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					THE                                                                                          MARCH 2005




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

        A NATIONAL LAW FIRM LOCATED IN MONTGOMERY, ALABAMA
                  Helping those who need it most for over twenty-five years




                                  www.BeasleyAllen.com
I.                                            based clinic, public housing-based          DEMOCRATS STAND PAT AND REPUBLICANS
                                              clinics, and a clinic that caters to non-   SHIFT GEARS
CAPITOL
                                              English speaking patients. Since 1994,
OBSERVATIONS                                                                                 It appears that Redding Pitt has
                                              Dr. Martin has provided preventative
                                                                                          weathered the storm and will remain as
                                              medical care to infants, children and
                                                                                          chairman of the Alabama Democratic
WEST ANNISTON MEDICAL CLINIC RIBBON-          adolescents to age twenty-one in
CUTTING                                                                                   Party. You will recall that Lt. Governor
                                              Anniston. She currently admits to
                                                                                          Lucy Baxley, State Agriculture Commis-
                                              Northeast Alabama Regional Medical
   The Honorable U. W. Clemon, Chief                                                      sioner Ron Sparks, House Speaker Seth
                                              Center, and does both high risk and
Judge of the United States District Court                                                 Hammett, and 16 Democratic state sen-
                                              routine deliveries. Dr. Martin, who was
for the Northern District of Alabama,                                                     ators had called for Pitts’ replacement.
                                              the first African-American female to
has approved the West Anniston                                                            Redding was elected party chairman in
                                              enter into solo pediatric practice in the
Medical Clinic Project. A ribbon-cutting                                                  March 2001, with the support of then-
                                              Anniston community, also runs the
ceremony was held by the Court on                                                         Governor Don Siegelman, and was
                                              Martin Foundation, which awards
February 14th to commemorate this his-                                                    re-elected to a four-year term in January 2003.
                                              scholarships in the areas of medicine,
toric event that came out of the federal
                                              education and environmental sciences.
court settlement. The Project will be                                                             IN THIS ISSUE
                                                 The Quality of Life facility will have
run by two established medical clinics
                                              the capacity to provide some diagnos-        I.      Capitol Observations . . . . . . . . . . . . 2
in the Anniston Community. Quality of
                                              tic testing. There will also be a phar-
Life Health Services, Inc. will treat adult                                                II.     Legislative Happenings . . . . . . . . . . 5
                                              macy on site for both children and
claimants. Dr. Angela Martin’s pediatric
                                              adults to ensure that patients receive       III.    Court Watch . . . . . . . . . . . . . . . . . . 6
clinic will treat children claimants. A
                                              their medications in a timely fashion.       IV.     The National Scene . . . . . . . . . . . . . 9
comprehensive medical clinic, not only
                                              Quality of Life Health and Dr. Martin
providing medical services and pre-                                                        V.      The Corporate World . . . . . . . . . . 15
                                              are looking forward to working
scription drugs to claimants, but health
                                              together on this most worthwhile             VI.     Campaign Finance Reform . . . . . . 18
education and scientific research, is
                                              project, and welcome the opportunity
planned. Pfizer, Inc. will provide a $2                                                    VII. Congressional Update . . . . . . . . . . 19
                                              to help improve the lives of Tolbert
million grant to enhance the infrastruc-                                                   VIII. Product Liability Update . . . . . . . . 19
                                              claimants. Presently, the medical clinic
ture of the two clinics, and the Defen-
                                              is only endowed for ten years. But, the      IX.     Mass Torts Update. . . . . . . . . . . . . 26
dants in the Tolbert case will provide
                                              goal of Quality of Life, Dr. Martin, the
$2.5 million per year for ten years to                                                     X.      Business Litigation . . . . . . . . . . . . 31
                                              parties to the lawsuit and the court is
help fund clinic services. Neither of
                                              to seek additional funding in an effort      XI.     Insurance and Finance Update . . . 34
these funding sources for a medical
                                              to make the medical clinic permanent.        XII. Premises Liability Update . . . . . . . 37
clinic would have been available but
                                              The medical clinic will be a most
for the settlement. Medical clinic serv-                                                   XIII. Workplace Hazards. . . . . . . . . . . . 37
                                              important, long lasting and beneficial
ices will be provided to claimants by
                                              aspect of the federal court settlement.      XIV. Transportation . . . . . . . . . . . . . . . 39
the Anniston Quality Health Care facil-
                                              In my opinion, this was a most impor-        XV.     Arbitration Update . . . . . . . . . . . . 40
ity at 1316 Noble Street in Anniston,
                                              tant part of the settlement that came
Alabama, and Dr. Martin’s clinic,                                                          XVI. Nursing Home Update. . . . . . . . . . 42
                                              out of the federal court lawsuit. David
located at 222 East 10th Street.
                                              and Shirley Baker, who has been              XVII. Healthcare Issues . . . . . . . . . . . . . 44
   Quality of Life has been in the Annis-
                                              involved in this fight for a long time,
ton area since 2001, operating as a                                                        XVIII. Environmental Concerns . . . . . . . . 46
                                              worked especially hard for the estab-
primary care center. Quality of Life was                                                   XIX. Predatory Lending Update. . . . . . . 47
                                              lishment of a medical clinic and are
founded in 1977 with one health care
                                              due a great deal of credit for this          XX.     Tobacco Litigation Update. . . . . . . 49
facility, the Roberta A. Watts Neighbor-
                                              becoming a reality. It is gratifying to
hood Health Clinic, in Gadsden. Cur-                                                       XXI. The Consumer Corner. . . . . . . . . . 50
                                              know that the clinic will be available to
rently, the company has twelve health
                                              help the people in West Anniston.            XXII. Recalls Update . . . . . . . . . . . . . . . 52
care facilities within a ten county
radius. The company has considerable                                                       XXIII. Special Projects . . . . . . . . . . . . . . 54
experience with financially challenged                                                     XXIV. Firm Activities . . . . . . . . . . . . . . . . 54
and diverse patients. It has a school-
                                                                                           XXV. Some Parting Words . . . . . . . . . . . 55


2                                             www.BeasleyAllen.com
   On the other side of the political        and was one of those who spoke in             of the State Board of Education
fence, the state Republican Party has        opposition to Channel One being               adopted reads as follows:
made a significant change at the top.        allowed in Alabama public schools. As
                                                                                             The State Board of Education rec-
Twinkle Andress Cavanaugh—the first          you already know, I am totally
                                                                                             ommends that Channel One
woman to hold the title in either major      opposed to Channel One and am
                                                                                             refrain from advertising high-
Alabama party—was selected to head           firmly convinced that it has no place in
                                                                                             sugar, high-fat, or low nutritional
up the party in Alabama. She replaces        the public schools of our State. I have
                                                                                             value food or drink products, over-
Marty Conners, who will be a tough act       grandchildren in the public schools,
                                                                                             the-counter medicines, or movies
to follow. I seldom agreed with Marty,       and I don’t want them exposed to what
                                                                                             and television shows that receive a
but I must say that he did an outstand-      I have seen coming from Channel One.
                                                                                             MPAA rating for sexual, violent, or
ing job as party chairman. The Republi-      In my opinion, those who run our
                                                                                             drug content. The Channel One
can Party made significant progress          schools should get Channel One out of
                                                                                             website and any recommended
during his tenure and that’s simply a        every school system in Alabama. I have
                                                                                             links on the Channel One website
fact of political life. After taking over,   seen the content of Channel One and I
                                                                                             are included. Monitoring shall be
Twinkle immediately set a goal of            don’t like what I have seen. Unfortu-
                                                                                             the responsibility of local school
taking control of the Alabama Legisla-       nately, most folks in Alabama don’t
                                                                                             personnel, parents, and Channel
ture from the Democratic Party. It           even know that Channel One exists.
                                                                                             One.
appears that my friend Dr. Paul              This commercial advertising channel in
Hubbert was her first target. Twinkle,       our schools fosters sexual activity,             I consider this to be a step in the
who served as deputy chief of staff to       extreme violence, and gross conduct of        right direction. The following members
Governor Riley, won the chairmanship         all sorts. It also pushes junk foods,         voted for the amendment: Betty Peters,
without opposition. I suspect the            which are bad for children. Students,         Stephanie Bell, Randy McKinney,
Hubbert fight will be a little tougher.      beginning with sixth graders, have            David Byers, and Dr. Mary Jane Caylor.
   Democrats currently hold a 61-41          access to Channel One and are com-            Voting against it was Sandra Ray.
majority in the Alabama House of Rep-        pelled to watch it virtually every school        Now that the State Board has taken
resentatives and have a 25-10 margin in      day. The history of Channel One gives         action, the pressure should be on the
the state Senate. There won’t be a pres-     me little reason to believe that things       local school boards to go further and
idential race or a U.S. Senate race on       will get any better. In fact, unless          take the steps necessary to get Channel
the ballot in 2006, and that will make       checked by our political leaders, I           One totally out of all Alabama schools.
Twinkle’s job much more difficult. The       predict they will get even worse.             It should be noted that the company
governor’s race will highlight the ballot       We should take every precaution to         that owns Channel One has had three
and, while it should prove to be very        protect our children. While this respon-      paid lobbyists working for it in
interesting, it won’t have the appeal for    sibility starts at home, it also extends to   Alabama. The last one hired was none
Republicans that the Bush-Kerry race         those who are in charge of our public         other than former Lt. Governor Steve
had in 2004. In Alabama, Democrats           schools. I am told that the overwhelm-        Windom. Why would Channel One
traditionally have run stronger in           ing majority of secondary schools in          even need lobbyists? If you want to
gubernatorial election years than in         this country don’t allow Channel One.         learn more about Channel One, go to
presidential election years. But, the        In fact, I understand that New York           www.obligation.org. If you agree that
Republicans have more money than             State—Channel One’s home base—has             Channel One should be banned in
they can spend and that may level the        banned Channel One from all public            Alabama, contact your local school
playing field somewhat. In any event,        school classrooms in that state. That         board members and let them know
2006 will be a most interesting political    should tell us something about the suit-      how you feel. I suggest you also
year.                                        ability of Channel One for students and       contact the governor, lt. governor, and
                                             especially for young children.                your local legislators and ask for their
                                                The members of the Alabama State           help.
MORE ON CHANNEL ONE
                                             Board of Education were asked to take
  The State Board of Education took          action that would help us get Channel
                                                                                           DIRTY TRICKS SHOULDN’T PAY
some needed action on February 10th          One out of our schools. The Board
that I believe will eventually prove to      voted for us on a proposed amend-               A recent race for a vacant House seat
be good for children in our public           ment, and that was the right thing to         has brought to the public’s attention a
schools. I appeared before the Board         do. The amendment that the members            need for some real election reform in

                                             www.BeasleyAllen.com                                                                  3
Alabama. I understand that the               with the words “God made Adam             Christian Coalition and every
Alabama Republican Legislative Com-          and Eve but Gloria Dolbare wants          group like it must let the public
mittee mailed a flyer in the special         you to meet...” And on the second         know what people and groups
election campaign for the vacant             page, “Adam and Steve! Shocking           fund their efforts.
House seat in District 65, which is          but true, Gloria Dolbare has failed
                                                                                       Republican lawmakers ought to be
located in southwest Alabama. I know         to sign the Alabama Christian
                                                                                       ashamed at using the Christian
Gloria Dolbare, the Democratic candi-        Coalition’s Marriage Protection
                                                                                       Coalition’s flimsy “evidence”
date who lost, very well. She ran to fill    Pledge,” the copy reads, alongside
                                                                                       against Dolbare to run such a
the vacancy created when her                 a picture of two smiling men, one
                                                                                       noxious campaign.
husband, who held the seat, died of          of them kneeling before the other
cancer. The tactic used by the Republi-      and holding the man’s left hand           What the Republicans did to Gloria
cans against Gloria was shameful and         with his own.                           Dolbare shouldn’t be allowed to
was “gutter” politics of the worst sort.                                             happen in future political races in
                                             “Defend Alabama. Defend your
That kind of thing should not be                                                     Alabama. We should make the election
                                             marriage. Defend your family.
allowed in politics at any level. Any                                                laws so tough—with strong penalties
                                             Reject Gloria Dolbare!” the flier
person who had anything to do with                                                   for offenders—that dirty tricks in
                                             says next to her picture with
the smear tactics employed in this race                                              Alabama politics will become a thing of
                                             “Reject” stamped in red across her
should hang their collective heads in                                                the past. The leadership of both politi-
                                             mouth.
shame. The Birmingham News put                                                       cal parties should jointly ask the
everything pretty much in context            First, how does the Republican Leg-     Alabama Legislature to enact some
recently in an excellent editorial. The      islative Committee or the Christian     meaningful changes in our election
editorial writer framed the issue as         Coalition know without doubt that       laws during the current session to pro-
follows: “Republican lawmakers should        Dolbare saw the pledge, much less       hibit dirty tricks in future campaigns.
be ashamed of the tactics they used to       what her position is on same-sex
win a Legislative race in southwestern       marriage? It’s wrong to assume
                                                                                     LUCY BAXLEY LEADING THE LATEST POLL
Alabama.” The following is the News          what her stance is without any evi-
editorial:                                   dence. Dolbare, a special educa-           According to a recent poll, Lt. Gover-
                                             tion teacher running for the seat       nor Lucy Baxley is the front-runner in a
                                             her husband held until his death        lineup of 2006 gubernatorial hopefuls.
    WINNING AT ALL COST
                                             from cancer last year, said she         The Mobile Register-University of South
                                             never saw the pledge during the         Alabama poll found Lucy leading both
    Is this really how Republican law-       campaign but probably set it aside      Governor Bob Riley and Judge Roy
    makers want to increase their            with other mail.                        Moore in separate head-to-head
    numbers in the Legislature? By
                                             Then there’s the Christian Coali-       matchups. The results certainly indicate
    demonizing Democratic opponents
                                             tion’s role in this. The group is       that Lucy will be her party’s strongest
    with questionable information
                                             demanding that legislators and          candidate in the 2006 general election.
    from a discredited special-interest
                                             legislative candidates disclose their   I don’t believe Don Siegelman, the
    group that refuses to disclose where
                                             position on same-sex marriage,          other known Democratic prospect thus
    it gets its money?
                                             while it refuses to disclose what       far, will be a factor. He trailed both
    Here’s the story: The Alabama            groups and people pay it to influ-      Republicans in hypothetical pairings in
    Republican Legislative Committee         ence elections. Remember, last year     the poll.
    mailed a flier late in the special       we learned that the Christian              The poll also found that 44% of
    election campaign between Democ-         Coalition had funded its battles        respondents believe Alabama is on the
    rat Gloria Dolbare and Republican        against gambling in Alabama with        wrong track. Only forty percent believe
    Nick Williams to fill the vacant         money from out-of-state Indian          the state is headed in the right direc-
    House seat in District 65 in south-      tribes that run casinos.                tion, and that is disturbing. Of those
    west Alabama. Williams won the                                                   surveyed, 39% said they are Republi-
    race on January 25th.                    If the Christian Coalition can          cans when it comes to state politics,
                                             demand disclosure from legislators      37% said they are Democrats, and 19%
    The first page of the flier shows a      and legislative candidates, the Leg-    said they are independents or back
    classical painting of Adam and Eve       islature can demand that the


4                                           www.BeasleyAllen.com
another party. Persons polled were           MONTGOMERY RANKS AS A BEST PLACE FOR           Myron Penn of Union Springs. Senate
asked how they would vote in hypo-           THRIVING ECONOMY                               Bill 64, which is called the Judicial
thetical general election pairings. In the                                                  Selection Bill, is an extremely fair way
                                               We hear so much talk about lawsuits
poll, Lucy drew 39% to Governor                                                             to handle the selection of associate jus-
                                             and tort reform these days that good
Riley’s 35%. She also led Judge Moore                                                       tices to the Alabama Supreme Court.
                                             news is often ignored by the media. In
44% to 38%. While this poll has to be                                                       Currently, under existing law, the chief
                                             the December issue of Business Devel-
encouraging for the obviously popular                                                       justice and the eight associate justices,
                                             opment OUTLOOK magazine, the City
lt. governor, it is a long time before the                                                  are elected statewide by popular vote
                                             of Montgomery ranked 27th on the list
campaign for governor really heats up.                                                      in what have become very partisan and
                                             of Best Places in the nation for a Thriv-
Fortunes in politics can change like the                                                    sometimes ugly elections. Senator
                                             ing Economy. Criteria for inclusion on
wind!                                                                                       Penn’s bill, which would require
                                             the list included such things as average
                                                                                            amending the Constitution of Alabama,
                                             unemployment rate and growth of the
                                                                                            provides for the long needed non-par-
A CHANGE OF PACE                             job market. Economic progress is
                                                                                            tisan election of the 8 associate judges
                                             always good news. Because I live and
   I have had the pleasure of represent-                                                    from 8 separate geographical districts.
                                             work in Montgomery, I really wasn’t
ing Coach Tommy Tuberville and                                                              The chief justice would still be elected
                                             surprised to learn that Montgomery did
helped negotiate his new long-term                                                          on a statewide basis. If the bill is
                                             well in this report. In any event, this is
contract with Auburn University. The                                                        passed and the people approve it in a
                                             good news for Montgomery. It tells a
contract, which was signed on February                                                      referendum, the election of justices in
                                             story that the tort reformers hate to
16th, is a very good one for both                                                           districts would begin in the 2006 elec-
                                             hear, and that is, Alabama is still good
parties. Coach Tuberville is a good man                                                     tion cycle.
                                             for business.
who runs a clean program, which I                                                              Most folks that I have talked to
believe are two things in his favor.                                                        believe that the fairest way to elect
Importantly, he also is an outstanding                                                      judges is on a non-partisan basis. That
                                             II.
football coach. He and his family love                                                      method of selecting judges in judicial
                                             LEGISLATIVE                                    races is already being used in the vast
Auburn and hopefully this contract will
assure Auburn of having Tommy
                                             HAPPENINGS                                     majority of the states throughout the
Tuberville as head football coach for a                                                     country. In fact, Alabama is one of the
long time. Negotiating this contract was     THE NEWEST MEMBER OF THE ALABAMA               few states that still allows the partisan
quite interesting. It was a contrast to      SENATE                                         election of judges. Many experts, as
what I normally do, which is trying                                                         well as most judges, believe that poli-
                                                Bobby D. Singleton was sworn in on          tics should be taken out of the judicial
lawsuits. This was quite a change of
                                             February 16th as the newest member of          election process. The Penn bill would
pace for me and I must say I enjoyed it.
                                             the Alabama Senate, after winning elec-        be a step in the right direction and
   I was most impressed with the
                                             tion in the 24th Senatorial District, and it   would bring about a needed change.
manner in which Dr. Ed Richardson
                                             didn’t take long for him to get down to        Specifically, under the Penn bill, the 8
and Director of Athletics Jay Jacobs
                                             work. In my opinion, the new senator           associate justices would be elected by
handled the negotiations. Lee Arm-
                                             will be a real asset to the Senate and         districts based on the districts currently
strong, a very good lawyer, who is
                                             will represent the folks in District 24        utilized to elect the state Board of Edu-
legal counsel for Auburn, also did an
                                             extremely well. Bobby is highly intelli-       cation. The chief justice would be
excellent job of protecting the Univer-
                                             gent, a hard worker, and a very good           elected in 2006 and the terms of the 8
sity’s interest. Being an Auburn gradu-
                                             person. I predict that Senator Singleton       associate justices would be staggered
ate, I must confess that it feels good to
                                             will be an outstanding member of the           to effectuate a smooth transition to the
know that I helped work things out on
                                             Senate and will bring credit to that           new system.
this contract. Auburn University’s foot-
                                             body. I wish him the very best.                   Personally, I commend Senator Penn
ball program will be in good hands for
a long time and that’s a fact! Cole Portis                                                  for proposing this needed legislation.
from our firm and Kyle Johnson, who          A CHANGE IS NEEDED IN THE ELECTION OF          In my opinion, this bill could help
is a very good tax lawyer from Mont-         SUPREME COURT JUSTICES                         eliminate the bitter partisan elections
gomery, assisted on working out the                                                         that have taken place in our state over
                                               A most important bill has been filed         the past several years. It would also
details of the contract.
                                             in the current session by Senator              reduce the costs of judicial elections,


                                             www.BeasleyAllen.com                                                                   5
which have become far too expensive.          federal standard that applies is anti-       large corporations and whose cases will
In fact, big money in judicial races          quated and very much out-of-date. It is      be effectively damaged by this so-called
effectively takes ordinary folks out of       obviously a very week standard. To get       reform litigation. The pharmaceutical,
the mix and virtually reduces their           in touch with Voices, call 800-444-KIDS      tobacco, chemical, insurance, finance,
influence to almost nothing. I also           (5437). I urge you to contact your local     and other powerful industries won this
believe passage of this bill could go a       legislators and ask them to support this     battle, and consumers are the losers.
long way toward adding both racial            legislation.                                 Only time will tell how bad this bill
and gender diversity to our state’s                                                        really is. The simple fact that the groups
highest court, effectively mirroring the                                                   that pushed this bill through Congress
state’s population, and that would be         III.                                         spent more than $100 million on their
good for Alabama. It is impossible to         COURT WATCH                                  anti-consumer campaign is reason
justify not having a singe black citizen                                                   enough for me to believe it will prove
of Alabama on our Supreme Court. In                                                        to be worse than most of us thought it
                                              A LOOK AT THE CLASS ACTION REFORM
fact, there is not a single black person                                                   would be. The new act will limit corpo-
currently serving on any of our appel-           The vote on final passage of the          rate accountability at a time of rampant
late courts. That is not something that       business-backed class action bill really     corporate scandals and corruption. That
Alabama politicians should be proud           came as no surprise to me. Because all       is truly sad news for ordinary citizens in
of. I would strongly urge all fair-           pro-consumer amendments that were            this country. Unfortunately, few people
minded legislators to seriously consider      proposed were defeated, the outcome          even realize at this stage what this Act
Senator Penn’s bill. I believe its            on final passage was a foregone con-         has done to them.
passage would be a step in the right          clusion. In fact, I never thought there
direction and would prove to be               was ever a chance of defeating the bill,     REFORM OF THE JUDICIAL SYSTEM
extremely beneficial to our great state.      and it turns out I was correct. The
                                              important votes were on two key                 The American civil justice system has
THE CHILD PASSENGER SAFETY BILL               amendments that were intended to mit-        long been the best line of defense for
                                              igate the harmful effects of the bill.       the average citizen against the abuse of
  I understand that the Child Passenger       One would have exempted employ-              corporate power. In fact, it is usually
Safety Bill will be considered by the         ment and civil rights lawsuits from the      the only line of defense that ordinary
Alabama Legislature during the current        reach of the bill. That amendment was        folks have when Corporate America is
session. This bill fills a large safety gap   defeated on a 59-40 vote that was            on the other side of an issue. It has
that currently puts elementary school         largely split along party lines. The         also been a counter to a government
aged children at great risk. Current          second amendment would have                  that too often fails to protect its own
state law requires newborns to leave          enabled federal judges to certify multi-     citizens. It has been proved that “tort
the hospital in an infant seat and            state class actions. It was also defeated,   litigation” has had to deal with the
requires toddlers and children up to          on a 61-38 vote.                             failure of the federal government to do
age 3 to ride in a car seat. The pro-            Passage of the so-called Class Action     its job of regulating big business in this
posed legislation supported by Voices         Fairness Act of 2005, without the incor-     country. Prime examples of the failures
for Alabama’s Children puts in place          poration of such a procedural mecha-         are: the FDA and the drug industry, the
what auto safety experts are now rec-         nism for federal courts to certify           Firestone tire debacle, the Enron
ommending, and that is that children 4        multi-state classes, will effectively lock   scandal, and countless more. Had the
and older who weigh less than 80              the courthouse doors to many con-            government done its job of regulation,
pounds must be buckled in appropri-           sumers. Disproportionately it will hurt      none of those would have ever
ate restraints or booster seats. Children     citizens of less populous states where       occurred. Now the Bush White House
who weigh less than 80 pounds are not         class actions are not financially viable     and their friends in Congress want to
protected by adult safety belts during        because of the relatively small number       close courthouse doors to all lawsuits.
auto crashes. It is also important to         of plaintiffs. Our firm handles rela-        To hear them tell it, every lawsuit
check out the booster seat that you           tively few class actions and our clients     should be considered a “frivolous” one.
purchase with safety groups. Just             will not be unduly affected by the              Clearly, “tort reform” legislation is on
because a manufacturer says their seat        passage of this bill. There are hundreds     a fast track. First up was the push to
complies with federal safety standards,       of thousands of victims, however, who        abolish class actions. There is a place
doesn’t mean it is safe for use. The          have been hurt by wrongful actions by        for class action lawsuits and the state

6                                             www.BeasleyAllen.com
courts have traditionally done a very        mean more unsafe products, danger-          tough on class actions, and many
good job in this area. It wasn’t until       ous drugs that continue to be on the        lawyers who handle class actions
1966 that class actions were formalized      market, unfair markets, and unchecked       prefer the federal courts. Anybody who
in the Federal Rules of Civil Procedure.     monopolies. To put it in simple terms,      claims there have been frivolous class
Where a widespread pattern of dis-           the “rich” will get richer and the “poor”   actions in our state courts simply
crimination, systemic abuse, or other        will get poorer.                            doesn’t know what they are talking
unlawful conduct has occurred, class           None of us know when we will need         about or are intentionally misleading
actions allow a few persons to repre-        the protection of the civil justice         their advice.
sent all the injured class members,          system. Teenagers, whose parents may           I know from experience that laws
streamlining the legal process and pro-      consider themselves immune from             don’t enforce themselves—somebody
viding plaintiffs with strength in           needing the courts, are driving unsafe      has to take the initiative and file a civil
numbers.                                     SUVs. Many citizens—Republicans,            lawsuit in many instances. Even crimi-
   The so-called reform—pushed by            Democrats, and Independents—are             nal prosecutions don’t just happen,
conservatives, who otherwise tout            taking prescription drugs such as Cele-     typically coming as a result of private
states’ rights—has now “federalized”         brex, Bextra, and Crestor that could        citizen involvement in some form. Civil
most class actions, taking them away         cause them to have serious health           lawsuits provide a critical backstop to
from local courts and juries. Already        problems. Consider the folks who took       government oversight, and that should-
overburdened, federal courts will now        Baycol, Vioxx, or any of the other dan-     n’t be subject to serious debate.
be required to resolve complex issues        gerous drugs that the FDA allowed to        Presently, we have a situation on the
of state law and adjudicate factual dis-     be put on the market and now have           federal level where government regula-
putes—resulting, at best, in slow justice.   been pulled. The federal courts are         tors don’t do a very good of regulation,
Many real victims can now forget about       also loaded down with litigation. I         Congress is largely asleep at the
justice and adequate compensation. It is     don’t believe any federal judge wanted      proverbial switch on most consumer
no coincidence that trade groups repre-      this added burden on their system. An       issues, and the federal courts are over-
senting chemical companies, the phar-        example of what can happen in the           loaded with cases. We should all watch
maceutical industry, the insurance           federal courts is the Exxon case in         closely to see how our representatives
industry, and manufacturers’ associa-        Alaska. The fishermen of Valdez,            in Washington vote on the next round
tions were behind the reform and             Alaska have yet to receive a penny          of tort reform. In my opinion, the vote
pushed it through both houses of Con-        through federal class action litigation     on the class action bill wasn’t a good
gress in record time. These are              against Exxon brought 16 long years         indicator. The real test will come on
members of the corporate community           ago. Remember, this was the greatest        the next round. Their votes then will
that are frequently subject to successful    environmental disaster in U.S. history.     signal whether they represent the
class actions in the state courts.           Yet the case is still bogged down in the    public interest or whether they are
   When you consider the current             federal system, and Exxon has been          controlled by corporate power that is
climate involving all of the major prob-     the winner so far because it still has      unparallel in modern times.
lems in Corporate America, it is difficult   money-earning dividends.
to see how the American people could           Class action lawsuits are not perfect.
                                                                                         TORT REFORMERS HAVE INTENTIONALLY
let tort reform take center stage in Con-    Some large corporations use them to         DECEIVED THE PUBLIC
gress. The attack on a citizen’s day in      wipe out enormous liabilities to large
court is occurring against a backdrop        number of people. Abuses like “forum          We have know for some time that
of kickback scandals in the insurance        shopping”—filing suits in what are          the big and powerful corporations
industry, unsafe drugs like Vioxx slip-      considered plaintiff-friendly courts—       pushing “tort reform” would mislead
ping through government oversight,           and excessive legal fees do occur—but       consumers and even lie about the legal
and corporate-power abuses unmatched         rarely. It should be noted, however,        system when they felt it was necessary.
since the scandals of the 1920s. Instead     that remedies for these problems are        I have written about tort reform on
of cleaning up the abuses—after dis-         already available through established       numerous occasions and have been
mantling much of the regulatory              court rules and procedures. In fact, no     amazed how some people still buy the
regime—the Bush Administration               other type of lawsuit is subject to as      tort reform myth. Most of you are prob-
wants to further let big business loose      much judicial oversight and control as      ably aware that tort reform is a well-
through tort reform. For the average         the class action. In Alabama, our           funded campaign to protect big
American, tort “reform” will simply          Supreme Court has been extremely            companies and limit damages against


                                             www.BeasleyAllen.com                                                                 7
them. The tort-reform bosses subscribe          tently trapped in the garage of a            long time ago that some big corpora-
to the principle that says “if you con-         house that he was burglarizing.              tions don’t let facts stand in the way of
tinue to tell a lie over a period of            Another false story that made its way        a good story if it suits their purpose.
time—pretty soon it takes on the look           around the U.S.                              Their motive is clear when it come to
of truth.” There is a growing collection                                                     their “lawsuit myths,” and that’s to turn
                                              • A man won more than $1.7 million
of “legal mythology” that now appears                                                        voters and jurors against lawyers and
                                                dollars and a new Winnebago after
regularly in the national media that has                                                     lawsuits. These “lawsuit lies” fit the
                                                he put his new motor home on
had its intended effect. I was talking to                                                    stereotype that Big Business wants you
                                                cruise control at 70 mph and then
a young lady recently, who told me                                                           to believe. They have sold the “frivo-
                                                went in the back to fix himself some
about a case that she said had “actually                                                     lous lawsuit” story using these tactics.
                                                coffee, only to crash on the highway.
happened,” and she was upset. She                                                            To them, the truth or falsity of the
                                                This too was totally false, but it has
was totally convinced that it was a “real                                                    stories actually become secondary.
                                                been repeated constantly.
case.” The case the lady described,                                                             Folks should be aware of the danger
however, was one that had never hap-            There are many more stories con-             that these “stories” promote. Corporate
pened. She was shocked to learn that          cerning lawsuits that would be consid-         America wants to take away your legal
there had never been such a case and          ered “frivolous,” but which never              rights to trial by jury. They will stop at
that it was just another “tort reform lie.”   happened, that are being discussed by          nothing to accomplish their goal. It
The following are a few of the lawsuit        folks who don’t know any better. What          does not seem so important when you
stories that many folks like my friend        big corporations have learned is that          are talking about someone else’s right
actually believed were real cases:            they can use their money and clout to          to bring a case when they have been
                                              influence public opinion by spreading          injured or wronged. But when it does
• A story spread around the country
                                              false horror stories about the court           happen to a person or one of their
  about the man who injured himself
                                              system. These tactics have been very           family members, their views on tort
  while using his lawnmower as a
                                              effective. In today’s world, unfortu-          reform—all of a sudden—change dra-
  hedge clipper and then won
                                              nately, image is everything. Horror            matically. Only then does the fact that
  $500,000 in a lawsuit against the
                                              stories offered by industry group’s play       our court system is the only place in
  lawnmower company. There was no
                                              to a weakness in the media for this            the world where an individual can truly
  such case and the whole thing was
                                              “you are not going to believe this” type       be on a level playing field with a large
  completely untrue.
                                              story. Of course, even when the stories        corporation, really sink in. Oftentimes
• There was also a “case” involving the       are made up about lawsuits that never          it takes a personal tragedy happening
  woman who threw a soft drink at her         happened, the effect is still there, and       for this to come home to a family.
  boyfriend, slipped on the wet floor,        that is a sad commentary on our times.         Source: USA Today
  and then won $100,000 in a lawsuit          Many of the stories the “tort reformers”
  against the restaurant? Again, this         provide to the media simply are not
  was a total falsehood.                      true and they know they have no                MORE THAN 100 FAMILIES SETTLE ASBESTOS
                                                                                             CASE
                                              factual basis.
• We hear that an Austin, Texas lady
                                                The hedge-clipper story mentioned               More than 100 northwest families
  received $780,000 from a jury after
                                              above has appeared in newspapers, on           reached a $30 million settlement
  she tripped over her own son in a fur-
                                              TV programs, on radio talk shows, and          recently in an asbestos lawsuit involv-
  niture story. There was no such case.
                                              certainly in political speeches. In fact, it   ing a subsidiary of Houston-based Hal-
• A 19-year-old Los Angeles man was           has even been repeated in law school           liburton Co. The settlement was part of
  awarded more than $74,000 when              classrooms. A number of national polit-        a $4.3 billion global settlement encom-
  his hand was run over by a neighbor.        ical figures have referred to this case as     passing Halliburton’s past, present, and
  The neighbor did not see him                a good reason for reforming the legal          future asbestos liabilities. More than
  because he was stealing his hubcaps.        system. You might be interested to             200,000 injured workers nationwide
  This was a good story, but it just          know where this story originated. It           were affected. Many were exposed to
  happened to be false—It never hap-          was part of an ad campaign put                 asbestos while serving on U.S. Navy
  pened.                                      together by Crum & Forster, an insur-          vessels contaminated with asbestos.
                                              ance firm. The company has now                 Others were exposed from shipyards,
• A Bristol, Pennsylvania man was
                                              admitted that it knew of no such case          paper mills, or industrial plants.
  given $500,000 after he was inadver-
                                              and had made up the story. I learned a         Dresser Industries, a subsidiary of Hal-


8                                             www.BeasleyAllen.com
liburton acquired when Vice-President       high settlements, the study concluded,      extremely expensive to operate a law
Dick Cheney was chairman of the             was high investor losses, which are cal-    firm. If the State doesn’t change its
company, distributed asbestos products      culated by estimating how much a par-       position, fewer lawyers will be able to
to shipyards, power plants, and indus-      ticular stock rose or fell when             take on indigent criminal cases. The
trial facilities. This was at a time when   compared to the Standard & Poor’s           State’s actions also affects lawyers who
the company had to know how dan-            500-stock index. Investor losses in a       represent abused and neglected chil-
gerous asbestos was.                        lawsuit rose to an average of $2.5          dren in Family Court cases. I under-
   Dresser officials had to know their      billion in 2003, compared with $140         stand that many of the lawyers affected
products were harmful to workers in         million in the average suit settled in      haven’t been paid for almost two
the 1930s, but continued to distribute      1996. In 2004, investor losses in the       months. The legislature should pass a
them through the mid-1970s. Thou-           typical suit decreased to $1.7 billion.     law during the current session that
sands of American workers were lost         The median loss for investors in 2004       would require the State of Alabama to
as a result of asbestos disease because     was five times that of 1996. A feature of   reimburse lawyers for office overhead.
the companies manufacturing asbestos        some settlements is the inclusion of        The shifting of $14 million in indigent
products concealed the truth from the       corporate governance reforms, some-         defense funds by the governor to help
public. It was a sad chapter in our         times secured instead of higher cash        tackle the State’s Medicaid funding
country’s history. The conclusion to        payments. Since the passage of Sar-         crisis is just another example of
this tragic mess will eventually come       banes-Oxley, at least nine settlements      “robbing Peter to pay Paul.”
from congressional action. Unfortu-         have incorporated reforms, including
nately, that may not be good for the        cases involving HCA Inc. and Sprint.
asbestos victims. The Bush Adminis-         Source: The New York Times                  IV.
tration—as        has    come      to  be                                               THE NATIONAL
expected—is more interested in pro-                                                     SCENE
tecting Corporate America than it is in     ALABAMA LAWYERS NEED HELP ON INDIGENT
                                            FEES
taking care of their victims. I hope
Congress won’t be pushed into                                                           MOST AMERICANS HAVE LOST TRUST IN OUR
                                               There are a good number of lawyers
                                                                                        LEADERS
passing a bad “asbestos bill.”              in Alabama who represent poor people
Source: Associated Press                    and abused children in the courts.             Folks in American are losing trust in
                                            Obviously, these lawyers perform a          their leaders and in some institutions
                                            valuable service for our state. The State   and for good reason. A recently
SECURITIES CLASS ACTION SETTLEMENT
SUMS REACH A RECORD                         of Alabama clearly has a responsibility     released nationwide poll found more
                                            to provide services for lawyers who are     than 61% of Americans feel this way.
  Securities class action settlements       appointed in criminal cases to represent    This should not be too surprising
reached a record level in 2004 as cor-      indigent defendants and who do work         because of the vast number of corpo-
porations paid shareholders for losses      in the family courts for low-income         rate scandals, as well as other events
in the stock market. A study released       people. Instead, the State has cut          that have caused many folks to have
last month by NERA, a consulting            funding for indigent defense and family     grave concern. The current drug prob-
group, contains some very interesting       court lawyers. Since February 1st, the      lems relating to the federal Food and
information. The average shareholder        state comptroller’s office has stopped      Drug Administration are a prime
settlement rose 33%, to $27.1 million,      all payments to these lawyers, who          example of why people feel as they
from $20.3 million in 2003, the study       provide a most valuable service. I          do. All of the corporate scandals came
concluded. The median settlement fell       understand the State’s long-standing        about because of greed and a failure of
4%, to $5.3 million, from $5.5 million.     practice of paying indigent defense         government agencies to do their job of
The study also concluded that Sar-          attorneys for office overhead has been      regulating. Leading newswire service
banes-Oxley, the corporate reform law       stopped. Lawyers who represent indi-        Reuters partnered with a consulting
passed in 2002, has had no significant      gent clients earn $60 an hour in court      firm, DecisionQuest, to research how
effect on settlement amounts or new         and $40 an hour out-of-court. The State     trust has been affected and how
federal filings, but might have been        also paid an additional amount for          national skepticism might impact juror
responsible for integrating corporate       office overhead. Many rely on those         attitudes. Dr. Philip Anthony, Decision-
governance reforms into settlements.        payments to maintain their law practice.    Quest CEO, made this comment:
  The main factor behind the record            As all lawyers know, it has become


                                            www.BeasleyAllen.com                                                              9
  The common theme found                        abuse case, which is most likely the          ernment as an agent for the very
  throughout so many major events               result of a perceived cover-up.               rich, particularly his campaign
  in recent years is a perceived abuse                                                        contributors. Born to great wealth
                                                Unless the present trends are
  of power, from news of church                                                               and prominence and helped along
                                              reversed, I suspect we will see folks
  abuse cover-ups to Martha Stewart.                                                          every step of the way by wealthy
                                              getting more and more distrustful of
  Americans are more suspicious of                                                            benefactors, he remains sorely out
                                              our political readers and of those who
  authority now than they were four                                                           of touch with the concerns and
                                              run things in Corporate America. Presi-
  years ago. This distrust is going to                                                        problems       that      Americans
                                              dent Bush’s answer to the problems
  have consequences in our justice                                                            encounter in their daily lives—and
                                              facing consumers has been to protect
  system, where witnesses or defen-                                                           sadly, his actions indicate he just
                                              the wrongdoers who have caused the
  dants are expecting the benefit of                                                          doesn’t care.
                                              scandals and to ignore their victims.
  the doubt.
                                              This, in my opinion, is largely responsi-        The staff at Public Citizen has done a
  All elected officials generally             ble for the President’s decline in trust. I   thorough analysis of what the President
received mediocre trust scores in the         hope the President will see the error of      proposed. I appreciate the group
survey. Even President Bush had               his ways and start showing concern for        giving us access to this information.
serious problems on the issue of trust-       ordinary citizens—that would indeed           Here are the responses by the con-
worthiness. The poll revealed that Pres-      be a welcome change.                          sumer advocacy group to several spe-
ident Bush, television reporters, and         Source: Reuters News                          cific issues:
corporate executives have lost the most
                                                                                            • Bush’s Assault on the Legal Rights
ground over the last four years. Find-
                                              PRESIDENT BUSH PROMOTES ANTI-                    of Citizens
ings from the poll include:
                                              CONSUMER AGENDA IN STATE OF THE UNION            Bush falsely claims there is a “crisis”
• Corporate executives, lawyers, and                                                        in the civil justice system and is
                                                I watched the President’s State of the
  entertainment celebrities are the least                                                   pushing Congress to enact sweeping
                                              Union address and really wasn’t sur-
  trusted groups in America. Con-                                                           changes that would dramatically curtail
                                              prised at its content. While it was the
  versely, family members and fire-                                                         the rights of citizens to seek redress in
                                              best “delivery” by President Bush thus
  fighters are ranked among the most                                                        court when they are defrauded or oth-
                                              far, what he actually said should be
  trusted in a list of 20 different cate-                                                   erwise harmed by corporations or
                                              really scary for most people in the U.S.
  gories.                                                                                   injured by doctors.
                                              President Bush’s address provided the
                                                                                               Specifically, Bush backed S. 5, the
• The war in Iraq is the biggest factor       nation another opportunity to examine
                                                                                            business class action bill, which was
  reported to cause decrease in trust.        and understand a radical domestic
                                                                                            recently adopted by both houses of
  The 2000 election controversy in            agenda that, if enacted, will curtail con-
                                                                                            Congress and signed into law by Presi-
  Florida is second place. White-collar       sumer, civil rights and environmental
                                                                                            dent Bush. This law will move most
  crime is third and terrorism is fourth.     protections; take away the legal rights
                                                                                            class action lawsuits of any significance
                                              of citizens defrauded or harmed by
• In various case types, people who                                                         out of state courts—which have tradi-
                                              corporations and medical providers;
  report their trust has declined over                                                      tionally heard these suits—to the
                                              and further erode democratic princi-
  recent years are about 10-15% more                                                        already-overburdened federal courts.
                                              ples. Public Citizen President Joan
  likely to find for a plaintiff in a court                                                 Because federal courts rarely certify
                                              Claybrook, who is a strong voice for
  case.                                                                                     nationwide class actions based on state
                                              American citizens, had this to say con-
                                                                                            consumer-protection laws (and there
• Respondents ranked British and              cerning the address:
                                                                                            are no comparable federal laws that
  Canadian corporate executives to be
                                                President Bush’s heartless agenda           can be enforced by citizen lawsuits),
  the most trustworthy witnesses in a
                                                is a blueprint for stomping out a           most class actions involving market
  courtroom case over Americans.
                                                century of reforms that have made           abuses—such as overcharges by insur-
  French corporate executives were
                                                this nation more prosperous and             ers, selling defective products, preda-
  ranked next to last, followed only by
                                                brought cleaner air and water, less         tory lending scams targeting seniors
  Middle Easterners.
                                                poverty and more basic fairness for         and the poor—will be blocked.
• Approximately 60% of Americans                the people who do the everyday                 “This bill, unless amended, creates a
  would side with the prisoners over            hard work to keep our country               classic Catch-22 for consumers,” Clay-
  the prison guards in the Iraq prison          running. Bush cynically views gov-          brook said before its passage. “Con-


10                                            www.BeasleyAllen.com
gress says, ‘You must go to federal         further deregulation of the energy            the North American Free Trade Agree-
court.’ But the federal courts will lock    sector. This includes the repeal of the       ment (NAFTA)—to six more countries
consumers out. It’s the perfect scenario    Public Utility Holding Company Act, a         through the proposed Central America
for businesses seeking to avoid             staple of consumer protection enacted         Free Trade Agreement, known as
accountability, and the most likely         to stem the type of abuses that helped        CAFTA. This model of trade relations
outcome is that we will see a surge in      cause the Great Depression. This law          has led to the largest U.S. trade deficit
corporate misbehavior.”                     protects utility customers from unjusti-      in history—a projected $600 billion by
  Also on Bush’s agenda is legislation      fied rate hikes and service disruptions       year’s end. The trade deficit, which is
to place a nationwide $250,000 cap on       by limiting the ability of executives to      5.5% of national income, is also the
non-economic damages that juries can        use ratepayer profits to embark on            largest as a share of our national
award to patients who are injured by        risky business ventures unrelated to          economy in the post-World War II
negligent or incompetent doctors, drug      their core utility business.                  period. Trade agreements have con-
companies, HMOs, nursing homes,                The Administration also wants to           tributed to growing income inequality
hospitals and other health care             deliver billions in taxpayer dollars to       in the United States and stagnant eco-
providers. Such limits would apply to       energy companies in the form of subsi-        nomic performance in less-developed
even the most horribly disfigured, crip-    dies and tax breaks, a clear reward for       countries.
pled, or brain-damaged victims.             the more than $8.5 million contributed           “The Bush Administration insistence
  Bush claims that “frivolous lawsuits”     to his re-election campaign by the            on pushing to extend the colossal fail-
are out of control and that such law-       energy and investment sectors, not to         ures of the NAFTA model to the poor
suits are making malpractice premiums       mention the $3.7 million donated to his       countries of Central America, which
for doctors unaffordable. But, there is     second inauguration and the additional        have suffered for decades from the
scant evidence to support Bush’s            $7 million to the Republican National         fallout of civil war, economic stagna-
dubious contentions. Malpractice pre-       Committee.                                    tion, and natural disasters, is morally
miums are driven by economic cycles            In addition, Bush advocates nuclear        unconscionable,” said Lori Wallach,
that affect insurance industry invest-      power as a promising and “renewable’          director of Public Citizen’s Global
ments (and profitability), not payouts      energy source, while ignoring the             Trade Watch. “We join with the major
to malpractice victims. In fact, just 5%    massive nuclear waste problem and             U.S. and Latino civil rights and immi-
of doctors nationwide are responsible       urging taxpayer subsidies to fund the         grant rights groups in opposing this
for about half of all malpractice           next generation of nuclear reactors.          offensive push.
payouts—but Bush is offering nothing        Tax dollars already are subsidizing half         “It is increasingly clear that no one is
to weed out these repeat-offender           the cost—estimated to be as much as           safe from the negative effects of these
doctors.                                    $87 million each—of the new U.S.              trade liberalization policies, which are
  “Once again, as he did with weapons       Nuclear Regulatory Commission “early          leading to increased off-shoring of
of mass destruction in Iraq and as he is    site permit” application process in Illi-     high-paying professional jobs and
now doing with Social Security, Bush        nois, Mississippi, and Virginia, as well      more risks to hard-won consumer pro-
has created a bogus crisis so that he       as combined operating and construc-           tections and social programs. Bush’s
can rally support for a special interest    tion licenses for several huge consortia.     plan to experiment with the privatiza-
agenda that is bad for America,” said          “Bush’s energy policy does nothing         tion of Social Security, for example,
Frank Clemente, director of Public          to help consumers, stem global                could put the nation’s most popular
Citizen’s Congress Watch division.          warming or help clean up the environ-         social program at the mercy of World
                                            ment,” said Wenonah Hauter, director          Trade Organization rules, which might
• Bush’s Corporate Welfare for
                                            of Public Citizen’s Critical Mass Energy      make the experiment more difficult to
  Energy Corporations
                                            and Environment Program. “It utterly          reverse when it predictably fails to gen-
  Bush likely will call for energy legis-
                                            fails to set a course that will sustain our   erate promised benefits.”
lation that will reward energy compa-
                                            country over the next century. It is the      Source: Public Citizen
nies and investment bankers that now
                                            exact opposite of visionary.”
own power plants and natural gas
pipelines. Despite the lessons learned      • Bush’s Stubborn Insistence on               THE BUSH BUDGET FAILS TO PROTECT
from the massive fraud and market             Expanding Failed Trade Policy               CONSUMERS
abuse by Enron and other energy com-          Bush wants to expand the corporate
                                                                                            Not only was the President’s State of
panies in recent years, Bush advocates      globalization model—as embodied by
                                                                                          the Union message a preview of what


                                            www.BeasleyAllen.com                                                                  11
is in store for ordinary citizens, the        asking taxpayers to further subsi-     more than eight hours a day.
budget presented actually contains            dize nuclear power—a failed tech-      Allowing the industry to fund the
even worse news for most folks. Amer-         nology for consumers and the           regulators who oversee them sets a
ican citizens should really be alarmed        environment. The Administration is     dangerous precedent and sets the
at the anti-consumer agenda that Presi-       seeking $56 million for the Nuclear    stage for conditions that could
dent Bush has proposed. But, few folks        Power 2010 program, in which tax-      compromise the effectiveness of
even know what the budget contains.           payers pay half the cost of apply-     inspectors. In fact, the USDA has
If they did, I suspect they wouldn’t be       ing for licenses to site and build     “de-listed” plants in other countries
too happy. In my opinion, this Presi-         new nuclear reactors. Last year,       from being eligible to export to the
dent is the most controlled of any            Bush requested $10 million, but        United States because the industry
occupant of the White House in my             thanks to Senator Pete Domenici        funds their government meat
lifetime, and that is reflected in his        (R-N.M.), the program received $50     inspection programs. It is senseless
budget. His agenda has been largely           million. Similarly, Bush is request-   to implement a policy in this
put together by Corporate America             ing $45 million for Generation IV, a   country that we oppose elsewhere.
with little—If any—input from con-            U.S. Department of Energy              Unfortunately,      the    proposed
sumer groups. A careful look at the           program to develop new “inher-         budget leaves very little wiggle
Bush budget reveals how “people” are          ently safe” reactor designs; last      room for the agency to avoid
left out and virtually ignored insofar as     year, he requested $30.5 million,      accepting industry user fees. Con-
anything really good for them is con-         but again thanks to Domenici, the      gress should reject these fees and
cerned. I agree with Public Citizen’s         program received $40 million.          instead appropriate adequate
belief that President Bush’s budget pro-                                             funding for FSIS operations. In
                                              Bush’s budget will also seek to
posal will do little to protect the health                                           addition to the proposed user fees,
                                              raise the inexpensive electricity
and safety of consumers in three criti-                                              the budget eliminates the 63 FSIS
                                              rates charged by the federally
cal areas: energy, food and water.                                                   personnel dedicated to humane
                                              owned and operated Power Mar-
These are essential resources that every                                             slaughter regulations and assigns
                                              keting Administration—a sop to
citizen must be able to afford, have                                                 them to general inspection duties.
                                              more expensive corporate-owned
access to, and most importantly, know
                                              power and a first step to privatiz-    Water
are clean and protected. Let’s take a
                                              ing these public resources. These
look at each of these important areas.                                               With crumbling infrastructures
                                              federal power agencies supply
                                                                                     nationwide, there is a desperate
  Energy                                      large parts of the country with
                                                                                     need of funding to maintain and
                                              inexpensive electricity generated
  In the fiscal year 2006 budget                                                     improve the safety and accessibility
                                              mostly from hydroelectric dams. It
  released by the White House, Bush                                                  of our public water supply. There
                                              is no secret that corporate owned
  requested $651 million for Yucca                                                   is a very real funding gap for water
                                              utilities, which nationally charge
  Mountain, which is $74 million                                                     and wastewater systems in the
                                              prices more than 8% higher than
  more than the program received                                                     United States. By some estimates, it
                                              publicly owned or cooperative
  last year. This is indefensible given                                              will cost $20 billion annually for
                                              power, seek to control these cheap
  the myriad problems of the nuclear                                                 the next 20 years to build, repair
                                              sources of power. The result is
  waste dump project. Further, Bush                                                  and maintain systems in this
                                              usually higher rates for consumers
  is asking that nuclear power user                                                  country. But the Bush budget allo-
                                              and bigger profits for the compa-
  fees be reclassified as “offset col-                                               cates only $730 million for the
                                              nies.
  lections.” (Since 1982, nuclear                                                    Clean Water State Revolving Funds,
  power utility consumers have paid           Food                                   which is $360 million less than
  fees to the Nuclear Waste Fund to                                                  Congress appropriated in FY05.
                                              The proposed budget for the U.S.
  pay for the establishment of a                                                     Further, Bush requested $850
                                              Department of Agriculture’s Food
  national high-level nuclear waste                                                  million—slightly less than was
                                              Safety and Inspection Service
  repository.) Reclassifying the fund                                                appropriated last year—for the
                                              (FSIS) calls for $139 million of the
  is simply a budgetary gimmick that                                                 Safe Drinking Water State Revolv-
                                              funding for meat inspection to
  obscures the fund’s impact on the                                                  ing Fund, which provides grants to
                                              come from “user fees” paid by the
  country’s massive budget deficit. In                                               states to help improve drinking
                                              meat industry at plants operating
  addition to Yucca funding, Bush is                                                 water systems and infrastructure.


12                                           www.BeasleyAllen.com
  It is abundantly clear that those who    • Farm subsidies; and                       munity nationwide for President Bush
control the federal government can                                                     and the Republican Party. It became
                                           • Community development grants.
accomplish their anti-consumer goals                                                   pretty well accepted in the last presi-
by what’s put in the budgets by the           It is significant that many Republi-     dential race that no Christian possibly
White House operations. This budget is     cans in Congress, who have been             could vote for a Democrat and espe-
no exception. It is one of the worst in    strong Bush allies, have expressed their    cially not one from Massachusetts. It
years for American consumers and           opposition to many of the cuts in his       will now be most interesting to see
ordinary citizens generally. I hope        budget. The numbers put out by the          where Rove places real Christian values
members of Congress will stand up for      Bush White House are “not credible,”        on his congressional agenda. Rove is
the American people and change the         according to a number of economists,        good at the use of “code words,” but
Bush budget where needed. If that          but of course, that’s nothing new. I        now we’ll see how serious he is about
doesn’t happen, and the Bush budget        have yet to hear a good explanation         getting something done in Congress on
passes, the American people will be        from any of my Republican friends on        issues that Christians are really inter-
headed for some dark days in a             how a “real conservative” person can        ested in.
number of critical areas.                  justify the record federal deficit being
Source: Public Citizen                     run up by President Bush. That is
                                                                                       THE PRESIDENT FILLS LONG-STANDING
                                           mind-boggling—to say the least!             VACANCY AT FDA
THE AMERICAN PUBLIC SHOULD BE ALARMED                                                     President Bush has nominated Dr.
OVER BUSH’S DEFICIT                        ROVE GETS BIGGER ROLE AT WHITE HOUSE
                                                                                       Lester M. Crawford to be Commissioner
   In addition to the consumer concerns       It was reported last month that Presi-   of the Food and Drug Administration.
stated above, there is a great deal more   dent Bush’s senior adviser, Karl Rove,      This position has been vacant for
not to like about this budget. The Pres-   has taken on a wider role in develop-       nearly a year—which I have never
ident’s budget will drive America          ing and coordinating policy in Presi-       really understood, considering the
deeper into debt while making cuts         dent Bush’s second term. That really        rising concerns about the safety of
that will hurt veterans, farmers, and      shouldn’t have come as a big surprise.      drugs on the market. Dr. Crawford, an
other working Americans. It is most        Rove, as we all know, was Bush’s top        Auburn University graduate, has been
significant that Bush’s budget leaves      political strategist during his 2000 and    acting commissioner since March 2004.
out the tremendous cost of the wars in     2004 presidential campaigns and is          He earned a degree as a veterinarian
Iraq and Afghanistan, currently running    commonly known as the man who               from Auburn and later received a Ph.D.
in excess of $5 billion per month. It      runs the show at the White House. He        in pharmacology from the University of
also leaves out the cost of his Social     now has become a deputy White               Georgia. I hope Dr. Crawford will
Security privatization scheme. The         House chief of staff in charge of coor-     provide the needed leadership to turn
Bush budget does nothing to decrease       dinating policy between the White           the ineffective FDA around and make it
the deficit, and that’s a big time         House Domestic Policy Council, the          the protector of people that it is sup-
problem. Despite the President’s failure   National Economic Council, the              posed to be. The FDA has been a
to rein in the deficit, his budget still   National Security Council, and the          failure, in my opinion, giving Dr. Craw-
includes cuts to some important pro-       Homeland Security Council. This             ford a tremendous opportunity to turn
grams that will hurt folks in this         sounds like some pretty big and impor-      things around. He will have to be
country who need the most help. The        tant stuff. I suspect it’s more semantics   tough and willing to take on the pow-
Bush budget has proposed cuts for the      than substance, because Rove was            erful pharmaceutical industry in order
following programs:                        already running the show. Needless to       to change things at the FDA. I hope
                                           say, Rove will continue to oversee          and pray that Dr. Crawford will be suc-
• Medicaid;                                                                            cessful.
                                           White House strategy and will work
• Veterans’ health benefits, which will    tirelessly to advance Bush’s agenda.           The FDA is under great pressure to
  force veterans to pay more for health       Clearly, Karl Rove is the most power-    make drugs safer and more affordable.
  care;                                    ful man in Washington and is also the       Critics say the FDA does not monitor
                                           most dangerous. His strategy has been       the side-effects of drugs, especially in
• College loans;                                                                       combination, after they are approved.
                                           to destroy anybody who gets in his
• Education programs that help poor        way. Rove carefully devised the plan to     Watchdog groups have criticized Dr.
  children;                                gain the support of the Christian com-      Crawford’s ties to the food industry.


                                           www.BeasleyAllen.com                                                             13
Actually, his record as acting commis-      expanding the earned income tax             verted the American judicial system
sioner provides another target. Oppo-       credit, and creating matching savings       through alteration and destruction of
nents say, for example, that the FDA        accounts for poor families. I don’t         evidence, according to Public Citizen.
reacted too slowly under his watch          know what the future holds for my              Under Donohue’s leadership, the
when drugs it had approved started to       friend from North Carolina. I do know,      U.S. Chamber has been one of the
show indications of being dangerous         however, that whatever John Edwards         most outspoken supporters of the tort
for users. Janell Mayo Duncan, counsel      does, he will work hard at it and will      law changes sought by big business. It
for Consumers Union, which publishes        do an outstanding job.                      has supported anti-consumer class
Consumer Reports had this to say:              In an unrelated note, I would ask all    action legislation and spent many mil-
                                            of our readers to pray for the full         lions of dollars in state political races to
  Under Dr. Crawford’s watch, the
                                            recovery of John’s wife, Elizabeth, who     defeat judicial and attorney general
  FDA has failed to protect the public
                                            was diagnosed with breast cancer in         candidates who they deemed to be
  from dangerous prescription drugs,
                                            November. She is now undergoing             sympathetic to consumer and investor
  dietary supplements, and contami-
                                            surgery and treatment. John is doing        rights. Donohue is now calling for a
  nated animal feed that could carry
                                            his part by helping to take care of their   massive overhaul of the tort system
  mad cow disease. As many of these
                                            children. Elizabeth will do her part and    and reduced regulatory oversight
  controversies arose while Dr. Craw-
                                            fight this unwelcomed visitor to the        by government agencies—the same
  ford was acting commissioner, it
                                            Edward’s family. She will, with God’s       authorities that have held Qwest and
  will be important for him to lay out
                                            help, beat this problem.                    Union Pacific accountable for a long
  to Congress and the American
                                                                                        string of corporate misdeeds.
  public his specific plans to ensure
                                                                                           Public Citizen President Joan Clay-
  the safety of our prescription drugs.     TOM DONOHUE APPEARS TO HAVE A
                                            PERSONAL INTEREST IN TORT REFORM            brook had this to say: “Using tens of
  I am going to give Dr. Crawford the                                                   millions in corporate money, Tom
benefit of all doubt and watch to see          I really thought Tom Donohue, the        Donohue is systematically trying to
how he performs now that the “acting”       president of the U.S. Chamber of Com-       disarm the public institutions that hold
designation has been taken away from        merce was simply a hired gun who had        corporate violators accountable—the
his job title. Certainly, American con-     just been hired to do a job on the “tort    liability system, the courts, state attor-
sumers are counting on the new boss         reform” front. Now it appears that Mr.      neys general and regulatory agencies.
at the FDA to do the job. I hope and        Donohue really has a vested interest in     He sits on boards of two companies
pray that he is up to the challenge.        the national campaign to limit corpo-       that serve as vivid examples of why we
                                            rate accountability. You might be sur-      need strong law enforcement for crime
                                            prised to learn that he sits on the         in the corporate suites.” The following
JOHN EDWARDS TO HEAD UNC POVERTY
                                            boards of two scandal-ridden corpora-       are among Public Citizen’s findings:
CENTER
                                            tions. A recently released Public Citizen
                                                                                        • Qwest has paid $250 million to settle
   My friend John Edwards will head a       report gives us some insight into what
                                                                                          fraud charges brought by the Securi-
University of North Carolina center that    is motivating this man. Although
                                                                                          ties and Exchange Commission (SEC)
will study ways to lift people in this      Donohue has proclaimed the impor-
                                                                                          for overstating earnings, has paid $25
country out of poverty. The former U.S.     tance of board members serving as
                                                                                          million to settle five lawsuits con-
senator will be director of the Center      watchdogs for the corporations they
                                                                                          cerning alleged insider trading, and
on Poverty, Work and Opportunity.           manage, he sits on the boards of two
                                                                                          still faces billions of dollars in poten-
John will hold a part-time, two-year        publicly traded companies—Qwest
                                                                                          tial civil litigation liabilities.
faculty position, funded by private gifts   Communications International Inc. and
to the university. As you know, John        Union Pacific Corp.—whose reputa-           • Since Donohue joined Qwest’s board,
served one term in the Senate and           tions have been marred by serious             the company has been assessed
pursued a presidential run last year        misdeeds that have prompted the very          more than $114 million in fines by 10
before having the misfortune of being       type of civil lawsuits that Donohue is        states and the Federal Communica-
picked as John Kerry’s running mate. I      now trying to limit. The two companies        tions Commission for defrauding
am convinced that John would be Pres-       have engaged in a monumental decep-           consumers and for failing to disclose
ident today if he had headed up the         tion of investors, violated federal and       secret business dealings.
ticket. While in the Senate, John           state regulations on a massive scale,
                                                                                        • Instead of punishing Qwest’s corpo-
pushed for raising the minimum wage,        jeopardized public safety, and per-


14                                          www.BeasleyAllen.com
  rate executives, Donohue and his          members appear to have rewarded           ers indicate they are likely to challenge
  fellow board members rewarded             Union Pacific executives with ever        it again in the near future. (Public
  them with higher pay packages.            higher pay. An independent research       Citizen’s complete report, “Tom
  Qwest’s board of directors has            organization last year recommended        Donohue: U.S. Chamber of Commerce
  received dismal ratings from two          against retaining Donohue as a board      President Oversees Renegade Corpora-
  independent research organizations        member because of his role on the         tions While Pushing for Limits to Cor-
  for furnishing executives with exorbi-    compensation committee in boosting        porate Accountability,” can be found at
  tant pay packages despite poor cor-       executives’ pay. Donohue has repeat-      http://www.citizen.org/docu-
  porate performance. Donohue sits          edly acknowledged the responsibility      ments/021805DonohueForPdf.pdf.)
  on the board’s compensation com-          of board members to make sure com-        Source: Public Citizen
  mittee.                                   panies behave responsibly. In 2000, he
                                            was quoted as calling for board
  Public Citizen reports that since
Donohue joined the Union Pacific
                                            members to perform “due diligence”        V.
                                            and be active in understanding the        THE CORPORATE
board in 1998, the company has
                                            company so they can provide the best
repeatedly been found liable in acci-                                                 WORLD
                                            possible advice. This is what
dents resulting from poor training or
                                            Donohue—the present day “tort-
unsatisfactory upkeep of tracks, has
                                            reformer”—was saying to them: “Save       TEN WORST CORPORATIONS LISTED
pressured workers not to report acci-
                                            me from a bunch of people on a board
dents, and has been deemed responsi-                                                    Each year the Multinational Monitor
                                            who are going to tell me what I want
ble by courts for manipulating or                                                     magazine puts out a list of the Ten
                                            to hear.” Frank Clemente, director of
destroying evidence:                                                                  Worst Corruptions in the U.S. The Feb-
                                            Public Citizen’s Congress Watch divi-
                                                                                      ruary issue of the Monitor listed the ten
• The Arkansas Supreme Court said in        sion observed:
                                                                                      worst corporations of 2004. These cor-
  a 2004 decision involving a fatal acci-
                                              The hypocrisy hits you like a train.    porations, according to the survey, are:
  dent, “the record in this case reflects
                                              Donohue has called for board
  the development of a corporate                                                      • Abbott Labs
                                              members to exercise proper over-
  policy at Union Pacific that put
                                              sight of companies, yet he has          • American International Group
  company profits before public
                                              responded to wrongdoing in com-
  safety.”                                                                            • Coca-Cola
                                              panies he oversees by hiking execu-
• A federal judge in Arkansas fined           tive pay. Donohue’s crusade to          • Dow Chemical
  Union Pacific $168,000 in 2001 for          limit the ability of consumers to
                                              hold companies accountable for          • GlaxoSmithKline
  destroying evidence in a case stem-
  ming from another railway crossing          wrongdoing takes on a new light         • Hardee’s
  crash that left a motorist dead.            when you look at his activity on
                                              these corporate boards.                 • Merck
• In Washington state, a federal judge
  sanctioned Union Pacific in February        Public Citizen’s report also draws      • McWane
  2002 after it was revealed that a         attention to the Chamber president’s      • Riggs Bank
  manager secretly fixed a faulty           opposition to the SEC’s proposed
  railway crossing after a motorist was     shareholder access rule, which would      • Wal-Mart
  killed there. The judge labeled the       allow shareholders holding a signifi-        Robert Weissman, editor of The
  actions “egregious” and said “severe      cant portion of a company’s shares to     Monitor, says that it’s becoming
  sanctions are appropriate” since the      place nominees for the corporate          increasingly difficult to choose the ten
  manager’s “actions were not that of a     board on the official company ballot.     worst corporations. The Monitor has a
  rogue underling.” Union Pacific had       Currently there is no practical way for   rule that they do not name companies
  sought compensation from the estate       shareholders to elect directors not       to the list if they appeared on the pre-
  of the driver in this case, claiming      nominated by the incumbent board.         vious year’s list. I guess that would
  the crash had left one of its locomo-     Donohue has a vested interest in          explain a number of really bad compa-
  tives damaged.                            keeping things as they are, because his   nies missed the list this year. Our
                                            continued tenure on Qwest’s board has     readers may agree or disagree with this
  Again, Donohue and fellow board
                                            been challenged and some sharehold-       listing of bad corporations. In fact, I

                                            www.BeasleyAllen.com                                                            15
can think of a few more companies           has never disputed the findings in that     sure in 1977, 1980, 1981, and 1982. At
that could be added to any such list.       study, has since declared the area a        one point, a Grace executive
The Monitor gave good reasons why           Superfund site and has spent more           responded to one of the studies by
each of the ten companies they chose        than $55 million dollars on cleanup.        writing in a memo: “Our major
made the list for 2004.                     Bill Mercer, U.S. Attorney for Montana      problem is death from respiratory
Source: The Corporate Crime Reporter        stated: “A human and environmental          cancer. This is no surprise.” Despite
                                            tragedy has occurred in Libby. The          having the information referred to in
                                            prosecution seeks to hold Grace and         the memo, Grace officials told the EPA
W. R. GRACE INDICTED OVER ASBESTOS          some of its executives responsible for      in 1983 that there was no indication
   The federal indictments in Montana       the misconduct alleged in this indict-      their products posed a substantial
involving W. R. Grace & Company are         ment.” Lori Hanson, a special agent         threat to human health. When the EPA
good news for people and bad news           with the Environmental Protection           arrived in 1999, company officials lied
for the officials who ran this company.     Agency, called the allegations against      about providing vermiculite insulation
The company and seven of its execu-         Grace and its executives “one of the        to local residents for their homes and
tives are said to have known a mine         most significant environmental indict-      businesses, and failed to reveal that
was releasing cancer-causing asbestos       ments in our history.”                      vermiculite was used on the school’s
into the air and effectively hid the           The Libby mine is now closed. Grace      running track. As late as April 2002, in
danger from workers and towns               filed for bankruptcy protection in April    response to the EPA declaring a public
people. You may recall that a newspa-       2001. The company had been over-            health emergency in Libby, the
per study linked nearly 200 deaths to       whelmed by asbestos-related injury          company still insisted its vermiculite
asbestos from the vermiculite mine in       lawsuits. As pointed out above,             was not a risk to the environment and
the small town of Libby, Montana,           asbestos contamination in Libby came        human health.
which is located near the Canadian          to light in 1999 after national news
border. More than 1,200 people became       reports first linked the pollution from a
                                                                                        FORMER MERCURY FINANCE CEO IS
ill over the thirty years that Grace, a     nearby vermiculite mine to the deaths       INDICTED ON FRAUD CHARGES
global supplier of chemicals and build-     and illnesses of area residents. The ver-
ing materials, operated the mine.           miculite ore was used in a number of           Several years ago our law firm tried a
   The federal grand jury handing down      household products, most notably a          civil fraud case in Alabama against
the indictment said top Grace execu-        common home insulation. The ore,            Mercury Finance Co., which at that time
tives and managers kept secret numer-       however, contained naturally occurring      was very big in the secondary auto loan
ous studies spelling out the risks the      tremolite asbestos, a carcinogen. The       business. We were successful in this
asbestos posed to its customers, its        EPA began its investigation shortly after   case. Our jury, after hearing the evi-
employees, and the residents of Libby.      news of the asbestos-related deaths         dence, returned a $50 million verdict
According to the indictment, Grace,         became public. The company could            against the company. Many tort reform-
while it knew the risks, put folks in the   face a fine of up to $280 million, twice    ers said at that time, we had “tricked”
area of the plant at great risk. For        the amount of after-tax profits the gov-    the jury and had taken unfair advantage
example, the company actually sold or       ernment alleges W.R. Grace realized         of a good company. We knew better.
leased some of its contaminated prop-       from the Libby mine, according to the       Now federal prosecutors have indicted
erties for homes and businesses, base-      Justice Department.                         the former chairman and chief execu-
ball fields, and even city use. The            The government alleged the defen-        tive of Mercury Finance Co. on charges
indictment, which was recently              dants kept secret the health dangers        of accounting fraud. John Brincat Sr.
unsealed, also accuses Grace and its        posed by the vermiculite mined at           was named in a 15-count indictment
former manager of trying to obstruct        Libby. They hampered federal govern-        charging wire fraud, lying to financial
efforts by the Environmental Protection     ment efforts to protect the public from     institutions, and conspiracy, according
Agency to investigate the extent of the     such risks. The result was a national       to the U.S. Attorney’s office in Chicago.
asbestos contamination beginning in         tragedy. As early as 1976, the company      The indictment claims that Mercury
1999. The reason the 1999 date is sig-      knew of lung health problems among          Finance, which had 290 offices in the
nificant is because a study by the          its employees at the mine, according to     U.S. and whose stock traded on the
Seattle Post-Intelligencer linked the       the indictment. Grace executives had        New York Stock Exchange, fraudulently
nearly 200 deaths and hundreds of ill-      reports or studies warning of the           obtained nearly $1.5 billion in loan
nesses to the mine. The EPA, which          dangers of asbestos vermiculite expo-       commitments and lines of credit.


16                                          www.BeasleyAllen.com
   Prosecutors said Mr. Brincat and        amount. Later, the car was virtually          sonal funds to compensate share-
three other Mercury Finance executives     destroyed by fire—that’s when our             holders for their losses, and a
manipulated earnings reports and           client found out his car wasn’t covered       similar one by WorldCom directors
failed to account for bad loans in an      by his policy. Mercury Finance                that was later overturned, repre-
effort to deceive shareholders and         arranged for the car to be repaired, and      sent significant events in the newly
investors. The indictment seeks forfei-    refinanced the loan by adding the             complex world of regulatory com-
ture of $17 million. Three other           repair cost to the loan balance. Again,       pliance. They come at a time when
Mercury executives have been named         all sorts of fees were added to the new       companies are struggling with the
in the alleged scheme. One of them,        loan amount.                                  high cost of complying with new
former Chief Financial Officer James          Our client, who was working at a           laws and regulations, such as the
Doyle,      is   deceased.     Lawrence    local hospital, was then paying 60% of        US Sarbanes-Oxley act. They also
Borowiak, former accounting manager,       his monthly salary each month on the          come amid growing fears that legal
pleaded guilty to charges in 2002.         loan to Mercury Finance. When he              and financial exposure will deter
Bradley Vallem, former treasurer,          became unable to pay the payments,            competent      individuals      from
received a sentence of 20 months in        he turned the car in to save his credit       joining public company boards.
prison after pleading guilty. Borowiak     and was assured by Mercury Finance            American companies estimate that
and Vallem agreed to cooperate in the      that his debt was satisfied totally and       Sarbanes-Oxley compliance costs
probe. Mercury, once a major player in     that nothing further was owed. A few          alone could run into hundreds of
the so-called subprime-lending busi-       weeks later, however, our client got a        millions of dollars. Are these
ness, disclosed in January 1997 that it    letter saying he owed over $10,000 to         onerous and unnecessary expendi-
had vastly overstated profits for previ-   Mercury Finance. The company, after it        tures or a worthwhile investment?
ous years. The company filed for bank-     repossessed the car, sold it to a well-       In the end, will they really benefit
ruptcy protection in 1998 and              connected company for $500. After             investors? Corporate opposition to
reorganized, as MFN Financial Corp.        looking into what had happened, we            increased regulation has met with
The new company was later sold to          then sued Mercury Finance for fraud.          some success. Deadlines for enact-
Consumer Portfolio Services Inc. of        After the verdict, we settled that plain-     ing the Sarbanes-Oxley require-
Irvine, California.                        tiff’s case and about 100 others on a         ments for certifying internal
   The case we tried against Mercury       confidential basis. All of them were fac-     financial controls were extended.
Finance revealed at the time how bad       tually similar. One thing that we             The Securities and Exchange Com-
the company and its bosses were. For       learned during pretrial discovery sticks      mission is also looking at ways to
example, the company was taking            out in my mind about Mercury                  make it easier for US-listed Euro-
advantage of low-income purchasers of      Finance. We got a memo from the               pean companies to meet Sarbanes-
used automobiles on a nationwide           home office to all branches that said:        Oxley requirements or delist. But it
basis. At the time the company was         “once we get them in debt—keep them           would be a mistake to conclude
charging a hidden $1,000 charge on         in debt—don’t let them out.” That phi-        that the overwhelming response of
each auto loan, it sold several types of   losophy tells us lots about the mental-       companies to these new regulations
insurance to the borrowers with high       ity of the folks who ran this company.        is obstruction, delay and then
premiums and little coverage, interest                                                   grudging compliance.
rates were over 25%, and the list goes
                                           ANOTHER POINT OF VIEW                          This was written for a national publi-
on. The so-called property damage
                                                                                       cation by Samuel DiPiazza, who inci-
insurance policy on our 19 year old           I have been accused by some folks        dentally is from Alabama. While I don’t
client’s car was most interesting—for a    of being too much of a consumer             disagree with much of what he writes,
premium of about $750 annually, the        advocate in this report. Some even say      I still believe that most of the scandals
car was covered by insurance only if it    that I never present “the other side” of    involving Corporate America could
was “repossessed” by Mercury Finance.      an issue. While I don’t apologize for       have been avoided had the federal
The sticker price on the car had been      being strong for consumers and their        government done its job of regulating.
$3,000, which means it could have          rights, I thought this might be a good      This is especially true of corporations
been purchased for that amount. The        time to present another point of view.      regulated by the SEC. Instead of worry-
initial loan wound up being over
                                             The recent settlement in which            ing about the corporations, I believe
$6,500 for a car that was listed at
                                             Enron directors agreed to use per-        our first priority is to worry about and
$3,000 with interest charged on that


                                           www.BeasleyAllen.com                                                              17
protect both their shareholders and         company. Her roles in government and         last year after it declined to restrict par-
others who trust the companies to do        with Enron are certainly worth looking       tisan interest groups spending tens of
the right thing.                            into. One might ask when she sold her        millions of dollars in the elections. As
                                            Enron stock, when she got it, and how        you most likely recall, both Bush and
                                            much she sold it for. The timing of her      Kerry were targets of this money.
JUDGE GIVES ENRON SETTLEMENT
PRELIMINARY APPROVAL                        stock sales could be most interesting           The Bush campaign and lawmakers,
                                            and revealing.                               who contend the groups’ activities were
   A proposed $168 million shareholder         The directors’ settlement is the fourth   illegal, want Judge Sullivan to order the
lawsuit settlement with 18 former Enron     reached since the main lawsuit was           Commission to curb the raising and
Corp. directors who oversaw the             filed in October 2001, a few weeks           spending of six- and seven-figure dona-
company ahead of its 2001 flameout has      before Enron imploded amid revela-           tions and require groups spending in
received preliminary approval from a        tions of hidden debt, inflated profits       federal elections to register with the FEC.
Texas judge. As you may recall, there       and fraudulent accounting. It is the first   The Commission contends the Bush
had been two other settlements that had     involving individuals. Last year the uni-    campaign and the congressmen have no
been reached previously with banks.         versity announced the settlements with       legal standing to sue it over the issue.
The agreement with plaintiffs in the        the Bank of America and Lehman               Judge Sullivan has scheduled a Septem-
conglomerate of lawsuits in Houston,        Brothers. Former Enron auditor Arthur        ber 13th hearing on the case. Lawyers
led by the University of California,        Andersen LLP’s former international          will file written briefs setting out their
involves $155 million in insurance pro-     umbrella       organization,      Andersen   legal arguments, starting in late April. I
ceeds and $13 million paid from the         Worldwide SC, reached a $40 million          hope these consolidated cases will help
pockets of 10 of the former directors       settlement in July 2002—a month after        to curb the wild spending by groups
who sold stock inflated by hidden debt      Andersen was convicted of altering and       such as the 527 committees and others.
and accounting tricks. The other settle-    shredding Enron-related documents as         But, that may be wishful thinking.
ments given preliminary approval by         regulators began investigating the           Source: Associated Press
the court were $69 million with the         energy company’s finances. Unfortu-
Bank of America Corp. and $222.5            nately, the victims of the Enron scandal
million with Lehman Brothers Inc. The       are still the “losers” in this sad affair.   THE URGENT NEED FOR REFORM
judge will consider whether to give final                                                   I could have titled this portion of this
approval to the settlement in April.                                                     issue as “The Buying of the Govern-
   There is an interesting aspect of the    VI.                                          ment,” but felt that that might be going
Enron scandal that has gone pretty          CAMPAIGN                                     a little too far. But, after reading some
much unnoticed by the media. The            FINANCE REFORM                               of the numbers below, you may dis-
former directors paying unspecified                                                      agree. Nobody can argue successfully
portions of the $13 million included                                                     that the large corporations aren’t being
Wendy Gramm, the wife of former             JUDGE COMBINES CAMPAIGN FINANCE CASES
                                                                                         taken care of in our nation’s capitol.
Senator Phil Gramm, R-Texas, and                                                         The economic agenda coming out of
                                               A federal judge has combined sepa-
that takes on a special significance. All                                                the Bush White House is a prime
                                            rate lawsuits filed by President Bush’s
of us have probably heard of Senator                                                     example. That agenda includes priva-
                                            campaign and sponsors of a 2002 cam-
Gramm, who was a very powerful                                                           tizing Social Security, shifting taxation
                                            paign finance law into one case. The
man, but few folks would have even                                                       from corporations and the wealthy to
                                            consolidated cases are seeking a federal
recognized the name “Wendy Gramm.”                                                       ordinary consumers, preventing folks
                                            crackdown on groups that spent big
Interestingly, Mrs. Gramm chaired the                                                    from exercising their rights to sue large
                                            donations in last year’s elections. U.S.
Commodity Futures Trading Commis-                                                        corporations that harm them, and
                                            District    Judge     Emmet     Sullivan
sion, a federal agency, before joining                                                   unleashing the energy companies to do
                                            announced on February 18 that the
                                                                         th

Enron’s board in 1993. That Commis-                                                      whatever they see fit with little restric-
                                            issues raised by the Bush campaign and
sion directly affected Enron’s opera-                                                    tion. In my opinion, this does not
                                            Representatives Christopher Shays (R-
tions in a most significant way and                                                      project an agenda that the public really
                                            Conn.), and Marty Meehan (D-Mass.),
gave them certain distinct advantages                                                    wants or has been hollering for. In fact,
                                            against the Federal Election Commis-
by their rulings. Mrs. Gramm was in                                                      all of the polls run indicate just the
                                            sion were virtually identical. The two
charge of audits with Enron and                                                          opposite. To give you an example of
                                            lawsuits had been filed against the FEC
acquired a good bit of stock in the                                                      how Corporate America has spent their

18                                          www.BeasleyAllen.com
political money, consider the follow-      by Corporate America and the Bush          the bill in effect a product liability
ing, which shows the amounts spent in      White House and who will say no to         measure. It is designed to protect the
2004.                                      the President’s programs that are not      pharmaceutical industry, the medial
                                           good for American citizens. In my          device manufacturers, nursing homes,
• Merrill Lynch           $1,900,326
                                           opinion, what happens during the first     HMO’s, and insurance companies. It
• Pfizer                  $1,465,317       year of the President’s second term will   will also give virtual immunity to all
                                           determine the future of the already        who are covered by the legislation.
• MBNA Corp.              $1,453,497
                                           shrinking middle class in this country.    The medical community should be
• Southern Company        $1,041,021       Personally, I believe we must fight to     strongly in opposition to what this bill
                                           save the middle-class—I hope you           attempts to do to the American public.
• Wachovia Corp.            $998,997
                                           agree!                                     The pharmaceutical industry and the
• GlaxoSmithKline           $822,210                                                  HMOs are much more of an enemy to
                                                                                      doctors than trial lawyers are. The
• Eli Lilly & Co.           $623,852       THE FDA NEEDS PROMPT ATTENTION
                                                                                      public needs protection from the
• Merck & Co.               $508,131          Congress must reform the federal        groups referred to above rather than
                                           Food and Drug Administration, which        the reverse being true.
• Abbott Laboratories       $420,225
                                           is badly in need of repair, and without
  The numbers listed above include         further delay. The regulatory agency,
PAC contributions and contributions by     which should be protecting the con-        VIII.
way of executives to either Republican     suming public, is controlled by the        PRODUCT
candidates for federal office or to the    pharmaceutical industry and incapable      LIABILITY UPDATE
Republican National Committee. This is     of protecting American consumers as
by no means all the political money        the agency is currently set up. Drastic
                                                                                      GM’S ROOF CRUSH SCANDAL
that can be attributed indirectly to the   changes must be made immediately by
corporations that winds up buying          Congress so that the FDA can be made         Unprotected internal General Motors’
influence. For example, the so-called      capable of doing its job. I am hopeful     documents reveal just how far GM
“527 Committees” don’t have to reveal      members of Congress will hear from         went to weaken the federal safety stan-
their sources or the amounts given by      people back home who I believe will        dards on the strength needed for vehi-
those sources. I suspect Corporate         demand that drugs on the market be         cles’ roofs. The federal standard
America spent billions over the last few   safe to use. If the FDA approves a drug,   applicable to roof strength is FMVSS
years that passed through these com-       the public should be entitled to rely on   216. In 1970, when it first proposed a
mittees.                                   the agency’s approval as an assurance      roof intrusion protection standard, the
                                           that the drug has been thoroughly          federal government was going to
                                           tested and is safe. I don’t believe that   require testing on both front corners of
VII.                                       can be said today. Simply put, the FDA     a vehicle’s roof. Specifically, the test
CONGRESSIONAL                              is broken and it must be fixed!            was to be a static roof crush test using
UPDATE                                                                                a device measuring 12 in. by 12 in.
                                           THE SO-CALLED MEDICAL MALPRACTICE          This rigid test device was to be ori-
                                           LEGISLATION                                ented 10 degrees horizontally and 25
THE BUSH AGENDA
                                                                                      degrees laterally. At these angles, the
                                             President Bush is working hard to        test device gradually applied a force
  The Bush congressional agenda
                                           pass the so-called Medical Malpractice     concentrated on the upper surface of
appears to be one carefully designed to
                                           legislation in Congress. The President     the roof at the A-pillar until it reached
weaken the middle class and to make
                                           and the powerful industries pushing        a force of one-and-a-half times the
the upper class in this country stronger
                                           “tort reform” are using medical doctors    empty weight of the tested vehicle or
than ever. I sincerely believe that this
                                           in an attempt to pass legislation that     5,000 lbs, whichever is less. Then the
will prove to be a mistake. Destroying
                                           does much more than “reform” pure          test was to be repeated on the other
the middle class makes no sense and
                                           medical malpractice litigation. The        side of the vehicle’s roof. The intent of
can’t be justified. I hope there are
                                           President’s legislation will apply to      the proposed rule was to insure that
enough members of Congress who will
                                           medical products, nursing homes, and       the roofs of vehicles were strong
stand up to the pressures put on them
                                           health insurance claims. This will make

                                           www.BeasleyAllen.com                                                             19
enough to prevent serious injuries and      crushes. In support of this theory, GM       windshield glass in its vehicles to
deaths in rollover accidents.               points to a series of rollover tests con-    support its roofs. In 1990, GM ran a
   When the federal government issued       ducted on Malibu cars. The Malibu            series of roof crush tests on its S/T
its notice of the proposed rule, GM         paper compared the results of rollover       model vehicle. GM tested the strength
immediately began testing its cars to       tests involving production vehicles and      of the roofs on the vehicles with the
see whether the cars could meet the         vehicles equipped with a roll cage. GM       windshield glass and without the glass.
proposed federal standard. GM’s inter-      claimed that the results showed that         What the test revealed was the roof of
nal documents showed that out of            serious injury can occur in either vehi-     the vehicles without the glass was 36%
seven vehicles tested, six of them          cles. Thus, according to GM, roof crush      weaker than those roofs with the glass.
could not meet the proposed roof            doesn’t make a difference. But, the          This is a frightening discovery because
intrusion requirement. GM then hid          data were manipulated by setting the         GM knows that most rollover accidents
this testing from the government. In        threshold for serious injury at a very       involve multiple occupant hits on the
1971, when it came time for GM to           low and unrealistic level. In reality, the   roof of the vehicle. In these accidents,
respond to the proposed testing stan-       level of force generally required to         the windshield glass is typically lost on
dard, the automaker told the govern-        cause serious injury is more than 3-4        the first contact with the roof. Thus, on
ment that testing both sides of the roof    times the level set by these Malibu          the next contact on the roof, the roof
was unnecessary. GM also recom-             tests. At the more accurate level of         has lost 36% of its strength and no
mended that the government change           force necessary to cause serious injury,     longer has enough roof strength
the size of the test device to a device     the Malibu tests prove that none of the      remaining to protect its occupants.
as large as 30 inches by 72 inches and      dummies in the rolled cage roof suf-            General Motors recognizes the
to change the horizontal orientation to     fered serious injuries.                      dangers of its weak roofs. The
5 degrees. All of GM’s proposed               Further, confidential data from the        company’s own internal safety guide-
changes to the federal test procedure       Malibu tests that were never published,      lines for its test drivers reveal the
weakened the federal roof crush stan-       but were discovered in litigation            automaker’s knowledge of the danger
dard and insured that GM’s current          against GM, debunk GM’s “diving into         of its weak roofs. GM’s safety guide-
1970-71 production vehicles could pass      the roof” theory. These confidential         lines require that its test drivers must
the test without having to strengthen       data from the Malibu tests demonstrate       use a helmet and seat belt for a driving
the roofs. In 1971, the government          that the forces on the dummies’ neck         maneuver as simple as lane changes
issued the roof crush standard in accor-    occurred after the vehicle’s roof started    from 0-55 mph if its static stability
dance to GM’s recommendations. GM           to crush. In fact, Gary Bahling, one of      factor (SSF) is less than 1.10 It is signifi-
got its way and pulled the roof strength    the authors of the second Malibu             cant that this would include the
standard down to the level of GM’s          paper, admitted the roof was crushing        popular Blazer and Jimmy vehicles.
1970 vehicles. That test procedure has      and deforming before the head or neck        Further, GM’s safety guidelines require
not changed in 32 years. If the standard    injury occurred. GM has used the             the installation of a roll bar or roll cage
had remained as it was proposed by          Malibu tests for years to defend not         in the same vehicles under these same
the government in 1971, roofs would         increasing the strength of its roofs, con-   simple driving maneuvers in order to
now be 200% stronger. Since 1971, it        cluding that a stronger roof would not       protect the occupants from roof crush.
has been estimated that 100,000 deaths      give added protection to passengers in       It is inconceivable, but GM continues
and 160,000 catastrophic injuries           rollover accidents. Clearly, GM’s own        to deny that roof crush causes injuries.
caused by the crushing of the roof          internal data does not support that con-     Yet, it puts roll cages on its trucks for
could have been prevented.                  clusion.                                     its own employees to protect them
   For the most part, GM takes the posi-      Roof crush does matter. In fact, it’s a    from roof crush. The sad reality is
tion that injuries and deaths in rollover   most serious problem. About 17,000           that—for 32 years, GM has known that
accidents do not occur because of the       occupants are seriously injured and          the roofs on its vehicles were weak
roof crush. Instead, GM argues that the     more than 10,000 are fatally injured         and not capable of withstanding forces
occupant “dives” into the roof, result-     each year in rollover accidents.             in real world rollover accidents. But,
ing in the injury before the roof ever      Approximately 6,900 of these non-            during those 32 years, instead of
crushes in a rollover accident. Accord-     ejected serious or fatal injuries are        strengthening its roofs to prevent
ing to GM’s theory, even a belted occu-     known to have received their injuries        deaths and serious injuries, GM has
pant “dives” into the roof and incurs       from roof contact. GM knows its roofs        continued to deceive the government
injury or death, before the roof            are weak. Actually, GM relies on the         and the motoring public by saying that


20                                          www.BeasleyAllen.com
roof crush does not matter. The truth is     been a big ticket item for Ford and is        required to do. I am convinced that
that roof crush kills and seriously          very popular with young people. The           simulations are not adequate for SUV
injures thousands each year. It does         company sold 339,333 Explorers in the         rollovers. Ford runs a type of rollover
matter to consumers and it certainly         U.S. in 2004. We also know there have         resistance maneuver known as the J-
should to General Motors and NHTSA,          been a number of lawsuits filed against       turn, abruptly turning the vehicle in the
which has the authority to make GM           Ford, claiming design defects in the          shape of the letter “J.” Ford documents
strengthen its roofs and save lives.         Explorer. In 2004, Ford lost two              with graphs comparing results of J-turn
                                             Explorer cases with verdicts totaling         testing correlated with computer
                                             about $375 million. Ford claims the           models are available. But, it is most
FORD ENGINEERS WARNED OF DEATH RISK
FROM SUVS                                    Explorer doesn’t roll over more often         interesting that Ford has been unable
                                             than any other vehicle in its class. Ford     to locate copies of the actual J-turn
  It has become very clear, as the           tries to use statistical data in all of the   results without the computer modeling.
result of information obtained mostly        trials that really has no place in individ-      Ford has limited some other tests of
through discovery in lawsuits, that Ford     ual cases. It says the fatality rate in       Explorers involving actual driving con-
Motor Co. has consistently ignored its       rollovers was lower for Explorer than         ditions, according to a report on a July
own engineers’ design advice on the          for the Chevrolet Blazer, the Jeep            1999 test at the Dearborn Proving
Ford Explorer. Their engineers told          Grand Cherokee and Kia Sportage,              Grounds. After a test driver in Dear-
Ford bosses that the Explorer needed         according to the National Highway             born rolled a 1999 Explorer while
design revisions to prevent rollover         Traffic Safety Administration’s Fatality      turning on a gravel road, Ford insti-
accidents and fatal injuries. This has       Analysis Reporting System data from           tuted new rules, the report says. The
been documented. Bloomberg News              1994 to 2001. Of course, even if that’s       report reveals that testing on gravel
put out an excellent story on Ford and       true, it doesn’t mean the Explorer is a       roads for the Explorer and other SUVs
the Explorer, which all consumers            safe vehicle.                                 are limited to “straightaway section
should read carefully. It points out how        Ford didn’t perform proper Explorer        only” at speeds not exceeding 35 miles
the automaker put profits over safety,       rollover tests before selling the SUV.        per hour. It is significant that Ford’s test
or at least that’s the way I view it. This   Ford’s truck engineering director,            drivers must wear helmets. In 1989,
news outlet obviously did a great deal       Thomas Baughman, admitted in a                Ford engineers recommended the
of work on this project and did an           December 2000 deposition that Ford            company widen the vehicle by 2
excellent job. Let’s take a look at what     stopped live testing of Explorer              inches to improve its stability. Ford
Bloomberg found out about Ford and           rollover resistance in the mid-1990s          didn’t redesign the Explorer because
the Explorer.                                because of an accident during a test          the work would have delayed both the
  Company records show that in 1993,         drive of a Ranger pickup truck. As you        marketing of the vehicle and the
Ford engineers James Cheng and Jessy         may recall, the evolution of the              company’s return on a $500 million
Li advised the company to reinforce          Explorer included the Ranger, which           investment in the model. This is
Explorer roof supports to prevent col-       became the Bronco II, which became            according to a November 2000 deposi-
lapses in rollovers. Ford didn’t make        the first generation of the Explorer. In a    tion by Roger Simpson, Ford’s program
changes because NHTSA didn’t require         November 2004 deposition, William             manager for the vehicle.
any, according to Ford engineering           Ballard, a Ford design engineer, testi-          Ford widened the 4-door Explorer in
supervisor Christopher Brewer in a           fied that Ford never intentionally rolled     the 2002 model year, Ford’s Baughman
2003 deposition. In 1999, Ford engi-         Ford Explorers to see how the seat-belt       testified in his deposition. But, the
neers in Venezuela warned that Explor-       systems operated in crash conditions.         company didn’t widen the 2-door
ers were rolling over and had caused a       In his deposition, Ballard said: “We          version. A California state court judge
number of deaths because of flaws in         don’t do rollover testing as part of a        wrote in upholding $75 million in
the suspension. Three years earlier,         development program.” In reality, Ford        punitive damages of a $369 million
Ford engineers had said in writing that      actually used their customers as “crash-      award against Ford last year in San
the deficiency could be solved by            test dummies,” instead of doing the           Diego: “There is evidence Ford knew
moving the shock absorbers toward the        necessary testing.                            of potentially fatal defects during the
wheels. But, Ford didn’t make the               We have learned that all of the auto-      development and manufacture of the
change. Ford has consistently put an         mobile companies are using computer           vehicle not addressed by the safety
emphasis on profit before safety.            simulations for much of this testing and      standards and chose not to remedy
  We all know that the Explorer has          will only do the testing they’re actually     those problems.” Joan Claybrook, pres-


                                             www.BeasleyAllen.com                                                                   21
ident of Public Citizen Inc. says:            Fort Myers case. Many of the pending         should have considered making the
                                              rollover lawsuits don’t focus entirely on    changes recommended by Cheng and
  The car company’s decisions are
                                              stability claims. Explorers also have sus-   Li. To this, he responded: “We chose,
  similar to marketing choices made
                                              pension, roof, or seat belt defects, as      based on the test results that we had,
  by pharmaceutical companies that
                                              well. Roof-crush claims were the key         to recommend that we should do some
  sell drugs linked in clinical studies
                                              elements in the San Diego verdict. The       kind of reinforcement like this between
  to potentially fatal side effects.
                                              memo by the Ford engineers, written          a 1995 and 1998 time frame.” He was
  There is a rush to market for many
                                              while Ford was considering changes for       then asked: “Why wait?” Brewer’s
  industries because of strong com-
                                              the 1995 model Explorer, said an             response was: “Every change that we
  petitive pressures.
                                              Explorer roof can buckle when the            make takes some amount of time to
   Ms. Claybrook, who was head of the         windshield breaks. It recommended            do, some amount of testing to do, and
National Highway Traffic Safety Admin-        improvements in roof strength. Cheng         costs some amount of money, right?” It
istration from 1977 to 1981 under             and Li, in their report written to engi-     should be noted that while the roof of
Jimmy Carter, says companies are              neering supervisor Brewer, suggested         the Ford Explorer complies with
willing to face lawsuits because their        reinforcing the B-pillar and changing A-     federal standards, that is no assurance
profits outpace legal costs. She says         pillar material from “cold roll steel to     of safety.
that “Many companies view this as a           high strength steel” to improve roof            There are also defects in the Explorer
cost of doing business.” I am totally         crush performance. As you probably           seat belt, which can spool out during a
convinced that this is true. In the           know, the A pillar is near the wind-         rollover, leaving an accident victim
Explorer’s first three years on the           shield, holding up the roof of a vehicle.    hanging out of the vehicle while the
market, profit from the sport-utility         The B pillar, which also holds up the        belt is still buckled. The seat belt can
vehicle exceeded that of the rest of the      roof, is adjacent to the front seats.        also release as the vehicle rolls. In 1996
company. During 1990 to 1992, the             Brewer testified in a January 2003 depo-     and 1997, the Society of Automotive
company had net income of $2.5                sition that Ford didn’t make the changes     Engineers published two papers on
billion on Explorer sales in the U.S.         in the 1995 Explorer because the roof        seat-belt failures in rollovers, along
and Canada, according to a 2002 depo-         met federal regulatory standards. It is      with proposed solutions. One paper
sition by Ronald Ross Johnson, a finan-       very important that Brewer testified in      cited a spool-out in an Explorer
cial analyst at Ford. From 1990 to 1997,      his deposition that the modifications        rollover. Ford has argued in lawsuits
Ford had about $13.4 billion in net           would have improved the safety of the        over roof crush that the occupants,
income on the Explorer, according to          Explorer. Brewer also testified in his       even those wearing seat belts, hit the
Johnson.                                      deposition that the B pillar was bol-        roof during the rollover before the roof
   Starting in 2000, the safety reputation    stered in early 1996. In May 1996, Ford      collapses. Of course, this is good evi-
of the Explorer was hurt by a federal         engineers listed “roof crush” as a safety    dence of a failure of the seat belts to
investigation into at least 271 highway       weakness of the then-current Explorer,       restrain occupants. A device attached
deaths involving tread separation by          according to an internal Explorer            to the retractor, where the belt’s
Firestone tires, mostly on Explorers.         “design review” document.                    webbing feeds through, can lock the
Our firm has been involved in several            The A pillar was never bolstered.         belt for 10 seconds and prevent it from
of these cases. Ford has settled an           When the Explorer was first planned,         unwinding. Pretensioners, devices
undisclosed number of lawsuits, with          company engineers warned in 1987             using sensors to detect rapid decelera-
more than 100 of these tread separa-          that federal standards were insufficient     tions, can “fire milliseconds before
tion cases still pending. Several of our      and rollovers would require greater          impact and pin you into the seat.” The
cases are still pending.                      roof strength. Ford’s engineers in July      devices were provided on the Ford
   In 2004, Ford lost two Explorer            1987, in a document titled “Light Truck      Mondeo in Europe in 1993, according
rollover cases at trial, including the $369   Safety Design Guideline Strategy,            to a November 2004 deposition of
million verdict in San Diego in June,         wrote: “Fatalities in rollover accidents,    Ford’s Ballard. However, they weren’t
later reduced by the trial judge to $150      which may or may not be accompa-             offered on Ford vehicles in North
million, and a $5.3 million verdict in        nied by roof crush or occupant ejec-         America until 1997. Pretensioners with
Fort Myers, Florida, in August. Ford          tions, are more prevalent in light trucks    sensors to detect potential rollovers
appealed the San Diego verdict after the      than cars.” Remember, the Explorer is        were offered as optional equipment as
trial judge turned down the company’s         designated a light truck. In a 2003 dep-     part of the side curtain airbag system in
request for reversal. Ford settled the        osition, Brewer was asked if Ford            all 4-door Explorers in March 2002.


22                                            www.BeasleyAllen.com
Unfortunately, Ford doesn’t make such         Kenneth Kramer, William Janitor, and       spite of its design defects—has made
equipment standard on its vehicles.           Lawrence Bradley, wrote about the sus-     litigation against Ford in Explorer cases
Most purchasers wouldn’t really see the       pension used on Ford light trucks,         extremely difficult. But, the more we
need for this option, unless they were        including the F-150 series, the Ranger     learn about what Ford’s engineers were
informed of the need.                         and the Explorer. The Ford engineers       telling the automaker, and what Ford
   There is another problem with the          said that “skate” occurred most often      refused to do after getting the advice,
Explorer. The vehicle’s suspension            when “vehicles are driven aggressively     the better the victims’ chances at trial
allows the back end of the vehicle to         on rough, winding roads.” They added       will be. Of course Ford vigorously
“skate” sideways when there is a vibra-       that “skate” could also occur “with        defends the Explorer, which was to be
tion in the rear. This can be caused by       single wheel events or potholes.” The      expected.
a rough road, a tread separation, or by       engineers advised that shock absorbers     Source: Bloomberg News
the wheels going over rumble strips           should be moved outward toward the
used on highways to slow down cars            wheels. Ford says extreme speeds in
or to alert drivers. When this occurs,        skate-related accidents “is an excep-      FORD EXPLORER CLASS TO PROCEED
the likelihood of rollover is great.          tion.” The driver in the Florida case        A state court in California certified a
   In August of last year, the first of the   was traveling the speed limit, 65 mph,     class action last month in a lawsuit
suspension cases went to trial, with a        before the Explorer rolled following a     pending against Ford Motor Co. The
Fort Myers jury finding against Ford in       tread separation.                          automaker is charged with knowing of
a claim brought by the family of Bob             Ford solved the skate problem in the    a rollover defect in its Explorer SUVs
Miller, who was killed in an Explorer         2002 4-door Explorer by changing to        and concealing the information from
rollover. Miller, who was 57 years old        an independent rear suspension. But,       consumers. The class certified by the
at the time, was the safety director for a    Ford didn’t change the suspension in       court includes persons who purchased
construction company. He was travel-          the 2002 2-door, Baughman said in his      or leased Ford Explorers in California
ing on Interstate 75 outside Fort Myers       deposition. Ford says the 2-door           during the period from 1990 to August
when he lost control of the Explorer          Explorer was discontinued after the        2000.
after a non-Firestone tire blew. The          2003 model year. The second trial
jury awarded $5.3 million in compensa-        involving the skate problem is sched-
tory damages and was considering the          uled for April in Miami. It involves the   A FULL TRUNK CAN BE TROUBLE
family’s request for $48 million in puni-     death of Lance Hall, 18, who was a
                                                                                            Most folks haul lots of “stuff” in the
tive damages when Ford settled the            passenger in a 1996 Explorer. Hall’s
                                                                                         trunk of their family passenger cars and
lawsuit for a confidential amount.            family says the Explorer went into
                                                                                         don’t realize that this cargo can create a
During the trial, documents from a            skate after driving over a rumble strip.
                                                                                         hazard. They probably don’t think
1999 study by Ford’s Venezuela unit              Ford said in November of last year
                                                                                         much about the safety factor when
were put in evidence. It concluded that       that it would add a rollover protection
                                                                                         they load their vehicle. Golf clubs, suit-
the Explorer’s shock absorber design          system to the 2005 Explorers. Ford
                                                                                         cases, even a case of Coca Cola, are all
was “too soft” and the vehicle’s high         made changes in the 2002 4-door
                                                                                         common things we put in the trunk of
center of gravity made it more suscepti-      Explorer that made it “inherently less
                                                                                         our cars. Unfortunately, during an acci-
ble “to rollover during hard shift,” or       prone to rollover,” Ford’s Baughman
                                                                                         dent, these items can become deadly
on rough roads.                               testified in 2000. Unfortunately, the
                                                                                         and can actually crash through the
   A July 1998 Ford engineer’s evalua-        changes in design won’t stop the acci-
                                                                                         back seat of a car. We have handled
tion of an Explorer that had experi-          dents because several million of the
                                                                                         cases where back seat passengers were
enced “slippage/loss of control during        older vehicles remain on the road.
                                                                                         killed in such cases. In each case, the
rough road/off road” was also used            People buy Explorers for their children
                                                                                         car met all U.S. government safety stan-
during the trial. The Ford evaluator          and young drivers tend to drive faster,
                                                                                         dards. There was one case where a
said: “This is typical ‘skate.’ Suspension    so the accident statistics will keep
                                                                                         back seat passenger was killed in a col-
design changes would be required.”            going up.
                                                                                         lision. The rear seat, which is consid-
Previously, in 1996, three Ford engi-            Without a doubt, Ford has done a
                                                                                         ered the safest part of a vehicle, was
neers had warned that the shock               tremendous job of “marketing” the
                                                                                         not adequate to protect her. Out of six
absorbers should be moved to prevent          Explorer, making this SUV extremely
                                                                                         people in the car, the unfortunate lady
skate. In an article published by the         popular with the driving public. The
                                                                                         was the only one who was killed. The
Society of Automotive Engineers,              public’s acceptance of the Explorer—in


                                              www.BeasleyAllen.com                                                              23
thing that killed the lady surprised not        European automakers tell us that         NOT EVERYBODY LIKES THE SUV AD
just her family, but also the police offi-   every model they sell in the United         CAMPAIGN
cers who investigated the accident. The      States meets this standard. Regardless
                                                                                            Last month I reported on the nation-
object that killed her was a small           of what kind of car you have, there are
                                                                                         wide SUV safety education campaign
toolbox. During the crash, the toolbox       things a person can do to reduce their
                                                                                         that was launched by state attorneys
in the trunk went flying. It broke the       risk. The first thing to do is never put
                                                                                         general. SUV Owners of America is
back seat, slamming it forward. The          more in the trunk than you absolutely
                                                                                         applauding the efforts to educate
lady was crushed against her seat belt.      need. Don’t carry things around all the
                                                                                         drivers about the different handling
An auto safety expert said the lady          time. It just increases your probability
                                                                                         characteristics of SUVs as compared to
would have survived if that seat had         of injury. But if you are going to carry
                                                                                         other vehicle types. But, they are con-
stayed in place.                             heavy things, push them as close as
                                                                                         cerned that media coverage of this
   Cargo crashing through back seats is      you can to the seat, and try to distrib-
                                                                                         advertising campaign has been inaccu-
a most serious problem. In a crash test,     ute the load so that it’s even. And if
                                                                                         rate. I suspect that the manufacturers of
for example, it is easily seen how a         you can, try to wedge them in. In a
                                                                                         SUVs would rather the public not see
small suitcase breaks through the back       crash, this will reduce the force of the
                                                                                         these ads at all. At the same time, many
seat of a car. One can only imagine          cargo against the seatback. It also helps
                                                                                         safety groups believe that the cam-
what would have happened to the pas-         to tie down any heavy items or to
                                                                                         paign fails to address the real problem,
sengers sitting in the back seat. A 25-      restrain them in a cargo net. Of course,
                                                                                         and that’s the bad design of SUVs gen-
pound suitcase is enough to go               NHTSA and the auto industry should
                                                                                         erally. The ads do appear to be prima-
crashing through that back seat and is       require and design stronger seats. It
                                                                                         rily telling folks who drive SUVs to be
enough to kill a passenger. It’s not just    takes a tragic accident for a family to
                                                                                         more careful. It seems to tell us that
suitcases in the trunk that can pose a       find out just how dangerous cargo in
                                                                                         being careful will keep an SUV from
risk. Any heavy, solid object can be         the trunk could be. The domestic
                                                                                         rolling over in an emergency avoidance
dangerous. Even a spare tire, if it’s not    automakers already know—but most of
                                                                                         maneuver. The emphasis on the driver
properly secured, can be a weapon.           them won’t do anything about it.
                                                                                         may be a little much in the scheme of
   The problem concerns the way rear
                                                                                         things. Actually, it is really the design
seats are made. They aren’t always
                                             HYUNDAI PAYS JUDGMENT                       that causes the hazard, thereby creating
strong enough to hold back cargo in a
                                                                                         the dangerous condition.
crash. When most lawyers—even those            Hyundai Motor Corp. has paid a
who handle product liability cases—          $10,000,000 judgment in a New York
look at how the seats are made, they         case. The case in New York state court      JURY VERDICT IN WRONGFUL DEATH LAWSUIT
are usually shocked. I suspect our non-      involved a front passenger who was
lawyer readers would be too. Actually,                                                      A Hidalgo County, Texas, jury
                                             killed in a 1993 Hyundai, while
there is little support built into the                                                   awarded $14 million last month to the
                                             wearing only the motorized portion of
seats. Often times a thin wire is                                                        family of a boy who was killed in a fire
                                             her 2-piece belt system. The victim’s
attached to a sheet metal clip and that’s                                                allegedly started by a Whirlpool Corp.
                                             lawyers challenged not only Hyundai’s
the only thing that holds the top of the                                                 clothes dryer. The 15-year-old died 2
                                             choice of belt systems, but also the
seat in. In the United States, car manu-                                                 years ago, when his family’s mobile
                                             implementation of the system it
facturers are not required to test their                                                 home in Mercedes, Texas burned
                                             selected. This included the location of
back seats to make sure they protect                                                     down. His parents filed a wrongful
                                             the knee bolster and the lack of
passengers against cargo. The truth of                                                   death suit against Whirlpool, claiming a
                                             adjustability of the shoulder belt, espe-
the matter is we badly need stronger                                                     defective dryer started the fire. During
                                             cially for short people. The middle
regulations, like those in Europe,                                                       the trial, jurors saw photos of the
                                             level appellate court in New York had
where every car sold must pass a strin-                                                  family’s fire-wrecked mobile home and
                                             affirmed the verdict unanimously. The
gent cargo test. The European standard                                                   heard testimony from experts who
                                             NY Court of Appeals, the highest state
calls for two 40-pound suitcases to be                                                   pointed to the dryer as the source of
                                             court in New York, then refused to
placed back toward the side of the car                                                   the fire. According to the U.S. Con-
                                             hear the case. After that, Hyundai paid
in the trunk. They run a 30-mile-an-                                                     sumer Product Safety Commission,
                                             the required amount to the victim’s
hour crash test, and the suitcases are                                                   clothes dryers are to blame for 15,500
                                             family.
not allowed to intrude into the back                                                     fires, 10 deaths, 310 injuries, and more
seat significantly.                                                                      than $84.4 million in property damage


24                                           www.BeasleyAllen.com
each year. The jury’s verdict will be        are available, Ford says it will issue a       The SCLC also asked U.S. Attorney
appealed by Whirlpool.                       second owner notification to have the       General Alberto Gonzales to declare a
                                             switch replaced and the speed control       moratorium on the weapon. Despite
                                             reconnected.                                recent questions about safety, the stun
FORD DEFECT SUSPECTED AS CAUSE OF
FIRE                                                                                     gun still has broad support among law
                                                                                         enforcement officers. Tasers became
                                             AN UPDATE ON BACK-UP SENSORS
   Officials are looking into whether a                                                  popular in recent years as an alterna-
faulty cruise-control switch on a              Last month we wrote on the avail-         tive to using guns to stop suspects. I
recalled Ford Expedition caused a fire       ability of back-up sensors on certain       have talked to a number of my friends
that destroyed two vehicles and              makes of vehicles. Lamar Wagner, who        in law enforcement who swear by the
damaged a home in Texas. Officials           is with Liberty Dodge in Prattville,        Tasers and say they have helped them
have determined that the fire last           Alabama, brought to my attention that       greatly in dealing with difficult situa-
month started in a Ford Expedition,          the Chrysler group now has back-up          tions. I hope any problems that exist
which was parked under a carport.            sensors on Chrysler, Jeep and Dodge         can be corrected. The Tasers have
Ford Motor Co. had recalled about            products. Lamar points out that the         been helpful to law enforcement per-
800,000 Expeditions and other models         back-up sensors are a good addition to      sonnel. Of course, they must be rea-
after fires started under the hoods of       the number of safety products available     sonably safe to use.
parked cars. Besides 2000 model Expe-        for vehicles. He also says the cost as a    Source: USA Today
ditions, the automaker recalled 2000         separate item is only $255. I appreciate
Ford F-150 trucks, 2000 Lincoln Naviga-      the fact that Lamar would take the time
tors, and 2001 F-Series Supercrew                                                        JURY FINDS GENERAL MOTORS RESPONSIBLE
                                             to bring this oversight to our attention.   IN LAWSUIT
trucks manufactured in the same
period as the 2000-model year vehicles.                                                    A Wise County, Texas, jury has found
Texas officials are looking at the cruise    DEATHS PROMPT REVIEWS ON USE OF STUN
                                                                                         General Motors partially responsible for
                                             GUNS
switch as the possible cause of the fire.                                                the injuries suffered by a woman, who
In the Texas case, as is oftentimes the        Obviously, stun guns, or Tasers, have     sustained severe brain damage as a
case, the problem is most of the evi-        proved to be a valuable tool for law        result of a January 2003 accident. The
dence is gone. It was consumed in the        enforcement personnel. The use of stun      jurors awarded $18.7 million in
fire. That makes it difficult to pinpoint    guns by law enforcement officers has        damages. The two-vehicle accident
the exact ignition point. Early reports      been in the news lately. It was reported    involved a 2001 Chevrolet Suburban
are that the fire started in the engine      by USA Today last month that the            and an 18-wheeler. The jury found that
compartment.                                 largest association of police chiefs are    the failure of a side impact airbag to
   The family was sleeping when the          asking police departments around the        deploy in the Suburban during the
fire occurred, but fortunately they          U.S. to review the use of stun guns         crash caused the woman’s injuries. The
escaped the blaze unharmed. However,         because of reports that the weapons         jury awarded $38.2 million in damages,
they did not know that Ford had issued       may be related to numerous deaths.          but they found the plaintiffs mother,
a recall on the sport utility vehicle they   The International Association of Chiefs     the driver of the vehicle, 51% responsi-
had bought four months before the            of Police and the Justice Department        ble for the injuries and GM 49%
date of the fire. Ford had issued the        will study more than 80 deaths, to          responsible. That means GM was only
safety recall on January 27th to address     assess the risks in using the weapons.      responsible to pay for 49% of the
fires under the hood related to the          Civil rights groups and some police         damages. The GM side airbags don’t
speed-control switch. The company            agencies have questioned the use of         always deploy, according to trial testi-
began mailing notices to owners of           stun guns, or Tasers, which emit electri-   mony. The woman hit her head on the
affected vehicles. The Expedition in         cal charges to temporarily incapacitate     area between the front and back
this case was bought used. The new           suspects. I understand that more than       doors—an area where the airbag
owners had not received a notice from        80 deaths have been reported since          should have been, had it deployed.
Ford. Reportedly, Ford would notify          1999 after victims were shocked with        GM could have fixed the problem for
owners to have the electrical connector      stun guns. This comes from reviews by       $8 per vehicle, but elected not to do
from the speed control disconnected          The Arizona Republic and the Southern       so. The medical bills incurred by the
until the company could acquire              Christian Leadership Conference as          plaintiff and her family were very high,
replacement parts. Once replacements         reported (SCLC) in the USA Today.           totaling millions of dollars. GM claimed


                                             www.BeasleyAllen.com                                                             25
that the accident and the injuries were     made by a Johnson & Johnson sub-               FDA, for the Pfizer drug. Bextra already
caused by the driver of the Suburban.       sidiary, and has done a very good job.         has a black box warning. How Pfizer
They Suburban crossed the center line       Judge Fallon is known to be a fair and         escaped on Celebrex is a real mystery.
while exiting from an Interstate            impartial jurist who is capable of han-        But the real mystery is how 17 of the
roadway in front of the 18-wheeler. A       dling complex cases.                           32 panel members, with all of the bad
collision resulted. I believe this is the      Analysts have estimated that Merck’s        information now available to them,
first case in the nation involving GM       total liabilities in federal and state cases   could say it’s fine to sell any of the
and the side airbag issue that has actu-    could run as high as $30 billion. So far,      three drugs at all. Certainly, for the
ally gone to trial. There are a number      the company has set aside $675 million         FDA panel to say that Vioxx could be
of similar cases pending around the         in reserves to cover its potential Vioxx       sold again is the biggest shock of all.
country.                                    liabilities. I was told that this number          In my opinion, Vioxx, Celebrex and
                                            was primarily for defense costs. After         Bextra should be banned by the FDA
                                            the panel issued its order, Merck issued       and not allowed to be sold. When
IX.                                         a statement that reiterated its intention      Merck voluntarily recalled Vioxx in
MASS TORTS                                  to “defend itself vigorously.”                 September 2004, it was the only one in
UPDATE                                         We expect these cases to be put on a        the group that showed cardiovascular
                                            fast track by Judge Fallon. Hundreds of        risks. Since then, studies have linked
                                            thousands of people have been badly            both Celebrex and Bextra to the very
FEDERAL PANEL CONSOLIDATES VIOXX SUITS      hurt and many died as a result of              same risks. It is extremely difficult to
                                            taking Vioxx. Handling these cases will        understand the panel’s actions. The
   All of the lawsuits filed in federal
                                            require a tremendous outlay of funds           final word on the painkillers will come
courts against Merck that blame Vioxx
                                            and a great deal of manpower. We are           from the Food and Drug Administra-
for deaths and injuries, will now be
                                            looking forward to the challenge. I            tion itself, which typically follows the
consolidated in a federal court in New
                                            don’t believe that the FDA advisory            recommendations of its advisory
Orleans. The consolidation order that
                                            panel action mentioned below will              panels. I don’t believe there are
sent the cases to Judge Eldon E. Fallon
                                            have a negative effect on the lawsuits         many—if any—doctors located any-
was issued on February 16th by a
                                            against Merck. In fact, I predict it will      where in the country who will pre-
seven-member administrative body of
                                            be just the opposite.                          scribe Vioxx to a patient. Neither do I
federal judges that rules on motions to
                                                                                           believe any patient who has access to
centralize nationwide litigation in the
                                                                                           the information that was available to
federal courts. Andy Birchfield from        FDA PANEL VOTES TO LET VIOXX SALES
                                            RESUME                                         the FDA panel would take Vioxx.
our firm was one of the lawyers for
                                                                                           Here’s a brief look at some of the infor-
Vioxx victims, presenting arguments to
                                               A Food and Drug Administration              mation the FDA panel had access to.
the seven-judge multiple district litiga-
                                            advisory panel voted on February 18th          I’ll let our readers decide whether the
tion panel. Both sides agreed in princi-
                                            to recommend that Merck & Co. be               panel did the right thing.
ple that the growing number of cases
                                            allowed to resume sales of Vioxx. This            Prominent cardiologist Dr. Garrett
made consolidation the best route to
                                            has to be one of the most shocking             FitzGerald reiterated his long-standing
take.
                                            developments to date relating to the           assertion that the entire class of drugs
   Merck had asked that the cases be
                                            Vioxx story. The decision, which sur-          increases the risk for cardiovascular
consolidated in a federal court in Illi-
                                            prised most analysts, came the same            problems. He made his point strongly
nois, Indiana or Maryland, but the
                                            day that the panel voted to recommend          to the panel. FDA whistle-blower Dr.
court in Louisiana was selected. The
                                            that both Celebrex and Bextra be               David Graham went even further,
administrative panel said in its order it
                                            allowed to remain on the market. The           asserting that “there doesn’t appear to
was assigning the cases to Judge Fallon
                                            FDA panel’s actions came during a              be a need for Cox-2 (inhibitors).” The
because he had the time and experi-
                                            three-day meeting called to discuss the        information supplied by Dr. Graham
ence to handle the Vioxx litigation. We
                                            safety of pain relievers. Analysts had         alone should have been enough to
agree with that assessment. The
                                            anticipated that studies linking Cele-         keep Vioxx off the market. There was
Louisiana judge is overseeing a pro-
                                            brex to greater risk of heart attack and       much more information—just as
posed settlement reached in his court
                                            stroke would lead the panel to recom-          strong—that this panel heard during
last year for all federal injury claims
                                            mend a so-called black box warning,            the three days it met.
related to Propulsid, a heartburn drug
                                            the highest level of warning at the               Several studies have shown a direct


26                                          www.BeasleyAllen.com
link between Vioxx and increased car-      the drug. How the panel could have           monly serve on Food and Drug Admin-
diovascular risk. According to an inter-   ignored all of the information it had        istration advisory panels. In my
nal study conducted by FDA scientist       access to is impossible to understand!       opinion, this is not good for consumers
Dr. David Graham, up to 140,000               We believe that Merck should do the       and has the look of potential—if not
people may have suffered heart attacks     right thing and leave Vioxx off the          actual—conflicts of interest.
as a direct result of taking Vioxx. And    market. We have been watching the sit-          The Center for Science in the Public
millions of people may have been           uation concerning this drug unfold           Interest, an advocacy group in Wash-
exposed unnecessarily to the risk of       over the past 4 years. Even though they      ington that maintains a large database
heart attack by taking Cox-2 inhibitor     were late in doing so, Merck finally did     of scientists’ industry ties gotten from
drugs, including Vioxx. The vote on        the right thing in September when it         disclosures in medical journals and
Vioxx by the panel, which incidentally     withdrew Vioxx from the market. To           other public documents, analyzed the
was 17-15, illustrates the weakness of     reintroduce the drug now would most          panel members’ affiliations at the
the current drug control policy and        certainly result in further cardiovascular   request of The New York Times. It
reinforces the need for immediate FDA      injuries, including deaths, for thou-        should be noted that the center has
reform. Most folks who took Vioxx—I        sands of people. The fact that Merck is      been a frequent critic of the FDA and
suspect—were influenced in their deci-     even considering putting Vioxx back          of the pharmaceutical industry and for
sion by the $60 million ad campaign        on the market clearly shows their            good reason. The center’s analysis may
put out by Merck. They were con-           motives are to put profits above the         understate the industry ties of the panel
vinced that Vioxx was a strong pain        safety of their drugs. For the FDA to        participants because some ties may not
killer, when the same relief would         allow this to happen—considering all         have been previously disclosed pub-
come from taking two Advils, I am told.    they now know about Vioxx—is                 licly. I certainly can’t say with certainly
   Another bit of information that the     incomprehensible.                            that any of the panel members allowed
FDA panel had access to gives us                                                        their ties to the drug company’s to
further reason to question the recent                                                   influence their vote. However, I can
                                           MEMBERS ON PANEL HAD INDUSTRY TIES
action. The editor of a leading medical                                                 say that in a issue as serious and
journal had questioned whether                Ten of the 32 members of the panel        volatile as this one, it sure doesn’t look
patients should continue using the         referred to above who endorsed con-          good. As they used to say back in
Cox-2 drugs. Dr. Jeffrey M. Drazen,        tinued marketing of Celebrex, Bextra         Barbour County—“It just doesn’t meet
editor of the New England Journal of       and Vioxx have apparently consulted          the smell test!”
Medicine, made this comment:               in recent years for the makers of these      Source: The New York Times
“Because there are well-established        drugs’ makers. The New York Times dis-
options for treatment of all the           closed that ten members of the panel
approved indications for these drugs, it                                                SHAREHOLDER SUITS CONSOLIDATED
                                           have worked in some capacity in
is reasonable to ask whether the use of    recent years for Merck and Pfizer. The         A federal panel has granted motions
the drugs can now be justified.” His       Times learned this from disclosures in       by several parties, including Merck, to
comments were in an editorial pub-         medical journals and other public            consolidate all Vioxx shareholder suits
lished on February 15th. The FDA’s         records. Consider this: If the 10 advis-     pending in federal courts nationwide.
Center for Drug Evaluation and             ers had not cast their votes, the com-       The shareholder cases were transferred
Research has noted that many con-          mittee would have voted 12 to 8 that         to the U.S. District Court for New
sumers and scientists have asked           Bextra should be withdrawn and 14 to         Jersey and will be heard by District
whether any Cox-2 drugs should be          8 that Vioxx should not return to the        Judge Stanley Chesler. This is separate
allowed to remain on sale. Dr. David       market. The 10 advisers with company         and apart from the individual injury
Graham told the FDA panel on Febru-        ties voted 9 to 1 to keep Bextra on the      cases that were sent to District Judge
ary 17th that the use of Vioxx poses       market and 9 to 1 for Vioxx’s return.        Fallon in Louisiana. Our firm isn’t
the risk of hundreds to thousands of       The votes of the 10 did not substan-         involved in the shareholder suits.
additional heart attacks in older men.     tially influence the committee’s deci-
Dr. Graham said studies indicate a         sion on Celebrex because only one
range of increased heart attack risk,      committee member voted that Celebrex         BAD NEWS FOR DRUG SAFETY
which translates to as few as 400 or as    should be withdrawn. As we have                I have to wonder just what it would
many as 10,800 additional heart attacks    learned over the past several years,         have taken to get the FDA panel’s
in men aged 65 to 74 at low doses of       researchers with ties to industry com-

                                           www.BeasleyAllen.com                                                                 27
attention. The New England Journal of        been prevented.” In a separate New           least 18 months. As you know, Merck
Medicine has released new details from       England Journal editorial, University of     officials still insist the problems with
studies indicating that the Pfizer           Washington epidemiologist Bruce Psaty        Vioxx didn’t become apparent until
painkillers Celebrex and Bextra may          and Wake Forest University’s Curt            patients were taking the drug for at
cause the same sorts of heart problems       Furberg were harshly critical of Pfizer      least that long. WellPoint has shared
that led to the recall of Vioxx last fall.   for not publicizing until just a few         the data with the FDA and with Pfizer.
The top-line results of the studies were     weeks ago details of another study that      There have been at least three studies
announced last fall, but the Journal’s       found hints of cardiovascular problems       linking Bextra to increased risk of heart
release was the first publication of the     with Celebrex in 2000. They wrote:           attack and strokes while two separate
full details. In one study of Bextra and     “Failure to publish the findings of these    trials indicated Celebrex elevates the
its injected cousin parecoxib, heart         studies not only violates the [trial par-    likelihood of cardiovascular problems.
bypass patients treated for as little as     ticipants’ trust], but also misrepresents    Source: Associated Press
ten days with the drugs had nearly           the evidence about risks and benefits
quadruple the risk of having a heart         for physicians.”
attack or other cardiovascular adverse                                                    FDA SEEKS SHELTER FROM DRUG STORM
events in the next month. In another                                                         In an attempt to restore some confi-
                                             STUDY LINKS PAIN KILLERS TO HEART RISK
National Cancer Institute study of 2,000                                                  dence in the agency, the U.S. Food and
people at high risk for colon cancer,           Another new study has linked Vioxx,       Drug Administration has created an
patients who took very high doses of         Celebrex, and Bextra to increased car-       independent drug safety board. Inter-
Celebrex for three years had more than       diovascular risk, reinforcing findings of    estingly, the announcement came just
triple the risk of serious heart problems    the other trials that had already caused     hours before the FDA started the
compared with those who got a                great concern over the safety of a Cox-      unusual three-day meeting by the
placebo. Also in the same issue, the         2 inhibitors. Vioxx and Celebrex             panel discussed above to review the
Journal is publishing results of the         increased patients’ risk of heart attack     safety of painkillers including Vioxx,
colon cancer prevention study that led       and stroke by about 20% while Bextra         Celebrex and Bextra, resulting in the
Merck to withdraw Vioxx last fall.           increased the risk by 50%, according to      rather bizarre action that it took. You
   It sure does appear that these results    a study by WellPoint Inc., the nation’s      will recall that last November, Dr.
support the theory that all so-called        largest provider of health benefits,         David Graham, the FDA researcher,
COX-2 inhibitors are quite likely to         which is based in Indianapolis,              told Congress that the agency was inca-
boost the risk of heart problems if used     Indiana. Dr. Sam Nussbaum, Well-             pable of defending the public against
for long-enough periods of time or at        Point’s executive vice-president and         another drug disaster. Even though the
high-enough doses. New England               chief medical officer, stated on Febru-      FDA has an Office of Drug Safety it
Journal of Medicine Editor Jeffrey           ary 14th that the study is further evi-      hasn’t worked very well. The office has
Drazen stated in a blunt editorial           dence of an “increasingly compelling         been criticized for a lack of independ-
accompanying the three studies: “It          trend” of data that show the drugs           ence. The recent action by the panel
appears that this is a class effect. Since   elevate patients’ risk of heart attack and   on Vioxx, Celebrex, and Bextra should
there are plenty of other painkillers, it    stroke. WellPoint studied the records of     tell the American people how powerful
is reasonable to ask whether the use of      7,232 patients over the age of 40 taking     the drug industry really is and how
these drugs can now be justified.”           one of the three drugs and compared          ineffective the FDA has been.
Drazen also takes Merck and Pfizer to        them with records of 629,245 people             I will concede that the Bush Adminis-
task for not conducting studies of Cele-     older than the age of 40 who were not        tration’s new drug safety board—if it is
brex and Vioxx specifically designed to      taking any of the drugs. WellPoint           given the necessary power and tools to
examine the safety of the drugs in           shared the data with researchers at          do their job—could play an important
high-risk patients, rather than just         Indiana University’s medical school,         role in policing the safety of drugs after
examining heart safety data from trials      who adjusted the information for heart       they are approved and on the market.
conducted for other purposes. He             attack and stroke risk factors, such as      But if the board is intended to be the
stated: “Had trials designed to test the     age. WellPoint, which began the study        Administration’s primary solution for
question of cardiovascular toxicity          after Vioxx was removed from the             the glaring weaknesses that have been
directly been launched in 1999 and           market, examined patient records from        revealed in the FDA’s ability to protect
executed with urgency...perhaps a sub-       January 2001 through June 30, 2004. All      patients from adverse effects that show
stantial number of deaths could have         the patients were on the drugs for at        up only after a drug is widely used, it

28                                           www.BeasleyAllen.com
will fall woefully short. The panel will     that in high doses it, too, multiplied   many thousands of people will get
be composed of government specialists,       heart problems. The U.S. Senate          heart attacks. A recent clinical trial
mostly from the drug agency, with a          Finance Committee held a hearing         showed an almost fourfold
few coming from other agencies. It will      in November on why the pharma-           increase in heart attack risk with
be charged with monitoring information       ceutical companies downplayed            high doses of Vioxx. We estimate
that emerges about serious side-effects      early warning signals of heart risk      100,000 people had heart attacks
and helping to resolve disputes over         and what role the U.S. Food and          due to Vioxx, with 30,000 to
safety issues. The FDA pledges to make       Drug Administration played. A key        40,000 dying. And the ones who
information about possible dangers           witness was physician David              didn’t die had their life expectancy
public promptly, even if the evidence is     Graham, associate director for           shortened because they’ve had a
not yet conclusive. That should go a         science in the FDA’s Office of Drug      first heart attack. This is a major
long way toward breaking the inertia         Safety and a 20-year veteran of the      safety problem.
that typically paralyzes the agency          agency, who gave his assessment of
                                                                                      Q. Why weren’t physicians and
while it waits to accumulate conclusive      FDA safety procedures. He also tes-
                                                                                      consumers more cautious
evidence.                                    tified that the FDA managers last
                                                                                      about prescribing and taking
Source: Forbes News                          summer suppressed his studies
                                                                                      these new drugs?
                                             showing the link between Vioxx
                                             and heart attacks. In January the        The direct-to-consumer advertising
AARP SPEAKS OUT ON THE DRUG PROBLEM          FDA granted Graham permission            magnified the risk [by encouraging
  I have always believed that the AARP       to publish his findings in the           consumers to ask doctors for the
would fight to protect consumers and         journal Lancet. In a statement, the      drugs]. It is difficult for people to
especially seniors, and recent events        agency said it would not comment         comprehend what these [risk-
have confirmed my belief. They are           on specific personnel issues, but “as    factor] statistics mean. If a person
now involved in the fight to make pre-       with any institution, sometimes an       has diabetes, is a smoker or has
scription drugs safe for use. An excel-      individual within FDA may ulti-          high cholesterol or blood pressure,
lent article appeared in the February        mately disagree with a consensus         the risk is even higher. It is also dif-
2005 issue of the AARP Bulletin that         scientific judgment for a variety of     ficult for the physicians, who rely
addressed the most serious drug safety       reasons. Nevertheless, FDA is            on the drug companies for most of
dilemma that American citizens are           required to base its decisions on the    the information they get about the
now facing. This excellent article,          best available, verifiable science. In   drugs. You would expect that
which contained an interview with Dr.        the end, we must weigh all the evi-      people should be able to rely on the
David Graham and was written by              dence and decide on behalf of our        FDA for information about drugs.
Merrill Goozner, can be read in its          citizens whether the products            But in the case of Vioxx, the FDA
entirety by going to www.aarp.org/bul-       should be available.” The FDA is         let the American people down.
letin. You can also receive a reprint of     sponsoring a review of its drug
                                                                                      Q. Why wasn’t the scope of the
the article by calling 800-635-7181, ext.    safety system by the quasi-govern-
                                                                                      problem identified before the
8158. With AARP’s permission, we are         mental Institute of Medicine.
                                                                                      FDA approved the drugs?
including the article, entitled “What        Graham talked about the pain pill
Went Wrong?” for your consideration.         dilemma in an AARP Bulletin              Before those drugs were marketed,
                                             interview with writer Merrill            there were theoretical concerns
  What Went Wrong?                           Goozner.                                 that they may cause heart problems
  By Merrill Goozner                                                                  in some cases. But these concerns
                                             Q. How serious are the heart
  Last September Merck took the                                                       were not properly evaluated. This is
                                             risk problems with newer pain
  painkiller Vioxx off the market                                                     typical. Before a drug is brought on
                                             relievers like Vioxx, which is
  after a clinical trial showed it                                                    the market, the tests are usually
                                             now off the market, Celebrex
  increased the risk of heart attack.                                                 small and focused on whether the
                                             and Bextra?
  Soon after, Pfizer pulled its ads for                                               drug works: does it cure arthritis
  Celebrex, a prescription drug              Any individual patient’s absolute        pain? But they weren’t large
  similar to Vioxx, when a govern-           risk for developing a heart attack       enough to quantify how often
  ment-funded cancer study showed            might be small, but if you have          serious problems occur— in Vioxx’s
                                             millions of people taking the drug,      case, heart attack. Part of this has


                                            www.BeasleyAllen.com                                                             29
 to do with how the FDA makes its           on the market for many years and          same FDA managers accused me
 decisions. They are responsible for        have been very well studied. But          of scientific misconduct; they tried
 determining if drugs are safe and          with newer drugs, we don’t gener-         to block the publication of my
 effective. The effective part is fairly    ally have good safety information.        paper in the Lancet, a prestigious
 well done. They ask for 95% cer-           They usually haven’t been studied         medical journal; and they called
 tainty that it will have the effect        in the many thousands of patients         the Government Accountability
 they think it will. But they don’t         you need to adequately show the           Project to convince them not to rep-
 require the same 95% certainty on          safety profile. If there is a drug on     resent me as a whistleblower. There
 safety. They assume the drug is safe       the market that has been taking           is a Whistleblower Protection Act,
 and require studies to show it is          care of a problem for 10 years,           but that doesn’t necessarily protect
 not safe. Yet they don’t require big       stick with it. If that isn’t working      government employees. The only
 enough studies to show that.               for you, and your doctor thinks           people who know when the govern-
                                            there is a new drug on the market         ment isn’t doing its job well are the
 Q. Do these problems extend
                                            that might be worthwhile, then            people within government. But if
 beyond these pain relievers?
                                            follow your doctor’s advice, realiz-      they can’t protect themselves when
 You mentioned five other drugs
                                            ing that we probably have a lot less      they go public, then it is going to be
 at the hearing.
                                            information about the safety of the       impossible for them to protect the
 This is a systemic problem at the          newer drug.                               consumer.
 FDA [because] the FDA has an
                                            Q. What could the FDA do to               Q. What led you to speak out?
 inherent conflict of interest. They
                                            help patients and doctors sort
 approved the drug, so why on earth                                                   It was conscience more than
                                            this out?
 would they turn around and say,                                                      courage. I would have to live with
 “We made a mistake” and pull it off        The FDA does not compare one              the knowledge that many people
 the market? Obtaining [safety] evi-        drug with another to determine            had been hurt or killed because I
 dence is almost impossible once a          which is better, although this might      didn’t act. Where does my con-
 drug is on the market because it is        be the most valuable information          science come from? For me, it has
 not in the company’s interest to do        to have. If there are five or seven       to do with my Christian beliefs and
 the studies that might show safety         cholesterol-lowering drugs out            trying to live those Gospel princi-
 problems. And they’re the only ones        there, it would be very valuable to       ples. My faith is a part of my life. It
 with the wherewithal to do it. The         know that they all work the same          is interwoven into everything that I
 FDA doesn’t have the money for             or that two or three work better          do. I’m acting based on the science,
 these large studies. The agency has        than the others. If you can get the       but I feel I have a moral responsi-
 focused on reviewing and approv-           generic version, and you knew it          bility.
 ing drugs as quickly as possible to        worked every bit as well as the         Source: AARP Bulletin — printed with permission.
 the detriment of safety. The               name brand, why spend $3 a
 approval process is driving the bus        tablet for the name brand that is
 while safety is at the back of the bus.    on your television screen when you      A CLOSER LOOK AT CELEBREX
                                            can get a generic that might cost          Because of the recent action by the
 Q. People are confused when
                                            50 cents a tablet to do the same        FDA panel, I believe a special look at
 conflicting studies come out.
                                            thing?                                  Celebrex is in order. The maker of this
 Despite the revelations about
 some pain relievers, can con-              Q. Did you have problems                drug recently admitted that its 1999
 sumers generally be confident              bringing these issues to the            clinical trial found that elderly patients
 about the drugs they take?                 forefront at the FDA?                   taking the pain killer were far more
                                                                                    likely to have heart problems than
 There’s no deliberate attempt to           When I presented the Vioxx data to      compared to patients taking a placebo
 confuse people. What we’re seeing          my managers at the FDA, they            (inactive substance). This 1999 clinical
 is that there are insufficient studies     wanted to change my conclusions.        trial was an Alzheimer’s study, which
 to determine safety. For most drugs,       When [Republican Senator Chuck]         found that 22 out of 285 patients taking
 consumers can be reasonably con-           Grassley’s office began to investi-     Celebrex suffered heart attacks,
 fident that they work and that             gate what the FDA knew before           strokes, and other heart problems com-
 they’re safe. Most drugs have been         Vioxx came off the market, these


30                                         www.BeasleyAllen.com
pared to only 3 out of 140 patients          warning about its cardiovascular risks.       class action settlement. Individuals who
taking a placebo. Even taking into con-      That difference is one of the main            do not wish to participate in the class
sideration the difference in sizes of the    reasons Celebrex enjoyed greater sales        action settlement must sign a written
two groups, Celebrex users were              than Vioxx.                                   request to be excluded from the settle-
almost four times as likely to suffer           Dr. Sidney Wolfe of Public Citizen         ment by April 8, 2005. Individuals who
heart problems, according to this clini-     stated recently that the 1999 clinical        wish to participate must submit an
cal study.                                   trial is further evidence that Celebrex is    Inventory Form by May 13, 2005, with
   When Pfizer acknowledged this             dangerous. Dr. Wolfe publicized the           all supporting documentation to be
unpublished 1999 clinical trial, the         1999 clinical trial in January of this year   submitted within 90 days thereafter. We
company attempted to marginalize the         after finding the study in a new              have real concerns about the proposed
study’s significance by saying it was        website where Pfizer and other drug           settlement. After reviewing the settle-
flawed. But, the results of this study       companies have begun to post some             ment agreement and the schedule of
contradicts earlier public statements by     clinical trial results. Dr. Wolfe said that   payments, we are convinced that
Pfizer about the safety of Celebrex          the results from the 1999 study had not       certain claims are severely underval-
regarding any association with heart         been on the site a few weeks earlier.         ued. Factors used to assign values are
attacks and strokes. On October 1,           He stated: “It’s a clear signal that I        subject to interpretation, with certain
2004, after Merck’s decision to with-        would have loved to have known                factors or conditions summarily
draw Vioxx, Pfizer said that no com-         about four years ago.” Public Citizen,        excluded, which gives rise to our
pleted study had ever shown any              as you know, has asked the FDA to             concern. The amount of time allowed
increased heart risks related to Cele-       ban Celebrex.                                 for Bristol-Myers Squibb to review and
brex. At that time, Pfizer stated in a                                                     make final payment on claims, assum-
news release, “The evidence distin-                                                        ing an appeal is not required, is
                                             PROPOSED SETTLEMENT IN SERZONE MDL
guishing the cardiovascular safety of                                                      another concern. Until we receive
Celebrex has accumulated over years            The United States District Court for        assurances from Bristol-Myers Squibb
in multiple completed studies, none of       the Southern District of West Virginia        regarding all of our concerns, we
which has shown any increased cardio-        has entered an order conditionally            cannot recommend to any of the folks
vascular risks for Celebrex.” But, in        approving a temporary settlement class        who have contacted us that they partic-
December 2004, when a colon cancer           and settlement in the Serzone litigation.     ipate in the proposed settlement.
prevention study done by the company         Pursuant to the court’s order, the pro-
indicated that Celebrex was in fact,         posed settlement agreement establishes
associated with heart attacks and            four settlement funds totaling $70            X.
strokes, Pfizer claimed that the results     million. Fund A will initially contain        BUSINESS
were unexpected.                             $30 million and will be used to satisfy       LITIGATION
   It is interesting to note that the 1999   the claims of the most seriously injured
Alzheimer’s clinical trial was never         Settlement Class Members. Fund B will
published and not submitted to the                                                         AMERICAN HONDA FINANCE CORPORATION
                                             contain $30 million and will be used to
                                                                                           AND BANKS SETTLE DISCRIMINATION
Food and Drug Administration until           satisfy claims of those individuals less      LAWSUITS
June 2001, months after the FDA con-         seriously injured. Funds C and D will
ducted a major review of the safety of       have $5 million each: Fund C will                In late January 2005, American
Vioxx and Celebrex. Two doctors who          satisfy claims of individuals with no         Honda Finance Corporation, the lender
participated in that review said they        serious injuries and Fund D will satisfy      for Honda Motor Company, and three
had not known about the 1999 study           claims of individuals not making claims       banks, Bank One, Bank of America
until the end of January 2005. One of        under Funds A, B, or C. A Schedule of         Corp. and U.S. Bancorp, settled class
them, Dr. Kenneth Brandt, a professor        Payments, attached as an exhibit to the       action lawsuits brought by African
of medicine at Indiana School of Medi-       settlement agreement, will be used to         American and Latino customers for
cine, said that if the safety panel had      categorize different levels of injuries       racial bias in the companies’ automo-
known about the study, it might have         and place values on individual claims.        bile lending policies. According to the
recommended that both the Vioxx and            Potential members of the class action       lawsuits, American Honda and the
Celebrex be taken with greater caution.      settlement have already received or           banks charged African Americans a
The panel decided to recommend that          will be receiving a notice from the           finance charge markup, an increase in
Vioxx, but not Celebrex, carry a             court advising them of the terms of the       the interest rate of the loan, which was


                                             www.BeasleyAllen.com                                                               31
greater than the finance charge markup    lending laws that cap interest rates with   suits. The HMOs now must either try
charged to non-minority customers.        markups, these laws provide little pro-     these cases or settle them. Health Net,
Although interest rates typically vary    tection against the arbitrary nature of     Humana, PacifiCare Health Systems,
depending upon creditworthiness, the      the markups. Thus, many consumers           Prudential Insurance Co. of America,
troubling factor in this case was that    have sought judicial intervention in        UnitedHealthcare, and WellPoint Health
African Americans with credit scores      order to put an end to these discrimi-      Networks remain defendants in the
similar to non-minorities were charged    natory practices. Under its settlement      lawsuits. Aetna and CIGNA have
higher markups than their non-minority    agreement, American Honda Finance           already settled the lawsuits they faced.
counterparts, without explanation. The    Corporation, Bank One, Bank of              The trial is scheduled for September 6th
markups in some cases amounted to         America, and U.S. Bancorp agreed to         in U.S. District Court in the Southern
$500 or $1,000 more than the amount       cap markups at 2.5% on loans up to 60       District of Florida. The doctors allege,
non-minorities pay on a single loan.      months, 2% on loans between 61 and          among other things, that the HMOs
   Markups are excess costs added to a    71 months and 1.75% on loans of 72          conspired to systematically underpay
consumer’s auto loan in order to gener-   months or more. The financing compa-        physicians by doing things such as
ate a greater profit. Generally, when a   nies will also offer car loans without      using computer programs to automati-
consumer applies for in-house financ-     any markups to up to 2.4 million            cally downcode or bundle claims.
ing for an automobile, the dealer         minority consumers. Bank One agreed
submits the consumer’s credit applica-    to offer 875,000 preapproved loans
                                                                                      SOME GOOD NEWS FOR INVESTORS
tion to the lender. Lenders affiliated    without markups to African Americans
with the automakers then approve an       and other minorities, Bank of America         A recently proposed change in
interest rate for the car loan based on   will offer 600,000 such loans, and U.S.     investor-arbitration rules could allow
the person’s income and credit history.   Bancorp will offer 300,000. American        courts to get more involved in investor
Some lenders also allow dealers to add    Honda agreed to offer 625,000 preap-        disputes. The National Association of
percentage points to that rate without    proved loans without markups to             Security Dealers has proposed a new
informing the consumer. The amount        minorities. Additionally, the settlement    rule that would force arbitrators to
of the finance charge markup is often     agreement would require Honda to            provide written decisions if asked. As it
shared by the dealer and lender.          institute a broad refinancing program,      currently stands, the arbitrators do not
Because consumers are unaware of the      reducing rates charged to current           have to issue a written report, and they
markup, this practice can be deceptive    African-American and Latino customers       rarely do. This leaves many investors
and discriminatory.                       whose loans were marked up by 1% or         confused and in the dark as to why
   Three studies by Professor Mark        more. Although the parties have agreed      they lost their case, or did not receive
Cohen at Vanderbilt University suggest    to the settlement, the terms of the         the amount that they requested.
that race is a key factor in auto-loan    agreement must be approved by the             If this rule is adopted, it will make it
markups. In a January 2004 report on      court before it becomes final.              easier for federal courts to see what
the racial impact of Ford Motor Credit                                                arbitrators have actually done in cases
Company’s (“FMCC”) finance charge                                                     that are appealed to them. I do not
                                          SUPREME COURT LEAVES MANAGED CARE
markup policy, Professor Cohen found      CLASS ACTION INTACT                         think there is any question that having
that 48.5% of African Americans who                                                   a written decision will make it easier
financed their cars through FMCC were        Lawsuits that question the way HMOs      for those investors who do not succeed
charged a markup, compared to only        pay physicians will go forward as a         before an arbitration panel to take their
30.9% of non-minority borrowers.          class action that includes more than        claim to a federal court. I think this will
According to the study, African-Ameri-    900,000 working and retired doctors         help investors, as they essentially have
can borrowers who receive a subjective    nationwide. As reported, the question       no choice in whether to arbitrate their
markup are charged on average $1,412,     was resolved for good in January of this    case or go to court. Most brokerage
compared to only $1,090 for non-          year when the U.S. Supreme Court said       contracts require that complaints be
minorities. Professor Cohen found         it wouldn’t hear an appeal of a lower       handled by arbitration.
similar results in studies of General     court ruling upholding the massive liti-    Source: Wall Street Journal
Motors Acceptance Corporation and         gation’s class action status. This denial
Nissan Motor American Corporation         of further review clearly is a great turn
customers.                                of events for the physicians and
   Although some states have predatory    medical associations that filed the law-


32                                        www.BeasleyAllen.com
RIGGS BANK SUES PNC FOR CUTTING BID         Riggs agreed to a $645 million buyout.      conclude the civil suit. The agreement
AND THEN COMPLETES DEAL                     Not surprisingly, Riggs then agreed to      brings to a close a protracted lawsuit
                                            drop its lawsuits. It does seem like        that has put further strains on already
   Riggs National Corp., the parent of
                                            maybe the courts were being used by         fragile Franco-American relations. The
Riggs Bank, filed a civil suit against
                                            Riggs in this deal. Maybe this is one of    case began following the takeover of
PNC Financial Services Group Inc., and
                                            the frivolous lawsuits the President        Executive Life, once the largest life
three days later made a pretty good
                                            has been telling folks about.               insurance company in California, in
deal with the very defendant it had
                                            Source: Associated Press                    1991. As part of the rehabilitation of
sued. The lawsuit came after PNC cut
                                                                                        Executive Life, both its insurance busi-
its takeover offer to Riggs by 20%,
                                                                                        ness and its junk bond portfolio were
citing legal uncertainties surrounding      DEALERS FILE ANTITRUST SUITS AGAINST        put up for sale. CL, through its invest-
Riggs’ recent guilty plea over a law        DAIMLERCHRYSLER UNIT
                                                                                        ment banking subsidiary Altus, report-
aimed at stopping money laundering.
                                               A pair of class action antitrust suits   edly orchestrated a scheme in which it
Pittsburgh, Pennsylvania-based PNC
                                            were filed against Detroit Diesel Corp.,    obtained Executive Life’s bond portfo-
had agreed in July to pay $24.25 a
                                            a leading manufacturer of truck             lio, and used secret “parking” agree-
share (a total of about $779 million in
                                            engines, in U.S. District Court in          ments—referred to in French as
cash and stock) for Riggs, an old-line
                                            Philadelphia, Pennsylvania. The actions     portage agreements—to illegally gain
Washington institution that had a near-
                                            were brought by truck dealers who           control of Aurora National Life Assur-
monopoly on business with the
                                            claim the company orchestrated an           ance Company, a newly formed Cali-
capital’s diplomatic community. Riggs
                                            illegal group boycott and price-fixing      fornia life insurance company that
National said its board had unani-
                                            scheme after it became a subsidiary of      acquired the restructured Executive
mously rejected a reduced offer of
                                            DaimlerChrysler. The suits were filed       Life’s insurance business.
$19.32 per share from PNC. Riggs
                                            on behalf of classes that consist of hun-      The transaction ultimately wound up
pleaded guilty on January 27th to failing
                                            dreds of International and Volvo truck      in the criminal courts as criminal
to report suspicious transactions in the
                                            dealers. In addition to Detroit Diesel,     charges were brought against the com-
accounts of foreigners, including
                                            the suits name 17 of its distributors as    panies and individuals involved. At the
former Chilean dictator Augusto
                                            defendants. According to the com-           time of the deal, the federal Glass-Stea-
Pinochet. The bank agreed to pay a
                                            plaints, Detroit Diesel and its inde-       gall Act was still in force, which pro-
$16 million fine—the largest criminal
                                            pendent distributors engaged in a           hibited banks from owning or
penalty ever imposed on a bank of
                                            group boycott of truck dealers not affil-   controlling insurance companies. CL
Riggs’s size, according to federal prose-
                                            iated with DaimlerChrysler by terminat-     and the others were also charged with
cutors. This was in addition to a record
                                            ing those dealers’ rights to perform        violating a California law that barred
$25 million civil fine levied on the
                                            major warranty repairs on Detroit           foreign governments from controlling
bank by a Treasury Department agency
                                            Diesel engines in trucks that they had      insurance companies. It should be
last May.
                                            sold. At the same time, the suits allege,   noted that CL was effectively owned by
   In the lawsuit, Riggs claimed
                                            Detroit Diesel and its distributors also    the French government at the time.
damages for financial injury to its repu-
                                            agreed to an across-the-board increase      The criminal charges were settled in
tation in the business world. The
                                            on the prices the terminated dealers        December 2003, with the agreement
parent of Riggs Bank said it had sued
                                            paid for Detroit Diesel parts.              that CL, the CDR, and other defen-
PNC because Riggs “had been
                                            Source: The Legal Intelligencer
                                                                                        dants, along with Artemis S.A., a
damaged by PNC’s decision not to
                                                                                        holding company controlled by French
proceed with the merger after Riggs
                                                                                        businessman Francois Pinault, would
had devoted the last six months
                                            EXECUTIVE LIFE SETTLEMENT                   pay a total of $771 million in fines,
preparing for the merger and taking
                                                                                        penalties, and victim compensation.
various actions at PNC’s insistence.”          Policyholders of Executive Life have
                                                                                           But, there was no settlement of the
One thing that Riggs said it was            reached a settlement with French bank
                                                                                        civil cases at that time. The agreed on
seeking was an order that would             Credit Lyonnais (CL) and the Consor-
                                                                                        settlement of those cases has to receive
compel PNC to proceed with the              tium de Réalisation (CDR), a govern-
                                                                                        the approval of the court. The case was
merger under the original terms agreed      ment sponsored group, which took
                                                                                        due to start with jury selection on Feb-
upon last summer. It is most interesting    over CL’s debts in 1995. The settlement
                                                                                        ruary 16th. The original claims totaled
that just three days after it sued PNC,     calls for a $525 million payment to
                                                                                        $3.7 billion dollars. In addition, the


                                            www.BeasleyAllen.com                                                              33
plaintiffs sought punitive damages          TITLE INSURANCE COMPANY REACHES              well as services in Australia, the
based on the alleged misconduct. The        SETTLEMENT                                   Bahamas, Canada, Guam, Hong Kong,
CID had reached an $80 million settle-                                                   Ireland, Mexico, New Zealand, Puerto
                                               First American Title Insurance Co., a
ment with another Aurora Life                                                            Rico, South Korea, the United
                                            title insurance company, has agreed to
Company. Pinault and his holding                                                         Kingdom, the U.S. Virgin Islands, and
                                            refund about $24 million to consumers
company, Artemis S.A., are now the                                                       other nations.
                                            nationwide after state insurance investi-
only major defendants who have failed                                                    Source: Associated Press
                                            gators claimed the company gave kick-
to settle the matter.
                                            backs to homebuilders, lenders, and
Source: The Insurance Journal
                                            real estate agents. The company agreed
                                            to give back the money to consumers
                                                                                         XI.
LAWSUIT OVER SOFTWARE SECRETS               across the country. The kickbacks cost       INSURANCE AND
                                            consumers millions of dollars and            FINANCE UPDATE
   A Birmingham, Alabama, jury has          involved other major title insurers in a
awarded a software company $27.5            complex financial scheme that began
                                                                                         ILLUSORY INSURANCE TRUSTS
million after finding that an Arizona       in 1997, according to information sup-
competitor and one of its employees         plied to the Associated Press by Col-           Insurance trust agreements are wide-
stole trade secrets. Group 8760 LLC,        orado Governor Bill Owens. The               spread in the insurance industry. But,
located in Homewood, Alabama, sued          arrangement kept the cost of title insur-    our firm, along with Tim Ryles, Ph.D.,
Systrends Inc. of Tempe, Arizona.           ance artificially high and may have vio-     an ex-insurance commissioner for the
Group 8760 claimed Systrends hired          lated state and federal laws, according      state of Georgia, recently uncovered a
Group 8760’s fired co-founder, who          to Governor Owens. The parent                deceptive marketing scheme used by
helped his new employer recreate the        company of First American Title is First     the world’s largest disability insurer to
Alabama company’s software for utility      American Corp. of Santa Ana, Califor-        sell disability insurance to thousands of
firms. Systrends hired Richard Brooks       nia. Governor Owens says that, in            schoolteachers around the state of
two weeks after he left Group 8760.         return for the alleged kickbacks, home-      Alabama. The scheme involved the use
The plaintiffs contended at trial that      builders, lenders, and real estate agents    of an insurance trust agreement with
Brooks violated his Group 8760              referred title insurance business to a       an out-of-state bank acting as trustee
employment contract, which called for       specific company.                            for the schoolteachers as beneficiaries.
him to wait a year before going to             It was reported that an average           But, the out-of-state bank’s only
work for a competitor and not to share      homebuyer would pay about $1,000             expressed duty under the trust agree-
trade secrets. The jury concluded that      for title insurance. Of that, $325 would     ment was to “hold” the master policy
Brooks helped his new company take          be funneled back to the homebuilders,        that was issued to the trust. The insurer
business away from Group 8760,              lenders, and real estate agents in the       retained all administrative and discre-
which suffered millions of dollars in       form of premiums paid to title insur-        tionary duties under the agreement.
damages.                                    ance companies established by those          The insurer in reality issued the master
   Group 8760, founded in 1996 by           businesses. Most states have laws that       policy to itself, which gave it the ability
Brooks and two other men, according         bar title insurance companies from           to change the terms of the teachers’
to trial evidence, would be worth $10       paying for business referrals in most        coverage at will. And that is exactly
million today had it not been for           states. I don’t believe that Alabama law     what happened. While the trust was in
Brooks’ breach of his agreement. The        specifically addresses the issue. We         existence and the teachers were paying
company is now worth only $1 million.       contacted the State Department of            their premiums, the insurer changed
The verdict requires Systrends to pay       Insurance and they were not aware of         the terms of the coverage numerous
$19.5 million, including $12.6 million in   any law or regulation covering that          times without notifying the teachers.
punitive damages. Brooks will have to       issue. We will check further to see if       This illusory trust agreement also
pay over $7 million, including $5.4         anything was missed. The State of Col-       allowed the insurer to avoid Alabama
million in punitive damages. Jurors saw     orado contended these are illegal kick-      insurance regulations that are in place
internal Systrends documents that           backs because there is no necessity for      to protect the citizens of Alabama. I
showed Brooks and Systrends con-            these arrangements. First American           hope the Alabama Insurance Depart-
spired to steal trade secrets from the      Title and other subsidiaries provide title   ment will begin to look more closely at
Alabama company.                            insurance or title abstracts in every        these types of arrangements.
                                            state and the District of Columbia, as

34                                          www.BeasleyAllen.com
ALABAMA CAPS MOLD DAMAGE CLAIMS             Pensacola News Journal. Fearing a rash      received. An insurance industry group
                                            of lawsuits, Florida insurance compa-       said that it believes most companies
  The Alabama Insurance Commis-             nies are looking for protection, the        have complied and those that haven’t
sioner has agreed to place a $10,000        newspaper reported. More than 400           had a good excuse. They claim that
cap on mold damage claims on home-          companies have asked the Florida            reporting requirements were “confus-
owner’s insurance policies. The             Department of Insurance to limit, and       ing and unclear.”
Alabama cap amount is below the             in some cases even eliminate, their         Source: The Insurance Journal
average mold claim of $17,000 in Texas,     responsibility to cover mold claims.
where a much smaller cap had been           The Department is expected to make a
requested. I understand that the            decision on the issue by the end of         THREE PLEAD GUILTY IN INSURANCE PROBE
Alabama Insurance Service Office, Inc.,     October. Currently, homeowners’ poli-
a rating organization that represents                                                     A former senior executive at Marsh &
                                            cies in Florida cover mold damage if        McLennan and two employees at
several hundred insurance companies,        it’s caused by an accident or an act that
requested the cap on mold damage                                                        American International Group (AIG)
                                            is covered in a specific policy. Several    have pleaded guilty in the state’s probe
claims, which harms most those who          Florida insurance companies are asking
suffer the greatest damage and other-                                                   of bid-rigging and price-fixing in the
                                            the state to allow them to offer the        insurance industry. The highest-ranking
wise expected their insurance to cover      mold coverage as an add-on option to
their losses. Alabama Business Review                                                   executive pleading guilty was Joshua
                                            a standard policy.                          Bewlay, a former senior vice-president
also reported that other companies,
                                            Source: The Insurance Journal               at Marsh who worked in the broker’s
including State Farm, are seeking state
permission to change the language on                                                    excess casualty group in New York. He
mold coverage. So far Wisconsin and         FLORIDA COMPANIES FINED                     admitted guilt to one felony count of
Alabama are the only states to have put                                                 scheming to defraud and faces up to
limits on mold claims. The Texas               The Florida Insurance Commission         four years in prison. John Mohs, a
Department of Insurance considered a        has issued fines against 91 insurance       former manager at AIG’s American
$5,000 cap and instead approved a plan      companies that reportedly didn’t file       Home Assurance unit, also entered a
to offer varying levels of coverage.        affidavits in a timely fashion showing      guilty plea to the same charge. Carlos
Many homeowners are now facing              compliance with state law requiring         Coello, an AIG underwriter, pleaded
sharply higher rates for the same levels    them to quickly settle hurricane claims.    guilty to a misdemeanor, second
of coverage they had last year. It has      Under Florida law, Florida property         degree scheming to defraud. Mohs had
been reported that there has been an        insurance companies are required to         reported to former AIG executives
increase in mold illness symptoms asso-     prove they have evaluated property          Karen Radke and Jean-Baptist Tateoss-
ciated with flooding in the southern        damage, made a reasonable effort to         ian, who last October were the first to
part of Alabama. Portions of our state      settle claims, gotten negotiations going    plead guilty to fraud charges arising
were declared disaster areas by the         in dispute situations, and advanced         from the Spitzer probe. To date, nine
president on 35 occasions from 1969 to      living expenses to customers forced         executives from AIG, Marsh, ACE, and
1997. The entire state was declared a       from their homes. The claim deadline        Zurich Financial Services have pleaded
disaster area on two occasions.             was November 22nd for Hurricanes            guilty to charges filed by the New York
  In our adjoining state of Florida,        Charley and Frances and Tropical            Attorney General.
mold was also a hot topic at a public       Storm Bonnie. It was December 8th for       Source: USA Today

forum held last month in Pensacola,         Hurricanes Ivan and Jeanne. Compa-
which is located in the Panhandle           nies that received claims from any of
                                            the storms after those deadlines were       THESE INSURANCE COMPANIES LIKE THE
section of the state. The Florida Depart-                                               COURTS
ment of Insurance sponsored the             supposed to file affidavits with the
forum to obtain public input concern-       information by January 3rd. “These            Five insurance companies will
ing mold coverage. Insurance compa-         companies were given an appropriate         recover 2.3 million euros ($3 million)
nies in Florida have reported a spike in    time period to submit the required affi-    and Air France will collect 850,000
mold claims the last couple of years.       davits based on these devastating hurri-    euros ($1.1 million) from the French
Such claims easily can reach tens of        canes and failed to do so,” according to    government. This is the result of a court
thousands of dollars and sometimes the      Florida Insurance Commissioner Kevin        ruling in Marseille, France stemming
full value of a home, according to the      McCarty. The fines are generally $2,500     from the near crash of an Airbus A320
                                            for each day the affidavit has not been

                                            www.BeasleyAllen.com                                                              35
in 1998. A report from Agence France             holders thus far. The company contends      BRITNEY SPEARS SUES EIGHT INSURANCE
Presse (AFP) described the incident as           that the damage to the houses was           COMPANIES
involving a “dead hedgehog” and a                caused entirely by water and not by
                                                                                                Britney Spears has sued eight insur-
“flock of hungry seagulls,” attracted by         wind. Policyholders are asking how a
                                                                                             ance companies for damages. I would-
the dead animal. Unfortunately, the              house on a barrier island can get no
                                                                                             n’t have thought the well-known
“feast” took place at the end of the             wind damage during a hurricane. Wind
                                                                                             recording artist would have had time to
runway of the Marseille airport, which           perils are clearly covered by hurricane
                                                                                             file a lawsuit given all of her “activi-
incidentally was also being used by the          policies. Storm surge is the domain of
                                                                                             ties.” These companies refused to pay
A320. The pilot had to abort his takeoff         federal flood insurance. In order to
                                                                                             the $9.8 million claim the popular
at the last minute when a number of              rebuild, after a storm loss, owners need
                                                                                             singer filed after she injured her knee
the seagulls were sucked into the                to collect their policy limits.
                                                                                             during a video shoot and had to cancel
plane’s right engine, destroying it. The            A good number of lawsuits have
                                                                                             her 2004 summer tour. Spears and her
insurers had already paid the claims             been filed. More than a dozen cases
                                                                                             company, Britney Touring Inc., paid
involved, but the court ruled that the           were filed against Citizens in Escambia
                                                                                             the firms more than $1.3 million in pre-
French government, which runs the                and Santa Rosa Counties recently.
                                                                                             miums to insure her tour through the
country’s airports, was responsible for          There were also lawsuits filed against
                                                                                             United States, Canada and Europe. On
keeping the runways clear. The court             other insurers. Allstate Floridian, USAA,
                                                                                             June 8th, while the policies were in
felt that the officials in charge should         Florida Select, Vanguard, Universal
                                                                                             effect, Spears hurt her left knee while
have noticed “such a large group of              Property and Casualty, and Southern
                                                                                             performing dance steps for a video of
birds” in the path of the jet.                   Family Insurance are some of the com-
                                                                                             one of her songs in New York. She
Source: The Insurance Journal                    panies that have been sued. The
                                                                                             required surgery, according to the com-
                                                 obvious question is “When a house is
                                                                                             plaint, and subsequently canceled the
                                                 destroyed, how are you going to deter-
INSURANCE COMPANIES SHOULD PAY                                                               rest of the 2004 tour. Seven British
                                                 mine how much was caused by wind
VALID CLAIMS                                                                                 insurance companies that refused to
                                                 and how much by flood?” It is esti-
                                                                                             pay the recording artist said the record-
   Citizens Property Insurance Co. is            mated that some 15,000 policyholders
                                                                                             ing artist failed to tell them about a
refusing to pay property losses, even            could have claims against Citizens.
                                                                                             pre-existing left knee injury and
after losing a south Florida appeals court       Many of these policyholders will have
                                                                                             surgery she underwent less than five
decision that came about from a major            substantial losses. According to reports,
                                                                                             years earlier. Thus far, the eighth
storm. Hurricane Irene brought both              Citizens has told Florida officials more
                                                                                             company, a French firm, hasn’t
wind and water when it totally destroyed         than 2,400 claims from Hurricane Ivan
                                                                                             responded to the claim.
the Fort Lauderdale house of Zennon              remain open. Citizens takes the posi-
                                                                                                According to Ms. Spears, she had
Mierzwa in 1999. Though Mierzwa’s                tion that some of these claimants won’t
                                                                                             “minor orthopedic surgery” on her left
home was insured for $281,000 with the           be paid because they ostensibly had no
                                                                                             knee in March 1999, four years and 11
Florida Windstorm Underwriting Associa-          wind damage.
                                                                                             months before she took out the insur-
tion, the state agency offered to pay only          A Florida legislative committee has
                                                                                             ance policies. She contends in her
$68,000, in part because Mierzwa also            recommended “clarifying” state law to
                                                                                             complaint that this surgery should not
was collecting $54,000 from his flood            require insurers to pay only a portion
                                                                                             have affected the insurers’ decision in
policy. A south Florida appeals court            of policy limits, based on the perils
                                                                                             the 2004 injury. It appears that not only
ruled in favor of Mierzwa and ordered            covered. Insurance settlement delays,
                                                                                             the middle and low-income policyhold-
the FWUA, now a part of Citizens, to pay         coupled with contractor shortages, can
                                                                                             ers have problems getting some insur-
the policy limit. Despite the ruling, which      confound the recovery of an entire
                                                                                             ance companies to pay claims. An
came down last summer, Citizens is               community. A Florida state legislator
                                                                                             interesting side note on this case is that
refusing to pay policy limits to 2004 hur-       has asked for an audit of Citizens. We
                                                                                             the policyholder probably has more
ricane victims caught in similar multi-          know from experience that many
                                                                                             money than the insurance companies.
peril situations. The insurer contends that      insurance companies were extremely
it shouldn’t have to pay for any share of        hard to deal with in both Florida and
damage caused by something excluded              Alabama on the recent storm damage
in its policy—flood. Citizens, which is the      claims. We have had to file suits against
State of Florida’s insurer of last resort, has   a number of the insurers.
refused to pay anything to their policy-         Source: The Insurance Journal



36                                               www.BeasleyAllen.com
XII.                                         to avoid state regulators or fixing the       have been filed in state court in Tal-
PREMISES                                     faulty machine. The jury was also told        lapoosa County against the academy,
                                             Dillard’s had used unlicensed workers         an all-male boarding school for grades
LIABILITY UPDATE
                                             to save money on escalator repairs, set       6-12, located in Camp Hill, which is a
                                             up a fake service company to avoid            small town in southeast Alabama. The
DILLARD’S TO PAY $15 MILLION TO GIRL         state inspections, failed to report           alleged incidents are said to have
HURT BY ESCALATOR                            dozens of accidents to state regulators,      occurred in 2002. It is alleged that the
                                             and had ample evidence that someone           adults either condoned the abuse or
   Dillard’s department stores has
                                             eventually would get seriously hurt on        failed to stop it. The Academy’s lawyer
agreed to pay $15 million to a little girl
                                             its escalator. More than 80 people had        says that the suits are unfounded and
who lost three fingers when her hand
                                             gotten shoes or clothing caught in the        that any abuse that might have
got jammed in an escalator as she tried
                                             down escalator at the store involved in       occurred would have simply been “the
to free her stuck shoe. The child and
                                             the case since 1998. More than a dozen        typical schoolyard brawls involving
her family settled their lawsuit against
                                             people had entire shoes ripped from           boys of that age.” The plaintiffs in the
Dillard’s Inc. just hours after a Florida
                                             their feet and ingested by the machine.       cases are being represented by Tripp
circuit court jury ordered the company
                                             It is significant that Dillard’s could have   Walton, an Auburn lawyer, and the
to pay $9.4 million for medical
                                             replaced the escalator for about              Academy’s lawyer is Tom Radney from
expenses, pain and suffering. The jury
                                             $60,000, but it would have meant              Alexander City. Each of these men is a
was about to begin hearing evidence in
                                             closing the escalator for up to 12            good lawyer and each happens to be a
the punitive damages portion of the
                                             weeks and possibly shutting down the          good friend of mine. This should be a
trial when the settlement was reached.
                                             store. Instead of replacing the escalator     most interesting case to watch as it
The jury was told during the trial that
                                             or hiring an expert company to main-          progresses through the system.
Dillard’s managers knew the escalator
                                             tain it, Dillard’s attempted to train         Source: The Opelika-Auburn News
was dangerous and had set up a sham
                                             employees to do escalator maintenance
company to make it appear to state
                                             so it could save the extra $30,000 it
regulators that the escalators were
being maintained when they were not.
                                             would have cost to hire an outside            XIII.
                                             firm. Dillard’s then attempted to get         WORKPLACE
Based on the law and evidence pre-
                                             around a state requirement for yearly
sented, it is very probable that the jury                                                  HAZARDS
                                             inspections by creating a company
would have awarded punitive damages
                                             called Dillard’s Elevator and Escalator
in the case. Dillard had set out to cir-
                                             Co., which suggested Dillard’s had an         WELDERS SHOW ELEVATED RATE OF
cumvent the safety laws that apply to                                                      PARKINSON SYMPTOMS
                                             independent company inspecting its
escalators. The jury’s award will deter
                                             equipment. Interestingly, the escalator
this kind of behavior in the future, and                                                     A new study tells us that welders
                                             company had no employees. Dillard’s
the settlement will assure the family of                                                   may have a higher-than-average rate of
                                             has 328 stores in 29 states with annual
receiving the funds now.                                                                   Parkinson’s     disease     symptoms.
                                             revenues exceeding $7.8 billion. This
   The little girl was 5 when she lost the                                                 Researchers found that among more
                                             case was a prime example of putting
fingers during a shopping trip with her                                                    than 1,400 welders from Alabama, the
                                             profits over safety.
mother and two siblings. Dillard’s                                                         prevalence of Parkinson-like symp-
lawyers acknowledged some fault for                                                        toms, including tremor, muscle rigidity,
the escalator, which had a history of        ALLEGED HAZING AT LYMAN WARD GIVES            and slowed movement, was 7 to 10
trapping shopper’s shoes, but contend        RISE TO LAWSUITS                              times higher than the norm for the
the accident happened because the                                                          general population. The findings,
                                                There have been several lawsuits
girl’s mother was not supervising her                                                      based on a group of mostly male
                                             filed against Lyman Ward Military
properly. The jury assigned 15% of the                                                     welders between the ages of 40 and 69
                                             Academy that are certainly worth men-
blame to the girl’s mother and the                                                         years, are published in the journal
                                             tioning. The lawsuits filed by parents
remaining fault to the Little Rock,                                                        Neurology.
                                             allege that cadets—some as young as
Arkansas-based retailer.                                                                     In an earlier study of 15 career
                                             10 years old—have been subjected to
   Jurors were told how Dillard’s had                                                      welders, the same investigators found
                                             physical, mental or verbal abuse by
known the escalator was dangerous,                                                         that the men started suffering Parkin-
                                             older classmates and adults during
but had spun a tale of corporate deceit                                                    son’s symptoms at an atypically early
                                             hazing at the school. At least eight suits


                                             www.BeasleyAllen.com                                                               37
age—at age 46 on average, versus age         inspectors tested positive for blood       with high levels of beryllium and
63 in a comparison group of non-             abnormalities that indicate they could     which inspector did the testing. The
welders. It was suspected at that time       be susceptible to the disease. Beryl-      agency says that its records show that
by the researchers that an as-yet-           lium, an extremely lightweight metal       since 1984, it has conducted 4,000
unknown toxin in welding fumes               that is a carcinogen, is used in making    inspections where beryllium was
might speed the onset of Parkinson’s         microprocessors, golf clubs, and dental    present and collected 13,000 samples.
disease in people who would likely           alloys, and in the military and nuclear    Of those, 147 samples, or 1.1%, were
have developed the disease at an older       industry. Inhaling even minute             above the agency’s safe exposure limit.
age. That study was published in 2001.       amounts of beryllium dust or fumes         The beryllium industry and some of its
   Parkinson’s disease is a progressive      can be dangerous, although not every-      users maintain that working with the
neurological      condition     typically    one exposed gets sick. Studies cited by    substance is safe when proper precau-
marked by four types of symptoms:            OSHA show that an average of 2% to a       tions are taken. Brush Wellman Inc., a
tremors, muscle rigidity, slowed move-       high of 15% of workers who manufac-        large producer, has supported exten-
ment, and problems with balance and          ture beryllium products get the disease.   sive research on the effects of beryl-
coordination. The disease occurs when           The permissible exposure level for      lium. That company contends that
certain brain cells that produce the         beryllium is 2 micrograms per cubic        there is no definitive link to cancer or
movement-regulating chemical dopa-           meter of air for an eight-hour period.     that beryllium should be listed as a car-
mine are damaged or destroyed. No            That limit was set in 1971 and was         cinogen. Wellman also thinks that
one is absolutely certain what triggers      based on a 1949 standard set by the        inspectors don’t need a special testing
this brain damage, but scientists            Atomic Energy Commission. OSHA             program and that the test being used is
believe that a number of factors,            began work on setting a new standard       inappropriate for screening.
genetic and environmental, play a role.      in 1975, but it was never completed.          Instead of tightening the beryllium
On-the-job exposures to certain chemi-       Peter Lurie, a physician and the deputy    standard, OSHA has issued periodic
cals, including pesticides and herbi-        director of Public Citizen’s Health        hazard information bulletins saying the
cides, have been linked to Parkinson’s       Research Group stated: “The agency is      standard may not be adequate. Public
disease, and overexposure to the             in some kind of grand denial of the        Citizen and a labor union petitioned
mineral manganese can lead to Parkin-        problem that extends to its own            the agency in 2001, asking that the
son’s-like symptoms. The welding             workers. Because they have not pro-        federal standard be lowered to 0.2
process creates fumes that contain           tected workers, they have put their        micrograms per cubic meter of air and
manganese. There are many potential          own employees at risk.” In 1999, the       that surveillance of workers be
toxins in welding fumes, although            Department of Energy cut the standard      required. In late 2002, OSHA issued a
manganese is the one best recognized         for beryllium exposure for workers at      “request for information,” which is a
as being damaging to nerve cells. Our        its plants to 0.2 micrograms per cubic     preliminary step to rulemaking. OSHA
firm is currently handling a tremendous      meter of air, and started a prevention     does not yet have a proposal, but is
number of cases involving welders            and testing program for current and        querying the small-business community
who suffer from advanced Parkinson’s         former workers. Medical and scientific     on the likely effects of changing the
disease.                                     staff members at OSHA tried to per-        standard. The Bush Administration
Source: Reuters News                         suade their agency to do the same. At      took up the issue of testing inspectors
                                             the time, Adam M. Finkel was a direc-      in April 2002. It is reported that OSHA’s
                                             tor of health standards for the entire     administrator at the time, John L.
OSHA SLOW TO ACT ON BERYLLIUM                agency. He later became a regional         Henshaw, pronounced in a meeting
EXPOSURE
                                             administrator in Denver. Clearly Finkel    that retired inspectors would not be
   It is shocking that for years the Occu-   was a top man at OSHA and was in a         tested and that any testing in the future
pational Safety and Health Administra-       position to know what was going on.        might be part of regular physical
tion failed to test its inspectors for          Finkel, who became a whistleblower      exams. Defying orders to keep those
exposure to beryllium fumes or dust.         in 2002, based his concerns on data        discussions       confidential,     Finkel
Inspectors were at risk for contracting      that showed possible exposure levels       reported the agency’s decision to the
chronic beryllium disease, which can         for up to 500 inspectors. Workers who      media. Almost immediately, Henshaw
be fatal. The agency didn’t begin            show a sensitivity to the metal should     told Finkel he was being transferred to
testing until last year. It has been         not be further exposed, Finkel said.       Washington to work on the agenda for
reported that at least three OSHA            OSHA has a database of workplaces          an upcoming health and safety


38                                           www.BeasleyAllen.com
meeting.                                     drunken drivers with blood-alcohol             NEW HAMPSHIRE JURY AWARDS $2.6
   That prompted Finkel to file whistle-     levels exceeding 0.08. Strayer and col-        MILLION IN CAR CRASH SUIT
blower complaints. Pressure on OSHA          league Frank Drews, an assistant psy-
                                                                                               A New Hampshire jury has awarded
increased when Finkel took his case          chology professor, found this to be true
                                                                                            nearly $2.6 million to the family of a
public in October 2003, accusing the         during research conducted in 2003.
                                                                                            man killed in a 1999 car crash. The jury
agency of failing to disclose “a substan-    The results of the study appear in this
                                                                                            found that the firm that redesigned the
tial danger to public health” and claim-     winter’s issue of Human Factors, the
                                                                                            intersection where it happened was
ing his bosses were retaliating against      quarterly journal of the Human Factors
                                                                                            partly at fault. The decedent was killed
him. OSHA Deputy Assistant Secretary         and Ergonomics Society. When 18- to-
                                                                                            when his pickup truck collided with a
R. Davis Layne sent a memo to                25-year-olds were placed in a driving
                                                                                            car driven by a 71-year-old woman
employees saying that Finkel’s allega-       simulator and talked on a cellular
                                                                                            who pulled into the intersection after
tions were “completely false” and the        phone, they reacted to brake lights
                                                                                            getting frustrated by a traffic light that
agency was expanding medical moni-           from a car in front of them as slowly as
                                                                                            got stuck on red for at least five
toring procedures for beryllium. The         65- to 74-year-olds who were not using
                                                                                            minutes. The jury agreed with the
testing began in April. Finkel settled       a cell phone. In the simulator, each
                                                                                            decedent’s family that CLD Engineering
with OSHA in late 2003 and remains on        participant drove four 10-mile freeway
                                                                                            Associates, which redesigned the inter-
the government payroll through this          trips lasting about 10 minutes each,
                                                                                            section, was partly at fault. The jury
year while he teaches at Princeton Uni-      talking on a cell phone with a research
                                                                                            placed 49% of the blame on the engi-
versity.                                     assistant during half the trip and
                                                                                            neering company, 49% of the blame on
Source: Public Citizen                       driving without talking the other half.
                                                                                            the other driver and 2% on the state
                                             Only hands-free phones—considered
                                                                                            Department of Transportation.
                                             safer—were used.
                                                                                               An appeal is expected by the
XIV.                                            The study found that drivers who
                                                                                            company. Their lawyers claim the
TRANSPORTATION                               talked on cell phones were 18% slower
                                                                                            crash was caused by the other driver,
                                             in braking and took 17% longer to
                                                                                            who ran a light and crossed five lanes
                                             regain the speed they lost when they
CELL PHONE USE UPS ACCIDENT RISK                                                            of traffic before colliding with the
                                             braked. The numbers, which come
                                                                                            pickup. The suit claimed that CLD’s
                                             down to milliseconds, might not seem
  A new study shows that talking on a                                                       “defective’’ traffic control system
                                             like much, but it could be the differ-
cell phone makes you drive like a                                                           caused a red light to become stuck in
                                             ence to stopping in time to avoid
retiree—even if you’re only a teen. A                                                       that position, leading the female driver
                                             hitting a child in the street, Strayer said.
report from the University of Utah says                                                     to get frustrated and pull into the inter-
                                             The new research questions the effec-
when motorists between 18 and 25 talk                                                       section as the decedent was approach-
                                             tiveness of cell phone usage laws in
on cell phones, they drive like elderly                                                     ing. CLD denied being at fault, saying
                                             states such as New York and New
people—moving and reacting more                                                             its redesign is based on the directions
                                             Jersey, which only ban the use of
slowly and increasing their risk of acci-                                                   of the Department of Transportation. It
                                             hand-held cell phones while driving.
dents. David Strayer, a University of                                                       will be interesting to see what happens
                                             It’s not so much the handling of a
Utah psychology professor and princi-                                                       to this verdict on appeal.
                                             phone, Strayer said, but the fact that
pal author of the study, told the Associ-
                                             having a conversation is a mental
ated Press: “If you put a 20-year-old
                                             process that can drain concentration.          NEW YORK SETTLES GUARD RAIL LAWSUIT
driver behind the wheel with a cell
                                             The only silver lining to the new
phone, his reaction times are the same                                                        The New York State Thruway
                                             research is that elderly drivers using a
as a 70-year-old driver. It’s like instant                                                  Authority has agreed to pay over $5
                                             cell phone aren’t any more of a hazard
aging.” Apparently, according to the                                                        million to a student who was paralyzed
                                             to themselves and others than young
study, it doesn’t matter whether the                                                        in a 1999 car crash that killed another
                                             drivers. The study found that more
phone is hand-held or hands-free. Any                                                       student. The settlement, which came
                                             experience and a tendency to take
activity requiring a driver to “actively                                                    during a November trial in the state
                                             fewer risks on the part of older drivers
be part of a conversation” likely will                                                      Court of Claims, has since been
                                             helped negate any additional danger.
impair driving abilities.                                                                   approved by the Thruway Authority
                                             Source: Associated Press
  It is said that motorists who talk on                                                     board of directors. Under the settle-
cell phones are more impaired than                                                          ment, the state will pay $5.15 million to


                                             www.BeasleyAllen.com                                                                  39
the student. The state also reached a        organizations have launched a nation-        Lawyers for Public Justice added these
$150,000 settlement with the family of       wide effort to stop the corporate use of     comments:
the other student, who was killed in         binding mandatory arbitration clauses
                                                                                            At Trial Lawyers for Public Justice,
the crash. A guardrail installed along       in consumer transactions. Millions of
                                                                                            we have been repeatedly asked for
the Thruway was said to be defective,        U.S. consumers unwittingly waive their
                                                                                            help by consumers and employees
thereby contributing to the accident.        right to access the courts on a daily
                                                                                            who had strong legal claims, but
That guardrail has since been replaced       basis and many don’t even realize. At a
                                                                                            were being forced into arbitration
with another guardrail of a different        press conference held last month, the
                                                                                            systems badly tilted in favor of cor-
design. The two students, both 18,           groups released a 10-point platform for
                                                                                            porate defendants. These persons
were among five Rochester Institute of       action, which includes the unveiling of
                                                                                            find it hard to believe that some-
Technology soccer players who were           two educational websites, a call for
                                                                                            thing so unfair could happen to
returning from a concert in Toronto          state and federal legislation, and a cam-
                                                                                            them in America, but it happens to
when their car skidded off the road          paign to encourage consumers to avoid
                                                                                            people every day. Under our
during a rainstorm. Proper design of a       doing business with companies that
                                                                                            current system, the fine print of
guardrail is very important. Many of the     use BMA clauses. There is probably not
                                                                                            BMA provisions in corporate con-
ones in use today are not properly           a single adult in the United States who
                                                                                            tracts can and does hurt people
designed and are considered defective.       is not subject to at least one binding
                                                                                            who have been ripped off by corpo-
                                             mandatory arbitration clause—and
                                                                                            rate wrongdoing.
                                             most are subject to many. Buried in the
XV.                                          fine print of credit card billing inserts,     Tom Greene, a resident of Enterprise,
ARBITRATION                                  health insurance plans, employee             Alabama, is a former poultry farmer
UPDATE                                       handbooks and even standard pur-             and a Vietnam veteran. Tom was on
                                             chase contracts, the clauses require         hand for the announcement and shared
                                             consumers to waive their right to go to      his story. In 1990, Tom built a poultry
THE BATTLES ARE STILL BEING FOUGHT           court if a dispute arises with the           farm in which he invested heavily.
                                             company involved in the transaction.         When the poultry processor attempted
   I wish that I could report that the
                                             Cases are funneled to a costly private       to force binding mandatory arbitration
battle against mandatory, binding arbi-
                                             legal system that favors companies and       on him, Tom refused to sign it. He was
tration was being won by consumers.
                                             operates outside the law; arbitrators are    forced out of business and suffered
But, that simply isn’t the case. Until the
                                             not bound to use legal precedent or          substantial losses. Tom described these
courts—and ultimately Congress—say
                                             even good sense in making their              events at the press conference, noting:
this anti-consumer weapon has no
                                             rulings, and an arbitrator’s rulings can’t
place in consumer disputes—unless                                                           Arbitration violates the fundamen-
                                             be appealed.
both parties agree to it after a dispute                                                    tal liberties our Constitution
arises,    as     Congress      originally     Joan Claybrook, president of                 extends to us as free citizens in this
intended—the problem for consumers             Public Citizen, said at the news             great republic. … As a soldier, a
will continue. We are continuing our           conference:                                  war veteran who has drawn blood
fight in this arena and don’t have any                                                      in defense of those principles, I
                                               We are starting a campaign to stop
intention of letting up. Fortunately,                                                       could not sign that contract.
                                               the use of binding mandatory arbi-
there are consumer groups involved in
                                               tration clauses, which Big Business           The groups’ 10-point platform aims
the fight. We will mention more on that
                                               is now forcing on unknowing con-           to highlight the widespread use of arbi-
below. Arbitration favors the powerful
                                               sumers in billions of pre-printed,         tration and provide tools to empower
and is bad for consumers and that’s a
                                               take-it-or-leave-it contracts as part      consumers to fight the anti-consumer
simple fact. There is no way that
                                               of its larger push to avoid oversight      clauses. In it, the groups pledge to:
forcing arbitration on ordinary citizens
                                               and accountability for fraud and
can be justified.                                                                         • Launch two new Web sites to
                                               deception. It is galling that corpo-
                                                                                            educate consumers about BMA
                                               rations are systematically denying
NATIONWIDE EFFORT TO STOP BINDING                                                           clauses. The first, www.givemeback-
                                               individuals their right to go to
MANDATORY ARBITRATION                                                                       myrights.org, explains what BMAs
                                               court.
                                                                                            are, where they are found and what
  More than two dozen public interest          Paul Bland, staff attorney with Trial        they mean to consumers. The


40                                           www.BeasleyAllen.com
  second, www.callbeforeyoubuy.com,         Consumers Union, stated:                    The 5-to1 ruling overturned the deci-
  helps consumers purchase vehicles                                                     sion of Florida’s Fourth District Court
                                              Consumers Union finds ominous the
  without being forced into a contract                                                  of Appeals, which held that Buckeye’s
                                              growing prevalence of fine print
  with a BMA clause.                                                                    arbitration clause should be enforced
                                              clauses in consumer contracts that
                                                                                        even though the plaintiffs were chal-
• Conduct a campaign to let con-              have the effect of blocking con-
                                                                                        lenging the legality of the entire
  sumers know which companies don’t           sumers’ access to the courts. These
                                                                                        payday loan contract. TLPJ Staff Attor-
  use BMA clauses.                            binding mandatory arbitration
                                                                                        ney F. Paul Bland, Jr., who argued the
                                              clauses are the stealth weapon of
• Encourage consumers to close credit                                                   appeal, stated: “Payday lending compa-
                                              corporations that seek to escape
  cards that have BMA clauses and call                                                  nies like Buckeye that charge interest
                                              being held accountable in a neutral
  on credit card companies to remove                                                    rates up to 1,300% should not be
                                              forum—a court of law—by giving
  BMA clauses from their contracts.                                                     allowed to shield these illegal loan-
                                              themselves the advantage of binding
                                                                                        sharking schemes by forcing borrowers
• Encourage homebuyers seeking                mandatory         arbitration—often
                                                                                        into private arbitration. The Florida
  mortgages to avoid lenders that use         without the consumer even knowing
                                                                                        Supreme Court was completely correct
  BMA clauses.                                she or he has no right to go to court.
                                                                                        that companies cannot use an illegal
• Urge consumers to avoid auto dealers         The use of arbitration is just another   contract to force consumers to give up
  and auto financers that use BMA           attempt to avoid corporate accountabil-     their day in court.”
  clauses.                                  ity. It must be stopped before the             Plaintiffs John Cardegna, Donna
                                            American marketplace is overrun with        Reuter, and thousands of other Florida
• Call for auto dealers to remove BMA
                                            corporate fraud and abuse that make         residents borrowed money from
 clauses from their contracts.
                                            Enron and Worldcom the rule, not the        Buckeye and received immediate pay-
• Provide bill stuffers for consumers to    exception. It is good to know that          ments of cash in exchange for post-
  send with their payments to repudi-       there are public interest groups, which     dated personal checks for substantially
  ate BMA clauses.                          are willing to stand up and fight for       greater sums of money. When the time
                                            consumers.                                  came for Buckeye to cash the checks,
• Urge large membership organizations                                                   borrowers who could not afford the
  to insist that partners providing serv-                                               greater amount due were allowed to
  ices to their members, such as credit     AN IMPORTANT RULING IN FLORIDA
                                                                                        “roll over” the loan by paying an addi-
  card and mutual fund companies,                                                       tional “fee” equal to the difference
                                               The Supreme Court of Florida has
  remove BMA clauses from their                                                         between the amount owed and the
                                            refused to enforce a binding mandatory
  group contracts as a condition of                                                     amount borrowed, even though they
                                            arbitration clause in a payday loan con-
  offering products to their members.                                                   did not receive any additional loan.
                                            tract charging interest rates of up to
• Conduct a nationwide campaign pro-        1,300%. The court ruled that low-           These added “fees” on deferred pay-
  moting the passage of model state         income borrowers couldn’t be forced         ments produced interest rates between
  laws limiting the use of BMA clauses.     to arbitrate their claims that the loans    137% and 1,317%.
                                            violated state usury laws. Trial Lawyers       Cardegna and Reuter filed suit
• Call for congressional hearings on                                                    against Buckeye on behalf of all its
                                            for Public Justice (TLPJ) and a team of
  BMA clauses and for legislation pro-                                                  Florida borrowers, alleging that
                                            consumer advocates representing bor-
  hibiting BMA.                                                                         Buckeye’s “deferred check-cashing”
                                            rowers are challenging the legality of
  As we have said on numerous occa-         the high interest “payday loan” rates       transactions were actually usurious
sions, arbitration was conceived as an      charged by Buckeye Check Cashing—a          consumer loans that required low-
informal, expedited process for resolv-     nationwide company with over 90             income borrowers to pay exorbitant
ing routine disputes between busi-          locations—and successfully argued that      interest rates in violation of numerous
nesses. But when used against               consumers cannot be forced out of           state consumer protection statutes.
consumers, arbitration becomes a tool       court and into arbitration.                 Buckeye responded by moving to
to block consumers from exercising             The court’s January 20, 2005, deci-      compel arbitration, arguing that all of
their rights. There is no such thing as a   sion held that Florida courts must first    its borrowers should be forced out of
level playing field when arbitration        decide whether a legal agreement            court and into individual private arbi-
involves a corporation and a consumer.      exists before enforcing the agreement’s     tration proceedings pursuant to the
Sally Greenburg, senior counsel for         binding mandatory arbitration clause.       BMA clause in its loan contracts.


                                            www.BeasleyAllen.com                                                            41
Richard M. Fisher of Cleveland, Ten-          XVI.                                         BEVERLY ENTERPRISES RECEIVES TAKEOVER
nessee, who is co-lead counsel for the                                                     OFFER
                                              NURSING HOME
plaintiffs, stated: “Buckeye wanted to
                                              UPDATE                                         Beverly Enterprises, Inc., one of the
force our clients into secret arbitration
                                                                                           nation’s largest nursing home chains,
proceedings so no court could ever
                                                                                           has received a $1.45 billion take-over
issue a binding judgment saying that its      WOMAN FOUND DEAD AFTER WANDERING
                                              FROM NURSING HOME                            offer from an investor group. Beverly
‘check-cashing’ business is an illegal
                                                                                           presently operates 351 nursing homes,
scheme to commit usury. If Buckeye
                                                 A seventy-six year old woman was          18 assisted living centers, and 52
had pulled off this gambit, it would
                                              found dead in a ditch after walking out      hospice and home health centers
have been impossible for us to publicly
                                              of a nursing home in Daytona Beach,          throughout the country. Based on all
vindicate the rights of thousands of
                                              Florida a few weeks ago. The elderly         the talk about how financially strapped
Floridians.”
                                              lady, who had been a resident at             nursing homes are, you would expect
   The Florida trial court initially denied
                                              Daytona Beach Health and Rehabilita-         Beverly to jump at this offer. But, the
Buckeye’s motion for arbitration, but
                                              tion Center, had attempted to leave the      chairman and chief executive officer of
the Fourth District Court of Appeals
                                              nursing home the day before she dis-         Beverly Enterprises, William R. Floyd,
reversed and held that the plaintiffs’
                                              appeared. Her body was discovered in         responded that the acquisition of the
claims that Buckeye’s loan contracts
                                              a ditch 200 yards from the nursing           nursing home chain would not be in
were illegal and void had to be
                                              home, where she had apparently               the best interests of the company. Mr.
resolved through arbitration. The state
                                              drowned in six inches of rainwater run-      Floyd stated further that the aggressive
supreme court granted review and then
                                              off, according to police reports. Resi-      suitors would only return Beverly to
reversed the appeals court, holding
                                              dents living near the nursing home           the “over-leveraged, financially weak
that “an arbitration provision in a con-
                                              were concerned that something like           condition the company was in prior to
tract which is void under Florida law
                                              this might happen because of similar         our turnaround.” Beverly Enterprises
cannot be separately enforced while
                                              earlier incidents. Bryan Lee of Florida’s    has in recent years sold off many of its
there is a claim pending…that the con-
                                              Long-Care Ombudsmen Program said,            underperforming nursing homes and
tract containing the arbitration provi-
                                              “each [nursing-home resident] should         nursing homes, which had a history of
sion is itself illegal and void ab initio.
                                              have a customized, individual care plan      lawsuits.
Chris Casper of James, Hoyer, New-
                                              that meets his or her specific needs.”
comer & Smiljanich in Tampa, Florida,
                                              Lee said residents of elder-care homes
who is also co-lead counsel for the                                                        SEX OFFENDERS FOUND LIVING IN NURSING
                                              have the “right to walk around the
plaintiffs, stated: “We are pleased that                                                   HOMES
                                              facility” but “many need supervision”.
the Supreme Court found that our
                                                 The Florida Agency for Healthcare            It is hard to imagine sex offenders
clients are entitled to their day in court.
                                              Administration has put the 180-bed           living in nursing homes but it is hap-
Now, we have the chance to hold
                                              facility on a statewide nursing home         pening. We have learned that convicted
Buckeye accountable for its repeated
                                              watch list four times, but records indi-     sex offenders may be living among res-
violations of Florida’s usury and con-
                                              cate that the facility corrected the prob-   idents in Tennessee nursing homes.
sumer protection laws.” In addition to
                                              lems. State inspectors gave the facility a   The most frail and vulnerable people in
Bland, Fisher, and Casper, E. Clayton
                                              one-star rating, meaning it ranks in the     our society could be at great risk. The
Yates of Fort Pierce, Florida also repre-
                                              bottom fourth of all nursing homes in        state is now in talks to form a list that
sented the plaintiffs.
                                              Florida in terms of care, life, nutrition,   would show the number of sex offend-
Source: Trial Lawyers for Public Justice
                                              minimizing use of restraints, prevention     ers that are living in Tennessee’s
                                              of bedsores, and maintaining dignity.        nursing homes. At least four offenders
                                              The facility is run by Northport Health      were found living in nursing homes in
                                              Services, Inc., a Tuscaloosa, Alabama,       the state. In my opinion, sex offenders
                                              based company that operates approxi-         should never be allowed to live in
                                              mately 40 nursing homes in four states.      nursing homes. When unregistered sex
                                              State officials had sanctioned the home      offenders were rounded up in Hamil-
                                              previously in 2001 for not keeping           ton County, Tennessee, last year, Ten-
                                              track of patients.                           nessee Bureau of Investigation (TBI)
                                                                                           agents made a startling discovery. A


42                                            www.BeasleyAllen.com
TBI spokeswoman reported: “Of the 72        the local sheriff’s office. Failure to      viduals. We need to safeguard our
people we were looking for, two of          notify the sheriff’s office is a misde-     seniors.… If Oklahoma’s act and the
them were actually in nursing homes.”       meanor, not a felony, and that’s inade-     federal act are not administered truth-
   State Ombudsman Adrian Wheeler           quate. Should sex offenders be allowed      fully and in good faith, then they are
reports that two more sex offenders         to live in nursing homes? I suggest you     just pieces of paper.”
have been found living in nursing           write the governor in your state and           Under Oklahoma state law, the State
homes in Tennessee. Wheeler can’t say       express your views on this subject.         Board of Examiners for Nursing Home
where those offenders were working,                                                     Administrators is responsible for
but he wants to know how many more                                                      “developing, imposing and enforcing
                                            STRICTER LAWS AGAINST NURSING HOME
are out there living among some of          ABUSE NEEDED                                standards which must be met by indi-
Tennessee’s most vulnerable. He stated:                                                 viduals” who are licensed to operate
“There are many residents who are              More than 1,000 complaints of abuse      nursing homes. News reports state that
bedridden. They are limited in motion       in nursing homes reach Mississippi          over the years, the Board has adopted
and they are not able to defend them-       state investigators each year. This year,   questionable management practices
selves,” said Wheeler. Just like many       Mississippi Attorney General Jim Hood       that have obscured the actions of some
other seniors, some aging sex offenders     is calling for more serious punishments     injurious administrators. A recent inves-
have to be cared for in nursing homes.      for those convicted of abusing senior       tigation by the Tulsa World revealed
That is not against the law. But more       citizens. The Attorney General is urging    that the Board routinely dismisses
and more states, including Minnesota,       legislators to create a special felony      many cases that are referred to it for
Florida and Oklahoma, report cases of       category for abuse of residents living in   investigation or disciplinary action,
sex offenders living in nursing homes       long-term care facilities such as nursing   according to the announcement. The
assaulting other residents.                 homes and mental health institutions.       paper’s review found that dismissed
   The State Ombudsman in Tennessee,        General Hood states: “We believe with       cases included incidents in which
who works on behalf of nursing home         requiring them to provide that informa-     nursing home residents “died, suffered
residents, doesn’t believe sex offenders    tion, they can call our unit and we’ll go   burns or other serious injuries, or were
should be allowed to live in nursing        out and investigate those matters, and      victims of abuse or neglect.” Addition-
homes at all. He also wonders if sex        it will give you more piece of mind.” In    ally, records indicate a subcommittee
offenders should be contained to a          Mississippi, you can report suspected       of the Board has dismissed cases
certain area of a nursing home.             abuse by calling (800) 829-6766.            without the Board’s approval, as
Wheeler is currently in talks to get Ten-                                               required by law.
nessee lawmakers involved before the                                                       House Bill 1453 would better define
                                            STRONGER OVERSIGHT OF NURSING HOMES
worst happens. The AARP is reviewing        SOUGHT IN OKLAHOMA                          the Board’s purpose, its membership
the issue and strongly believes some-                                                   and its duties and would open the
thing should be done about sex                Seeking to put an end to accounts of      process to public scrutiny. The legisla-
offenders living in nursing homes.          neglect, abuse and mismanagement at         tion would require that any nursing
Under Tennessee law, a sex offender’s       many of Oklahoma’s nursing homes,           home administrator devote at least half
address has to be listed on-line only if    the Oklahoma Legislature is consider-       their work time to “on-the-job supervi-
they committed the crime after July 1,      ing legislation that would revamp the       sion” of the facility and would change
1997. If the offender committed a sex       board responsible for overseeing the        configuration of the board that over-
crime before that date, they have to        administrators of those facilities. House   sees their management. Of the 13
register with law enforcement, but that     Bill 1453 was filed in response to          appointed members of the State Board
isn’t listed publicly. In Alabama a sex     growing concerns that the Oklahoma          of Examiners for Nursing Home
offender’s address has to be registered     State Board of Examiners for Nursing        Administrators, five would be required
when they commit a notifiable crime         Home Administrators may be violating        to be licensed nursing home adminis-
after May 1996. If a person has commit-     federal and state guidelines, circum-       trators with bachelors’ degrees and
ted a sexual crime prior to May 1996,       venting the state’s Open Meeting Law,       three would be members of the
served their time, and has not moved        and placing Oklahoma’s seniors in           general public. Under the bill, none of
since that date, he or she would not be     danger. The legislator who filed the        the remaining five members could
listed online. If they move after 1996 or   bill, who incidentally is a Republican,     have any direct or indirect financial
commit a notifiable crime past that         stated: “Those who take advantage of        interest in nursing homes. Under HB
date, they are required to register with    our elderly and frail are vile indi-        1453, each investigation of a complaint


                                            www.BeasleyAllen.com                                                              43
received by the Board must be com-           pressure from the President and the         interest. Now all staff scientists at the
pleted within 180 days of receipt.           powerful pharmaceutical industry.           National Institutes of Health (NIH) will
Extensions could be granted with the         Congress will have to take a very close     be banned from accepting any consult-
Board’s approval. HB 1453 also would         look at the program’s costs and may         ing fees or other income from drug
require the board to establish a process     have to pass new legislation to hold        companies. NIH employees must also
for reviewing complaints, create a           down costs and give seniors the true        divest themselves of all industry stock
formal file on each complaint received,      benefits they deserve. When Congress        holdings. This comes under a far-reach-
and maintain a publicly accessible reg-      narrowly approved the drug legislation      ing reform that was long overdue. The
istry of all complaints or referrals com-    in 2003, the Administration told waver-     new regulations—drawn up by admin-
plaining of acts or omissions of             ing lawmakers that the program would        istrators from the NIH, the Office of
licensed administrators.                     cost no more than $400 billion, includ-     Government Ethics and the Depart-
Source: The Insurance Journal                ing expected savings. The White House       ment of Health and Human Services—
                                             revised the estimate to $534 billion just   are aimed at halting lucrative deals that
                                             two months later, after the law was         have led to conflict-of-interest inquiries
XVII.                                        enacted. Now we find that the drug          at the government’s premier agency for
HEALTHCARE                                   program’s gross 10-year cost will be        medical research. While the new rules
                                             over $1.2 trillion.                         can be reassessed after one year, I
ISSUES
                                               Even Republican members of Con-           hope they will be permanent. This is
                                             gress, including Senator Judd Gregg (R-     certainly a step in the right direction.
MEDICARE DRUG BENEFIT TO COST $720           N.H.), the new chairman of the Senate          For the last decade, government sci-
BILLION                                      Budget Committee, are complaining.          entists at the NIH have quietly been
                                             Based on the new numbers, the               allowed to consult for biomedical com-
   President Bush didn’t level with Con-
                                             program’s costs are estimated at            panies. Hundreds of scientists took mil-
gress or the American people when he
                                             roughly $100 billion annually in 2014       lions of dollars in fees and stock from
pushed the Medicare prescription drug
                                             and 2015, or more than a third of what      industry. Unfortunately, most of the
benefit bill through Congress last year.
                                             the Medicare bill was projected to cost     payments were hidden from public
Now the President says fixing Medicare
                                             in its first 10 years. Under the new        view. Obviously, this raises obvious
is next on the government’s fix-it list.
                                             program, participants will pay monthly      questions about the scientists’ impar-
New Administration estimates, released
                                             premiums that are expected to average       tiality in overseeing clinical trials and in
last month, revealed that the Act will
                                             $35 in 2006 and the first $250 in drug      making recommendations to doctors
cost taxpayers $724 billion over its first
                                             costs. Medicare will pick up 75% of the     for treating patients. In some cases,
full 10 years. Obviously, this is far
                                             next $2,000 in prescription expenses.       NIH scientists worked for drug compa-
higher than earlier estimates. This has
                                             After that, a gap is built into coverage    nies that directly benefited from their
caused the President a great deal of dif-
                                             during which participants are responsi-     recommendations to doctors. In other
ficultly in Congress and with consumer
                                             ble for the entire drug bills until costs   cases, scientists appeared at public
groups. The new estimate exceeds
                                             top $5,100, after which the government      forums and commented upon or
earlier projections by over $300
                                             pays 95%. Controversy over cost has         endorsed treatments or drugs without
million. The prescription benefit that
                                             plagued the program since before its        revealing that they were on the payroll
the President signed into law last year
                                             passage. Now the public has learned         of companies making the products.
doesn’t take effect until next year.
                                             that you simply can’t trust the White          The Los Angeles Times in 2003 and
   The Administration now estimates
                                             House to always tell the truth.             2004 revealed the existence of the
the drug program’s gross price tag will
                                                                                         deals, along with the secret policy
be $1.19 trillion. The new numbers
                                                                                         changes that made them possible. A
should cause the American public to          NIH TO BAN DEALS WITH DRUG FIRMS
                                                                                         blue ribbon panel was appointed last
question the White House on other
                                                I have always believed that persons      year to examine the NIH’s policies.
programs, considering how they mis-
                                             who are in a position to determine          Congressional leaders, citing the Times
represented the cost of this one. The
                                             healthcare issues should not be             articles, asked the director to provide
White House low-balled cost estimates
                                             allowed to receive money from compa-        details on all biomedical industry pay-
two years ago to win votes from con-
                                             nies in the healthcare industry. Finally,   ments to agency scientists for a five-
servatives when Congress narrowly
                                             some steps have been taken to take          year period. Four congressional
approved the program under intense
                                             away the appearance of conflicts of         hearings into conflict of interest at the


44                                           www.BeasleyAllen.com
NIH were convened last year. Three of        agent. The March 1991 memo, obtained             Thimerosal has been largely removed
these hearings took place in the House       first by the news media, said that 6-         from pediatric vaccines in recent years
and one in the Senate. All NIH scien-        month-old children who receive their          in what health officials have described
tists will now be prohibited from            shots on schedule would get a mercury         as a precautionary measure. This has
accepting consulting fees, speaking          dose up to 87 times higher than guide-        been accomplished as drug makers
fees and any other form of income            lines for the maximum daily consump-          have voluntarily switched from multi-
from all biomedical companies, profes-       tion of mercury from fish. The memo,          dose vials of vaccine, which require a
sional societies, and other outside enti-    written to the president of Merck’s           chemical preservative like thimerosal,
ties. The scientists must sell or            Vaccine Division, was prepared at a           to single dose containers. Merck contin-
otherwise dispose of any stock or stock      time when U.S. health authorities were        ues to claim that there is no credible
options they hold in individual phar-        aggressively expanding their immuniza-        evidence of harm from the amounts of
maceutical or biotechnology firms.           tion schedule by adding five new shots        mercury previously used in children’s
   It should be pointed out that the         for children in their first six months.       shots. At the very least, the memo
government employees will be allowed         Many of these shots, as well as some          obtained from Merck provides the first
to accept paid outside positions as          previously included on the vaccine            real hard evidence that the company
physicians at hospitals or in other clini-   schedule, contained thimerosal, an anti-      knew that the children were getting sig-
cal settings. They also will be allowed      bacterial compound that is nearly 50%         nificantly more mercury than the gener-
to accept fees in some circumstances         ethyl mercury, a neurotoxin.                  ally accepted dose. If Merck knew, it is
from universities for teaching or writing       Federal health officials disclosed for     reasonable to conclude that other com-
and editing services. The number of          the first time in 1999 that many infants      panies had this same information.
NIH employees required to file annual        were being exposed to mercury above              I have to wonder why this damaging
financial disclosure reports open to         health guidelines through routine vacci-      Merck memo was provided to the news
public inspection under the Freedom          nations. The announcement followed a          media, but not to lawyers who are han-
of Information Act also was to be            review by the U.S. Food and Drug              dling these cases for victims. A Wash-
expanded. Any potential conflict of          Administration that was described at the      ington lawyer who works with parent
intent should be subject to public           time as a first effort to assess “the cumu-   groups on vaccine safety issues actually
scrutiny. In my opinion, this is not         lative mercury dose.” The Merck memo,         provided the memo to the media. He
asking too much. I believe this will         however, shows that at least one major        obtained it from a whistle-blower
result in more objective work coming         manufacturer was aware of the concern         whom he would not name. Clearly,
from the NIH employees, and that is          much earlier. The memo states:                Merck had a legal duty to provide this
good news for American citizens.                                                           damaging memo during discovery in
                                               The key issue is whether thimerosal,
Source: The New York Times                                                                 cases pending against the company.
                                               and the amount given with the
                                                                                           Just as clearly, the company elected not
                                               vaccine, does or does not constitute
                                                                                           to do so. The 7-page memo states that
DOCUMENTS IN THIMEROSAL CASES                  a safety hazard. However, percep-
                                                                                           regulators in several countries had
CONTINUE TO COME OUT                           tion of hazard may be equally
                                                                                           raised concerns about thimerosal. For
                                               important.
  As you may recall, our firm is cur-                                                      example, in Sweden the chemical was
rently involved in thimerosal cases on         The legitimacy of thimerosal is             being removed from vaccines. The
behalf of families whose children            causing major problems for Merck and          Merck memo goes on to say:
received vaccine shots that contained        other drug companies. More than 4,200
                                                                                             It appears essentially impossible,
excessive doses of mercury. We contend       claims have been filed in a special
                                                                                             based on current information, to
that these shots have caused a number        federal tribunal, “The Vaccine Injury
                                                                                             ascertain whether thimerosal in
of problems for those children and their     Compensation Program,” by parents
                                                                                             vaccines constitutes or does not
families, including autism. A recent dis-    asserting that their children suffered
                                                                                             constitute a significant addition to
covery regarding a memo from Merck &         autism or other neurodevelopmental
                                                                                             the normal daily input of mercury
Company shows that nearly a decade           disorders from mercury in vaccines.
                                                                                             from diverse sources. It is reason-
before the first public disclosure, senior   Similar claims, including our client’s
                                                                                             able to conclude that it should be
executives with the company were con-        cases, are awaiting trial in civil courts.
                                                                                             eliminated where possible, espe-
cerned that infants were getting an ele-     Various scientific studies we believe
                                                                                             cially where use in infants and
vated dose of mercury in vaccinations        prove the dangers of thimerosal,
                                                                                             young children is anticipated.
containing a widely used sterilizing         including the levels found in vaccines.


                                             www.BeasleyAllen.com                                                               45
   The Merck memo goes on to say            BATTERY PROBLEM MAY CAUSE CERTAIN            drug advertising. Only 18% said they
that unlike regulators in Sweden and        DEFIBRILLATORS TO FAIL                       trust drug company ads “most of the
some other countries, “the U.S. Food                                                     time,” compared with 33% in 2000.
                                              Medtronic Inc. is advising doctors
and Drug Administration…does not                                                         Interestingly, the poll revealed that the
                                            about a potential battery problem that
have this concern for thimerosal.”                                                       public still generally trusts the Food and
                                            can cause certain of its implantable
That assessment, considering how                                                         Drug Administration, although 27% said
                                            defibrillators to fail. Medtronic says
controlled and ineffective the FDA has                                                   they had lost some confidence in the
                                            there are no reports of patient injuries
been, is not surprising.                                                                 agency during the last few years. The
                                            or deaths due to the problem. The Min-
   Congress passed a bill in 1997                                                        Kaiser poll of 1,200 adults was taken
                                            neapolis medical-device maker said
ordering an FDA review of mercury                                                        during the first week of February had a
                                            nine batteries out of 87,000 implanted
ingredients in food and drugs. That                                                      margin of sampling error of plus or
                                            devices in question have gone dead
was a real turning point. Please keep                                                    minus 3 percentage points. I suspect
                                            because of a shorting action, but it esti-
in mind, however, that this was six                                                      the FDA’s popularity has slipped even
                                            mates that the failure rate might
long years after the 1991 Merck                                                          more due to recent events. This sort of
                                            increase as high as 1.5% as the devices
memo. The review was not completed                                                       thing normally takes a few weeks—and
                                            get older. According to the company, if
until 1999, when it revealed the high                                                    sometimes longer—to sink in. There is
                                            the shorting happens the batteries can
level of mercury exposure from pedi-                                                     one thing for certain and that is folks
                                            be depleted within a few hours or a
atric vaccines and raised many ques-                                                     believe the FDA should ensure drug
                                            few days, and the devices would stop
tions. In e-mails released subsequently                                                  safety and should never put a danger-
                                            working. Devices with batteries manu-
at a Congressional hearing, an FDA                                                       ous drug on the market.
                                            factured from April 2001 to December
official said health authorities could be
                                            2003 may have the problem, Medtronic
criticized for “being asleep at the
                                            reported. The potentially affected
switch” for decades by allowing a                                                        XVIII.
                                            models are the Marquis VR/DR and
potentially hazardous compound to
                                            Maximo VR/DR ICDs and the InSync
                                                                                         ENVIRONMENTAL
remain in many childhood vaccines,                                                       CONCERNS
                                            I/II/III Marquis and InSync III Protect
and not forcing manufacturers to
                                            CRT-D devices. About 75% of these
exclude it from new products. While
                                            devices were implanted in the U.S.           ASBESTOS COMPENSATION FUND FAR FROM
asserting that there was no proof of
                                                                                         A DONE DEAL
harm, in July 1999, the U.S. Public
Health Service called on manufactur-        MOST AMERICANS WANT U.S. PRICE LIMITS           The asbestos bill, sponsored by Sen.
ers to go mercury-free by switching to      ON DRUGS
                                                                                         Arlen Specter (R-PA), continues to face
single-dose vials. Soon thereafter,                                                      serious opposition from within both
                                              The results of a new survey dealing
Merck introduced a mercury-free                                                          parties. The bill, which would create a
                                            with healthcare issues tells me some-
version of its Hepatitis-B vaccine,                                                      national trust fund to settle all asbestos-
                                            thing that I already knew. Nearly two-
replacing the only thimerosal-contain-                                                   related claims, does not seem likely to
                                            thirds of Americans want the
ing vaccine it was still marketing at                                                    emerge from the Senate Judiciary Com-
                                            government to play more of a role in
the time. It is shocking that these vac-                                                 mittee anytime soon. The latest compli-
                                            the prices charged for prescription
cines could have been mercury-free a                                                     cations are coming from within Senator
                                            drugs, according to the survey. Most
long time ago, but the companies                                                         Specter’s own Republican Party. Senate
                                            don’t believe the claims from the phar-
elected not to take that option. The                                                     Majority Leader Bill Frist, who appears
                                            maceutical industry that the high costs
vaccines are today and that’s good,                                                      to be running for President, has placed
                                            of prescription drug prices are driven
but that doesn’t excuse the sins of the                                                  bankruptcy reform and federal budget
                                            by research and development.
past. Remember, it was only in 2002                                                      bills ahead of the ailing asbestos bill.
                                            Three-fourths in the poll, conducted by
that thimerosal was eliminated or                                                           If history is any indication, the oppo-
                                            the Kaiser Family Foundation, say the
reduced to trace levels in nearly all                                                    sition for this type of legislation will
                                            desire for profit by the industry is the
childhood vaccines.                                                                      continue to be fierce. The first asbestos
                                            biggest factor in prescription drug
Source: Los Angeles Times
                                            prices. Two-thirds of respondents (65%)      bill was introduced in 1978. The busi-
                                            say they want more regulation limiting       ness community, through the Asbestos
                                            prescription drug prices and over half       Alliance and the American Insurance
                                            (51%) say they want more regulation of       Association, wants assurances that $140
                                                                                         billion is the maximum funding and

46                                          www.BeasleyAllen.com
that there is no provision for a return      • Payday Loans—borrowers use a               and to adhere to a list of “best prac-
to the tort system should the fund be          check dated in the future as collateral    tices.” Ameriquest says it holds itself “to
depleted. On the other hand, the Asso-         for a short-term loan.                     the highest standards” and does not
ciation of Trial Lawyers of America and                                                   tolerate unethical or improper behavior
                                             • Title Pawns—the pawning of an
the AFL-CIO are concerned there will                                                      by its employees. The nation’s largest
                                               automobile’s certificate of title by the
not be adequate up-front funding and                                                      sub-prime mortgage lender has sought
                                               owner.
that subrogation against awards victims                                                   to polish its image because it is moving
might receive would leave sick victims       • Refund Anticipation Loans—these            into prime mortgage lending, which is
with little or no real compensation.           are short-term loans offered by tax        referred to as mainstream lending. The
                                               reparation services and secured by         company has also increased its political
                                               the taxpayer’s expected refund.            profile, donating heavily to various
XIX.                                                                                      political campaigns. The privately held
                                             • Rent-To-Own—these         companies
PREDATORY                                      operate as lenders without having to
                                                                                          company is also being very visible in
LENDING UPDATE                                                                            the sports world. It committed $75
                                               comply with loan regulations.
                                                                                          million to have the Texas Rangers ball-
                                             • Sub-prime Mortgages—these are              park dubbed Ameriquest Field. This
PREDATORY LENDING IN ALABAMA                   loans offered at higher interest to        company also sponsored the halftime
                                               home-buyers who don’t otherwise            extravaganza at Super Bowl XXXIX. In
   Anybody who travels our state can
                                               qualify for prime rates because of         fact, Ameriquest even sponsors one of
tell you that Alabama is overrun with
                                               their credit history’s.                    my favorite TV programs “Antique
predatory lenders. Signs promising
                                                                                          Roadshow,” which regularly appears
“easy money” are visible in almost           • Loan-flipping—while this is not a
                                                                                          on public TV. The company likes to
every community. Currently, Alabama            loan in and of itself, it is a real bad
                                                                                          say, “we never forget that our cus-
citizens face an overwhelming variety          practice. Flipping or renewing con-
                                                                                          tomers deserve respect, fairness and
of credit services designed to “trap           sumer loans is a method by which
                                                                                          honesty.” Yet the Los Angeles Times
consumers” in “financial quicksand.”           lenders exploit vulnerable borrowers.
                                                                                          found a far different picture when it
Once they get in, it’s mighty hard to          The loans are constantly renewed,
                                                                                          looked into the company’s past history.
get out. Nearly all states have laws           with all sorts of fees and charges
                                                                                          This is what the Times discovered:
against usury, which prohibits the             each time being added to the loan.
charging of obsessive interest, and we                                                    • Ameriquest customers filed more
are no exception. Alabama has the              I hope the Legislature will take a
                                                                                            complaints with the Federal Trade
Alabama Small Loan Act, which caps           close look at the predatory lending
                                                                                            Commission from 2000 through 2004
the interest on small, short-term loans      industry in Alabama and do something
                                                                                            than did those of two of its biggest
at 3% per month (APR of 36%). Unfor-         to get Alabama consumers out of the
                                                                                            competitors combined—466 com-
tunately, the laws that regulate payday      “quicksand” they find themselves in
                                                                                            pared with 101 for Full Spectrum
lenders, mortgage brokers, and pawn          when dealing with this industry. I am
                                                                                            Lending (Calabasas, California-based
shops permit certain kinds of loans that     not aware of any real movement in the
                                                                                            Countrywide Financial Corp.’s sub-
have APRs of more than 10 times the          current session to get something done
                                                                                            prime unit) and 51 for New Century
usury limit. Owners of the predatory         in this area of concern.
                                                                                            Financial Corp.
lending outlets are raking in tons of
                                                                                          • From 2000 through 2004, 134 com-
cash and in the process are making           A GOOD LOOK AT AMERIQUEST                      plaints (including allegations of fraud
huge profits. The most vulnerable bor-
                                               Our firm sees lots of cases these days       and unfair business practices) were
rowers in our state are at the mercy of
                                             involving sub-prime lending practices.         registered against Ameriquest with
these lenders.
                                             Generally, those loans involve high            the California Department of Corpo-
   We have been asked on occasion to
                                             costs along with very high interest            rations, compared with 39 for New
explain exactly what a predatory loan
                                             rates. Ameriquest Capital Corp., one of        Century and 21 for Full Spectrum.
is. There are several categories of loans
that fall under this classification and so   the sub-prime lenders, has been held         • Recent lawsuits filed by consumers in
far, I haven’t found a single one that is    up as an industry model. It should be          over 20 states allege a pattern of
consumer-friendly. Here are the ones         noted that the company agreed in 2000          fraud, falsification of documents,
that are most widely used:                   to establish a fund for needy borrowers        bait-and-switch sales tactics, and


                                             www.BeasleyAllen.com                                                                 47
  other violations. Six of these suits     2000 based largely on the lender’s pro-     Ms. Russ purchased her home in 1993
  seek class action status to represent    nouncement of its new “Best Practices”      for $31,000 and the loan was soon sold
  large groups of borrowers.               policy. That new policy was to have a       to American General Finance. About
                                           strict prohibition against soliciting the   seven years after she purchased the
• In court documents and interviews,
                                           refinancing of their own loans within       home, the house was in desperate
  32 former employees across the
                                           24 months of origination. Unfortu-          need of repair. Ms. Russ contacted
  country say they witnessed or partici-
                                           nately, Ameriquest never had any            American General Finance about
  pated in improper practices, mostly
                                           intention of following this rule and is     loaning her money to make the neces-
  in 2003 and 2004. This behavior
                                           blatantly violating it today. For           sary repairs. American General
  included deceiving borrowers about
                                           example, Ameriquest charges its cus-        informed Ms. Russ that she could get
  the terms of their loans, forging doc-
                                           tomers who are refinancing an existing      the loan, but she would save money
  uments, falsifying appraisals, and
                                           loan with the new loan with the sub-        and it would be in her best interest to
  fabricating borrowers’ income to
                                           stantial pre-payment penalty from the       refinance her existing loan. The agent
  qualify them for loans they couldn’t
                                           old loan.                                   also steered Mrs. Russ to a contractor
  afford.
                                              Consumer activists say the company,      to perform the repairs.
• Two ex-workers at an Ameriquest          a big-time donor to both Democrats            When Ms. Russ came back to com-
  office in California that focuses on     and Republicans, has also been lobby-       plete the paperwork for the loan, her
  retaining existing customers said        ing against state legislation aimed at      nephew came with her to read the
  people often were solicited to refi-     countering alleged abuses by sub-           documents to her. American General
  nance loans that they had for less       prime lenders. Incidentally, Ameriquest     refused to allow her nephew into the
  than two years. In adopting a best-      was the number one contributor to the       room during the closing so he could
  practices    standard     in   2000,     2005 Presidential Inaugural Committee,      read the documents to Ms. Russ, even
  Ameriquest pledged not to resolicit      which won’t hurt its chances of getting     though she told them that she couldn’t
  its customers for two years to dis-      help in Washington. The company has         read and needed her nephew to read
  courage “flipping,” or pushing new       a history of fighting predatory lending     the documents to her. After the docu-
  loans simply to generate fees and        legislation, which is badly needed.         ments were signed, the contractor
  commissions.                             Predatory lenders have a duty to treat      began work on the house, but did not
                                           their customers fairly and few—if           complete any of the work. Also, the
• Nearly one in nine mortgages made
                                           any—of them do. They also have a            work that was done was very shoddy.
  by Ameriquest last year was a refi-
                                           duty not to commit fraud in connection      Therefore, Ms. Russ got very little
  nance of an existing company loan
                                           with their lending practices.               work, but owed a whole lot of money.
  less than 24 months old, according to
                                           Source: Los Angeles Times                     In addition to this, Ms. Russ recently
  an analysis of public records by
                                                                                       learned that the contractor forged her
  DataQuick Information Systems done
                                                                                       name to another loan three months
  at the request of The Times. That        A CASE IN POINT                             after this loan. The forged loan paid off
  was a higher rate than for any of six
                                              Tom Methvin, who is the firm’s Man-      the previous loan, gave $1,800 to the
  competitors included in the analysis.
                                           aging Shareholder, appeared on              contractor, and charged her $2,500 for
• On January 10, 2005 the Connecticut      Alabama Public Television several           an insurance policy that she did not
  Department of Banking said it would      times last month. He appeared on a          know that she had. The insurance
  seek to bar Ameriquest from doing        program called “Where Credit is Due.”       policy was written by a subsidiary of
  business in the state for allegedly      On this program, Tom primarily              American General Finance so it
  charging excessive fees and repeat-      focused on the plight of the working        received a commission from the sale of
  edly violating a state law aimed at      poor in Alabama as it relates to preda-     the insurance policy. Interest was also
  preventing loan flipping. Ameriquest     tory lenders. As a specific illustration,   added to the amount of the premium.
  is challenging the action.               he related the story of Ms. Lannie Russ,      On the house that Ms. Russ paid
                                           one of our clients whose story should       $31,000 for 11 years ago, she now
  Bob Kirby, who is a very good
                                           get the attention of all of us. Ms. Russ    owes over $45,000 on it. She is cur-
lawyer from Birmingham, has handled
                                           is a middle-aged African American           rently unemployed and has been for
a number of cases against Ameriquest.
                                           female who lives in Montgomery. Our         the past 5 years. Ms. Russ suffers from
He tells me that the FTC terminated its
                                           client can neither read nor write and       arthritis, severe headaches, and has
ongoing investigation of Ameriquest in
                                           only completed the 5th grade in school.     constant nerve trouble. Before she


48                                         www.BeasleyAllen.com
became        unemployed,       she    was    made it virtually impossible to success-      panies deny they illegally conspired to
employed doing general labor in a             fully sue a tobacco company under             promote smoking and say the govern-
chicken house.                                state law. I regret to say that suing a       ment has no grounds to pursue them
  Unfortunately, Ms. Russ’ predicament        tobacco company has become                    after they drastically overhauled mar-
is similar to that of thousands of            extremely difficult in any state or           keting practices as part of the 1998 set-
working-poor families both in Alabama         federal court. Tobacco is the only            tlement with state attorneys general.
and throughout the southeastern part of       product to my knowledge that when             Judge David Sentelle, a Ronald Reagan
the U.S. To add insult to injury, most        used exactly as the manufacturer tells a      appointee from the tobacco-producing
predatory lenders now use arbitration         person to use it, will kill the user. It is   state of North Carolina, wrote that the
agreements in their contracts. This           extremely frustrating to see how the          civil racketeering statute used to bring
means that if they get caught cheating        tobacco industry has avoided its legal        the case was aimed at putting an end
folks, it’s very hard to hold the predatory   responsibilities to its victims. The          to the illegal conduct going forward.
lenders accountable. We badly need            national settlement with the states a         The judge wrote: “Disgorgement is a
more and stronger regulation in this area     few years ago did nothing for victims         very different type of remedy aimed at
of concern. The predatory lending             or their families. I hope the present         separating the criminal from his prior
industry must be reined in and soon.          trends in the courts will change.             ill-gotten gains and thus may not be
                                                                                            properly inferred from (the statute).”
                                                                                            Judge Sentelle was joined by another
XX.                                           GOVERNMENT LOSES $280 BILLION TOBACCO
                                              BID                                           Reagan appointee Judge Stephen
TOBACCO                                                                                     Williams. Dissenting was Judge David
LITIGATION                                       Last month, we reported that the U.S.      Tatel, who was appointed by former
                                              government was really going after the         President Bill Clinton, whose Adminis-
UPDATE
                                              tobacco industry. Unfortunately, a U.S.       tration brought the case. I doubt seri-
                                              appeals court has rejected the federal        ously that politics played any part in
A LOOK AT THE FUTURE OF TOBACCO               government’s bid to force cigarette           either the majority or dissenting opin-
LITIGATION                                    makers to pay $280 billion in past            ions.
                                              profits. The court struck the toughest
  Many lawsuits seeking to recover the
                                              sanction from the racketeering case.
health-care costs of treating sick                                                          FEDERAL APPEALS COURT REVERSES
                                              The three-judge panel of the Court of         TOBACCO LIABILITY AWARD
smokers, or seeking personal-injury
                                              Appeals for the District of Columbia
damages, have either failed or been
                                              ruled 2-1 that federal law does not             While a federal appeals court upheld
overturned on appeal. The Engle class
                                              allow the monetary “disgorgement”             a Kansas man’s right to sue tobacco
action case in Florida is currently under
                                              penalty the government sought in the          companies over a disease that cost him
review by that state’s Supreme Court,
                                              civil case that has been on trial since       his legs, it took away $15 million he
following the 2003 decision by a
                                              September. The panel stated: “We hold         had received in damages. The U.S.
Florida appeals court to toss out a
                                              that the language of (the racketeering        Court of Appeals for the Tenth Circuit
landmark $145 billion class action judg-
                                              law) and the comprehensive remedial           overturned the punitive damages
ment against the five largest U.S. ciga-
                                              scheme of (the racketeering law) pre-         awarded to the smoker, but upheld a
rette makers. The jury verdict that had
                                              clude disgorgement as a possible              federal jury’s finding that R.J. Reynolds
produced the largest damage award in
                                              remedy in this case.” This decision           Tobacco Co. failed to adequately warn
U.S. history was reversed by that
                                              strips the government of its most pow-        or test for the dangers of smoking. A
ruling. A decision is expected this
                                              erful weapon in the case and has to be        three-judge panel rejected the claim
summer. The only other major legal
                                              considered a major blow to their case.        that R.J. Reynolds fraudulently con-
threats currently facing the industry are
                                              In addition to the monetary penalty,          cealed information about the dangers
the “light” class action cases, in which
                                              the government is seeking to impose           of cigarette smoking. The appeals court
smokers are bringing suit under state
                                              tougher rules on marketing, advertising       said Kansas state courts would not rec-
consumer-protection laws, based on
                                              and warnings on tobacco products.             ognize such claims based on the evi-
the claim that cigarette makers falsely
                                                 The government charges cigarette           dence.
advertised their light cigarettes as less
                                              makers deceived the public about the            The Kansas suit against R.J. Reynolds
harmful than other brands.
                                              dangers of smoking as part of a 50-year       and the American Tobacco Co. filed in
  In Alabama, our Supreme Court has
                                              industry conspiracy. The tobacco com-         1994, claimed the companies had


                                              www.BeasleyAllen.com                                                                49
known about the potential hazards of       XXI.                                        does not take you off their mailing list.
smoking since the 1950s but failed to      THE CONSUMER                                Instead, it verifies to the SPAMer that
warn the public cigarettes were addic-                                                 your email address is valid and it is
                                           CORNER
tive and dangerous. The man, who had                                                   then resold to other SPAMers. The end
smoked for 43 years, quit after his legs                                               result is more SPAM being sent to your
were amputated due to peripheral vas-      THE GROWING SPAM PROBLEM                    inbox. Our reactive plan includes a
cular disease. His doctor had warned                                                   message filtering system that uses the
                                              A real problem that is causing diffi-
him that smoking could also cause him                                                  following techniques for catching
                                           culty for businesses, as well as individ-
to lose his arms. In February 2002, a                                                  SPAM:
                                           uals who rely on e-mail and the
federal jury in Kansas determined R.J.
                                           Internet, is known as SPAM. As you          • Identifies emails sent from known
Reynolds was liable for his injuries and
                                           probably know, SPAM e-mails are               SPAMers,
ordered the company to pay $196,416
                                           those unwanted, unsolicited, and
in compensatory damages to cover                                                       • Looks for approximately 1,500 key-
                                           many times obscene e-mails that we
economic loss and other actual injuries.                                                 words in the subject line and body;
                                           all have received in our inbox at one
The jury also authorized the judge to                                                    and
                                           time or another. The SPAM crisis is
award additional punitive damages,
                                           growing so rapidly that anti-SPAM soft-     • Contains a Bayesian learning system
which are used to punish defendants in
                                           ware developers are fighting an uphill        that looks at the overall email.
lawsuits. A few months later, a U.S.
                                           battle on a daily basis to maintain
District Judge awarded $15 million,                                                       We also encourage folks to send and
                                           some sort of control over the situation.
saying the tobacco company’s conceal-                                                  receive email in plain text and to
                                           Our firm has been bombarded by
ment of how addictive cigarettes are                                                   lessen the use of preview panes in
                                           SPAM e-mails at the rate of nearly
was “particularly nefarious.” The plain-                                               their email application.
                                           10,000 per day. Although up to 90%
tiff later dropped his claim against                                                      Even though SPAM can be a huge
                                           of these undesirable messages are
American Tobacco, which the jury                                                       problem for businesses, these issues
                                           blocked by our internal systems before
ordered to pay $1,984. Now the                                                         can also present themselves in the
                                           they reach the end-users inbox, a few
remaining part of his case has been                                                    home, where it can be an even greater
                                           slip through the cracks and arrive at
taken away.                                                                            challenge for parents. Parents should
                                           the intended destination. Many of the
Source: Associated Press                                                               be cautious of the emails and Internet
                                           SPAM e-mails are pornographic and
                                                                                       sites that your children are allowed to
                                           contain really bad stuff.
                                                                                       view. One of the most underrated
MISSOURI FAMILY AWARDED $20 MILLION IN        There have been many commercial
                                                                                       problems today is the widespread
TOBACCO SUIT                               systems developed to combat this
                                                                                       misuse of the Internet by our children
                                           issue. Unfortunately, the financial
  On a brighter note, a jury has                                                       and teenagers. These issues span from
                                           resources of the SPAMers are many
awarded the family of a woman who                                                      Internet pornography, to inappropriate
                                           times greater than those of the software
smoked for nearly 50 years more than                                                   emails, to unsupervised chat sessions.
                                           developers. Thus, the SPAMers are
$20 million in a wrongful death lawsuit                                                Unlike Hollywood or television, where
                                           staying one step ahead of the “good
against the maker of Kool cigarettes.                                                  many times we have a greater opportu-
                                           guys.” However, you can take a few
This is the largest total judgment                                                     nity to screen our children from poten-
                                           simple steps to help reduce the amount
against a tobacco company in Missouri.                                                 tially obscene or violent content, the
                                           of SPAM that is sent to your e-mail
The jury awarded punitive damages to                                                   Internet is even more alluring and
                                           address and/or block it when it arrives.
the family of the smoker. Brown &                                                      deceptive.
                                           Our firm employs both proactive and
Williamson officials called the damages                                                   The Internet can be a safe and suc-
                                           reactive steps to curb SPAM. From a
“grossly excessive” and asked the judge                                                cessful tool. Unfortunately, when it is
                                           proactive approach, we encourage our
to set aside the verdict. The woman,                                                   misused, it becomes a tool in the hands
                                           staff to use alternate e-mail addresses
who smoked Kool cigarettes for nearly                                                  of Satan. Take a word of caution from
                                           when filling out forms on the Internet
50 years, quit smoking in 1990. She                                                    the passage of scripture found in 1 Peter
                                           or signing up for newsletters. As well,
died 10 years later of a heart attack at                                               5:8: “Be sober, be vigilant; because your
                                           they are asked to never use the
age 73. During her later years, she had                                                adversary the devil walks about like a
                                           “unsubscribe” feature that is found
heart and lung disease. Hopefully, this                                                roaring lion, seeking whom he may
                                           within many SPAM emails. This
verdict will survive on appeal.                                                        devour.” The Internet is ready made for
                                           “unsubscribe” feature, in most cases,
Source: Associated Press                                                               evildoers and we must all learn more


50                                         www.BeasleyAllen.com
about it so that we can protect our busi-    WARNING TO ALABAMA CITIZENS ABOUT A           An autopsy, confirming the cause of
nesses and more importantly our homes        SECURITIES INVESTMENT SCAM                    her death, revealed that the student
from those who use it for evil!                                                            suffered heart failure and brain
                                                Joseph P. Borg, Director of the
                                                                                           damage. The student spread the pre-
                                             Alabama Securities Commission has
                                                                                           scription-strength cream she purchased
U.S. SETS ACCEPTABLE LEAD LEVEL IN           warned Alabama citizens to be on the
JEWELRY                                                                                    from Premier Body Clinics from her
                                             alert for investment offerings from
                                                                                           waist to her ankles and then wrapped
                                             Premium Income Corp, Tri-Forex Inter-
   The federal government has set an                                                       her legs in plastic wrap. A pharmacy
                                             national, LTD, and suspected key associ-
acceptable level for the lead found in                                                     sold the compounded Lidocaine that
                                             ates. In issuing the warning, Director
millions of pieces of children’s jewelry                                                   killed her to the Premier Body Laser
                                             Borg stated: “The Commission is very
sold mainly at dollar stores and in                                                        Clinics. It should be noted that com-
                                             concerned that an apparent illegal
vending machines. Concerns over lead                                                       pounded drugs by definition are never
                                             investment scam will target citizens of
resulted in the largest toy recall in U.S.                                                 specifically tested, but Lidocaine by
                                             Alabama. Reports have been received
history in July—150 million pieces of                                                      itself is routinely sold over-the-counter
                                             from other states of possible scam activi-
jewelry by four importers, which                                                           in smaller concentrations that appar-
                                             ties.” The Commission wants any citizen
together supply nearly all vending                                                         ently pose few problems. The fact that
                                             of Alabama who has been approached
machine jewelry. They agreed at the                                                        the student wrapped her legs in plastic,
                                             by the entities listed below to call 1-800-
time to halt imports of jewelry contain-                                                   after applying the drug, most likely
                                             222-1253 and ask to speak to an
ing lead until the Consumer Product                                                        made the situation worse.
                                             Enforcement Investigator. Their informa-
Safety Commission determined a safe                                                           This is not an isolated occurrence. A
                                             tion can help protect Alabamians and
lead level. Now imports will start up.                                                     woman died in Tuscan, Arizona, last
                                             assist the Commission in its investiga-
Gib Mullan, director of the CPSC’s office                                                  fall under circumstances similar to this
                                             tion. Alabama is working closely with its
of compliance, said, “As far as we’re                                                      case. The Tucson resident died Novem-
                                             counterparts in Texas and with the Com-
concerned, they (the companies) have                                                       ber 1st after being hooked to a respira-
                                             modities Future Trading Commission
kept their end of the bargain by waiting                                                   tor in her mother’s house for nearly two
                                             (CFTC) to prevent investment loses from
for our policy.” Studies have found that                                                   years. On January 25, 2002, the woman
                                             spreading any further.
even small amounts of lead ingested by                                                     had applied anesthetic cream to her
                                                The Alabama Securities Commission
children can cause neurological damage,                                                    legs and wrapped them in cellophane
                                             cautions potential investors to thor-
or behavior and learning problems.                                                         several hours before an appointment
                                             oughly check out any investment
   The agency’s chairman, Hal Stratton,                                                    for laser hair removal. She became dis-
                                             opportunity. You can contact the Com-
has estimated that about one-half of all                                                   oriented while driving, had seizures,
                                             mission for inquiries regarding securi-
the jewelry sold in vending machines                                                       and fell into a coma. She never
                                             ties broker-dealers, agents, investment
contained unacceptable levels of lead.                                                     regained consciousness and died of res-
                                             advisors, investment advisor represen-
He said some pieces were as much as                                                        piratory failure. The victim’s mother
                                             tatives, financial planners and the
70% lead. Under the new policy, a                                                          sued a Tucson clinic and the clinic’s
                                             registration status of securities; to
piece of jewelry should not have lead                                                      physician. An out-of-court settlement
                                             report suspected fraud; or to obtain
content of more than 0.06%, the same                                                       with the Utah pharmacy that com-
                                             consumer information: Alabama Secu-
standard used for paint. Any piece that                                                    pounded the cream has been reached.
                                             rities Commission; 770 Washington
exceeds that level is subject to further                                                   Source: Associated Press
                                             Ave., Suite 570; Montgomery, Alabama
testing to determine whether the lead
                                             36130; Telephone: (334) 242-2984 or
is likely to leak out when, for example,
                                             1-800-222-1253; Fax: (334) 242-0240;          MCDONALD’S SETTLES TRANS FAT LAWSUIT
children put the jewelry in their
                                             Email: asc@asc.alabama.gov Website:
mouths. The product would then be                                                             McDonald’s Corp. will pay $7 million
                                             www.asc.state.al.us
subject to a recall. The four companies                                                    to the American Heart Association set-
involved in last year’s recall are A & A                                                   tling a lawsuit that accused the fast-
Global Industries Inc. of Cockeysville,      STUDENT DIES FROM OVERDOSE OF SKIN            food giant of failing to reduce fat, as
Maryland; Brand Imports LLC of Scotts-       CREAM
                                                                                           promised, in the cooking oil used for its
dale, Arizona; Cardinal Distributing Co.                                                   popular french fries and other foods.
                                               A North Carolina State University
Inc. of Baltimore; and L.M. Becker &                                                       The settlement will require the Heart
                                             student died in January from an over-
Co. Inc. of Kimberly, Wisconsin.                                                           Association to use the proceeds to
                                             dose of Lidocaine, a numbing cream.
Source: Associated Press                                                                   educate the public about trans fats in

                                             www.BeasleyAllen.com                                                                51
foods. Heart-clogging trans fat is made      NHTSA INVESTIGATING LEXUS SUV’S             cate unaffected latches to prevent cor-
when manufacturers add hydrogen to           BRAKES                                      rosion. The states where the affected
vegetable oil, a process called hydro-                                                   Focus cars were sold or are registered
                                               The National Highway Traffic Safety
genation. BanTransFats.com sued                                                          are Connecticut, Delaware, Illinois,
                                             Administration is investigating com-
McDonald’s in California state court in                                                  Indiana, Iowa, Maine, Maryland, Massa-
                                             plaints about the Lexus RX330’s power
2003, alleging McDonald’s did not                                                        chusetts, Michigan, Minnesota, Mis-
                                             brakes. Several owners have com-
effectively disclose to the public that it                                               souri, New Hampshire, New Jersey,
                                             plained that the brakes went out while
had not switched to a healthier cooking                                                  New York, Ohio, Pennsylvania, Rhode
                                             they were driving. Apparently, Lexus
oil. In September 2002, McDonald’s                                                       Island, Vermont, West Virginia, and
                                             knew about the problem but failed to
announced it would lower trans fat in                                                    Wisconsin.
                                             notify customers because the company
its cooking oils and said the switch
                                             did not believe that the problem was
would be completed in five months. In
                                             widespread. It would appear that any        DODGE DURANGO RECALL
February 2003, however, McDonald’s
                                             braking problem would be cause for
announced a delay. The lawsuit                                                              The NHTSA announced that Daimler-
                                             concern.
accused the Oak Brook, Illinois-based                                                    Chrysler AG is recalling 26,000 Dodge
company of failing to adequately                                                         Durango sport utility vehicles from the
inform consumers of that delay.                                                          2005 model year because the fuel tank
                                             XXII.
McDonald’s says that it has reduced the                                                  filler valve may not fully close after
amount of trans fat in its Chicken
                                             RECALLS UPDATE
                                                                                         refueling. Fuel could leak from the
McNuggets, Crispy Chicken and                                                            vehicle if the valve isn’t closed. At
McChicken sandwiches. I hope that is         FORD RECALLING 358,857 FOCUS CARS           press time DaimlerChrysler hadn’t
factual and that the company is really                                                   determined when the recall will begin.
working to reduce trans fat in its other        Ford Motor Co. is recalling 358,857
                                                                                         Fuel leakage in the presence of an igni-
fried foods.                                 Focus cars because their rear passenger
                                                                                         tion source can result in a fire.
                                             doors may not latch properly, the
                                             National Highway Traffic Safety Admin-
SUIT FILED AGAINST WAL-MART FOR              istration announced on its website. The     FAULTY SWITCH SPURRING VEHICLE FIRES
DEFECTIVE BICYCLES
                                             recall affects four- and five-door Focus
                                             cars from the 2000-2002 model years.           Ford truck and SUV owners across
  A class action lawsuit has been filed
                                             All of the vehicles were sold or are reg-   the country have had problems with
in California against Wal-Mart Stores
                                             istered in 20 eastern and midwestern        fires. Ford has issued a recall for
Inc. and a California company for
                                             states and the District of Columbia,        800,000 vehicles. The problem is one
importing defective bicycles that have
                                             NHTSA said. One person reported a           tiny switch in the cruise control system
injured at least nine children. The suit
                                             minor wrist injury because of the           and in problem trucks, it can overheat
alleges that Wal-Mart conspired with
                                             defect, according to Ford. There are 33     even when the engine is not running.
Dynacraft Industries, an importer, and
                                             complaints about the defect listed on       Under Ford’s recall, thousands of truck
investigator Carl Warren & Co. to cover
                                             NHTSA’s website. The defect is caused       owners have had their cruise control
up the fact that the front wheels of the
                                             by corrosion of the latch. The door         disconnected. The recall involves the
bicycles can easily detach after hitting a
                                             may be difficult to open and close, and     2000 F-150, Expedition and Lincoln
bump, causing serious injuries. Accord-
                                             eventually may not close at all.            Navigator and certain 2001 F-series
ing to the suit, at least nine children
                                                This is the second major recall by       Supercrew trucks. Anybody who has
sustained injuries ranging from broken
                                             Ford this year. On January 27th, it was     had a fire can file a complaint. The
teeth to head trauma. It is alleged that
                                             announced that the automaker was            NHTSA complaint line is (888) 327-
the deaths were reported to Wal-Mart,
                                             recalling about 792,000 pickup trucks,      4236. Ford customer assistance can be
and Wal-Mart continues to sell the
                                             sport utility vehicles and minivans         reached at (800) 392-3673.
product. Dynacraft Industries imported
the Next brand bicycles from China,          because of possible fire risks from the
and Carl Warren investigated com-            overheating of their cruise control         GM IS RECALLING 215,000 VEHICLES
plaints, according to the suit.              switches. Ford began notifying cus-
                                             tomers about the latest recall on March       General Motors Corp. has announced
                                             1st. Ford dealers will replace corroded     three separate recalls affecting a total
                                             latches for free or will clean and lubri-   of about 215,000 vehicles, stemming


52                                           www.BeasleyAllen.com
from a variety of potential safety               The third recall involves the accelera-   B411 and end with the last four digits
defects. The moves, which continued a         tor pedal on GM’s Cadillac XLR and           0904 through 3304. The DOT code is
string of recalls reported by the world’s     SRX vehicles, and the Pontiac Grand          on the inner sidewall of the tire just
biggest automaker in the past year,           Prix, affecting about 21,885 cars. The       above the wheel rim. BFGoodrich is
affect GM’s full-size trucks, sport-utility   problem relates to the electronic throt-     mailing notices to consumers who
vehicles, vans, and cars. In 2004, GM         tle-control function. At low tempera-        bought the tires and will replace them
recalled about 10.7 million vehicles in       tures, the pedal-return springs on some      free. Consumers who believe they are
the U.S. in 41 total recalls. So far this     of the vehicles may be broken. At press      affected by the recall can return to
year, the company has recalled a total        time GM hadn’t determined when it            where they purchased their tires for a
of about 283,548 vehicles in the U.S. in      will notify customers.                       free inspection. Goodyear says the tires
five separate recalls, according to the                                                    were made using two molds provided
National Highway Traffic Safety Admin-                                                     by a supplier that did not have the
                                              TOYOTA IS RECALLING 22,228 TACOMA
istration. The largest of the three latest    PICKUPS                                      required tread wear indicators. The
recalls affects about 173,361 GM full-                                                     indicators, also known as wear bars, let
size trucks that may have a defective            Toyota Motor Co. is recalling 22,228      drivers know when they need to
valve in a “Hydro-Boost accumulator,”         Tacoma pickups because the parking           replace their tires.
a part that helps enable braking and          brake may not work. The automaker
power steering. If not working prop-          and federal safety regulators made an
                                                                                           BISSELL RECALLS UPRIGHT CARPET
erly, power-steering and braking capa-        announcement of the recall on Febru-         CLEANERS
bilities could suffer and the valve could     ary 15th. Tacomas from the 2005 model
burst, potentially injuring bystanders if     year with automatic transmissions are           Bissell Homecare Inc. is recalling
the hood is open, NHTSA said. GM              involved in the recall. Toyota said the      about 750,000 upright carpet cleaners.
says “There have not been any injuries        company recalled the vehicles after the      The Grand Rapids, Mich.-based
or any cases of this actually happen-         National Highway Traffic Safety Admin-       company says the carpet cleaner’s
ing.” GM plans to begin notifying cus-        istration received eight complaints. No      metal upper handle can pose an elec-
tomers and making free repairs                injuries have been reported due to the       tric shock hazard to consumers. The
sometime during this month.                   defect. Toyota said the lock nut on the      company says it has received six
   The recall covers certain Chevrolet        parking brake cable may not have             reports of consumers getting shocked.
Suburban,        Silverado,    Avalanche,     been properly tightened and can              The recalled upright carpet deep clean-
Kodiak, and Express van models, and           loosen and come off. If that happens,        ers have an open handgrip and a par-
certain GMC Sierra pickups, Yukon XL          the vehicle could roll if it’s stopped on    tially metal handle, and come in a
sport-utility vehicles, Top Kick medium-      a slope and the transmission isn’t in        variety of colors. The recalled carpet
duty trucks, and Savana vans. Certain         park. Toyota will notify owners of the       cleaners have date codes beginning
Hummer H2 models are covered. The             recall this month. Dealers will tighten      with 01, 02, 03 or 04 and include the
potentially affected trucks were built in     the lock nut for free.                       following models:
February to September 2004.
                                                                                           • PowerLifter Plus (model number
   In a separate announcement, GM said
                                              BFGOODRICH RECALLS 20,000 LAND                 1620)
it is recalling 20,260 additional vehicles    TERRAIN TIRES MADE IN ALABAMA
related to windshield urethane that may                                                    • PowerSteamer ClearView (model
not have properly adhered to the body            BFGoodrich is recalling 20,000 Land         numbers 1692, 1692-1, 1692-R)
on 2005 models of the Chevrolet Trail-        Terrain tires sold in the United States
                                                                                           •Power Steamer (model numbers 1685,
blazer, the GMC Envoy, the Buick              and Canada because they do not have
                                                                                             1693, 1693-R, 1693-W, 1694, 1694-1,
Rainier, and the Isuzu Ascender. If there     the required tread wear indicators. The
                                                                                             1694-R)
were a crash, the windshield might not        tires were produced between February
stay in like it’s supposed to, according      29th and August 19th 2004, at the            • Power Lifter (model number 1694-3)
to GM. Thus far no injuries or incidents      company’s plant in Opelika, Alabama.
                                                                                           • Rubbermaid X-tra-Lift (model 9E00)
have been reported. I understand GM           The size is P235/75R15, and the mold
discovered the potential problem at its       numbers are 40381 and 40382. The               The date codes and model numbers
factory in Moraine, Ohio. The company         recalled tires have U.S. Department          are printed on a label on the bottom of
plans to begin notifying customers and        of Transportation tire identification        the unit. The recalled carpet cleaners
making repairs this month.                    numbers that begin with DOT AN HL            were sold at major discount, appliance,


                                              www.BeasleyAllen.com                                                              53
and department stores nationwide from        Alabama State Bar and really enjoyed        Bill Clark, who preceded Doug as Pres-
January 2001 through December 2004           the experience. The one-day event was       ident, has to be given the credit for
for between $100 and $145. Consumers         held in Montgomery and was attended         putting this program together during
should stop using the carpet cleaners        by an impressive number of “young”          his tenure. I believe that it will pay
immediately and contact Bissell for the      lawyers. The leadership class was com-      great dividends in years to come. Pat
location of the nearest service center to    prised of lawyers who have been prac-       Graves and Alyce Spruell were in
receive a free inspection and if neces-      ticing law between 5 and 15 years.          charge of this year’s program and did
sary, repair. Consumers can call Bissell     Each participant was selected by the        an excellent job. Ed Patterson also did
at (866) 860-2392 or visit the               State Bar. The leadership program,          his usual good job in coordinating
company’s website (www.bissell.com)          referred to as “The Alabama State Bar       things for the event. It’s good to know
for more recall information.                 Leadership Forum,” is designed to           that our State Bar is in good hands and
                                             produce committed and involved              is working to improve things in
                                             lawyers willing and able to take signifi-   Alabama.
GOVERNMENT RECALLS 2 MILLION BARBECUE
LIGHTERS                                     cant leadership roles in the local and
                                             state bar associations and to serve as
   The U.S. Consumer Product Safety          role models in matters of ethics and        XXIV.
Commission (CPSC) is recalling about 2       professionalism. The goals of the           FIRM ACTIVITIES
million multipurpose barbecue lighters       Alabama Leadership Forum are to:
sold under the brand name “Kitchen
                                             • Raise the level of awareness of           EMPLOYEE SPOTLIGHTS
Works.” The CPSC says the lighters lack
                                               lawyers as to the purpose, operation,
child-resistant mechanisms required by                                                   Davida de Gonzalez
                                               and benefits of the Alabama State Bar
federal safety standards. Federal stan-                                                     Davida De Gonzales has been with
dards require multipurpose lighters to       • Build a core of practicing lawyers to     the firm for almost five years. She cur-
have the same level of child-resistance        become leaders with respect to            rently works in the Administrative
as required in the safety standard for         ethics and professionalism, resulting     Department taking new client calls. In
cigarette lighters. The lighters were dis-     in raising the overall ethical and pro-   this position, Davida has a number of
tributed by Arett Sales Corp. of Cherry        fessional standards of lawyers in the     important duties. She takes the majority
Hill, New Jersey. There have been no           community                                 of the new client calls and performs
reports of incidents or injuries involv-                                                 duties relating to new client contacts.
                                             • Form a pool of lawyers from which
ing the lighters. The recalled gas-fueled                                                She assists other departments with calls
                                               the Alabama State Bar, state and local
lighters have an orange or red plastic                                                   as needed. Davida, who has a degree
                                               governmental entities, local bar asso-
body, and a silver-colored metal                                                         in optics and is ABO certified, is cur-
                                               ciations, and community organiza-
nozzle. Dollar stores nationwide sold                                                    rently attending Troy University
                                               tions can draw upon for leadership
the barbecue lighters from January                                                       working on a degree in psychology.
                                               and service.
2001 through July 2004 for about $1.                                                     Davida has a 4-year-old son, Darius.
Consumers should stop using the                My part on the program was to serve       She does an outstanding job for the
lighters and return them to the place of     on a panel in a question and answer         firm.
purchase for a full refund. Consumers        session on Friday afternoon. The other
can contact Arett Sales at (800) 431-        members of the panel were former            Willie Fred Gamble
1212 for more recall information.            Governor Albert P. Brewer, Dr. David          Willie Fred Gamble came to the firm
                                             Bronner, Birmingham lawyer William          last month to work primarily in our
                                             N. Clark, Dr. John Dew and me. It was       mailroom. Fred was born and raised in
XXIII.                                       an honor to be on a panel with such         Montgomery and attended Lanier High
SPECIAL                                      distinguished men. I was most               School before going on to Oklahoma
PROJECTS                                     impressed with the program, which I         State. At Oklahoma State, Fred majored
                                             believe was most successful. Doug           in Physical Education and played foot-
                                             McElvy, who is doing an excellent job       ball for the Cowboys. He then signed
THE ALABAMA STATE BAR’S LEADERSHIP           as President of the State Bar, had the
FORUM                                                                                    on to play with the N.Y. Giants. After
                                             responsibility of carrying out the          his time in the NFL, Fred returned to
  I participated in a leadership confer-     overall program this year. In my            Montgomery and spent several years
ence on February 18th sponsored by the       opinion Doug’s hard work will pay off.      working for the State of Alabama. He

54                                           www.BeasleyAllen.com
moved from that job to work at Henig        our faith has very little to do with what   it? I believe we should let all of our
Furs, where he worked in both sales         we watch and what we allow our chil-        political leaders know that we want tel-
and security. Fred has also run a lawn      dren and grandchildren to watch.            evision programs, including commer-
service for the past 18 years. He stays        One secular writer, speaking about       cials, cleaned up. We should especially
active in football, coaching children’s     today’s television programs, com-           call on those politicians in our nation’s
teams. We are most pleased to have          mented: “The notion of indecency has        capitol. Today commercial channels, as
this new employee. I predict he will be     become obsolete.” It is pretty evident      well as cable and satellite television,
a real asset to the firm.                   that if any real standards exist, they      are pretty rotten. We are finally seeing
                                            have been largely pushed aside. If we       some cracking down on indecency in
                                            all applied the moral standard found in     programming, but it’s not enough. Our
XXV.                                        biblical teaching, our families would be    churches should be leading the fight to
SOME PARTING                                much better off and so would we. I          clean up the television industry—and
WORDS                                       don’t believe anybody would argue that      we could add the movie industry to
                                            most TV productions are not governed        that effort as well—but are they?
                                            by the guidelines God wants each of us         It’s easy to spot problems like those
   For the first time in years, I watched   to follow. The Bible has set out a pretty   mentioned above, but doing something
the entire Super Bowl game this time. I     good rule of thumb that we could            about them is much more difficult in
suppose there are a number of reasons       apply to our TV viewing habits:             today’s world. With all of the troubles
why people watch the Super Bowl.                                                        facing us, it is extremely important that
                                              Whatever things are true, whatever        we look for things spiritual and eternal
Apparently, some watch for football,
                                              things are noble, whatever things         in our daily lives. Otherwise, we could
others for the commercials, others
                                              are just, whatever things are pure,       get so discouraged that life would get
simply because they just happen to be
                                              whatever things are lovely, what-         sort of miserable. Some of us might
with friends who are watching the
game. I didn’t watch most of the com-         ever things are of good report, if        even quit trying to make things better
mercials this year for several reasons—       there is any virtue and if there is       for our families and for others. I
one being I can’t figure out the              anything praiseworthy—meditate            encourage all of our readers to take a
message most of the time—so I fall in         on these things.                          look at John 3:1-21. If we are like the
the “football group.” I do watch com-         Philippians 4:8                           powerful Jewish ruler mentioned in
mercials from time to time, however,                                                    John’s Gospel—who was confused and
and have a real problem with the              It’s really hard for us to do that when   was seeking some real answers—I can’t
content of many of the commercials          we’re constantly being bombarded by         think of a better message to put things
that are shown on commercial TV             the ungodly images presented on tele-       into focus for us. This has really helped
channels as well as on cable and satel-     vision every day of the week—even on        me understand that having power, pres-
lite TV channels. I have to wonder          Sunday—and during all hours of the          tige and standing in one’s community
whether there is a connection between       day. It is pretty sad that commercials      doesn’t mean that we understand God’s
what we decide to watch and what’s          appear during the news programs at 6        plan for all of us. In fact that sort of
actually in our heart? Should a Christ-     o’clock on all commercial stations that     thing oftentimes blinds us to an under-
ian’s faith in Jesus Christ have anything   young children have no business             standing of God’s plan of salvation. My
at all to do with his or her TV choices?    seeing. Some of the promos during the       prayer is that every person reading this
In a world of declining moral stan-         news for programs to be aired later         report has been exposed to that plan
dards, we must think through that           that night are very close to being “X       and—if not already on board—that
question. How does our Christian faith      Rated.” The same is true for lots of        each will accept the promises available
affect our TV viewing habits? I suspect     commercials shown during prime time         to all of us. I can assure you—there’s
if we were totally honest, sometimes        sporting events. What can we do about       no other way!



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