. Needed money wasdiverted to maintain a computerizedlisting of side-effect reports. This hasbecome the FDA’s main tool to detectpost-marketing problems. Virtually allexperts say it has serious shortcomings.A Republican-dominated Congress andan Administration beholden to drugindustry campaign contributions are notlikely to change a system that works tothe industry’s advantage. In my opinion,corporate money should never be usedto support initial drug reviews. Congressmust provide better support for theFDA. Funding must be significantlyincreased. Safety monitoring must beadequately financed and the drug indus-


try’s influence proportionately reduced.Regardless of the cost, this has to bedone. It will be a price worth paying.

Source: New York Times

MERCK APPOINTS COMMITTEE TO REVIEWVIOXX

In a move that reminds me of thestory where the “fox” guards the “hen-house,” Merck & Co. has appointed acommittee of board members and aretired federal judge to review thecompany’s actions relating to thepulling of Vioxx from the market.Merck says the committee will act forthe company’s board of directors inhandling shareholder litigation over theVioxx withdrawal and would advisethe board on any action to be takenafter the review. Merck says the com-mittee’s purpose is “to ensure that thecompany acted appropriately and ethi-cally.” Merck’s action “raises morequestions than answers,” according toknowledgeable experts. About 2million people worldwide were takingVioxx, which had been Merck’snumber two drug with 2004 globalsales of $2.5 billion. The special com-mittee will be chaired by William G.Bowen, chair of the Merck board ofdirectors’ committee on corporate gov-ernance and president of The AndrewW. Mellon Foundation. The board willbe advised by John S. Martin Jr., aformer U.S. attorney who served asU.S. district judge for New York’sSouthern District for 13 years beforegoing into private practice in 2003.

In the meanwhile, Merck has beenspending a great deal of money andresources trying to repair the damagesto its image as a result of the Vioxxproblems. The above referenced com-mittee is just one example. Thecompany has also assembled a team ofdefense lawyers from all over thecountry to handle the Vioxx litigation.Merck says it will mount an aggressivedefense. Nobody should expect Merckto make things easy for their victims. Weexpect the company to play hard ball.

STATE OF NEW YORK SUES MERCK OVERVIOXX

New York State Comptroller AlanHevesi has filed a lawsuit againstMerck & Co. over pension fund losses.The New York State Pension Fund haslost $171 million dollars on Merckstock depreciation. Merck has lost $38billion in market value since Vioxx’swithdrawal from the market. Thelawsuit, which was filed in FederalCourt in Trenton, New Jersey, seeksclass action status for people whobought shares between May 21, 1999,and October 21, 2004. The lawsuit alsoaccuses several executives of insidertrading in selling Merck shares whilepossessing material, nonpublic infor-mation. The suit alleges that CEORaymond Gilmartin sold $30.37 millionin shares; CFO Judy Lewent sold $16.57million in shares; General CounselKenneth Frazier sold $1.97 million inshares; and Controller Richard Hen-riqus sold $1.88 million in shares.

We reported in last month’s issue thata judge in New York had ruled in favorof shareholders and against Bayer in asimilar case. That court ruled thatBayer should have informed sharehold-ers about problems related to Baycol,their statin medication. Similar evi-dence has already been produced inthe case filed by New York. TheLancet, a highly respected medicaljournal, has conducted an analysis ofscientific evidence available to Merck.The Lancet article’s author concludedthat Merck executives had enough dataavailable to them that Vioxx shouldhave been withdrawn from the marketas early as the year 2000. This will beextremely damaging evidence in ashareholder case.

MORE ON SOME DANGEROUS DRUGS

We reported last month that congres-sional hearings on issues surroundingthe Vioxx withdrawal were underway.As previously stated, Dr. DavidGraham, the FDA drug safety reviewer,testified during those hearing andrevealed some disturbing information.

In addition to his testimony concerningVioxx, Dr. Graham discussed five othermedications that he considers danger-ous. These medications—Accutane, anacne medication; Meridia, a weight lossagent; Bextra, a pain reliever in thesame class of Vioxx; Crestor, an anti-cholesterol medication; and Serevent,an asthma drug—are all currently onthe market. Dr. Graham specificallycalled Accutane a twenty-year regula-tory problem. Our law firm has beencontacted by clients who were takingthese medications over the past years.We are actively involved at this time ininvestigating their claims.

Dr. Graham testified that he had rec-ommended withdrawal of twelve differ-ent drugs in his twenty-year career atthe FDA and that ten of those had beenwithdrawn. One drug that he recom-mended for withdrawal, but which wasnot withdrawn, was a rheumatoidarthritis drug manufactured by Aventiscalled Arava (Leflunomide). In makinghis recommendation regarding Arava,Dr. Graham cited in his report theserious liver injuries caused by this drugand not caused by the other medica-tions used to treat rheumatoid arthritis.Dr. Graham also cited studies that indi-cated patients did not stay on Aravalong-term. His assessment was thateither Arava didn’t work or the patientsdidn’t like its side effects. After Dr.Graham issued his report on Arava rec-ommending its withdrawal from themarket, the FDA conducted an advisorycommittee meeting several monthslater. It was unfortunate that Dr.Graham was not allowed to testifybefore the advisory committee meetingregarding his findings. Dr. Graham testi-fied that when he completed his studieson Vioxx he was pressured into chang-ing his findings by his superiors at theFDA. Perhaps Dr. Graham should bequestioned about Arava to see if hissuperiors pressured him into not testify-ing before the advisory committee sothat Arava could remain on the market.


CRESTOR ADS MUST BE PULLED

I have never believed that the Foodand Drug Administration (FDA) shouldallow a drug company to advertise anydrug. Recent events have strengthenedmy beliefs. In my opinion, a recent adrelating to Crestor really crosses theline. I believe the FDA should crackdown on the maker of this cholesterol-lowering drug Crestor for the mislead-ing advertising on the company’swebsite and in national newspapers. Asyou know, Crestor was one of fivedrugs named as potentially hazardousby Dr. David Graham in his recent con-gressional testimony. In an apparentresponse to Dr. Graham, AstraZeneca,which manufactures and marketsCrestor, responded with full-pageadvertisements in national and regionalpublications, including The Wall StreetJournal, The Washington Post, The NewYork Times, and USA Today. The adssaid, “The FDA has confidence in thesafety and efficacy of CRESTOR.”

Obviously, AstraZeneca’s advertisingconflicts with the FDA’s public state-ments about the drug. The FDA shouldreview the company’s statements andorder them to post a correction if thestatements are incorrect. The drugcompany’s statement on its website thatit had been assured that senior-levelFDA officials have “no concern in rela-tion to Crestor’s safety” is clearly in con-flict with FDA statements. Many groups,including Public Citizen, believe thatCrestor is unsafe and should be bannedfrom the market. On December 23rdthe FDA told AstraZeneca to stop mar-keting the “false and misleading” claimsin its advertisements. Crestor is said tobe the only statin that causes acutekidney failure and carries a higher risk of rhabdomyolysis. However,AstraZeneca is standing by its advertis-ing and says it is consistent with whathas been communicated to thecompany by the FDA. This is totallyfalse and the FDA has called thecompany to task on the issue.

As you probably know, Crestor,approved in August 2003, is a “statin”drug prescribed to lower cholesterol

levels. The FDA issued a health advi-sory last year after AstraZenecachanged the label on Crestor for theEuropean Union to include a warningabout the risk of developing a muscleproblem called rhabdomyolysis.Although the U.S. label already notedthe risk, the FDA said it would alertphysicians to be especially carefulwhen prescribing the drug.

Sources: USA Today and Public Citizen

BEXTRA FOUND TO POSE RISKS AFTERHEART BYPASS SURGERY

In an earlier section, it was pointedout that Public Citizen was calling onthe Food and Drug Administration toban Bextra. Now the FDA is warning ofpotential heart problems associatedwith the use of Bextra, which isanother Cox-2 Inhibitor painkiller. Thisconcerns people who have recentlyhad heart bypass surgery. The FDA isadding the warning to the label ofBextra, which is made by Pfizer. TheFDA issued a statement saying that“results from a new study of more than1,500 patients who had just had cardiacsurgery show that patients treated withBextra for pain were more likely tohave heart and blood clotting problemsthan other patients who did not receiveany drug.” The problems includedheart attack, stroke and blood clots inthe legs and the lungs, according to theFDA. The new label will indicate thatBextra was not suggested for treatmentof pain immediately after coronarybypass graft surgery. In a letter pub-lished in the New England Journal ofMedicine it was stated that doctorsshould not prescribe Bextra “except inextraordinary circumstances.” Bextracame on the market after Celebrex wasintroduced. Both drugs are manufac-tured by Pfizer.

PFIZER TO TURN OVER ZOLOFT RESEARCH

Pfizer Inc. will turn over some inter-nal research documents on its anti-depressant drug Zoloft to lawyersdefending a 15-year-old South Carolina

boy accused of murdering his grand-parents. The drug company willcomply with a South Carolina judge’sorder requiring the drug maker to handover the documents, which containmedical information from clinical trials.The teenager was charged with shoot-ing his grandparents as they slept intheir beds. The defense lawyers believethe documents will help them proveZoloft led the boy to commit thekillings. The ruling may also pave theway to make public some reports ofadverse reactions to Zoloft that haveremained confidential under settle-ments of civil cases. The boy in thecase had been prescribed Zoloft off-label—meaning for a condition notindicated on the drug’s label - by afamily doctor weeks before the killings,and his dose was boosted only daysbefore.

A state forensics psychiatrist has testi-fied she believes the Zoloft caused tobecome psychotic and hear voicestelling him to kill. Pfizer claims theinformation subpoenaed by defenseattorneys in the criminal case was con-fidential medical information onpatients, and shouldn’t be relevant tothe criminal trial. Zoloft is not specifi-cally approved by the FDA for use indepressed children and adolescents,but it and other antidepressants,including GlaxoSmithKline PLC’s Paxiland Wyeth’s Effexor, have been pre-scribed for children “off-label.” An FDAadvisory committee in Septembercalled for the labels of all antidepres-sants to get a tough “black box”warning about the risk of increasedsuicidal tendencies in young people.

DRUG MAKER REFUSED CALL TO MONITORUSERS

A lawsuit has been filed in Floridaagainst Hoffmann-La Roche, the makerof Accutane, the controversial acnemedication that has brought to lightsome disturbing information. Thecompany, according to allegations in afederal court case, disregarded acompany doctor’s recommendationthat users of the drug be monitored for


signs of depression and that a warningto that effect be added to the drug’sU.S. label. The Florida lawsuit againstthe drug maker charges that the Swissdrug giant omitted the warning after itsmarketing officials argued that such analert could cost the firm sales orprompt lawsuits. To my knowledge,the doctor’s recommendation and themarketing debate had not been previ-ously publicized.

It should be noted that, althoughthere has been no official finding thatlinks Accutane to depression or otherpsychiatric illnesses, there is plenty ofreason to believe it does. Roche saysthe drug is effective when used prop-erly. Nonetheless, a senior Roche offi-cial, testifying in a pretrial depositionfor the Florida case, said the firm’sinternal analysis showed Accutane“probably caused” depression andother psychiatric illnesses in somepatients. Roche is a defendant in about70 pending lawsuits for alleged adversereactions that include suicides, depres-sion, birth defects and gastrointestinalinjuries. Accutane made its U.S. debutin 1982 as a prescription drug that pro-vided relief to many who have a severeform of acne that fails to respond toother treatments. Although still widelyused, the drug has been the focus ofmore than 20 years of medical and reg-ulatory controversy.

Motivated by concern about birthdefects and other medical problemsreported with Accutane, Public Citizenpetitioned the FDA in 1988 for a banon the drug. The agency failed to grantthe petition or even act on the recom-mendations that Accutane be pulled.Instead, the FDA, over a period ofseveral years, considered establishing amandatory registry for doctors whoprescribe Accutane, pharmacists whodispense the drug, and patients whotake it. The registry proposal wasaimed at strengthening efforts to keeppregnant women from taking Accu-tane. Regulators also considered usingthe registry for adverse psychiatricproblems associated with the drug.But, the FDA didn’t take final actionuntil November of last year, when it

announced formal plans for an Accu-tane pregnancy registry.

Internal Roche documents uncoveredby congressional investigators for the2002 House subcommittee hearingshow the company officials listed theabsence of immediate FDA action onthe proposed Accutane registry on aninternal list of corporate “successes.”Records found by the investigatorsinclude an October 2001 e-mail writtenby a Roche vice president of drug reg-ulatory affairs and sent to Roche U.S.CEO and other company officials. Themessage said the firm should “CELE-BRATE” the FDA’s non-action at thetime. Noting that a registry might have“alienated” dermatologists who pre-scribe Accutane, the vice-presidentwrote that “the outcome could havebeen drastically different” but forRoche’s efforts. This wasn’t the onlytime a drug company celebrated afailure by the FDA to regulate the phar-maceutical industry. In fact, things thatonce shocked this writer are now socommon I am no longer shocked. Infact, lawyers in our Mass Torts Sectionhave come to expect this sort of thingform the drug companies.

Source: USA Today

FDA STAFF MEMBERS HAD DRUG SAFETYCONCERNS

We have known for a good whilethat the powerful drug industry hashad tremendous influence in ournation’s capitol. It now appears that anumber of U.S. Food and Drug Admin-istration scientists were under tremen-dous pressure to act in a certainmanner. Nearly 20% of these scientistssurveyed in late 2002 said they werepressured to approve or recommendapproval of a medicine despite theirreservations about the drug’s risks oreffectiveness. Documents from thestudy were made public last month. Itis highly significant that two-thirds ofthe scientists questioned by the Depart-ment of Health and Human Services’inspector general said they lacked fullconfidence in the FDA’s ability tomonitor side effects of prescription

drugs after they hit the market. Thesurvey shows at least some govern-ment scientists backed accusations lastmonth by FDA safety officer Dr. DavidGraham, who told a Senate hearing hewas pressured to water down safetyconcerns about Vioxx. We all knowwhat happened subsequently—thedrug was pulled from the market—andthat is now the subject of a mostserious debate.

Dr. Graham, associate director forscience in the FDA’s Office of DrugSafety, also told Congress he felt theFDA was incapable of protecting thepublic from other dangerous drugs.The survey of nearly 400 FDA scientistswas obtained through the Freedom ofInformation Act by the Union of Con-cerned Scientists and Public Employeesfor Environmental Responsibility,which are two environmental activistgroups. Kathleen Rest, executive direc-tor of the Union of Concerned Scien-tists, which has Nobel-prize winningresearchers as members, says: “The sci-entists’ concerns warrant further inves-tigation as Congress reviews drugapproval practices at FDA.”

Among other findings, 36% of theFDA scientists said they were “not atall” or only “somewhat” confident that“final decisions adequately assess thesafety of a drug.” Portions of the surveywere published in a March 2003inspector general’s report about theFDA’s review process. It appears thatthe negative opinions were down-played in favor of a focus on positivefindings. It doesn’t take a survey,however, to figure out that the drugindustry exercises tremendous politicalclout. That clout has been quite appar-ent in influencing FDA decisions.

Sources: Reuters and Forbes

ANOTHER BAYER CRIMINAL INVESTIGATION

Anyone involved in the Baycol litiga-tion against Bayer Pharmaceuticalsbecame well acquainted with allega-tions of wrongdoing involving Bayercorporate entities. It was reported onNovember 26, 2004, that the federal


government is checking records todetermine whether drug maker BayerAG was forthcoming about safety con-cerns with its cholesterol loweringmedication. If the evidence shows thatthe company knew, but was slow toinform the government, that its drugwas riskier than comparable drugs, theFood and Drug Administration (FDA)could begin a criminal investigation. Arecent JAMA article stated that “beforethe agency (FDA) was aware of thedata, the company knew that the drugwas more dangerous than others.”During a C-Span appearance, Dr.Stephen Galson stated: “If this allega-tion is correct, the FDA takes itextremely seriously and we are goingto have our criminal investigators lookinto this.” Galson is acting director ofthe FDA Center for Drug Evaluationand Research. Based on all of the avail-able evidence, it certainly appears thatthe FDA should take the strongestaction possible against Bayer AG.

THE FDA MUST BE CHANGED AND SOON

With all of the information nowavailable concerning the vast numberof dangerous drugs on the market, noteven the most conservative person inthe U.S. could make a good case indefense of the FDA’s failure to protectthe public. The American peopleclearly deserve much better from thefederal government when it comes todrug safety than they have received.We shouldn’t have to worry that drugswe take in the prescribed manner cankill us. In my opinion, the FDA shouldbe fully investigated by Congress andprompt remedial action taken. TheFDA has failed miserably to regulatethe powerful pharmaceutical industryand in the process protect the publicfrom a safety perspective. The FDA haslost credibility with the public andsurely that has been noticed by ourpolitical leaders.

It is a sad commentary when youconsider that none of the revelationsabout the dangers of the Cox-2Inhibitors (Vioxx-Celebrex-Bextra) cameabout because of anything the FDA

did. Had the agency monitored thelong-term effects of these drugs prop-erly, surely they would have discov-ered the problems much earlier.Something must be done to correct thesituation without further delay. Ratherthan protecting the drug industry bypassing tort reform laws, the Presidentand Congress should reform the FDAand curb the influence of the drugmanufacturers. But, considering all ofthe campaign money that came fromthe drug industry last year—much of itto President Bush—it will be most diffi-cult to accomplish anything of conse-quence. Hopefully, people—ratherthan money—will rule the day!

X.BUSINESSLITIGATION

FEDERAL JUDGE UPHOLDS SARBANES-OXLEYLAW

A federal judge in Birminghamrecently rejected a constitutional chal-lenge by Richard Scrushy, the formerHealthSouth chief executive, to thenew corporate fraud law aimed at topexecutives. This law was adopted aftera series of major accounting scandals.This was the first court test of the Sar-banes-Oxley Act — which requires topexecutives of public corporations tovouch for the financial reports of theircompanies — and received nationalattention. U.S. District Judge Karon O.Bowdre disagreed with the argumentby Scrushy that the act is unconstitu-tionally vague and should not be partof the indictment accusing Scrushy of amassive fraud at HealthSouth. Thejudge in her ruling said jurors, not ajudge, should decide key questionsraised in Scrushy’s case.

When Scrushy was charged last year,he became the first CEO charged underSarbanes-Oxley. Scrushy is now free on$10 million bond. He is accused ofheading a scheme to overstate Health-South earnings by some $2.7 billion.Judge Bowdre wrote:

If the jury finds that the reports didnot fairly present, in all materialaspects, the financial conditionand results of operations of Health-South, the jury must then deter-mine whether Mr. Scrushy willinglycertified these reports knowing thatthe reports did not comport withthe statute’s accuracy require-ments.

Jury selection in this case is set tobegin January 5th.

RETAILERS FIGHT FOR FOREIGN IMPORTS

America’s leading retailers have fileda lawsuit to stop the Bush Administra-tion from imposing curbs on imports ofpopular Chinese-made apparel andtextiles. The Administration has todecide between retailers and consumeradvocates seeking access to lessexpensive goods on the one hand, anddomestic manufacturers who fear theloss of market share and jobs on theother. The uncertainty about futureaccess to their Chinese suppliers iscausing the importers concern. Theimporters group filing the lawsuitincludes such prominent retailers asGap, Inc., J.C. Penney, Co., FederatedDepartment Stores, Inc. and Liz Clai-borne, Inc. Domestic textile manufac-turers allege that China’s low-costproducers would cripple the U.S.industry if left unrestrained.

The case is triggered by the year-endexpiration of global textile and apparelquotas, which is expected to result inhuge gains for China and India andlower prices for consumers. Of coursethis comes at the expense of textile andapparel manufacturers in America andelsewhere. The Commerce Depart-ment, under extreme pressure fromdomestic textile makers, says that it willconsider their petitions seeking curbson Chinese-made apparel and textilesbased on the threat of a surge inimports when the quotas disappearJanuary 1st. The Commerce Depart-ment takes the position that the U.S.government has “ample authorityunder U.S. law” to accept a petition


based on “market disruption or thethreat of market disruption.”

In its lawsuit, filed with the U.S. Courtof International Trade, the U.S. Associa-tion of Importers of Textiles andApparel said the Bush Administrationviolated its own rules when it acceptedthe textile makers’ petitions after it had“repeatedly assured the import andretail community that no petitionswould be accepted based on somefuture threat.” The lawsuit seeks to forcethe Committee for the Implementationof Textile Agreements to give importersgreater participation in its decision-making process, which is not open topublic scrutiny. The Committee wascreated in 1972 to oversee U.S. textiletrade. With the quota deadline nearing,the importers have requested an injunc-tion to stop the government from actingon the textile makers’ petitions.

XI.INSURANCE ANDFINANCE UPDATE

WTC ATTACKS WERE TWO EVENTS

Several months ago, we wrote on thedispute concerning the World TradeCenter’s twin towers. The second ofthree scheduled trials to determine theamount of the recovery for the destruc-tion of the towers ended in a victoryfor master leaseholder Silverstein Prop-erties and its head, Larry Silverstein.You may recall that in the first trial,which ended last April, jurors haddetermined that the attacks, althoughcarried out by two hijacked airplanes,constituted a single “occurrence.” As aresult Swiss Re, a number of Lloyd’sinsurers, Chubb and several other com-panies were held responsible for onepayment, rather than two.

The second trial determined theresponsibility of those insurers, whocould not prove that they relied on thewording of the WilProp form preparedby Willis. The defendants were: AllianzGlobal Risks (with part of the risk rein-sured by France’s SCOR Group - see

article in international section), St. Paul/Travelers (Gulf Insurance), IndustrialRisk Insurers (a unit of General Elec-tric), Royal & SunAlliance (RoyalIndemnity), TIG Insurance (a unit ofCanada’s Fairfax Financial), TokioMarine & Fire ‘Millea Group), ZurichFinancial (Zurich American) and TwinCity Fire Insurance (a unit of The Hart-ford). The question of liability ulti-mately turned on the interpretation ofthe wording contained in a bindingform prepared by Travelers, which didnot contain the restrictive definition ofan occurrence, as was the case with theWilProp form. The jury therefore foundthat the insurance binders should beinterpreted to encompass two separateattacks. It should be noted that noformal written policies had been exe-cuted on September 11, 2001.

The original claim of approximately$1.1 billion may therefore be doubled to$2.2 billion. However, there are still anumber of additional considerations thatcould influence the amount of any finalpayment. St. Paul Travelers has statedthat the impact of the decision, “takinginto account the Company’s reserveposition and reinsurance, will be imma-terial to the Company,” which is mostinteresting. Some of the companies,however, who lost in court may appealthe jury’s verdict, which could extendthe case for several years. Silverstein hasalready appealed the first verdict.

The actual amount of loss is also indispute, with a specially appointedarbitration panel engaged in trying todetermine the exact amount. Swiss Rehas not joined in those proceedings.There is a third trial scheduled to deter-mine the amount of damages, but nodate has yet been set. As a result of thejury verdict, an additional billiondollars of insurance proceeds will beavailable. This should result in timelyand complete rebuilding of the WorldTrade Center. I strongly felt, and thejury agreed, that the destruction of theTwin Towers by two separate airplanesat two separate times had to be twoseparate occurrences and that theseinsurers had an obligation to pay.


TERMINATED INDEPENDENT INSURANCE AGENTWINS CASE

A federal court jury in Connecticuthas awarded $2.3 million in compensa-tory damages to an independent insur-ance agent. This verdict is expected tohave serious ramifications on the rela-tionship between insurance companiesand their independent agents all acrossthe country. The case marked the firsttime an independent contract agenthad been held to be a franchisee, whowould be covered under franchise law.Alex Charts, who had been one of themost successful and respected agentsfor Nationwide Insurance, sued Nation-wide after the company terminated hiscontract in January 1996. The juryfound that Nationwide terminatedCharts without good cause. It alsofound that Nationwide violated theimplied covenant of good faith and fairdealing and, more significantly, vio-lated the Connecticut Franchise Actand the Connecticut Unfair Trade Prac-tices Act.

Nationwide never informed Charts inwriting why it terminated the agent.The company contended that Chartshad violated unidentified state law andunwritten company policy. Nationwidesays that it did not have to show it hadgood cause to terminate the agent. Italso contends that it was not requiredto inform Charts in writing of thereasons for his termination. Nationwidesays it presented evidence to show thatCharts violated Connecticut state lawby “unfairly providing benefits to indi-viduals when these same benefits werenot available to all.” The typical indus-try contract with an independent con-tract agent contains a clause that says itcan be terminated at any time “with orwithout cause.” Nationwide argued thatMr. Charts’ agreement had such aclause.

This jury decision is said to breaknew ground since it is the first in theUnited States to apply franchise rulesto the insurance business. Several ofthe major insurance companies such asNationwide, Allstate and Prudentialoperate through networks of independ-


ent agents. The jury’s decision meansthat independent agents, acting asstand-alone businesses, fall under thepurview of franchise law and there-fore have far more protection againstsome actions taken by insurance com-panies. This may well open up thepossibility of future class action suitsagainst major insurance companiesfrom independent agents terminated inthe last few years without cause.Nationwide claimed that it could termi-nate Mr. Charts regardless of cause andthat it acted in good faith after conduct-ing an investigation. The jury also dis-agreed.


MULTISTATE UNUMPROVIDENT SETTLEMENTAPPROVED

At least 40 states have approved asettlement relating to the investigationof UnumProvident Corp. Under the set-tlement, the disability giant will have toreconsider about 200,000 claims andpay a $15 million fine. Approval of thesettlement in the claims-handling inves-tigation required the nation’s largestdisability insurer to notify affected poli-cyholders within 15 days. PaulaFlowers, Tennessee’s Commissioner ofCommerce and Insurance was one ofthe real leader in this effort. The settle-ment provides for a $145 million fine ifthe company fails to meet the terms.Insurance regulators in Tennessee,Maine and Massachusetts, the leadstates in the investigation, signed theagreement in November, as did officialsin New York and with the U.S. Depart-ment of Labor. Unum Life InsuranceCo. of America, Paul Revere Life Insur-ance Co., Unum National InsuranceCo., and Provident Life and AccidentInsurance Co. will have to notifyaffected customers that their denied orclosed claims can be reassessed.

Those claims were denied or closedsince January 1, 2000, for reasons otherthan settlement, death or reachingmaximum benefits. Insurance officialsin Virginia, Missouri and Wisconsinreceived requested extensions, officials

said. While regulators in California andMontana chose to not approve thedeal, individual policyholders are notaffected by whether their states agreeand are eligible to have claims re-examined. UnumProvident insuresmore than 25 million people. Theinvestigation began in 2003 in responseto customer complaints. CommissionerFlowers says that investigators saw a“lack of diligence in the claims person-nel’’ and insufficient training. Regula-tors will re-examine the company’sclaims handling after two years. Thecompany has to hire an additional 75employees as part of the settlement.We had reported on this settlement,which at that time was in the works, inour December issue. Our firm is cur-rently representing a tremendousnumber of Unum policyholders inpending lawsuits against the company.These cases will continue and will beunaffected by this settlement. However,we believe the settlement will have apositive effect on our cases.

XII.PREMISESLIABILITY UPDATE

UTILITY WILL PAY $7.2 MILLION INELECTROCUTION

Nearly a year after a woman waselectrocuted while walking her dogs ona wet East Greenwich Village street inNew York City, Consolidated Edisonhas agreed to pay her family more than$6.2 million and to set up a $1 millionscholarship fund in her name at Colum-bia University, where she was a doc-toral student. The settlement came aftermonths of negotiations between ConEdison and the family of the womanwho died the night of January 16th afterstepping on an electrified metal platenear a bakery on East 11th Street. Thisdeath set off a firestorm of criticism ofthe utility that led to aggressive newsafety rules and citywide inspections ofelectrical equipment that turned uphundreds of locations where the public

was exposed to stray voltage. Under the terms of the settlement,

Con Edison will provide a $1 millionfund at the Teachers College for schol-arships and research in the clinical psy-chology department, where the 30-yearold victim was completing her degree.The fund, which will receive fiveannual installments of $200,000 each,will be established early next year. ConEdison will form a panel consisting ofthree electrical safety experts - twochosen by a foundation the victim’sfamily will create, and one by theutility - who will meet periodically toreview the company’s safety perform-ance. It was the family’s idea that thesettlement include an education aspect.

The family will use part of themoney to create the Jodie S. LanePublic Safety Foundation, which willpursue efforts to improve public safetyin New York. The metal plate thevictim stepped on had become electri-fied by a wire inside a utility box thathad not been properly insulated. Theshock killed her, though her dogs sur-vived. The victim’s father, who is aengineer, did a great deal of study onelectrical systems. He pushed Con Edto overhaul its safety policies. Hisefforts resulted in a part of the settle-ment. The panel of electrical expertswill monitor the utility’s efforts toexpand training for first responders inhandling electrical emergencies. It willalso oversee the utility’s efforts todetect and repair stray-voltage prob-lems, and produce reports that it willrelease to the public and the victim’sfamily. Of the $6.25 million to be paidto the family, $5.27 million is for theclaim of wrongful death and $975,000is for the victim’s pain and suffering.Under the terms of the settlement, thecompany will pay a total of $7.25million, including the scholarship.

As a result of this lawsuit, state andcity officials imposed strict new ruleson how the utility guards against elec-trical hazards. The City Council haspassed a law requiring Con Edison toinspect almost all of its equipmentannually to protect against strayvoltage, and it required the utility to


publish the results of these inspections.State regulators also passed similarinspection rules, while also requiringall utilities in the state to report cases inwhich people are injured by strayvoltage within an hour of the incident.Con Ed has begun a comprehensiveprogram of research and developmenttargeted at eliminating stray voltageincidents. The result in this case willnot only provide compensation for thefamily, but will result in improvedsafety and educational funds forleading students in honor of the victimwho tragically lost her life.

Source: The New York Times

ALARM COMPANY FOUND LIABLE INROBBERY-MURDER

With all of the national emphasis onsecurity, the security industry isgrowing by leaps and bounds. Legalobligations on the part of companiesoffering security services will continueto be defined. The results are in from acivil trial in Indiana where a securitycompany was being sued that are mostsignificant. The company had providedalarm service for a liquor store. A clerkwas tortured and killed following arobbery at that store. The jury awardedthe 10-year-old child of the victim $1million in damages to be paid by Soni-trol Security Systems of Muncie,Indiana. The security company had aset of procedures it was to follow withall of its customers.

Sonitrol failed to phone the store, asit was supposed to do when the clerkdid not set the alarm as scheduledwhen he closed the store. The clerk,who worked alone, was required to setthe alarm at midnight when he closedthe store. If the alarm was not acti-vated, Sonitrol, under its procedures,was to phone the store within 30minutes and call the store manager ifno one answered. On the night theclerk was murdered, however, thealarm company did not phone thestore’s manager until 3:15 a.m. Whenthe manager arrived 15 minutes later,he found the store had been robbed

and the clerk missing. Police found the clerk taped to a tree

in a city park hours later after he wasreported missing. The clerk died laterin a hospital. A store customer pleadedguilty to murder and was sentenced to155 years in prison. It was learned thatthe clerk had been robbed at gunpoint,abducted, and subsequently taped to atree. The robber then beat and torturedthe clerk. A medical expert testifiedthat the victim likely would have sur-vived if he had been found sooner.Jurors did not accept Sonitrol’s argu-ment that the clerk should havepushed the “panic button” alarm,because they felt he might have beenshot immediately.

XIII.WORKPLACEHAZARDS

DUPONT SUPPRESSED TEFLON BLOOD STUDY

It clearly appears that Teflon makerDuPont has violated federal law requir-ing chemical companies to report newdata on the dangers of their products.The Environmental Working Group hasprovided the Environmental ProtectionAgency with documents showing thatthe Teflon maker failed to report newevidence that neighbors of the Teflonplant, which is located in West Virginia,have Teflon chemicals in their blood atrates many times higher than the Amer-ican public. The EPA currently hasongoing litigation against Dupont forhiding similar health and tap water pol-lution studies from the Agency for 20years. Richard Wiles, senior vice-presi-dent at EWG stated:

Once again, Teflon maker DuPonthas ignored its most basic legalresponsibilities to the Americanpublic. DuPont is already defend-ing itself in court against EPAcharges that it suppressed criticalsafety information from the com-munities surrounding its plants.What will it take for DuPont to tell

the public everything it knowsabout the extraordinary dangers ofTeflon chemicals?

The new study, conducted byExygen, a DuPont consulting firm,shows that people living near theTeflon plant have amounts of theTelflon chemical known as C8 or PFOAin their blood that are several times theamounts currently found in the Ameri-can public. Over 95% of the Americanpublic has the Teflon chemical in theirblood. Decades’ worth of peer-reviewed research shows that Teflonchemicals cause cancer, birth defectsand developmental problems in labora-tory animals. They never break downand are found in consumer productssuch as Teflon and other coated cook-ware, clothing, household cleaners,carpets and other textiles, fast foodpackaging and more.

In addition to suing DuPont forhiding a critical health study and datashowing the company had polluted thedrinking water of thousands of neigh-bors of its Teflon plant in West Virginia,the EPA is in the middle of an investi-gation to find out how the Teflonchemical has gotten into nearly everyAmerican’s blood. This second investi-gation could lead to a limit in use or aban of this Teflon chemical. EPA offi-cials took EWG’s advice in a petitionrequesting the government to prose-cute DuPont for breaking pollutionlaws by hiding damaging data for over20 years. The first hearing in the result-ing lawsuit took place on December16th in Washington, D.C. The EPAcould levy a fine of $313 millionagainst DuPont.


SELMA PLANT CITED FOR SAFETY HAZARDS

OSHA, a federal job safety agency,has proposed $40,500 in fines forGlobe Metallurgical, Inc. after a workerdied from injuries suffered at its Selmaplant in June. The 38-year-oldemployee died on June 6th fromsevere burns after being exposed totemperatures above 3,000 degrees


when an electric arc furnace eruptedon May 28th. Globe was cited for twoviolations by OSHA, totaling $10,000 infines, for failing to require furnaceoperators to wear aluminized jacketsand failing to automatically charge fur-naces. The company also received 11more citations, totaling $30,500, thatinclude fall hazards and unsafe electri-cal equipment.

WAL-MART WORKERS’ SUIT WILL BENARROWED

Florida employees who say Wal-MartStores, Inc., failed to pay them forworking during breaks and after hourshave been allowed to proceed with alawsuit against the retail giant.However, a state appellate courtrefused to grant class action status tothe suit. The case had been filed onbehalf of about 230,000 Wal-Martworkers. The three-judge appellatepanel ruled that the class was toobroad. The court panel suggested nar-rowing the class to only those whohave worked off the clock instead ofall current and former hourly wageearners who had been employed on orafter July 13, 1997. The plaintiffs’lawyers will follow that recommenda-tion. Even so, tens of thousands ofFlorida workers would still be coveredby the narrower suit.

$4 MILLION SETTLEMENT IN ASBESTOSLAWSUIT

A Chicago-area man has settled hisasbestos-related lung cancer lawsuit foralmost $4 million. The 78-year-olddeveloped mesothelioma, which isalways fatal, from exposure to asbestosin joint compound when he worked asa painter and drywall supervisor. Thedefendants, Georgia-Pacific and Bondex,agreed to the settlement. Several othercompanies had settled with the retriedworker prior to the date the currentcase was supposed to go to trial. Testi-mony at trial revealed that doctors havegiven the plaintiff less than a year tolive.

XIV.TRANSPORTATION

RAILROAD COMPANY LITIGATION

Burlington Northern & Santa FeRailway Co. has settled 40 lawsuits andits lawyers are trying hard to resolve 84others filed on behalf of passengerswho were killed or injured in a colli-sion that happened back in 2002. Theincident involved a Burlington Northfreight train and a Metrolink commutertrain. The settlement came shortly aftera jury in the first case to go to trial hadawarded an injured passenger $8.9million as damages. That lawsuit wasone of 100 consolidated cases and thefirst to go to trial. The injured passen-gers and relatives of the three peoplekilled were allowed to sue BurlingtonNorthern & Santa Fe after a SuperiorCourt judge in July ruled they can seekpunitive damages. Terms of the settledcases are confidential.

There are currently 84 cases in medi-ation. Four cases are set for trial. Some20 others are scheduled for settlementnegotiations within the next twomonths. Burlington Northern admittedresponsibility before the trial thatprompted the settlement. The onlyissue for the jury was the extent of herinjuries and the damages. The victimwas awarded $7.5 million for pain andsuffering, $900,000 for past and futurewage losses, and $500,000 for medicalbills. The verdict was said to send amessage to Burlington about safety andaccountability. If nothing else, it did setadditional settlement talks in motion.

More than 150 claims were originallyfiled by passengers or their relativesafter a mile-long train of 167 Burlingtonfreight cars crashed head-on into adouble-decker Metrolink train duringmorning rush hour. Three people werekilled, and 162 were injured. Federalinvestigators concluded that the acci-dent was caused by an inattentiveBurlington Northern crew that missed awarning signal and the lack of an auto-matic braking system on the freighttrain. The lawsuits allege that the

braking system, long sought by theFederal Railroad Administration, couldhave prevented the collision. The law-suits also allege that the crew wasfatigued from overwork and that theconductor had a history of losing trackof signals.

SETTLEMENT IN BARGE ACCIDENT CASES

A Jacksonville, Florida, constructioncompany has been ordered to paymore than $19 million dollars to eightpeople who were injured in a boatcrash that occurred three years ago.Eight people on the boat were throwninto the water. A judge ordered theconstruction company, Superior Con-struction, to pay more than $19 milliondollars to the 8 victims. The judgeruled the barge was not adequately litand it was improperly placed in achannel beneath a bridge in the city.

XV.ARBITRATIONUPDATE

JUDICIAL REVIEW OF AN ARBITRATIONAWARD

The Alabama Supreme Court hasaffirmed a trial court’s entry of judg-ment on an arbitration award of$500,000 to the plaintiff. The claimsthat led to the arbitration awardincluded fraudulent conduct in a newmobile home purchase. H&S Homes,the defendant in the case, claimed thatthe arbitrator manifestly disregardedthe law. Both the trial court and theSupreme Court rejected this argument.This is a most interesting and highlysignificant opinion. The Court acceptedthe arbitration award including punitivedamages based on the fraudulentconduct. As to the excessiveness of theamount of punitive damages, theSupreme Court stated that it “cannotdetermine how much of the arbitrator’saward of $500,000 was for compensa-tory damages, including damages formental anguish. Therefore, this Court


cannot hold that the arbitrator showeda manifest disregard of the law inawarding punitive damages.” Thisruling by the Supreme Court may causethe tort reformers a bit of concern.

XVI.NURSING HOMEUPDATE

STAFF SHORTAGE ENDANGERS RESIDENTS

A recent analysis by the Detroit Newsof nursing home staffing thresholdsnationwide indicates that four out ofevery five nursing home residents livein facilities with not enough aides ornurses to provide them with the bestpossible care. About 292,000 residentsnationwide, or about one in five, are ina nursing home with so few staff that itjeopardizes their health. These areemployees who get the residents out ofbed in the morning, help them to thebathroom, get them showered anddressed, and make sure they get theirmedications and are fed. When the facil-ity is short-staffed, all of those things areless likely to be completed. Residentadvocates point to that as a key reasonfor widespread dehydration and malnu-trition, which take the lives of many res-idents and injure many more.

Scientific studies have continuallyfound clear links between low staffinglevels and dehydration and malnutri-tion. In 2001, a study by the Centers forMedicare and Medicaid Services, thefederal agency ultimately responsiblefor overseeing most nursing homecare, found residents were more likelyto suffer severe weight loss in facilitieswith low staffing levels. The study alsofound that facilities without enoughemployees to give each patient threehours of care every day risk causingthem serious harm. According to theDetroit News analysis, facilities caringfor about 20% of the nation’s nursinghome residents did not meet thatthreshold as of October of this year.

WEAKNESS IN OVERSIGHT OF QUALITY OFCARE CONFIRMED

Recently, the United States Govern-ment Accountability Office (GAO) wasasked to assess the effectiveness ofnursing home oversight by consideringthe effect of a unique Arkansas lawthat requires county coroners to inves-tigate all nursing home deaths. Underthis law, coroners refer cases of sus-pected neglect to the state surveyagency that regulate nursing homesand to law enforcement entities.According to the GAO’s study, thePulaski County coroner referred 86cases of suspected resident neglect tothe state survey agency during theperiod of July 1999, when the Arkansaslaw took effect, to December 2003. Thereferrals involved 27 facilities, over halfof which had at least 3 referrals.

For some reason, however, Arkansasstate survey agency officials told theGAO that they received only 36 of thePulaski County coroner’s referrals. Ofthe 36 referrals for alleged neglect that itreceived, the survey agency substanti-ated 22 and eventually it closed the facil-ity with the largest number of referrals.However, the agency’s investigationsoften understated serious care problemsaccording to the newspaper reports.

The GAO’s prior work on nursinghome quality of care found that weak-nesses in federal and state oversight offacilities nationwide contributed toserious, undetected care problemsindicative of resident neglect. Theirreview of the Arkansas survey agency’sinvestigations of coroner referrals con-firmed that serious, systemic weak-nesses remain.

NURSING HOME LAWSUIT SETTLED

Managers of a Chicago nursing homehave agreed to pay more than $1.6million to settle a portion of a whistle-blower lawsuit involving allegations ofextreme patient abuse and Medicaidfraud. Two former employees revealedthat the owners and managers ofMaxwell Manor nursing home, which isnow closed, billed the federal and state

government for care that was neveradministered and permitted routinesexual assaults, theft and impropermedical care that, in some cases,resulted in death. The whistle-blowerswere a former facilities program coor-dinator and a former psychiatric reha-bilitation services coordinator.

The case began in February 2000when a whistle-blower lawsuit wasfiled against owners and operators ofthe home, which the former workersdeemed “a house of filth, terror anddeath.” They alleged that betweenOctober 1998 and June 30, 2000,Maxwell Manor residents were “rou-tinely abused, neglected, mistreated,sexually assaulted, medicated as a formof punishment, unsupervised and oth-erwise untreated for their mentalhealth, physical disability and sub-stance abuse problems.” The lawsuitalso alleged that the seven-story, 276-bed facility was operated in a physi-cally hazardous manner. According tothe suit, chronic conditions included“bulging ceilings, crumbling walls,rodent and insect infestations, perva-sive mildew and hazardous fire alarmand electrical systems.” One of thewhistle-blowers was fired in July 1999after documenting the abuse and alert-ing the facility’s upper management.

Managers of the nursing home, thelawsuit alleged, engaged in a pattern offraud that included falsifying patientcharts to make it appear they werebeing treated and medicated, as well asfailing to report patient accidents,abuse and assaults. In one case, awoman allegedly fell into a coma fordays before medical personnel werecalled. She died within days. Inanother, an AIDS patient went withoutmedication and fell gravely ill beforedying. Maxwell Manor residents, whowere mostly black, ranged from youngadults to the elderly. Tragically, mostsuffered from a physical or mental dis-ability.

Under terms of the agreement, thefederal government will receive $1million and the state would get$610,000. The settlement involved ABSLong-Term Care Management Co., Inc.,


and MBA-LTC, Inc., and four individu-als. In June 2000, several months afterthe lawsuit was filed, federal and stateauthorities closed the nursing homeafter finding unsafe, unsanitary andhazardous conditions. The facility hada long history of problems, withvarious owners being fined on severaloccasions. A beating death wasreported in 1992. The lawsuit is stillpending against the Brooklyn, NewYork-based nursing-home owner,Rabbi Efroim Stein, and a company heoperates, National Voluntary HealthFacility Number 4. Rabbi Stein wasconvicted in 2002 of bilking hundredsof thousands of dollars from a tax-payer-funded group established to helpJewish World War II survivors.

NURSING AIDE PROSECUTED FOR ABUSE OFELDERLY PATIENT

A Florence woman has been con-victed on a charge that she physicallyabused an elderly resident of Sun-bridge Care and Rehabilitation inMuscle Shoals. The woman, who wasemployed as a certified nursing assis-tant at the facility, was found guilty ofreckless abuse of a protected person.She was sentenced to 10 days impris-onment, which was suspended, andplaced on one year of probation underthe condition that she commit nofurther offenses and pay a fine of $100plus court costs and $25 to the CrimeVictims Compensation fund. After thetrial, Attorney General King stated:

It is reprehensible that this defen-dant—who was entrusted as acaretaker for the elderly and vul-nerable—manhandled an 83-year-old woman so roughly that a largearea of skin was torn on her arm,and then not only failed to admin-ister any care to the injury, butcaused such fear in the victim thatshe was afraid to call anyone elsefor help until her tormentor hadgone. This behavior is not justappalling; it is an intolerable crime.The elderly citizens of Alabamadeserve our gratitude, our respect,

and our protection. I pledge anewto the people of Alabama that theprotection of our families, from ourchildren to our grandparents, willremain my priority.

The conviction resulted from aninvestigation by the Attorney Generalof a complaint referred by the AlabamaDepartment of Public Health. Accord-ing to the warrant brought by an inves-tigator of the Attorney General’s Office,the employee jerked the patient by herright arm and caused a four-inch skintear. She then failed to provide anycare or alert anyone else to take care ofthe injury. It was reported that the resi-dent was afraid to call for assistanceuntil the employee had left the nursinghome. The victim, an 83-year-old resi-dent at the nursing home, is typical ofmany persons who have been placedin nursing homes. The Medicaid FraudControl Unit and its prosecution ofelder abuse is a part of AttorneyGeneral King’s Family Protection Unit,which he has committed to the protec-tion and defense of Alabama’s familiesand particularly to the defense of theelderly. Alabamians with concernsabout family protection issues may calltoll-free to 1-800-230-9485 or visit theunit’s web page at www.familyprotec-tion.alabama.gov.

NURSING HOME SUED AFTER WOMAN’S LEGSAMPUTATED

Life Care Center of Omaha, aNebraska nursing home, has beenaccused of providing poor care that ledto the amputation of an elderlywoman’s legs. As a result, the 77-year-old resident filed suit. The nursinghome is owned by Life Care Centers ofAmerica of Cleveland, which owns andmanages more than 260 facilities in 28states. The suit claims the medical staffordered a bunion removed from herright foot, even though this was notnecessary. After the operation the resi-dent developed gangrene, whichrequired the removal of her right legbelow the knee. The suit claims herother leg had to be amputated because

of an untreated ulcer that becameinfected.

XVII.HEALTHCAREISSUES

WE MUST IMPROVE DRUG SAFETY

We have spent a great deal of space inthis issue on the dangerous situationfacing people in this country because ofthe U.S. government’s failure to ade-quately regulate the drug industry. TheFood and Drug Administration, whichmany believed had provided the UnitedStates with the safest drug supply in theworld, has been under fire over the pastfew weeks and justifiably so. The atten-tion given to the FDA’s performanceintensified starting with the Vioxx disclo-sures and continuing with stories onCelebrex, Bextra, Crestor and severalother drugs. You will recall that threeyears ago, Bayer withdrew Baycol, thecholesterol-lowering drug, which wasfound to cause a rare muscle diseasethat was responsible for about 30 deathsand thousands of serious injuries. Thatdisclosure caused folks question theeffectiveness of the FDA for the firsttime. Unfortunately, little has been doneby the FDA to address what now hasbecome a major problem. As bad as it is,however, several lessons can be learnedfrom all of the recent drug tragedies:

• Not all drugs are equal. The stan-dards that are appropriate for break-through drugs that significantlyadvance medical care are not appro-priate for drugs that have no measur-able advantage over products alreadyon the market.

• The FDA should be given not only thelegal authority, but also the resourcesneeded to monitor drugs after theyenter the marketplace. Typically, newdrugs are studied in a population ofabout 3,000 people. Such a study candetect drug-related injuries that occur ata rate of between one in 500 and onein 1,000. Yet, if the drug is used by


200,000 people (Vioxx was used by 2million people in the United States), aserious adverse event appearing in asfew as one in 10,000 people is very sig-nificant, since it would occur 20 times.These rare reactions can be identifiedonly after a drug has been widely used.

The FDA’s legal authority underfederal law to require companies toconduct post-market studies ofapproved drugs is unclear. Moreover,the agency has never been givenresources that would be necessary tokeep careful track of adverse reac-tions that are reported for drugs.With clear legal authority and addi-tional resources, the FDA could identify drugs causing unexpectedadverse reactions sooner.

• The FDA should actively intervenewhen physicians misuse drugs. It isalmost gospel at the FDA that theagency doesn’t interfere with the“practice of medicine.” This meansthat once a drug is approved for asingle use, physicians are free underfederal law to prescribe it for anyuse. Sometimes these unapproveduses can become widespread anddangerous. In the high-profile caseof fen-phen, the diet drug combina-tion that damaged the heart valves ofthousands of consumers, the FDAhad never approved the drugtherapy for long-term weight loss.

In other cases, physicians areignoring FDA directions and riskingthe health of their patients. The FDAshould be given the legal authority torequire drug companies to studypopular, unapproved uses and tolimit physicians’ use of drugs whendeviations from FDA-approved usescan lead to severe injuries.

• The FDA should separate the moni-toring of drugs after they have beenapproved from the drug review func-tion. To some extent, the job of thepost-market reviewer is to second-guess the decisions of the officialswho approved the drug in the firstplace. Yet today the FDA drugreview divisions have primary

responsibility for deciding whetherdrugs should be withdrawn or theirrecommended uses limited. Thepost-market function should be sepa-rated from the drug review function.

• Leadership and resources matter. Thecombination of resources from Con-gress (in the form of user fees paid bythe drug companies) and strong FDAleadership cut the review time of newdrugs in half and eliminated the “druglag.” Now is the time for the FDA toturn its attention to drug safety. If itsleaders exert the same energy improv-ing the safety of the drug supply asthey exerted in eliminating the druglag, and if Congress gives them ade-quate legal authority and monetaryresources, once again the UnitedStates can indisputably have the safestdrug supply in the world.

The President and Congress mustmake reform of the FDA a top prioritythis year. In my opinion, this is some-thing this President can’t afford to leaveoff of his agenda. People are extremelyupset over all the drug problems andwill demand that the safety issues beaddressed. It will be difficult for thePresident to substitute tort reform forreform of the FDA and the drug industryin his legislative agenda. However, thelarge sums of campaign money receivedby the President could be a problem.

Source: The Washington Post

XVIII.ENVIRONMENTALCONCERNS

SECOND ROUND OF LITIGATION BEGINS—LEGAL FIGHT MOVES TO STATE COURT AS142 PROPERTY OWNERS CLAIM DAMAGE

Our firm is representing 141 propertyowners for damages resulting fromyears of carbon black emissions fromthe Continental Carbon plant. We willprove that the emissions have damagedtheir homes, boats and cars, reducedproperty values and threatened thehealth of the people in the area. The

case will be tried before veteran RussellCounty Circuit Judge Al Johnson inPhenix City. The lawsuit had been origi-nally filed in April, but was removed atthe defendant’s request to federal courtin July. The case was correctly sent backto state court by U.S. District CourtJudge Myron Thompson. The 141 resi-dents who are plaintiffs reside in southColumbus and Phenix City. The suitalleges the dust from carbon black—avery fine, powder-like product used inproduction of tires—has for yearsdamaged properties when the wind-carried particles settled on them.

The “fugitive emissions” from theplant have been especially damagingsince the plant doubled its productioncapacity in December 1998, allowing itto make more than 200 million poundsof the product annually. The pollutionconstitutes trespass on the properties ofour clients, nuisance, gross negligence,wanton disregard and, because of con-tinuing denial and other allegedactions, fraudulent concealment. Weare asking for unspecified damages formental anguish, diminished marketvalue of real and personal properties,loss of use and rental value, cleanupcosts and punitive awards. Thecompany has refused to admit wrong-ful conduct or to remedy the defectsand deficiencies causing the pollution.

A federal court jury returned a $20.7million verdict in an identical case onAugust 25, 2004. The plaintiffs in thatcase were the City of Columbus, ActionMarine, Inc., John Tharpe and OwenDitchfield. Our firm also representedthe plaintiffs in that case. Post-verdictproceedings in the federal case arebeing conducted in the case by U.S.District Court Judge Mark Fuller. Inaddition to Continental Carbon and theformer plant manager, the defendantsare Kim K.T. Pan and Todd Miller ofHouston, Texas; Douglas Emerich, theplant’s safety, health and environmen-tal affairs manager; CSRC USA Corp., orChina Synthetic Rubber Corp., ofTaiwan; and Taiwan Cement Corp. Inaddition to our firm, lawyers for theplaintiffs include Jeffrey Friedman ofBirmingham, Alabama, Edward Jackson


of Jasper, Alabama, and James R.McKoon Jr. of Phenix City.

$2.3 MILLION JURY VERDICT IN POLLUTIONLAWSUIT

A Mobile County, Alabama jury hasreturned a $2.3 million verdict againstIPSCO Steel Co. in a pollution lawsuit.After the trial of a lawsuit in whichneighbors claimed their homes werecovered in soot because of the mill,the jury ruled in favor of the home-owners. Neighbors also claimed theywere kept up late at night because ofnoise at the mill. The area around theIPSCO plant was described during thetrial as being like “a war zone.” Four-teen residents filed the lawsuit, claim-ing they were damaged because of“nuisance, negligence and wantonnessassociated with excessive noise andparticulate/soot material” accumulatingon their property. IPSCO took theposition that there was no evidencethe particles residents saw in theiryards were coming from their plantand that the noise levels recordedaround the plant were no louder thana passing train or a barking dog.

It was agreed by all parties to the suitthat the conventional emissions fromthe plant—the emissions that are runthrough a filter and a smokestack—were not an issue. Instead, the fallouton neighboring properties was said tohave come from pollutants that had notbeen run through a smokestack. Thevibrations and explosions neighborscomplained about at the plant weresufficient to shake loose the particlesand send them sailing on the wind.Recordings in which IPSCO plant offi-cials, answering calls from irate neigh-bors, said “Yes, sir, I heard that one.Sounds like dynamite,” were heard bythe jury. This made it difficult for thedefendants to deny that excessivenoise was a problem.

XIX.THE CONSUMERCORNER

CITIZENS STRIPPED OF PROTECTION

The poor regulation of the drugindustry is just an example of how thefederal government operates in regulat-ing other industries. The public has tobe concerned over how the federalgovernment works these days when itcomes to its overall regulatory respon-sibilities. After the U.S. Food and DrugAdministration discovered unsanitaryconditions at a plant in Great Britainproducing flu vaccine for the U.S.market, the agency refused to order acleanup. In fact, the FDA didn’t eveninspect the plant to ensure that acleanup was actually carried out.Instead, the FDA allowed the plant to“comply voluntarily.” The vaccine laterproduced by the plant—50 milliondoses, or half of the expected supplyfor the U.S.—was so contaminated itwas unusable.

The FDA also relies on “voluntarycompliance” in asking drug companiesto report evidence that their productsmight be harmful, and to withdrawdrugs they believe might cause prob-lems. Tragically, a prime example ofhow inept the FDA really is comesfrom the Vioxx debacle. Even whenMerck began to see evidence thatVioxx, which was highly profitable,was causing widespread heart prob-lems, it ignored those findings. Younow know the story of Dr. DavidGraham, associate director at the FDA’sOffice of Drug Safety, who told Con-gress that by the time Merck withdrewthe drug, Vioxx may have caused asmany as 55,000 fatal heart attacks. Incomparison, this rate is 18 times thedeath toll of the attacks of September11th. Unfortunately, the behavior con-cerning Vioxx isn’t unique, as we haveseen over the past weeks.

There are examples in other indus-tries where the government likewisehas failed the public. The Environmen-tal Protection Agency, the Occupa-

tional Health and Safety Administrationand every other federal agency chargedwith protecting consumers, patients,workers, and customers have alsobecome far less aggressive in enforcingexisting laws. For example, when theNational Highway Traffic Safety Admin-istration (NHTSA) discovered thissummer that the suspension system ofthe Saturn Vue collapsed duringrollover testing, as reported in anothersection of this report, NHTSA did notrequire a recall. Instead, NHTSA onlyasked Saturn to conduct a voluntary“service campaign,” thereby allowingthe company to continue selling unre-paired Vues. NHTSA didn’t evenrequire Saturn dealers to notify poten-tial buyers and let them know that theproblem even existed.

New York Attorney General EliotSpitzer, who continues to prosecutestartling cases of systemic white-collarcrime on Wall Street and elsewhere,has been a breath of fresh air. But, weall have to wonder where the SEC andother government agencies have beenall this time. General Spitzer has actu-ally had to do the U.S. government’sjob and he has done it well, with everycharge that he brought proving to beaccurate. There is one thing forcertain—voluntary compliance simplydoesn’t work. We have seen the culmi-nation of a conscious, long-term effortby business and its conservative alliesto emasculate government protectionof its citizens. Except in cases wherethey’re pressured into it by publicityand lawsuits, federal agencies rarelyenforce the law these days. Withoutany real fear of enforcement, respectfor the rules begins to erode and greedtakes over. Voluntary compliance intheory is a useful concept, but onlywhen companies know that it’s notreally voluntary, but mandated, will itwork. There has to be a fear of gettingcaught and being punished for theirwrongdoing to make the system work.

The sole remaining restraint on cor-porate misbehavior today is in thecourtroom. The fear that, unless busi-nesses meet their public responsibili-ties, they will have to justify their


behavior to a jury, is a strong deterrent.But, that last bit of protection is cur-rently under fierce and well-financedattacks by the so-called “tort reform”movement. Corporate America, whichfinances and directs the tort reformefforts, wants to dramatically limit thefinancial penalties that juries canimpose in cases of gross or even inten-tional corporate misconduct. CorporateAmerica has made passage of tortreform bills its highest priority at thestate and federal levels. With govern-ment agencies already weak andlargely ineffective, removing the jurysystem would leave private citizenswith no real recourse. Nevertheless,that seems to be where we’re headedin this country. It is high time thatprivate citizens get involved. Onlywhen that happens will the politicianslisten and respond.

A WARNING ON TOYS

Now that the Christmas holidays arehistory, all parents and facilities, suchas day care centers and church nurs-eries, should carefully check all toys towhich children have access. Theyshould be on the lookout for recalledtoys and children’s products. Any toyswith small parts that come off shouldeither be destroyed or the partsremoved. The reason being that smallchildren can choke on them. Consumeradvocates had issued their annualholiday toy safety warning in lateNovember. During 2003, according tothe Consumer Product Safety Commis-sion, 11 children under age 15 died oftoy-related injuries—all but one causedby choking on small balls, balloons,pieces of a game and/or toy beads.Also, in 2003, an estimated 155,400children were treated for toy-relatedinjuries in U.S. hospital emergencyrooms, down nearly 23% since 2001.The U.S. Public Interest ResearchGroup, in its 19th annual toy safetysurvey warned that the greatest dangerto children still comes in the form ofsmall balls, uninflated or pieces of bal-loons, and toys with parts smallenough to choke on. Such toys remain

widely available, and often are notlabeled as hazardous. Parents can’tassume that all toys on store shelvesare safe or adequately labeled. Unfor-tunately, there are still some dangeroustoys on the market. Others—whilerecalled—are still available for use.

One toy of particular concern, is the“yo-yo water ball”—a water-filled ballon an elastic-like cord that can bebounced, squeezed, or twirled over-head like a lasso. The toy has been thesource of nearly 400 injury reports tothe CPSC. Suffocation injuriesaccounted for almost 75% of the injuryreports after the cords wrapped arounda child’s neck, with other reportedinjuries to the eyes, face and head. Thetoy should be banned from sale in theUnited States, but the CPSC does notyet agree. In September 2003, thefederal agency warned of a “low butpotential risk” of playing with yo-yowater balls, but stopped short ofbanning them—an assessment that hasnot changed. In its warning, the agencysaid it found no toxicity or flammabilityconcerns with the yo-yos’ liquidcenters. Besides monitoring children atplay with them, it also advised cuttingoff the cords or throwing away thetoys. Most parents don’t know that theCPSC does not test all toys. Parentsshould never consider a toy to be safesimply because it’s for sale. Even toysthat meet federal requirements may stillpose dangers.

Before Christmas, the CPSC put out aTop Ten List of recalled toys. I recom-mend a review of that list to make sureno recalled children’s toys were pur-chased. The Commission compiled itsannual top 10 list of children’s productsafety recalls to coincide with the startof the holiday shopping season. Whilethe toys should all have been off storeshelves, it is possible not all wereremoved. The Commission is con-cerned that people who did their shop-ping early might have given recalledgifts. According to the CPSC, all theproducts on the list were recalled inthe past year.

The agency also is launching Neigh-borhood Safety Network, a Web-based

grass-roots effort to help spread theword about safety recalls to consumerswho may be harder to reach. Thenetwork will put life-saving informa-tion into the hands of people whoneed it most. These messages areposted and passed on in Boys andGirls Clubs, American Indian reserva-tions, firehouses and housing projects.The list of top recalled children’s toysand products includes:

• Bumble Bee Toys (398,000), distrib-uted by Graco Children’s Products.Graco received 26 reports of theantennae breaking off the bumblebee toys, including five reports ofchildren who started to choke on thebroken antennae. One child’s throatwas scratched when the child’smother removed the broken antennafrom the child’s mouth. Call Graco at(800) 258-3213 to receive a freereplacement toy.

• Nerf® Big Play Football (294,000),distributed by Hasbro. The footballcontains a hard plastic interior framethat can pose a risk of facial cuts if achild is hit during play. There havebeen nine reports of facial injuries,including eight requiring stitches ormedical attention. Call Hasbro at(866) 637-3244 or visit the firm’swebsite at www.nerf.com to receivea replacement NERF product ofequal value.

• Children’s Mirror Books (225,000),distributed by Kids II Inc. The mirrorin the books can crack or break,posing a laceration hazard to youngchildren. Kids II has received 26reports of the mirror cracking orbreaking, including four reports ofcuts and one report of a pinchedfinger. Call Kids II at (877) 325-7056or visit the firm’s website atwww.kidsii.com for instructions onreturning the mirror for a refund.

• Radio-Control Toy Trucks (287,000),distributed by Nikko America, Inc. Aproblem with the circuit boardcauses the toy truck to overheat,posing a fire and burn hazard. Noinjuries have been reported. Call


Nikko America at (866) 232-6013 forinstructions on returning the productfor a free circuit board replacement.

• Ride-On Toys (70,000), distributed byTek Nek Toys International. Thescrew and nut assembly attaching thesteering wheel can come loose,posing a choking and aspirationhazard to young children. Tek NekToys has received six reports of thescrew and nut coming loose, includ-ing the death of an 18-month-oldboy who aspirated a screw. Call TekNek Toys at (888) 661-0222 toreceive free replacement parts.

• BATMAN™ BATMOBILE™ Toy Vehicle(314,000), distributed by Mattel Inc.The rear tail wings of the Batmobileare made of rigid plastic and come toa point, which poses a potentialpuncture or laceration hazard toyoung children. Mattel has received14 reports of injuries consisting ofscrapes, scratches, lacerations andpunctures. Four of the injuriesrequired medical treatment. CallMattel at (888) 271-9891 to determinewhether the toy is among therecalled models and to order the freereplacement wings if needed.

• Children’s Athletic Shoes (441,000),distributed by Payless ShoeSourceInc. The metal eyelet lace holder atthe top of the shoes can detach,posing a choking hazard to youngchildren. Payless ShoeSource hasreceived one report of a child start-ing to choke on a detached eyeletfrom one of these shoes. No injurieshave been reported. Call Payless at(800) 654-697 or visit the firm’swebsite at www.payless.com forinformation on returning these shoesto a Payless ShoeSource store for acash refund or exchange.

• “Rock ‘N Roller” Baby Strollers(300,000), distributed by Dorel Juve-nile Group USA. If the stop pins arebent or missing or the seat is notfully attached, the seat can partiallydetach from the frame during useand the infant occupant can beinjured in a fall. There have been 77

reports of problems related to thestroller seats. Injuries included onechild who fell and had a slight con-cussion and another child who cuthis forehead and required stitches.Additionally, there were 46 reports ofbumps and bruises. Call Dorel Juve-nile Group at (800) 711-0402 todetermine how to inspect the strollerfor possible replacement.

• Metal Toy Jewelry Sold in VendingMachines (150 million pieces), byfour toy jewelry importers (AAGlobal Industries, Inc., BrandImports, Cardinal Distributing Co.and L.M. Becker & Co., Inc.). Someof the toy jewelry contains danger-ous levels of lead. CPSC has receivedone report of lead poisoning when achild swallowed a piece of toyjewelry containing lead that was pre-viously recalled. No reports ofinjuries or illnesses have beenreceived relating to products bythese companies listed above. Con-sumers should throw away recalledjewelry.

• Toddler’s Athletic Shoes (140,000),distributed by Reebok International.The I-3 logo-tag on the tongue of theshoe can be peeled off, posing achoking hazard to young children.Reebok has received a report of an 8-month-old child mouthing the logo-tag. The tag was removed withoutinjury. Call Reebok at (800) 843-4444or visit the firm’s website atwww.reebok.com to receive a refund.

I suggest that our readers go to thewebsite of the Consumer ProductsSafety Commission (www.cpsc.gov) foradditional information on toys and otherproducts that children have access to.

MOTORIZED SCOOTERS ARE DANGEROUS FORSMALL CHILDREN

Many children will have received aRazor scooter, which was one of thehottest toys on holiday wish lists forchildren, this Christmas. These scooterscan be very dangerous. Razor scootersare made of aluminum. They are

lighter and faster than other scootersand as a result can be more dangerous.Speed is one of the reasons the scoot-ers are so popular. Very young childrenare riding these scooters. The light-weight aluminum scooters sell for any-where from $99 to $199. Parents mustrealize that these scooters aren’t streetvehicles and should never be riddenon streets. If children are allowed toride these scooters, they should alwayswear helmets and follow other ruleswhen riding the scooters. According tothe American Academy of Pediatrics,there were about 9,000 Razor scooter-related emergency room visits in 2003.Emergency room doctors say manyinjuries can be avoided on the scootersif the children don’t ride in traffic, dowear protective gear and have closeadult supervision. My recommendationis to restrict the sale and use of thesescooters to older children who mustwear helmets when riding.

MANDATORY STANDARD FOR CIGARETTELIGHTERS

The U.S. Consumer Product SafetyCommission (CPSC) has voted unani-mously to start development of amandatory safety standard for cigarettelighters. The mandatory standard couldbe based on the current voluntary “Stan-dard Consumer Safety Specification forLighters” (ASTM F-400) to preventmechanical malfunction of lighters.CPSC Chairman Hal Stratton reportsthat, “Reducing fire deaths is one of ourtop priorities. A mandatory standard forcigarette lighters - along with standardsfor the flammability of mattresses andupholstered furniture - would helpreduce fires, deaths, and injuries.” Thereare approximately one billion cigarettelighters sold in the U.S. annually. About400 million of those are imported fromChina. From 1997 through 2002, CPSCestimated that 3,015 people went tohospital emergency rooms for injuriesresulting from malfunctioning lighters.Most of these injuries involved thermalburns to the face, hands, and fingers.For the same time period, CPSCreceived 256 incident reports related to


cigarette lighter malfunctions and fail-ures; 65% of these cigarette lighter fail-ures resulted in fires, leading to 3 deathsand 6 serious injuries.

The voluntary standard for lightersaddresses the risk of fire, death, andinjury associated with mechanical mal-function of lighters. A mandatory stan-dard would apply to imported as wellas domestically manufactured products.Fires are a leading cause of consumerproduct-related deaths. Many lives willbe saved if tough standards areimposed for manufacturers. CPSCalready has a mandatory standard forchild-resistant cigarette lighters, whichaddresses the hazard of children under5 years of age starting fires withlighters. That standard for child-resist-ance applies to imported as well asdomestically manufactured disposableand novelty lighters. Fire deaths associ-ated with children playing with lightersdropped dramatically since the manda-tory standard for child-resistancebecame effective in July 1994 - from230 in 1994 to 130 in 1998. Childrenunder age 5 accounted for 170 of thedeaths in 1994 and only 40 of thedeaths in 1998. In 1994, there were10,400 residential fires associated withchildren playing with lighters. By 1998,that number declined to 5,500 fires.Because even lighters with child-resist-ant mechanisms are not childproof, alllighters should always be kept out ofthe reach of children.

ORKIN SUIT GETS CLASS-ACTION STATUS

Tens of thousands of Floridians willbe allowed to join a civil lawsuit accus-ing Orkin pest control of defrauding itscustomers. A Florida Circuit CourtJudge said Floridians who have had acontract with Atlanta-based Orkin sinceMarch 1995 can join the suit. The pestcontrol giant is accused of deceivingcustomers that treatments had beenmade and then reneging on guaranteesagainst termite damage. As many as100-thousand Florida homeownerscould seek damages for deceptive andunfair trade practices under the court’sruling. Orkin will appeal the ruling.

The lawsuit claims Orkin never pro-vided re-inspection or re-treatmentservices although customers werecharged for the program.

XX.RECALLS UPDATE

HONDA RECALLS 258,000 ACCORDS

American Honda has recalled nearly258,000 Accord sedans. The recall wasbecause the driver’s airbag may notdeploy properly. Accords from the2004 and 2005 model years areinvolved. Owners were able to get freerepairs beginning December 6th. Anyowner can contact the U.S. division ofHonda at (800) 999-1099.

RECALL OF DODGE TRUCKS

The U.S. government has askedDaimlerChrysler AG’s Dodge divisionto recall some of its Dodge DurangoSUVs and Dodge Dakota pickupsbecause of concerns over their safety.The National Highway Traffic SafetyAdministration (NHTSA) is investigatingDurangos and Dakotas from the 2000to 2003 model years with four-wheeldrive. When we went to the printerthere had been no recall of the vehi-cles. NHTSA began investigating possi-ble premature wear of the trucks’wheel assembly after numerous reportsof the wheels suddenly detaching andflying off. If the recall takes place, asmany as 600,000 vehicles would beinvolved. NHTSA found that a third ofthe nearly 2 million vehicles investi-gated had defective upper ball joints.

FORD TO RECALL 474,000 ESCAPES, MAZDATRIBUTES

Ford Motor Co. has recalled morethan 474,000 Escape and Mazda TributeSUVs because the accelerator cablemay prevent the engine from returningto the idle position and may increasestopping distance. The vehicles in the

recall are from the 2002-2004 modelyears. To date, no injuries or accidentshave been linked to the recall, accord-ing to a Ford spokeswoman.

GAS FURNACES FOR MOBILE HOMESRECALLED

The Unitary Products Group (UPG)of York International Corp., of York,Pennsylvania, recalled about 226,000gas furnaces for mobile homes inNovember after reports that they couldhave been linked to a series of fires.The furnaces can overheat, causing theheat exchanger to crack or burnthrough, and in extreme cases, cancause the furnace wrapper to burn.The overheating can in turn burndrywall and other combustibles nearthe furnace, posing a fire and smokehazard. According to the company, theproblem has been traced to differencesin installation, application factors andvariations in components. Thecompany received 27 reports of firesthat could have been related to the fur-naces, some of which resulted inextensive property damage. As wewent to the printer, there had been noinjuries reported. The company warnedthat the problem, if left unresolved,could lead to personal injury or death.

The furnaces were manufactured inWichita, Kansas, and sold nationwidebetween 1995 and 2000 under thebrand names Coleman, Coleman Evconand Red T as original and replacementfurnaces in manufactured homes. Thefurnaces, used only in manufacturedhousing, are a silver color with whiteaccess panels. Model numbersincluded in the recall are listed on thecompany’s website at http://www.dgat-program.com. Consumers can also callUPG toll-free at 1-888-665-4640between 8 a.m. and 5 p.m. CDT,Monday through Friday, for a referralto a service center where they canschedule a free inspection and repair.Consumers are advised not to use theheating function of these furnaces untilthey have been inspected and repaired.


LAWN TRACTORS RECALLED BECAUSE OFPOSSIBLE FIRE HAZARD

Electrolux Home Products is recalling5,280 Husqvarna lawn tractors. Accord-ing to the U.S. Consumer ProductSafety Commission, these lawn tractorscan develop abrasions on the fuel tankbecause of the fuel line clamp’s loca-tion. This can result in a fuel tank leak,which could pose a fire hazard to con-sumers. Husqvarna has received fourreports of fuel tanks leaking. To datethere have been no reports of fire orproperty damage. These Husqvarna18.5 horsepower, hydrostatic transmis-sion, 42-inch cutting deck, lawn trac-tors are gasoline-powered and aredesigned for residential use. The recallinvolves models LTH18542A andLTH18542B and includes all serialnumbers. The model plate with themodel number information is foundunder the seat. The lawn tractors weresold at Husqvarna dealers and distribu-tors nationwide from November 2003through July 2004 for about $1,500each. Consumers who have one of therecalled lawn tractors should contactan authorized Husqvarna serviceprovider in your area, which willprovide a free repair. For more infor-mation or to locate a Husqvarna dealer,call Husqvarna at (800) 448-7543between 9 a.m. and 5 p.m. ET Mondaythrough Friday, or visit the firm’swebsite, www.usa.husqvarna.com.

AMERICAN SUZUKI MOTOR RECALLS ATVS

American Suzuki Motor Corp., ofBrea, Calif., recalled 27,000 2004-2005Eiger and Vinson all-terrain vehiclesbecause of a potential fire hazard. TheATVs were assembled with an incor-rectly sized mounting bolt under thefuel tank that could result in fuelleakage, presenting a fire safety hazardand risk of injury or death. There havenot been any reports of incidents.Suzuki 2004 and 2005 models EigerATVs—LT-A400K4, LT-A400FK4, LT-F400K4, LT-F400FK4, Vinson ATVs—KT-A500FK4, LT-F500FK4, EigerATVs—LT-A500FK5, LT-F500FK5 are

included in the recall. All are vehiclesdesigned for use by riders age 16 andolder. The ATVs were sold at Suzukimotorcycle/ATV dealers from August 2,2003 to August 26, 2004. Consumersshould take their affected ATV to anauthorized Suzuki dealership or call800-444-5077 to replace the fuelpetcock-mounting bolt and sealingwashers at no charge to the consumer.

XXI.SPECIALPROJECTS

ALABAMA WATCH NEEDS YOUR HELP

Over the past few years, AlabamaWatch, one of the few consumer advo-cacy groups in Alabama, has led thecharge in defending consumers andpromoting consumer education.Alabama Watch has stood up to Corpo-rate America on consumer issues, andthat’s no easy job. The group has beenworking hard to educate the citizens ofAlabama on matters that affect all con-sumers. As we all know, it takesfunding for any group to operate andAlabama Watch is no exception.Funding sources are few in number forconsumer advocacy groups. For thisreason, individuals must help shoulderthe load by contributing to groups thatstand up for consumers and fight fortheir rights.

I hope each of you will considerhelping Alabama Watch as we enterthe New Year. Please let AlabamaWatch know that you will make themone of your top priorities in 2005 andthat you will stand by their side withfinancial and moral support as theytake on consumer battles. AlabamaWatch needs your checks, yourprayers, and your goodwill this year.You can send a contribution toAlabama Watch, 400 S. Union Street,Suite 245, Montgomery, AL 36104. Ifyou want more information, go to theirwebsite at www.alabamawatch.org.

BEASLEY ALLEN CHRISTMAS CHARITIES

Our firm believes it is important toreach out to our community and helpthose who are less fortunate than weare. This Christmas season was no dif-ferent. Our employees picked fourcharities our firm to be involved in. Iam pleased to report that our effortswere highly successful. We participatedin Operation Christmas Child, which isa unique project of Samaritan’s Purse.Employees were asked to take “shoe-boxes” and fill them full of small giftsfor children. The shoeboxes weredelivered to children in time for Christ-mas. Our employees filled 117 boxesand that made 117 children happy onChristmas Day.

Another project involved the localVeteran’s Administration. Our employ-ees participated in a friendly IronBowl. However, this Iron Bowl didn’thave anything to do with football. Itwas a Nutrition Iron Bowl whereemployees were asked to donate fooditems in the name of Alabama orAuburn to help feed the hundreds ofhomeless veterans in the area. Theseveterans helped to secure the freedomsthat every American enjoys, and wewere grateful for the opportunity togive back to those who once wore amilitary uniform on behalf of ourcountry. We also helped out Aid toDependent Mothers by collecting“Nearly New” toys and books to give toneedy children of incarcerated mothersliving in the Montgomery Area. Ourlast employee charity involved CapitolHill, a local nursing home. Each Christ-mas Capitol Hill puts up an Angel Treefor the residents. Each Angel on thetree contains a resident’s Christmaswish list. Employees were invited tochoose an Angel and purchase some-thing on the resident’s wish list. Ouremployees filled 100 wish lists for thenursing home residents.

Lawyers in our firm were also able toparticipate in a Sunshine Centerproject. Each year a list of needs from anumber of families from this shelter isgiven to the lawyers. The needs on thelist are met with little difficulty. These


gifts are purchased and wrapped byeach participating lawyer, and all of thegifts are taken to the Center in prepara-tion for the Christmas party held for thefamilies. It gives all of us a goodfeeling to know that we have helpedlots of folks during the Christmasseason. In my opinion, we have astrong obligation to help folks whohave real needs. God has blessed ourfirm, and He expects us to share oursuccess with those who are less fortu-nate. It is great to know that ouremployees step up to the plate eachyear during the holidays and do goodfor others.

XXII.FIRM ACTIVITIES

EMPLOYEE SPOTLIGHTS

Elizabeth KiddElizabeth Kidd has been with the

firm for almost ten years as a secretaryfor Julie Beasley in the PersonalInjury/Products Liability Section. Shehas worked up a tremendous numberof important cases. Elizabeth has twochildren: a son, Samuel, is in the 9thgrade at Prattville High School; and adaughter, Hope, is a senior at Troy Uni-versity. Interestingly, Hope is majoringin broadcast journalism and will befilming sports events soon. Elizabeth isa dedicated employee who does excel-lent work. Her attitude and work ethicare a real plus for her. We are fortunateto have Elizabeth with the firm.Sherri Markos

Sherri Markos has been with our firmfor three years and works in ourAccounting Department. In this posi-tion she serves as Accountant II andhandles disbursement schedules andchecks for settlements. Sherri also has avariety of monthly reports, enteringdata and balancing bank statementsthat she is responsible for. Sherri ismarried to Andy Markos and they havetwo children; Summer who is 14 andChristian who is 5. Andy owns CountryHeating & Air and also works a fulltime

job with Edwards Heating & A/C.Sherri is a valuable employee and weare most happy to have her with us.

XXIII.SOME PARTINGWORDS

SOLDIERS WITH A MISSION

A great deal had been said andwritten about the great season enjoyedby the 2004 edition of the AuburnTigers. A very good case can be madethat the Tigers should have been in theOrange Bowl playing for the nationalchampionship. As we all know, thatdidn’t happen. In fact, as I write this,we didn’t even know how the SugarBowl game came out. I do know thatVirginia Tech has a very good teamand is extremely well coached.

Regardless of how the sugar bowlgame turns out, this is a very specialgroup of players and coaches. As anAuburn football fan, I have reallyenjoyed this season and am extremelyproud of the coaches and players. JoeWhitt, who is a good friend and anexcellent coach whose responsibilitiesare, coaches the linebackers, came bythe house for a visit after the SECChampionship game. Joe says that thevery special nature of this team wasevident early in the season. Membersof any athletic team—and that’s espe-cially true in football—typically formstrong bonds that last long after theirlast game is played. While Joe says thisteam has been a joy to coach, I can saythey have also been a joy to watchover the entire season.

Coach Tommy Tuberville took over aprogram in 1999 that was in chaos,lacking direction and purpose. Mostfolks don’t know how bad things hadactually gotten. At that time, Auburnhad players who caused lots of off-fieldproblems and it was reflected in theteam’s on-the-field performance. Manybelieved it would take a miracle torebuild the program. Something hap-pened that really made a difference

early in the Tuberville tenure. CoachTuberville made Rev. Chette Williams,a former player, the team’s chaplain,and that may well be the best moveany Auburn coach has ever made.Chette had an immediate impact on theplayers. Through his guidance, liveswere turned around. The spiritual bondthat developed helped transform abunch of individuals into a tight-knitband of brothers. Team prayer meet-ings quickly grew into a regular part ofthe team’s weekly schedule. If Auburnhas had any major discipline problems,I am unaware of them. In fact, Chettesays there is not a single problem outof 140 young men playing football atAuburn. That speaks volumes, consid-ering all of the discipline problems thatseem to exist at a number of schools.

I sincerely believe that God—through Rev. Chette Williams—had Hishand on this team. Carnell Williams,who returned for a great seniorseason, was quoted in one mediareport as having said:

Brother Chette has done an out-standing job. We have people onthis team that show outstandingfaith from top to bottom. From thebest player down, we’re all in thistogether and we’re all pulling toplease the Lord. We feel He is withus and we can do all thingsthrough Him. Not to take anythingfrom the other teams I’ve played on,because I’ve felt that bond and thatchemistry. But this team is special.We’re really out there for oneanother.

I understand Carnell and RonnieBrown, two great players and evenbetter young men, have met withChette every Wednesday morning from5:30—7:00 for prayer and Bible study.In my opinion, that will be moreimportant to these young men than anyof their personal accomplishments onthe field. I went over to watch a SugarBowl practice on December 22nd andwas most impressed with what Iobserved. It was quite evident theyoung men on this team really likeeach other and their coaches and were


having a great time during theirworkday. Coach Eddie Gran closed outthe practice—with everybody on theirknees—with a stirring prayer. It wasthe real deal and really got the atten-tion of all observers.

Many of the players have stated onnumerous occasions how their rou-tines—both before and after games—include spiritual guidance in someform. Many players on the 2004 Auburnteam speak openly of their spiritualbeliefs and made use of the powerfuluse of prayer during games. After theOle Miss game, Auburn’s players fol-lowed the traditional Auburn fight songwith a rendition of their own spiritualsong, “Hard Fighting Soldier.” Sopho-more tight end Kyle Derozan, who getscredit for this song, first sang it during aFellowship of Christian Athletesmeeting. The spiritual song quicklybecame a part of the team’s officialprayer meetings and was actuallyadopted as the team’s official song andrallying cry. The song was also sung atthe celebration that took place onDecember 18th at Toomer’s Corner inAuburn. If you haven’t heard it, I rec-ommend that you do so. I believe thatit will have a profound effect on you.

This team’s spiritual faith has had aprofound effect on coaches, the mediaand Auburn fans. Young children aregreatly affected by the actions ofcollege athletes on and off the playingfield. These athletes become rolemodels whether they intend to be ornot. The example set by the 2004Auburn Tigers will have a tremendous

effect on young men and women—andespecially children—in my opinion. Ifirmly believe that the strong faith inGod by members of this team will bethe group’s real claim to fame. Actu-ally, as we travel down life’s path—that’s really what it’s all about!

A BIT OF ADVICE FROM THE PAST

On occasion, I look at all of theproblems facing our country andwonder how this nation will be able tocontinue its role of leadership in theworld. When we see politicians whohave no real concern for the plight ofordinary folks and who favor the richand powerful at every turn, it is mostdiscouraging. Currently, we areengaged in a war in a foreign countrywith no real end in sight. We arespending billions there and have lost atremendous number of our troops. Thiswar is far from over and I fear we willbe in Iraq for years to come. At home,the economy appears to get weaker bythe day. There have been othertimes—both here and abroad—whenthings appeared dismal and the futurebleak. One such time was the early1940s in England. The following state-ment was made by Winston Churchillduring those times and I believe it’sworth repeating today:

You cannot tell from appearanceshow things will go. Sometimesimagination makes things out farworse than they are; yet withoutimagination not much can be

done. Those people who are imagi-native see many more dangersthan perhaps exist, certainly morethan will happen; but then theymust also pray to be given thatextra courage to carry this far-reaching imagination. But foreveryone, surely, what we havegone through in this period...this isthe lesson: never give in, never givein, never, never, never, never - innothing, great or small, large orpetty - never give in except to con-victions of honour and good sense.Never yield to force; never yield tothe apparently overwhelmingmight of the enemy. We stood alonea year ago, and to many countriesit seemed that our account wasclosed, we were finished...Very dif-ferent is the mood today...thoughwe ourselves never doubted it, wenow find ourselves in a positionwhere I say that we can be surethat we have only to persevere toconquer.

– Prime Minister Winston Churchill, October 29, 1941,Harrow School.–

Finally, I wish for each of you ahappy, healthy and prosperous NewYear. We face a lot of challenges as weapproach 2005. With God’s help wecan handle whatever comes our way. Iam convinced of that and look forwardto the year. May God continue to blessand protect each of you and yourfamily.


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The Jere Beasley Report Jan. 2005

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