The Jere Beasley Report May 2004

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

THE

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

MAY 2004

A NATIONAL LAW FIRM LOCATED IN MONTGOMERY,ALABAMA

I.CAPITOLOBSERVATIONS

JERNIGAN V. GENERAL MOTORS

I am pleased to report that the case ofJernigan v. General Motors Corp. wassettled satisfactorily on April 16th.Young Jeffrey Jernigan was 12 years oldwhen his life was dramatically changedforever on December 10, 1999 becauseof a defective automobile having beenput on the highway by General Motors.This young child, who was a brilliantstudent with unlimited potential, suf-fered a severe brain injury that renderedhim permanently impaired. Jeffrey’s lifecare plan has a present value of over$10 million. In other words, that’s whatit will cost today to fully fund the plan.The total cost over his life expectancy ofalmost 60 years will be tremendouslyhigh. The actual settlement amount,however, is confidential at GeneralMotors’ request. It has been a long,tough journey from the time this lawsuitwas filed to a final resolution. Ourobjective was to make sure that Jeffreywas taken care of for the rest of his life.I will write more on the ramifications ofthis case and General Motors’ wrongdo-ing under the Product Liability UpdateSection.

ALABAMA JUDICIAL BUILDING RENAMED

The Alabama Judicial Building is nowofficially named “The Heflin-TorbertJudicial Building.” A resolution waspassed by the Legislature to rename thebuilding in honor of two former chiefjustices of the Alabama Supreme Court,Howell Heflin and C.C. “Bo” Torbert.Over the years, these two outstandingAlabamians have contributed greatly totheir state. Howell was Chief Justiceand later served as an outstanding U.S.Senator. Bo had a distinguished recordin the Alabama Legislature before beingelected Chief Justice. Alabama’s judicialsystem has been recognized as one ofthe best in the country. The work ofthe two honorees was largely responsi-ble for the creation of the system duringthe 1970s, and it is quite appropriate

that the State’s judicial building benamed in their honor. I am alsopleased to say that each of these menhas been a good friend of mine for anumber of years.

NEW REVENUE FOR STATE GOVERNMENT

NOT AN OPTION

A task force assembled by GovernorBob Riley to study rising health insur-ance costs for public employees held itsfirst meeting on April 21st. It shouldnot have come as a surprise when thechairman said new revenue for the Statewas not an option. The Governor toldthe health care insurance task force thathe wanted its recommendations in twomonths. Obviously, that would be afterthe current session of the Legislatureends. The task force includes legisla-tors, lobbyists and business people.Task force Chairman John McMahon,who is chairman of Ligon Industries inBirmingham, told the group: “It willnot be the scope of this committee totalk about revenue.” I am concernedthat the mission of the task force is notbroader. I would like to see a real in-depth look at tax reform and the needfor additional revenues. We must faceup to the State’s fiscal problems andthat should be the first priority, in myopinion.

EXXONMOBIL IS BOTH PROFITABLE AND

POWERFUL

Those of us who have litigatedagainst the powerful oil and gas indus-try were not surprised to learn thatExxonMobil Corp. was number 23 onthe latest BusinessWeek 50 list ofAmerica’s top-performing companies.ExxonMobil is one of the most power-ful corporate entities in the world. In2003, the world’s largest oil companyracked up record earnings of $21.5billion, up 91% from 2002, on revenueof $246.7 billion. In addition, the energygiant posted industry-leading return oncapital employed of 21% and cash flowfrom operations and asset sales inexcess of $30 billion, while returning arecord $11.5 billion to shareholdersthrough dividend payments and sharepurchases.

The merger between Exxon andMobil in 1999 made for a most powerfulcompany. Since the merger, ExxonMo-bil has generated $120 billion in cash.In the last five years, ExxonMobil hasearned $74 billion, representing thecombined profits of nearly 400 of the500 companies in the Standard & Poor’s500-stock index over the same period.ExxonMobil has developed tremendouspolitical clout and is not bashful aboutusing it. The company’s bosses areaccustomed to having politicians ask“how high” when ExxonMobil says“jump!” I suspect that the high gasprices that American citizens are cur-rently paying are a good example ofhow effectively the top five oil compa-nies – which includes ExxonMobil atthe top of the list – use their politicalinfluence in Washington.

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IN THIS ISSUEI. Capitol Observations . . . . . . . . . . . . 2

II. Legislative Happenings . . . . . . . . . . 3

III. Court Watch . . . . . . . . . . . . . . . . . . 6

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

V. Congressional Update . . . . . . . . . . . 9

VI. Campaign Finance Reform . . . . . . . 9

VII. The Corporate World . . . . . . . . . . 10

VIII. Product Liability Update . . . . . . . . 12

IX. Mass Torts Update. . . . . . . . . . . . . 19

X. Business Litigation . . . . . . . . . . . . 22

XI. Insurance and Finance Update . . . 23

XII. Predatory Lending Update. . . . . . . 25

XIII. Premises Liability Update . . . . . . . 26

XIV. Workplace Hazards. . . . . . . . . . . . 27

XV. Transportation . . . . . . . . . . . . . . . 27

XVI. Arbitration Update . . . . . . . . . . . . 28

XVII. Nursing Home Update. . . . . . . . . . 28

XVIII. Healthcare Issues . . . . . . . . . . . . . 30

XIX. Monsanto Update . . . . . . . . . . . . . 32

XX. Environmental Concerns . . . . . . . . 33

XXI. Tobacco Litigation Update. . . . . . . 35

XXII. The Consumer Corner. . . . . . . . . . 36

XXIII. Recalls Update . . . . . . . . . . . . . . . 38

XXIV. Firm Activities . . . . . . . . . . . . . . . . 40

XXV. 25th Anniversary . . . . . . . . . . . . . . 42

XXVI. Closing Remarks . . . . . . . . . . . . . . 42

THE EXXONMOBIL CASE

Jim Martin served with distinction asCommissioner for the Department ofConservation and Natural Resourcesunder two Governors. The formerCommissioner, who was a successfulbusinessman, is very much familiar withthe State’s case against ExxonMobil. Mr.Martin wrote a letter to the Editor of theBirmingham News, which I hope eachof you will read. It tells how the giantoil company set out to cheat the State ofAlabama and almost got away with it.You can read the text of the letter bygoing to www.BeasleyAllen.com/news/exxon_letter_to_editor.htm.

GROCERY STORES SHOULD LABEL FOREIGN

PRODUCE

Agriculture Commissioner Ron Sparksis hard at work on behalf of Alabamaconsumers. He is pushing a plan thatwould require labels designating thepoint of origin of fruits and vegetablesgrown outside the United States inAlabama grocery stores. Legislationmandating the labeling is movingslowly through the legislative process.Hopefully, a bill sponsored by Repre-sentative John Robinson (D-Scottsboro)will become law. However, theAlabama Retail Association and theAlabama Grocers Association haveactively opposed the legislation.

Given that produce comes to stores inboxes and sacks showing the point oforigin, it shouldn’t be a big problem totransfer that information to the displaysin the produce section. According toCommissioner Sparks, most grocerystore chains operating in Alabama arealready familiar with labeling becausethe chains have stores in Florida, whichrequires labeling. The labeling legisla-tion offers merchants a variety ofoptions for complying, ranging fromlabeling each piece of produce tosimply putting a sign on the bin holdingthe produce. Stores that mislabeledproduce would be subject to fines. Ibelieve this legislation is needed andshould be passed by the Legislature.

COMMISSIONER JOSEPH BORG ON

THE ROAD

Joseph P. Borg, Director of theAlabama Securities Commission spokeat the United Nations Commission onInternational Trade Law in Vienna,Austria, on April 16th. CommissionerBorg proudly represented all State secu-rities regulators and the great state ofAlabama as participants in this interna-tional effort to build unity and coopera-tion in fighting crime. Presently, a widevariety of laws and policies in differentcountries often make it very difficult totrack down criminals or launderedmoney that have left our borders. Inter-national crime affects Alabamians andcitizens throughout the United States aspeople around the world can invest viathe Internet from anywhere and at anytime. As we have stated in previousissues, Alabama citizens have beenvictims to offshore Ponzi, foreign cur-rency, pyramid and prime bankschemes. Cooperative informationsharing programs, policy and laws tomove towards greater enforcement andprotection from fraud make sense andare needed. Commercial fraud doesn’trecognize boundaries, and that’s whyit’s important to have cooperation fromthe international community. It ishighly appropriate that Joe Borg, who isa real credit to the State of Alabama andwho has done a tremendous job forAlabama citizens, be made a part of thismovement. I can’t think of anybody Iwould rather have in this role.

REPORT ON ALGERIA LNG BLAST

The Mobile Register’s April 14thedition carried another timely story con-cerning the January explosion of a liq-uefied natural gas facility in the Africannation of Algeria. A newly releaseddocument provides important insightsinto the chain of events that led to theexplosion. Several scientists who spe-cialize in LNG research said the docu-ment indicates that a similar accidentcould occur at LNG plants such as thoseproposed for Mobile Bay and otherlocations in this country. The new doc-ument presented by Sonatrach, theowner of the destroyed LNG plant,

gives additional information concerningthe cause of the explosion. Apparently,initial reports blaming a faulty steamboiler were inaccurate.

The Algerian explosion should be awarning signal for those who mustmake decisions concerning location ofLNG facilities in this country. Accordingto the Mobile Register article, it nowappears that a large amount of liquidgas escaped from a pipe and formed acloud of highly flammable and explo-sive vapor that hovered over the facility.The cloud exploded after coming intocontact with a flame source. You willrecall that 27 people were killed by theforce of the blast at the facility inAlgeria. Significantly, the fire burnedfor 8 hours. This report raises moreconcerns about the location of the LNGterminal in the State of Alabama or else-where for that matter. Thanks go out tothe Mobile Register for staying on top ofthis matter.

II.LEGISLATIVEHAPPENINGS

AN UNHEALTHY IMPASSE

With the legislative session nearingthe final days, it appears that a mostserious impasse has developed that mayresult in making a bad fiscal situationfacing our state, very much worse. Atthis writing, there were only 6 legisla-tive days left. It is well-documentedthat without new revenues, there willbe a tremendous shortfall in the generalfund budget. One of the most seriousfiscal problems deals with the fundingof Alabama’s Medicaid program. Undera law passed by the U.S. Congress lastyear, Medicaid coverage was signifi-cantly expanded. Due to this congres-sional mandate, many states, includingAlabama, will have to come up withadditional funding. As you probablyknow, Medicaid works on a 70-30matching funds basis. This means thatthe federal government provides 70% ofthe funding, with the states beingresponsible for the remaining 30%. In

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the event a state fails to come up withits 30% share, that state gets no federalfunding. As I understand it, Alabamamust come up with an additional $180million in new revenue for next year’sbudget to comply with the Medicaidformula. Obviously, if Medicaid is to befully funded, then drastic cuts must bemade in other state programs, unlessnew revenues are found.

The partisan stalemate, which hascaused this session to be less than pro-ductive, shows no signs – at this writing– of being resolved. The reported riftbetween the Governor’s office and theLegislature should be patched up if atall possible, for the good of all con-cerned. But, the obvious division thathas developed between the Democraticand Republican members of the Legisla-ture could also stand some remedialattention.

It appears that I may be one of thefew folks in Alabama who believes ourstate needs a substantial amount of newrevenues. I also believe that those taxmeasures should be permanent innature and not another “Band-Aideffort.” I am sure we also have a needfor some accountability in governmentand in the public schools. However,passage of every single accountabilitybill won’t solve the “fiscal mess” ourstate is in. The groups spending “bigbucks” to kill any tax measures are notdoing the State’s citizens any favors. Ihope some progress will have beenmade before this issue is received. Ifnot, we are heading toward a majorfiscal disaster, which will be bad for allAlabama citizens. The best Alabamacitizens can hope for from this sessionis a stop-gap approach to the State’sproblems – with no real solutionshaving been found – and that’s notgood.

ALL ALABAMIANS SHOULD SUPPORT THE

SUPREME COURT ELECTION BILL

Last month, we mentioned the Senatebill that, if passed, would have associatejustices on the Alabama Supreme Courtelected by districts rather than instatewide races. The bill was approvedby the Senate Judiciary Committee andwill go to the full Senate for a vote. If

passed by the full Senate and theHouse, the bill would assign the eightassociate justice positions to the geo-graphic regions designated for membersof the state school board. The chiefjustice still would be elected statewide.The bill’s sponsor, Senator Myron Penn(D-Union Springs), wants to make sureall regions of the State are representedon the court and to lower the costs ofSupreme Court elections. In the lastelection cycle, candidates for the courtspent an average of more than $1million.

Committee chairman Rodger Smither-man (D-Birmingham) said the bill alsowas crucial to ensuring that black candi-dates have access to the State’s highestcourt. To my knowledge, there havebeen only three black justices, the lateOscar Adams, Ralph Cook, and JohnEngland. Each of these men servedwith distinction. It is regrettable that noblack candidate has won statewideoffice without first being appointed tofill a vacancy. The Senate committeeapproved the bill 10-3 over objectionsfrom Senators who disagreed withhaving judges represent districts the waylegislators do. Reports from the StateHouse reveal that a number of powerfulspecial interest groups oppose the bill.That makes me know for sure thatpassage of the bill would be a step inthe right direction. The only change Iwould suggest is the addition of sometype campaign finance reform, which isbadly needed. Because a vote of thepeople is required, all Alabama citizenswill have the right to express theiropinion at the ballot box. I hope theywill get that opportunity. However, it isgetting pretty late in the session to passany bill with strong opposition to it. Ifyou believe this to be a good thing forAlabama citizens, let your senatorsknow how you feel.

COMMITTEE VOTES DOWN JUDICIAL BILL

The House Judiciary Committee hasvoted down a proposed bill that wouldhave prevented the Alabama Court ofthe Judiciary from removing judgesfrom office. The bill would haveallowed the Court of the Judiciary tosuspend judges, but not remove them.

Representative Mark Gaines (R-Home-wood), the sponsor of the bill, toldcommittee members the power toremove judges should be limited to theLegislature. Committee members voted7-6 to kill the bill. I had stated prior tothe session that this was a bad bill, andI still believe that to be the case.

VETERANS HOMES CONTRACT DELAYED

Alabama’s Board of Veteran Affairsappears to be catching flack from allcorners concerning the operation ofsome state-run nursing homes. TheBoard was facing mounting criticismfrom veterans’ families who believedthat VA nursing homes perpetuateneglect and abuse. According to newsreports, the Board found that the homeswere understaffed. The facilities forveterans are currently operated by USAHealthcare, Inc., the Cullman-basedcompany owned by Frank Brown.After making its findings, the Boardtook action that didn’t set well with theAlabama Legislature. Last month, a leg-islative panel stalled efforts by theBoard to change the operator of threestate veterans homes. Members of theLegislature’s Contract Review Commit-tee criticized the notion of awarding athree-year $70 million contract to HealthManagement Resources Inc., a SouthCarolina company, without first accept-ing public bids. The contract is for thecare of about 400 residents of nursinghomes in Bay Minette, Alexander Cityand Huntsville.

Representative Neal Morrison, D-Cullman, took the lead in committee,arguing that the Board should havelooked more closely at renewing theexisting contract with USA Healthcare.This company has operated the homesfor the last five years and submitted acheaper proposal than HMR to continuethe services. But, because of the com-plaints relating to the level of care andespecially the staffing levels provided atthese facilities, the contract was notrenewed.

The legislative panel reviews moststate government contracts that areissued without seeking bids. Lawmakerscannot void a contract, but a singlemember can delay it for 45 days. The


full Legislature had adopted a resolutionasking the Board to delay its decisionon the contract for six months to givelawmakers a chance to examine themanner in which the contract wasawarded. The existing contract withUSA Healthcare expired May 1st, whichis about three weeks before the 45-dayhold period from the Contract ReviewPanel will expire. However, legislatorsmay lift their holds on contracts at anypoint during those 45 days. Agree-ments reviewed by the Contract ReviewCommittee must be signed by the gov-ernor in order to take effect.

James Jackson of Mobile, vice chair-man of the Veterans Affairs Board, toldthe Associated Press that he believes thecontract with the South Carolinacompany is in the best interest of thestate’s veterans. Jackson opposed thehold on the contract. The Legislature,the Board and the Governor all havethe responsibility to make sure that thenursing homes serving our veterans areproperly staffed and provide good careand attention to the residents. Anythingless should not be tolerated. I hope theend result of all of this will be good forthe veterans and their families.

ENVIRONMENTAL LEGISLATION

There have been a fairly goodnumber of bills introduced in thissession that, if passed, would affect ourState’s environment. As expected, oneof the bills (Senate Bill 261) that wasbeing pushed hard by Alfa was the newinfamous “Alfa hog bill,” which bearsthe title “The Alabama Family FarmPreservation Act.” The Senate JudiciaryCommittee held a public hearing on thisbill a few weeks ago. There was novote taken at that time by the Commit-tee. I hope the bill will die a naturaldeath in committee. This is bad legisla-tion, with a title that sounds good, butis designed to benefit primarily largehog farm operations. It does very little– if anything – for the overwhelmingmajority of farmers in Alabama. This isa prime example of how special interestgroups can mislead even their ownmembership. The hog bill “smells tohigh heaven” and shouldn’t have a

chance to pass during this session. Thefollowing items are a few things thatyou should be aware of:

• Another bill (House Bill 116), pushedby environmental groups, provideslocal tax abatement for brownfielddevelopment property that is volun-tarily cleaned up by the owners. Thisbill should have been signed by theGovernor by the time this issue isreceived. This is good legislation andthe legislators should be commendedfor doing a “good thing” for our state.

• There is an effort to have theLegislature take a look at what ourstate government needs to do inorder to improve the state’s ability toprotect the environment. HJR 23 (aHouse Joint Resolution), if passed,would create a joint interim commit-tee to study ADEM and make recom-mendations for improvements. Atthis writing, the bill was still in theSenate Rules Committee and may staythere, according to my sources. Inmy opinion, passage of this resolutionwould be a step in the right direction.ADEM has a duty to protect the envi-ronment in our state. We should doeverything possible to give thisagency the tools necessary to do thejob required of it.

• House Bill 126, if passed, wouldplace a 10-cent per ton severance taxon natural materials such as granite,gravel, limestone, and other naturalminerals. A good amendment byRepresentative Jeff McLaughlin wasadded to the bill in the House thatprovides for local approval of a quar-ry before a quarry could be started upin a county. At this writing, the billhad passed the House and was in theSenate. I am hopeful this bill willpass the Senate with the amendmentattached. I believe there is anotherquarry bill in the Senate. Senate Bill469, which is known as the QuarryBill, was introduced by SenatorMyron Penn. At this writing, the billwas in the Environmental and NaturalResources Committee. There are a number of groups fight-

ing to protect Alabama’s environment.AlaLEAVs, one of such groups, does anexcellent job with limited resources. If

you are interested in protecting ourenvironment and proper usage of ourstate’s natural resources, call Jeff Martinand let him know you want to help out.If you need additional information con-cerning the status of environmental leg-islation, Jeff Martin, Executive Directorof AlaLEAVs, can be reached at 334-221-5882 or Post Office Box 1987, Mont-gomery, Alabama 36102.

CONSTITUTION REFORM IS STILL NEEDED

Advocates for rewriting Alabama’s1901 constitution have to be a little dis-mayed by the obvious lack of supportfor reform around the State. There cer-tainly needs to be something to rekin-dle the effort. Some of those pushingreform believe a petition drive couldbring about a constitutional conventionwith the issue being kept alive by theuse of public forums. But, the Legisla-ture would still have to approve astatewide referendum calling for theconvention. A petition drive for a con-stitutional convention is currently beingdiscussed by groups interested in bring-ing our state fully into the 21st Century.The petition and campus forums were akey topic at the state meeting in Birm-ingham recently. There seems to begrowing consensus to start a petitionmovement. I am hopeful the reformmovement is still alive. I believe webadly need to amend the 1901 constitu-tion. I also realize there is not muchpublic support for reform, which is dif-ficult to understand.

The constitution reform movementslowed after voters defeated the effortto pass the tax and reform package lastSeptember. Subsequently, a key leaderin the reform movement, University ofAlabama journalism professor BaileyThomson, died and that compoundedthe problem. Bailey’s death was a greatloss, not just to the reform movement,but for the state. He was an outstand-ing person and was totally dedicated toconstitutional reform. Passage of a newconstitution would be a proper mannerin which to pay tribute to a man whoworked hard for meaningful change inour state.


III.COURT WATCH

THE PRIMARY SEASON IS HERE

There will be three Supreme Courtjustices elected this year, as well as theChief Judge of the Civil Court ofAppeals. Sharon Yates, who has servedtwo terms on the Civil Court of Appeals,and who now serves as Chief Judge, isseeking reelection. Sharon, who isrunning as a Democrat, has done anexcellent job on this court and shouldhave strong support from people fromall walks of life. Frankly, I was sur-prised that she picked up any opposi-tion. Apparently, doing a fair andimpartial job on the court doesn’tamount to much any more. If it did,Sharon would not have to worry aboutreelection. She has done an outstand-ing job and has been totally fair andimpartial during her years on the court.

The most interesting thing about thisyear’s election is the fact that most ofthe action in the spring elections will bein the Republican primary. In yearspast, the interest was in the Democraticprimary. But, this year, a total of 8Republican candidates are seeking 3seats on the Alabama Supreme Court.In contrast, only 3 Democratic candi-dates are running for these 3 seats onthe highest court in our state. I am notsure I understand fully why all the inter-est appears to be in the GOP primarythis year. Maybe I will figure it all outduring the next few weeks. In themeanwhile, if anybody has the answer,or can enlighten me, please feel free tolet me hear from you.

JUDICIAL CANDIDATES SHOULDN’T HAVE

AGENDAS

There has been a great deal said andwritten concerning our court system inAlabama. It was rather interesting thata recent survey indicated our judgesweren’t doing their jobs very well. Per-sonally, I take issue with that finding.My only complaint with judges is whenthey come into their positions with anagenda of any kind. All any personshould ask of a judicial candidate is apledge of fairness and a willingness to

follow the well-established law inmaking decisions once they are elected.No candidate with an agenda should beelected to any judicial position and cer-tainly not to a slot on an appellatecourt. I hope we don’t elect folks withagendas in Alabama, but sometimes Ihave to wonder.

The Governor and Legislature coulddo the people of Alabama a greatservice if they would get together onsome significant campaign financereform that would apply to judicialraces. That would solve most “agendaproblems.” There can be no justifica-tion for the tremendous sums of moneythat are spent on judicial races inAlabama – or in any state for thatmatter. Limits should be placed on theamounts of contributions, and politicalaction committee donations should beprohibited. It’s too late to expect anylegislation this year. But, the politicalparties could join together and dosomething constructive on their own.The primary voting will take place onJune 5th. It should be an interestingspring. It would be much better forAlabama citizens if we had some reallimits on contributions to candidatesand strict limits on what their cam-paigns could spend.

MANAGED-CARE LAW DOESN’T BRING

FLOOD OF LAWSUITS

It is most interesting that the HMOand insurance industries had claimedthat if lawsuits were allowed againstHMOs, the numbers of such suits wouldgo “through the roof.” That argumentwas made in Texas a few years ago andis still being made today in Congressand state legislative bodies. A 1997 lawmade Texas the first state to makemanaged-care plans legally responsiblein court for wrongdoing. Consumeradvocates hailed it as an invaluable toolthat would hold insurers accountablefor their decisions. The HMOs andinsurance companies warned that adeluge of litigation would send healthcare costs soaring. Seven years later,the effect of Texas’ patients’ bill ofrights has been far less dramatic, withonly a trickle of lawsuits there and inthe nine states that followed Texas’

lead. The message in Texas was clear.If you wrongly refuse to cover patients’prescriptions, hospital stays or medicalprocedures, consumers harmed bythose denials will have the state Legisla-ture’s go-ahead to sue.

That’s a telling outcome for right-to-sue measures, which have proven sodivisive that Congress’ attempts at anationwide patient-protection bill havestalled repeatedly – primarily becausethe powerful insurance industry hasresisted provisions allowing litigation.Despite the dearth of lawsuits, Texas’overhauls – combined with economicpressure from employers and con-sumers – have transformed insurancecoverage in the state. Since the law’spassage, health maintenance organiza-tions and preferred-provider organiza-tions have become less stringent aboutcontrolling members’ spending. Forexample, insurance companies in Texasrarely second-guess doctors’ plans fortheir patients. But, before this bill waspassed, most of the health plans inTexas were very strict about utilizationreview and how they oversee medicaldecisions. That has changed, and theresult has been good for people.

In Texas there have been only about50 lawsuits filed after the 1997 law waspassed. Nationwide, litigation was anonevent as well, with some statesseeing no suits at all, according to aSeptember 2003 study by researchers atthe University of North Carolina andWake Forest University.

Since the inception of Texas’ law,health plans have argued that the statelaw is preempted by the federalEmployee Retirement Income SecurityAct, which sets standards for privateemployers’ pension and health plans.The HMOs have consistently pushed tomove lawsuits to federal courts. Afterseveral conflicting rulings from lowercourts, the U.S. Supreme Court willdecide that issue as soon as thissummer, in a pair of cases broughtagainst Aetna and Cigna HealthCare ofTexas.


IV.THE NATIONALSCENE

LARGE CORPORATIONS SHOULD PAY THEIR

FAIR SHARE OF TAXES

Having just written a check to the IRS,I am acutely aware of how painful thepayment of taxes can be. Nevertheless,I consider paying taxes to be a duty thataccompanies citizenship. Unfortu-nately, there is much unfairness in oursystem of taxation in this country.Some are simply not paying their fairshare of taxes and some pay no taxes atall. During the boom years of the late1990s, more than half of U.S. corpora-tions paid no federal income taxes.Those that did were able to sheltermuch of their income, according to con-gressional accountants. A recent reportby the General Accounting Office raisesquestions about whether the corporateincome tax burden is too light and dis-tributed unequally. It could underminearguments that U.S. companies areovertaxed. Many observers believe toomany companies are able to use loop-holes to avoid paying their fair share.Senator Byron L. Dorgan (D-N.D.), aformer state tax commissioner whorequested the GAO study, stated: “Thisdescribes a problem in the corporatetax system in which a good many ofthese companies are avoiding any taxobligation at all. We’ve got a bad taxlaw that tells ordinary folks, ‘You payup,’ and allows some of the largestenterprises to avoid paying.”

U.S. government figures show thatthe share of tax receipts paid by corpo-rations has been declining for decades.The GAO report showed that 61% ofU.S. corporations paid no federalincome taxes from 1996 through 2000, aperiod of rapid economic growth andrising corporate profits. The study wasbased on an Internal Revenue Servicesampling of more than 2 million taxreturns. An estimated 94% of U.S. cor-porations reported tax liabilitiesamounting to less than 5% of their totalincome in 2000. The corporate incometax rate is ostensibly 35%, but compa-nies are able to reduce their effective

burden by claiming various deductionsand credits. In some cases, deductionsfor losses incurred in other years can betaken. U.S. companies paid an averageof $11.88 in corporate taxes for every$1,000 in gross receipts, the study said.About 38% of big companies (thosewith more than $250 million in assets or$50 million in revenue) paid no taxesduring the five-year period. Foreign-owned firms fared better in somerespects than did their U.S.-based com-petitors. The report found that 71% offoreign-controlled corporations paid notaxes on their U.S. income. About 90%had liabilities of less than 5% of theirincome.

The burden of the federal tax share isbeing shifted to the average worker inthis country. This shift to the worker isat the expense of fairness in America.The percentage of federal tax collec-tions paid by corporations has tumbledfrom a high of 39.8% in 1943 to a lowof 7.4% last year. It ranged from 10% to11% in 1996 to 2000, the period studiedby the GAO. But since World War II, theshare paid by individual income taxfilers has remained relatively stable. Ithas ranged between 40% and 50%. Wehave all read about the aggressive mar-keting of shelters to corporations. Thismay well become a major issue in thepresidential campaign. Corporate taxshelters cost the Treasury an estimated$18 billion each year. Unfortunately,when corporations dodge the paymentof taxes, the burden falls on the averageAmerican citizen to pick up the differ-ence. Last year, corporations werepaying just 13.7% of the federal tax bill.Individuals, on the other hand, werepaying 86.3%, or almost $800 billion.According to the Congressional BudgetOffice, corporate income taxes in 2002contributed to less than one-tenth ofoverall federal budget revenues. Ifirmly believe that massive tax avoid-ance is simply wrong. All citizens –including corporate citizens – have anobligation to pay their fair share oftaxes. It is grossly unfair to put anunreasonably harsh and unbalancedburden on working men and women inthis country.

DEDICATED PUBLIC EMPLOYEES SHOULDN’THAVE TO PAY A PRICE

Jack Spadaro is an engineer who hasdevoted his life to the safety of minersand the safety of people who live nearmines. Until recently, he was head ofthe National Mine Health and SafetyAcademy, a branch of the Departmentof Labor, which trains mining inspec-tors. It went unnoticed last year whenMr. Spadaro lost his job. His termina-tion came after Spadaro blew thewhistle on what he called a “white-wash” by the Bush Administration of aninvestigation into a major environmentaldisaster. CBS News did a feature storyon what has been described as amassive cover-up of an environmentaldisaster. Spadaro told CBS News:

I had never seen anything so cor-rupt and lawless in my entire career,what I saw regarding interferencewith a federal investigation of themost serious environmental disasterin the history of the Eastern UnitedStates. I’ve been in government sinceRichard Nixon. I’ve been through theReagan Administration, Carter andClinton. I’ve never seen anything likethis.

The safety advocate believes the gov-ernment is guilty of the cover-up of aninvestigation into a disaster 25 times thesize of the Exxon Valdez spill. It hap-pened in October of 2000, when 300million gallons of coal slurry - thickpudding-like waste from mining opera-tions - flooded land, polluted rivers anddestroyed property in Eastern Kentuckyand West Virginia. The slurry containedhazardous chemicals, including arsenicand mercury, and presented seriousenvironmental hazards, according toreports.

Spadaro was second-in-command ofthe team investigating the accident.The slurry had been contained in anenormous reservoir, called an impound-ment, which is owned by the MasseyEnergy Company. The heavy liquidbroke through the bottom of the reser-voir, flooded the abandoned coal minesbelow it and flowed out into the


streams. According to Spadaro, theinvestigators discovered the spill wasmore than an accident. He describes itas an accident waiting to happen. Theslurry polluted 100 miles of stream,killing everything in the streams, all theway to the Ohio River.

During the investigation carried outby Spadaro and his colleagues, it cameout that there had been a previous spillin 1994 at the same impoundment. Themining company claimed it had takenmeasures to make sure it wouldn’thappen again, but an engineer workingfor the company said the problem hadnot been fixed. The company engineersaid that both he and the companyknew another spill was “virtuallyinevitable.” Spadaro claims that anumber of people in the companyknew there would be another break-through. Clearly, it would have beenexpensive to find another site and it isSpadaro’s contention the company waswilling to take the risk.

The reason another massive spill issaid to have been a certainty is becausethere was only a very thin layer of rockat the bottom of the reservoir. Appar-ently, the mining company had told thegovernment that there was a solid coalbarrier, at least 70 to 80 feet wide,between the mine workings and thebottom of the reservoir. Davitt McAteer,who was Spadaro’s boss when the dis-aster happened and head of the federalMine Safety and Health Administration(MSHA), told CBS News that his ownregulators hadn’t done their job. It wasreported by CBS that MSHA was primedto cite the coal company for serious vio-lations carrying large fines and possiblecriminal charges. Interestingly, that allchanged when the Bush Administrationtook over and decided that the countryneeded more energy – and less regula-tion of energy companies. The investi-gation into Massey Energy, reportedly agenerous contributor to the RepublicanParty, was abruptly cut short.

The new head of MSHA, Dave Lau-riski, a Bush appointee, was a formermining industry mining executive.Interestingly, so are his top deputies.Spadaro claims that Lauriski insisted hesign a watered-down version of thereport - a version that virtually let the

coal company and MSHA off the hook.Originally, Spadaro says his investigat-ing team wanted to cite the companyfor eight violations. But in the end,Massey Energy was only cited for twoviolations, and had to pay approxi-mately $110,000 in fines. This was aslap on the corporate wrist for the fifthlargest mining company in America.Since there are hundreds of slurryimpoundments in the mountains ofAppalachia, the potential for anotherspill is certainly there.

Spadaro had worked for mine safetyover his entire career. So when he felthis new bosses were trying to sabotagethe investigation by trying to get him togo along with a cover-up, he com-plained to the Labor Department’sInspector General. The InspectorGeneral looked into the matter andreleased a report, saying: “None of theallegations brought forward by Mr.Spadaro were substantiated.” The gov-ernment says he was removed from hisjob primarily for abusing his authority,failing to follow procedures, and also forusing his government credit cardwithout authorization.

Residents of Appalachia, who werefamiliar with his record, demanded thatSpadaro get his job back. I understandSpadaro is now back at work instead ofbeing fired. Instead of termination, hewas demoted, taking about a $35,000pay cut. Spadaro is also being trans-ferred to the agency’s Pittsburgh office,far from his family in West Virginia.Spadaro told CBS News that he plans tosue the government. The Office ofSpecial Counsel for Whistleblower Pro-tection has agreed to investigatewhether Spadaro was a victim of retalia-tion by MSHA officials. I hope thisstory is not what happens when acareer public servant wants to protectthe environment and go after the pol-luters.

RELEASE OF ENERGY POLICY TASK FORCE

DOCUMENTS ORDERED

Last month, a federal judge orderedthe Bush Administration to release moredocuments related to a White Housetask force that met behind closed doorsto develop a national energy policy.

Government watchdog groups, includ-ing Judicial Watch and the Sierra Club,have requested the records as part of aninvestigation into whether top energycompany executives and lobbyistshelped draft energy policies friendly totheir industries during President Bush’sfirst year in office. The Administrationhas maintained for some time that onlygovernment employees were membersof the task force, which was disbandedin 2001. Judicial Watch alleges thatformer Enron Chairman Ken “KennyBoy” Lay and energy lobbyists MarkRacicot, Haley Barbour (who is nowGovernor of Mississippi) and ThomasKuhn may have participated in the taskforce.

The court’s order covers documentsthat the Energy Department, InteriorDepartment and other Federal agencieshave failed to produce since a similarfederal court order was issued twoyears ago. This latest order wouldcover some of the material that is thesubject of a separate case now beforethe U. S. Supreme Court. That particu-lar case involves documents thatdescribe the inner workings of theEnergy Task Force headed by Vice-Pres-ident Dick Cheney. The powerful Vice-President, who many believe is reallyrunning the federal government withthe able assistance of Karl Rove, wasordered to produce the documents.Cheney appealed that part of thedispute to the Supreme Court, whichwill hear oral argument on the case.

It will be very interesting to see howthis case plays out. I believe verystrongly that top energy company exec-utives and lobbyists have had a “fieldday” with this Administration. The doc-uments at issue in these lawsuits maydemonstrate the degree of involvementthat these individuals tied directly to theenergy companies have had in theshaping of our nation’s energy andenvironmental policies. No Administra-tion in my lifetime has done a better jobof taking care of their “corporatebuddies” and especially those with con-nections to the oil industry. The factthat Ken Lay is still a free man could beconsidered as Exhibit “A” if I set out toprove this case.


V.CONGRESSIONALUPDATE

AN ELECTION YEAR AGENDA

I don’t expect anything of significanceto happen in Washington until after thefall elections. Unfortunately, little goodhappens in Congress during an electionyear. With the sharp partisan divisionthat exists at present, I don’t expect thisyear to be any different. I hope thisassessment will be wrong and somegood consumer legislation will beenacted. I suspect the recent revela-tions concerning how the President andVice-President bypassed Congress ontheir “secret” war plans will get a greatdeal of attention in coming weeks. Ifall reports are accurate, both Republi-cans and Democrats in Congress shouldbe pretty upset. One thing is certain,however: so long as the special interestgroups and their lobbyists call the shots,consumers won’t see any relief in ournation’s capitol for the rest of this year.

THE ASBESTOS BILL

As this issue was going to the printer,the asbestos bill had been debated inthe U.S. Senate. I received a call just asI was putting the finishing touch onthings, letting me know that an effort topass the bill had failed. There weren’tenough votes in the Senate to get a voteon the bill. It is possible that a reason-able compromise can be reached. Ifnot, the present bill should be with-drawn. I hope the current version willnot come back up, but when you con-sider the power of the groups pushingit, it may very well pop up again.

VI.CAMPAIGNFINANCE REFORM

PRESIDENTIAL CAMPAIGN SPENDING AT ARECORD PACE

I don’t ever recall more “early spend-

ing” in a presidential race. It hascaused many to forget that we haven’teven had the nominating conventions.President Bush spent a record of nearly$50 million in March. Of course, thishasn’t put a dent in his campaignfortune. Bush raised $26.2 million inMarch and about $52.9 million for thequarter, setting a presidential campaignrecord for a three-month period,according to the campaign financereport filed on April 20th with theFederal Election Commission. The cam-paign of presumptive Democraticnominee Senator John Kerry raisedabout $50 million for the quarter, aDemocratic Party record. In all, Bushhas taken in at least $185.7 million andspent $99 million since he “officially”began his re-election effort last May.Bush’s March spending marks the mostever in one month by a presidentialcampaign. Nearly all of Bush’s adspending last month — about $40.8million — went to Maverick Media, anadvertising firm run by Bush mediaadviser Mark McKinnon. The campaignpayroll and direct mail were the othertwo single biggest expenses. Bushspent more than $2 million on mailingsand about $1.3 million on staff salariesand related payroll costs.

Kerry came out of the primaries withvery little money on hand. He raisedover $20 million over the Internet aloneafter becoming his party’s nominee-to-be. Bush will have spent at least $50million for ads during March and April.Kerry has spent a fraction of thatamount on ads since early March, about$12 million. Both Bush and Kerryskipped public financing for theprimary season. This allowed them tosurpass the program’s $45 millionspending limit. Both are expected toaccept full government funding for theirgeneral election campaigns. That meanseach will receive a taxpayer-financedgrant of about $75 million when theyare nominated by their parties in latesummer.

REGULATION OF SECTION 527 GROUPS

NEEDED

Public Citizen has submitted com-ments to the Federal Election Commis-

sion (FEC) supporting the agency’s pro-posal to regulate so-called “Section 527”electioneering groups (named for asection of the Internal Revenue Code)under federal campaign finance laws toprevent a flood of “soft money” fromspecial interest groups from flowinginto federal elections. Public Citizenalso criticized the proposed regulationas too sweeping and urged the agencyto narrow its scope so that “501(c),”organized under another section of theCode, non-profit groups would not becaptured under the regulation, becausethese groups usually are legitimateadvocacy organizations.

The FEC has proposed regulation toexpand the definition of a “politicalcommittee,” which is subject to federalcontribution limits, to include non-profitgroups, which currently are not subjectto the limits. Under federal campaignfinance laws, as amended by the newMcCain-Feingold law, political commit-tees are not entitled to use “soft money”- money from corporate or union treas-uries or from individuals and PACs inexcess of the contribution limits - to payfor electioneering for or against federalcandidates. Many electioneering groupshave avoided the contribution limits byregistering as Section 527 groups underthe tax code, rather than as politicalcommittees under the election code.Because 527 groups fall outside thecampaign finance laws, these groupscan raise and spend unlimited softmoney, and many are planning ondoing exactly that in the 2004 presiden-tial election. Public Citizen does notbelieve that Section 527 groups, whoseprimary purpose is to influence elec-tions, should be exempt from campaignfinance laws. This is a gaping hole thatneeds to be closed.

Public Citizen urged the FEC not toadopt an overly broad definition ofpolitical committee that could falselycapture legitimate advocacy organiza-tions, such as 501(c) non-profit groups.Some of the regulatory options beingdebated by the Commission, such asclassifying any group that spends morethan $50,000 supporting or attacking anofficeholder as a committee subject tofederal campaign finance laws, are fartoo sweeping and could endanger the


right of citizens and groups to discussserious political issues and criticizeofficeholders for their positions onthese issues. 501(c) advocacy groupsshould have the right to challengeofficeholders and candidates on the realissues that affect citizens. Public Citizenbelieves that right must be protectedand I agree. Public Citizen urged theFEC to act quickly on the proposed reg-ulation because the political campaignshave already started – much earlier thanusual. The group recommended thatthe FEC promulgate this regulation byMay of this year or consider delaying itsimplementation until after the 2004elections.

Public Citizen’s comments also reflectits strong concerns about protecting theadvocacy rights of the non-profit com-munity. It noted that some politicaloperatives abuse the tax code andconceal their primary purpose of elec-tioneering under 501(c) tax status. Thisabuse is likely to become morecommon if the FEC does, in fact, closethe 527 loophole. As a result, PublicCitizen believes that the FEC shouldadvise the IRS to enhance its disclosurerequirements of 501(c) non-profitgroups so total “electioneering expendi-tures” are distinguished from total “lob-bying expenditures.” Currently underthe tax code, both types of expendi-tures are aggregated as “lobbyingexpenditures,” making it impossible todetect shadow electioneering groups.Such an improved disclosure system forthe non-profit community would notpenalize groups with extensive expen-ditures that praise or criticize candidatesand officeholders - the type of advocacywork expressly permitted for 501(c)non-profits. But it would help the IRSflag potential abuses of the tax code bygroups primarily seeking the election ordefeat of candidates for closer scrutinyunder the “facts and circumstances” ofeach individual case.

VII.THE CORPORATEWORLD

EX-BOEING EXECUTIVE PLEADS TO

CONSPIRACY

A former Air Force official, who laterserved as a top executive at the BoeingCo., has pleaded guilty to conspiring tohelp the aviation giant obtain a multibil-lion-dollar Pentagon contract. DarleenA. Druyun entered the plea in U.S. Dis-trict Court to a single count of conspir-acy, which carries a maximum fiveyears in prison. Druyun was an AirForce procurement officer beforebecoming a Vice-President at Boeing.She and former Boeing chief financialofficer Michael Sears were the subject ofa federal grand jury investigation of theAir Force’s plan to acquire 100 refuelingtankers from the Chicago-based jetmaker. With our country at war, thissordid story should make all Americanstake stock of how our tax dollars arebeing wasted and how some govern-mental contractors “profit” during timesof crisis by cheating the government.

Sears, while at Boeing, is said to havecontacted Druyun about a possible top-level company job in 2002, when shestill was at the Air Force and playing akey role in deciding whether Boeingshould get the tanker contract. This con-tract could be worth up to $23 billion toBoeing. Druyun retired from the AirForce in November 2002 and joinedBoeing in January 2003 as deputygeneral manager of its Missile DefenseSystems unit. The tanker contract, even-tually awarded to Boeing, is under sus-pension while a series of reviews areconducted. The Air Force wants toacquire 100 modified Boeing 767 aircraftto modernize its aging fleet of aerialrefueling tankers. The Pentagon’s inspec-tor general has said the unusual lease-purchase arrangement is more expensivethan buying the planes outright, and saidsignificant changes should be madebefore the deal is allowed to proceed.In a highly critical report issued lastmonth, Inspector General JosephSchmitz said procedural and financialproblems with the deal could cause the

government to spend as much as $4.5billion more than necessary.

Senator John McCain (R-Ariz.), whohas been a vocal critic of this deal, hascalled it “corporate welfare” for Boeing,which has cut nearly 40,000 jobs sincethe 2001 terrorist attacks sent the avia-tion industry into a tailspin. McCain hassaid Druyun’s actions demonstrate the“incestuous relationship between thedefense industry and defense officialsthat is not good for America.” Boeingofficials have said they expect the dealto go forward, but are prepared to takea $310 million charge if it collapses.Boeing claims it has been cooperatingwith authorities since the company“uncovered inappropriate conduct”involving the company’s hiring prac-tices. To call this sort of thing “inappro-priate” is a gigantic understatement.

The more we learn about how somein Corporate America cheat the U.S.government, the more disgusting thehandling of government contractsbecomes. It appears that some corpo-rate officials simply believe it’s notreally cheating if the victim is the U.S.government. What seems to be lost inthe reporting of these scandals is thatthe American taxpayers are the realvictims. Personally, I believe that weshould ban any corporation that iscaught cheating the government on asecond offense from doing businesswith any branch of the federal govern-ment. That is the only lesson that willget their corporate attention.

ANOTHER SHOCKING CORPORATE SCANDAL

Almost three years after price capsfinally put an end to the Californiaenergy crisis, federal prosecutors havecharged a corporation with manipulat-ing the price of electricity. ReliantEnergy Services Inc. and four former orcurrent employees were charged withconspiracy, fraud and manipulating theprice of electricity. According to federalprosecutors, Reliant used phony mainte-nance and environmental problems asexcuses to shut down four of its five-generation plants in order to drive upprices by cutting supply. When theprices soared to $750 per megawatthour – as compared to a more typical


price of $35 per megawatt hour –Reliant brought its plants back on line.Prosecutors allege that the two-dayscheme cost California ratepayers asmuch as $32 million in overpayments.It is significant that the charges targetthe corporation itself as a criminaldefendant.

That prosecutors decided to chargeReliant, instead of just the employeeswho engaged in the price manipulation,is noteworthy. Prosecutors said theydid so because Reliant had not cooper-ated with prosecutors, which I findtroubling. If a corporation breaks acriminal law, that alone justifies prose-cution. It shouldn’t depend on cooper-ation or the lack of it. Attorney GeneralJohn Ashcroft, in announcing the indict-ment, said that “When evidence showsthat a company’s corporate culturebreeds corruption and disrespect for thelaw, the Department of Justice will nothesitate to bring criminal chargesagainst the company itself.” My ques-tion to General Ashcroft is, “how muchevidence does it require?”

Reliant Energy faces several milliondollars in fines and up to five years pro-bation. Its parent company, ReliantResources, services 1.8 million cus-tomers in four states and had revenuesof $11 billion last year. You may recallthat Reliant Resources paid $13.8million to settle an investigation by theFederal Energy Regulatory Committeelast year. But, Reliant was just one of70 firms and utilities that the state ofCalifornia believes were responsible formanufacturing an energy crisis in Cali-fornia’s deregulated energy market in2000 and 2001. So it appears federalprosecutors have lots of work to do.

JUDGE DECLARES MISTRIAL IN TYCO CASE

Last month, the judge in the criminaltrial of two Tyco executives declared amistrial in the case. The mistrialoccurred after a juror, thought to beholding out for acquittal, reportedreceiving a letter questioning her reluc-tance to find the executives guilty and aphone call urging her to convict theexecutives. The juror caused a stirseveral days earlier by allegedly flashingan “OK” sign to the defense team –

something the juror later denied. Inaddition, during deliberations jurorssent a note to the judge saying that theatmosphere in the jury room had turned“poisonous” and that the juror in ques-tion was refusing to deliberate with anopen mind. After the juror’s name wasprinted in several news reports, defenselawyers filed for a mistrial. JudgeMichael Obus initially rejected thedefense team’s request to end the trial.But, after the juror reported receivingthe letter and phone call, Judge Obusreconsidered, declaring a mistrial.

The former executives, DennisKozlowski, and Mark H. Swartz, werecharged with grand larceny, falsifyingbusiness records, conspiracy and securi-ties fraud. The two are said to havelooted Tyco of $600 million, using themoney to pay for yachts, lavish houses,parties, and jewelry. Jurors in the trialhave said that they were very close toconviction on several counts before thejudge’s ruling. The former juror at thecenter of the controversy, whiledenying that she ever flashed an “OK”signal to defense lawyers, has statedthat she does not think that she wouldhave voted guilty on any count. Thejuror had reportedly expressed herconcern to other jurors that Tyco’sboard of directors unfairly targeted theexecutives, and that prosecutors wereeager to make an example of corporategreed. Frankly, I believe corporategreed should be targeted and thegreedy prosecuted when criminal lawsare violated.

The trial judge ordered Kozlowskiand Swartz to return to court on May7th, when a tentative retrial date isexpected to be set. Besides the crimi-nal prosecution, Kozlowski and Swartzstill face a great deal of civil litigation,including cases filed by the Securitiesand Exchange Commission and Tyco’snew managers. These cases have beenput on hold until the criminal proceed-ings end.

I have three observations about thismatter. First, the trial lasted much toolong and that I can’t understand. Next,it is pretty clear that Kozlowski andSwartz were doing some pretty badthings and were literally “raping” share-holders and employees of the corpora-

tions, using corporate funds for theirpersonal use. Finally, I am hopeful thatthe civil courts will do their job andrecover all of the funds taken by thesecorporate executives who had noregard for the law or for their owncompany’s welfare. They must betaught a lesson!

MARTHA STEWART SEEKS NEW TRIAL

In a post-trial motion filed in March,lawyers for Martha Stewart claim that ajuror violated his oath and lied to serveon the jury. In a jury questionnaireanswered by juror Chappell Hartridgeprior to the Stewart trial, the juror statedthat the only time he had been to courtwas for a traffic violation. However,Stewart’s lawyers allege that after thejury returned a guilty verdict againsttheir client on March 5th, they learnedthat Hartridge was arrested in 1997 forassaulting a female roommate. Har-tridge spent several days in jail and wasarraigned in court for the assault chargebut the victim eventually dropped thecharge because she could not misswork to attend court. The new trialmotion asserts that Hartridge, “dishon-estly suppressed information concern-ing a gender-related incident in order tobe able to sit in judgment of a well-known and highly successful woman ina case alleging false statements.”

In addition, lawyers for Stewart alsoaccused this juror of failing to state onhis jury questionnaire that he had beensued three times. According to themotion for new trial, judgments havebeen entered against him in each case.Stewart’s lawyers also allege, based onits post-trial investigations, that a littleleague baseball coach once accused thejuror of stealing up to $50,000 from thelittle league team when the juror servedas the team’s treasurer. Stewart’slawyers are seeking a new trial under a1984 Supreme Court case that said aconvicted defendant could seek a newtrial if he or she can show a juror lied injury selection and that the truth wouldhave provided a basis to remove thatjuror. Unless the judge grants the newtrial motion, Stewart’s sentencing isscheduled for June 17, 2004.


KPMG AND FORMER UNIT SETTLE

OVERBILLING CASE

KPMG, one of the Big Four largestaccounting firms, and BearingPoint, itsformer computer consulting unit, haveagreed to pay $34 million to settle alawsuit that accused them of overbillingclients for travel expenses. Eachcompany will pay $17 million as part ofthe preliminary settlement of the classaction lawsuit. The lawsuit was broughtagainst several accounting and consult-ing firms. PriceWaterhouseCoopersagreed in December to a $54.4 millionsettlement to end its role in the case.This leaves Ernst & Young and CapGemini as defendants. The caseinvolves undisclosed rebates that thecompanies are accused of receivingfrom travel companies on client-relatedtravel. The suit says the consulting firmsprofited from rebates after travel wascompleted. The Wall Street Journal firstreported news of the settlement in arecent edition.

VIII.PRODUCTLIABILITY UPDATE

THE JERNIGAN CASE FINALLY SETTLES

On April 16th, after 4 long years, thetragic case involving young JeffreyJernigan against General Motors Corpo-ration (GM) was finally settled. Whilethe amount of the settlement is confi-dential at GM’s request, the story relat-ing to this company’s wrongdoing isn’tand can be told. I believe the Americanpeople have a right to know how badGM’s conduct actually was leading upto this case. You will recall the casewent up to the Alabama Supreme Courtafter a $122 million jury verdict wasreturned against GM in the first trial.The jury had found conclusively thatthe vehicle designed, manufactured,and sold by GM was not crashworthy.The jury specifically found based onclear and convincing evidence, that GMengineers were fully aware of thepotential head injury problem thatexisted with the class of Oldsmobile

involved in this case. The evidenceagainst GM in this case was not onlyoverwhelming, but also devastating forthe automaker – and made the amountof the verdict totally justified. The trialjudge found during post-verdict hear-ings (after the first trial) that the juryhad also been completely justified inawarding punitive damages in this case.On the question of whether the puni-tive damage verdict was excessive, thecourt found the following:

GM’s own internal documents, inconjunction with governmental test-ing, showed that GM knew that thesechanges increased the head injurycriteria for this vehicle and made therisk of a serious head injury likely.With this knowledge, GM, in its docu-ments, prior to the sale of this vehicle,made the decision to wait until the1994 model year to implement designchanges, which would have mini-mized this danger. GM made a con-scious and deliberate decision toreduce safety in the Delta 88 and putan occupant at risk, including JeffreyJernigan. The defendant’s conduct issufficiently reprehensible to support asignificant award of punitive dam-ages. This factor weighs heavilyagainst General Motors on this issue.

There was a reason why GM had toknow it had created a hazard and wasputting people in their cars at risk. GMhad instituted what was known as the“2500 Project” a few years before the1993 Oldsmobile 88 owned by theJernigan family was sold. This projectdid two things: (1) it cut needed safetyfeatures from the cars, and (2) itincreased GM’s profits because the retailcost was not reduced. The evidenceclearly showed that, based on thenumber of vehicles GM sold, even asmall cost savings would have resultedin hundreds of millions of dollars inprofits. The 2500 Project, which waslabeled a cost reduction program, actu-ally saved $2,500 per vehicle each yearduring the time the H-car platform carswere sold. This statement by the trialjudge is found in the court’s post-verdictorder:

The payment of this entire awardwould not take away or remove GM’s

profit for two months recognized fromthe cost reduction program.

During the post-verdict motionshearing, we proposed to GeneralMotors, on behalf of our clients, that ifthe company would simply recall all ofthese defective vehicles, we wouldforego any claim for punitive damagesin the case. GM refused to do this,which is extremely difficult to under-stand when you consider how manydefective vehicles are still on the high-ways of this country, and the greatpotential for harm to people that stillexists. Perhaps the most telling indict-ment against GM arising out of theJernigan case was this comment foundin the trial court’s order:

GM’s conduct in the defense of thiscase was of a nature that cannot betolerated by the Court. The abuses ofdiscovery and failure to comply withorders of the court by GM’s trial coun-sel shocked the court.

Even though the Alabama SupremeCourt reversed the verdict from the firsttrial on a jury selection issue, theCourt’s lengthy opinion was very strongon all liability issues. In fact, it hasbeen described as a classic opinion oncrashworthiness and has been widelydiscussed by legal scholars around thecountry. So there can be no misunder-standing about GM’s wrongdoing whichwas the basis for the settlement of theJernigan case, we are putting both thetrial judge’s post-verdict order and themajority opinion from the AlabamaSupreme Court on our website. Youcan read these two documents by goingto www.BeasleyAllen.com and thendraw your own conclusions.

GENERAL MOTORS’ 2500 PROJECT –PUTTING PROFITS OVER SAFETY

I want to discuss in more detail GM’sdisregard for safety. There was onemost significant discovery made duringour handling of the Jernigan case thatdeserves further mention. As statedabove, the case involved an OldsmobileDelta 88 that was found to be danger-ous and defective by an Alabama jury.


The reason for the large punitive awardby the jury was General Motors’ callousdisregard for safety. In an effort toincrease profits, GM had implemented acost reduction program to take effect inthe design and manufacture of whatGM refers to as the “H car” platform(the Oldsmobile Delta 88, the BuickSkylark, and the Pontiac Bonneville).During discovery, we learned that the2500 project played a major role incausing the Jernigan car to be “uncrash-worthy.” It literally took safety featuresout of the H cars or reduced the effec-tiveness of what remained after thedesign changes.

During the extensive pretrial discov-ery, we learned a great deal about GM’scost cutting efforts – instituted to reducethe costs of production by $2,500 pervehicle in the H car group – and whichmade the cars uncrashworthy. GMintentionally compromised safety in anumber of areas. As a part of theproject, the company removed a sub-stantial amount of mass, which equatesto weight, from the vehicles. Thisresulted in a compromise of the front-seat passenger’s survival space, whichGM refers to in its marketing as the car’ssafety cage. I urge all of you to obtaincopies of the marketing materials putout by GM relating to their cars. Sincewe are still under a protective orderrelating to actual documents receivedfrom GM, I am not going to quote fromthe marketing documents. But, I urgeyou to check out for yourself what GMtold its potential customers about safetyin the H car platform cars, including theOlds 88. I can say without question,Project 2500 is certain to cost lives andcause serious injuries and disabilitiesthroughout this country unless all ofthese vehicles are recalled. Because ofthe lack of crashworthiness of thesevehicles, the occupants in otherwisesurvivable wrecks will very likelyreceive serious head injuries in frontalcollisions.

The portion of the vehicle from thebumper to the beginning of the passen-ger compartment is designed so as toabsorb and distribute the energy forcesof a crash. The front portion actuallycrumples – much like an accordion – bydesign. Specifically, the following

changes were made in the H car plat-form cars that made the cars unsafe.The upper rail, which is an importantsafety feature, was reduced from 40-psisteel to 30-psi steel. This means thehard steel was taken out and soft steelused instead. Interestingly, this changewas brought about to accommodateplastic fenders, which were replacingthe previous metal fenders on thesevehicles. In addition, the mid rails,which go down the lower sides of thevehicle, were reduced in size and actu-ally cut off under the floor pan of thecars. The door beam, which had beena large, wide one in the previous gener-ation of the H cars, was changed to amuch smaller tube. All of this wasdone to take weight from the vehiclesand had the direct effect of compromis-ing safety. GM did crash tests of the Hcars with the 2500 Program changes inplace and got results that told themhead injuries to front seat passengerswere “likely.” The Head Injury Criteria(HIC) numbers received were in excessof the 1000 HIC number allowed by thefederal government. In fact, the testresults greatly exceeded GM’s owninternal standard, which was 800. Thebottom line is that GM knowingly andintentionally put a defective vehicle onthe highways knowing it was gamblingwith human life. GM gambled andJeffrey Jernigan and his family were thelosers.

FORD MOTOR CO. HAS A PATTERN OF

DISCOVERY ABUSE

Last month, I wrote about ourpending case in Crenshaw County,Alabama, where we have pending amotion for default judgment againstFord Motor Company for its blatant dis-covery abuse in that court. The trialjudge recently conducted a hearing onour motion and took testimony from aFord design analyst engineer andseveral of its lawyers. For the unin-formed, an engineer with that titledoesn’t design cars. Instead, designanalyst engineers serve as lawsuit engi-neers and are a part of Ford’s litigationteam. Although I cannot discuss theparticulars of the hearing because weare under a protective order that places

all Ford testimony under seal, I can saythat the testimony confirmed that Fordintentionally withheld critical informa-tion in our case for over four years. Italso confirmed their pattern of discov-ery abuse for which it has gainednationwide notoriety. We are waiting onan order from the trial judge. I hope atsome point, we can discuss fully thetestimony offered by Ford. Once again,Ford cannot claim an “honest mistake”as they have in our case and in numer-ous other cases during the past decadein its “take no prisoners” approach todefending against claims that itdesigned and built defective vehicles.

Ford Motor Company has engaged ina pattern and practice of discoveryabuse in a number of courts. Personswho are victims of a defective vehicleresulting in serious injuries or the deathto a family member shouldn’t be furthervictimized by a corporation thatbelieves it is above the law. Judgeshave an obligation under their oath ofoffice to deal harshly with discoveryabuse. Although our firm is certainlyno stranger to Ford’s discovery prac-tices, we wanted to do a little checkingto see just how bad Ford has been in itsapproach during the discovery phase oflitigation. Shockingly, we found nearly50 instances over the past decade or sowhere Ford has been seriously sanc-tioned by Judges across the countrywho imposed large fines, reverseddefense verdicts, and granted defaultjudgments. There is no telling howmany other court-ordered sanctionshave been levied against Ford or howmany times Ford has gotten away withtheir tactics. While a complete listing ofall of the sanction orders is not possi-ble, I do want to comment on some ofthe more recent sanction orders againstFord which confirm this company’sarrogant approach. We uncovered dis-covery abuse orders dating all the wayback to the 1980s. Some of these ordersincluded the entering of default judg-ment just as we have requested in ourpending case referred to above. Eachof the following is a report from variousactual cases involving Ford.• In March of this year the judge presid-

ing over the Crown Victoria fuel sys-tem class action filed in St Clair


County, Illinois, ruled that Ford hadonce again willfully and intentionallydisobeyed Court Orders regardingdiscovery. As a result, the court levieda high monetary sanction against Fordfor not producing documents andalso ordered the company to conducta seventy-five mile per hour crash testof the trunk pack on the CrownVictoria as it had falsely claimed tohave done. The court, in reprimand-ing Ford further, held that the “settingthe record straight” brochure mailedby Ford was deceptive and mislead-ing because Ford had not conductedany fuel system testing despite itsassurances in the brochure that it hadconducted a seventy-five mile perhour crash test on the Crown Victoria.

• Last August, a Hinds CountyMississippi judge reversed a defenseverdict in favor of Ford and ordered anew trial in a fuel-fed fire case involv-ing the death of two students in anExplorer. In that case, Ford waiteduntil trial to produce thousands ofdocuments in willful and blatant vio-lation of court rules, according to thecourt. The Mississippi trial judge alsoordered Ford to pay $200,000 as trialexpenses. Ford has appealed.

• Earlier in 2003, the Los AngelesCounty Superior Court, after the com-pany continuously disobeyed discov-ery orders, issued an order sanction-ing Ford. The sanctions includedinstructing the jury at trial that jurorsshould assume the lap-belt-onlydesign in Ford’s vehicle at issue wasinadequate. In that case, the juryawarded a $30 million compensatoryaward with an additional $15 millionin punitive damages. Ford has alsoappealed this verdict and the sanc-tions order.

• Also in 2003, a federal judge in theNorthern District of Illinois scoldedFord for its conduct during a caseinvolving a fifteen-passenger seatvan. The plaintiff’s lawyers arguedthat the Ford van was unstable andprone to roll. As a part of the prose-cution, the plaintiff requested thatFord produce computerized stabilitytests on the van. Ford claimed that

they did not have any such tests.Subsequently, the plaintiff’s lawyersdiscovered that Ford had actuallyconducted such tests with the testsconfirming that the vans were unsta-ble. Ford’s lawyers argued that theyhad made an “honest mistake” in notproducing the information. UnitedStates District Judge Robert W.Gettleman, in severely sanctioningFord wrote, “that it almost borders oncriminal…somebody is committingperjury… or at least may be commit-ting perjury. I do not want to believethat a corporation such as Ford doesstuff like this, but I am being con-vinced against my own instinct.”

• In March 2003, an Ohio court setaside a settlement and vacated an ear-lier judgment, clearing the way forproduct liability claims and fraudclaims against Ford relating to FordBronco litigation. That court foundthat Ford had committed a fraudupon the court by misrepresentingthe true facts, submitting and notariz-ing documents and materials thatFord and its lawyers knew to be false.Ford was also found to have withheldcritical information from the courtconcerning the severity of the injuriessuffered by the young victims.

• In 2001, a New Mexico judge entereda default judgment against Ford for itsdiscovery abuse in a case involving aFord pickup truck that rolled overcausing the roof to collapse.Throughout the litigation, Ford main-tained that it had no records showingthat the company had ever consid-ered and implemented a reduction ofthe thickness in the steel of the roofso as to make the roof more suscepti-ble to collapse. Remarkably, the sup-posedly non-existing documentsappeared in a case in another state.The trial judge, noting that Ford’sconduct bordered on being criminal,issued a default judgment and thecase eventually settled.

• Finally, Ford began the year 2003 hav-ing to pay more than $700,000 insanctions after a Michigan court foundthat the carmaker had failed to pro-duce test reports in a case where seat

belt failure caused an occupant to beparalyzed. Ford’s disregard for thenotions of fair play and good faith isnot limited to the past year. Just a fewyears before Ford was caught in NewMexico, it was severely scolded in itshome state of Michigan. In the caseof Traxler v. Ford, a child’s parentsbrought suit to recover damages fortheir young infant who sufferedsevere brain damage when the rearseat in their Ford Tempo failed. Afterthe carmaker disobeyed several dis-covery orders, a Kent County judgeissued a default judgment againstFord, citing the company’s disgustingfailure to cooperate in discovery. Thejudge found that Ford has perpetratedan outrageous fraud on the court,concealed documents, and then bla-tantly lied about the existence of thosedocuments. Any word short of “lying”would understate what Ford did inthat case. The judge in the Michigancase found that Ford had concealednumerous safety tests and the exis-tence of other lawsuits that revealedthe problems with their seats and theramifications of those problems.

While Ford is not the only bigcompany to be cited for improperbehavior and specifically discoveryabuse, several national newspapers haverecently reported that Ford apparentlyhas a special knack for antagonizingjudges and continues to disregard courtorders and rules of fairness at an alarm-ing rate. It is obvious that Ford MotorCo. has time-and-time again exhibited apattern and practice of discovery abusein product liability lawsuits. Ford can’tclaim the “honest mistake” defense anylonger. Neither should the company beallowed to get away with abusing thediscovery process and then thumbing itscorporate nose at the courts. Frankly, Ihave to wonder how a judge could evertolerate this type activity by any litigant– regardless of whether they representplaintiffs or defendants, because itdestroys our system of justice. I hopejudges around the country are now real-izing how widespread the discoveryabuse problem has become and thatFord Motor Co. is one of the worstoffenders.


MIDSIZE SEDANS DO POORLY IN SIDE

CRASH TESTS

The results are in from the first con-sumer test of how passenger cars farewhen struck in the side by sport utilityvehicles and pickup trucks, and theresults aren’t good. Last month, Iwatched a news program on CBS Newsconcerning the new crash tests thatreally got my attention. The newssegment showed crash tests performedby the Insurance Institute for HighwaySafety, and the results were shocking.Twelve midsize sedans earned thelowest safety rating from the insuranceindustry in crash tests designed to showwhat happens when pickup trucks orsport utility vehicles hit cars in the side.The test results were released on April18th and should cause automakers tomake side airbags standard, becausevehicles with both head- and torso-pro-tecting side airbags performed best.Models of the Toyota Camry andHonda Accord with optional sideairbags were the only cars to earn thehighest safety rating from the Institute.Without the airbags, the Camry and theAccord got the lowest rating. About15% of Camry buyers get the optionalairbags, which cost $650. Apparently,Toyota has no plans to make them stan-dard. Vehicles with standard sideairbags did not necessarily do well. TheSaturn L-Series has a standard torso-pro-tecting airbag, but the crash dummy’shead was hit. The Hyundai Sonata andKia Optima, which have combinationhead-torso bags, did not protect thedummy’s torso. All three vehicles wererated as poor.

The only car tested without standardor optional side airbags was the SuzukiVerona, and it was rated as poor. TheInstitute said these were the first con-sumer tests to use a dummy represent-ing a short female. Researchers wantedto make sure side-curtain airbags,which come down from the ceiling,were long enough to protect smalleroccupants. Each vehicle was hit with a3,300-pound barrier moving at 31 mph.A vehicle earned the highest safetyrating if its driver wearing a seat beltwould have a lower likelihood ofserious injuries in an actual crash. The

Institute’s president Brian O’Neill, saidside airbags that protect the head arecritical because they have been shownto reduce the number of deaths by upto 45%. Side airbags that protect thechest and abdomen are less effective.Design improvements by the automo-bile industry could minimize injuries inside-impact crashes.

The Mitsubishi Galant had the beststructure among sedans because it wasnot severely crushed, although it ratedas poor because the dummy’s head andtorso were not protected. The DodgeStratus was the most damaged. About9,600 people were killed in side-impactcrashes in 2002, according to the Insti-tute. While driver death rates in front-impact crashes are half what they werein 1980, side-impact crashes are killinga growing percentage of drivers.According to the Institute, side-impactcrashes accounted for 37% of driverdeaths in 2000-2001, compared with26% in 1980-1981. Better vehicle designand increased seat belt use are helpingdrivers survive front-impact crashes. Cardrivers are at increasing risk in side-impact crashes because SUVs andpickups are so much larger and manyvehicles lack side airbags. The Institutebuys cars for testing based on salesvolume. If an airbag was optional, theInstitute tested the vehicle without it.Manufacturers had the option of supply-ing a second car with an airbag for asecond test. The ratings for all of thecars tested can be seen at www.iihs.org.

Although the National HighwayTraffic Safety Administration alreadyperforms front and side crash tests onnew cars and trucks, the Institute’s testmore closely resembles the impactmade by light trucks, which now makeup more than half of new vehicle sales.For that reason, safety advocates believethat the government’s test is obsolete.The government’s test uses a 3,015-pound moving metal barrier set at aheight to simulate a car’s front end. TheInstitute, the insurer’s group, has abarrier that is a foot taller and 285pounds heavier to simulate whathappens when the front end of an SUVor pickup truck strikes another vehicle.The group also uses a shorter dummy -which more closely resembles a woman

driver - than the government. It is interesting to note that the

Department of Transportation is almosta generation behind in its safety stan-dards and in its consumer information.The Institute’s test is conducted at 31miles an hour. The government’s test isdone at 38.5 mph. The average lightduty truck tips the scales at almost 4,600pounds, according to data from theEnvironmental Protection Agency, morethan half a ton heavier than the insur-ance group’s barrier weight. Height, aswell as size and weight, is a factor.Light trucks ride high off the groundand many do not engage the bumpersor side floor structure of passenger carsand can directly strike an occupant’shead. Protecting heads is important intruck-car collisions, but the shorterstature of women and children canleave them more vulnerable. Sideairbags that descend from the roof tooffer head protection are seen as partic-ularly effective. Other airbags thatinflate from the seat to protect thepelvis and chest are viewed as impor-tant but less critical. Side airbags comestandard on many luxury vehicles butare generally options on others, if theyare available. But they vary in effective-ness and do not always offset structuraldeficiencies.

Federal safety data has shown foryears that booming sales of SUVs andlarge pickup trucks are adding to thedeath toll of people riding in cars, par-ticularly in side-impact accidents. At thesame time, SUVs and pickup trucks donot, as a class, better protect their ownoccupants, because they tend to be lessstable and more prone to rollovers thanpassenger cars. NHTSA administratorDr. Jeffrey W. Runge has pressured theindustry to voluntarily agree to upgradedesign and safety equipment to accountfor the growing number of light truckson the road. As a result, the industryhas agreed to install side airbags onalmost all cars and trucks by the end ofthe decade. The agency’s plan for atougher side-impact performance stan-dard will probably use a new dummythat can measure damage to the side ofa dummy’s head. The government’scurrent minimum performance standardonly measures damage to a dummy’s


chest and pelvis. Frankly, I don’tbelieve voluntary compliance by theindustry will ever work. Nor do Ibelieve we need to wait any longer forneeded safety features that are bothavailable and feasible.

Senator John McCain (R-Ariz.) hasbacked new auto safety regulations inthe Senate’s version of a massivehighway funding bill working its waythrough Congress, including new side-impact requirements. But, the Houseleadership not surprisingly is giving thebill a cool reception. The industryopposes the measures, supposedlybecause they lay out timetables foraction by the traffic agency. Dr. Rungehas said he prefers to set his ownagenda, which sometimes favors volun-tary agreements over regulation. R.David Pittle, the senior vice-presidentfor technical policy of ConsumersUnion, the publisher of ConsumerReports, and a former regulator, saidCongress needed to prod the agency towork faster. We have seen the reluc-tance of Congress to force action byNHTSA and the automobile industryover the years. Members of Congressonly seem to get active when pressuremounts from the public, such as outcryover the Ford/Firestone problems thatgot them moving, for a short time.

PLYMOUTH VOYAGER DEFECT

After a 5-week trial, a New Jersey juryfound that the front seatback in aChrysler Plymouth Voyager minivanwas defectively designed. The seatbackhad collapsed in a 25 to 30 mph rearimpact. The female plaintiff, who was48 at the time, suffered the followinginjuries: traumatic brain injury, TMJ(jaw) dysfunction, two herniated disksand other problems. As a result, shebecame totally disabled. Daimler-Chrysler Corporation argued that thevast majority of the cars on the roadhave similar seatback strength and thatit far exceeded the federal standard forseatback strength. Predictably, the carmanufacturer contended that any injurysuffered by the plaintiff was caused bythe crash itself and not by the seatback.The jury found that the seatback wasdefectively designed and awarded

$2,160,000, with DaimlerChrysler liablefor $1,296,000. The other defendant, thedriver whose vehicle struck the plain-tiff’s car, settled early in the trial for$600,000. It should be noted that thefederal standard for seatback strength isso weak that an aluminum lawn chairwould meet the standard.

SENSELESS DEATHS STILL HAPPENING

Our firm has handled a number ofcases where innocent children werestrangled by power windows in familycars. Another child fatality thatoccurred recently underscores the needfor Detroit-based automakers and thefederal government to act immediatelyto prevent these senseless tragedies.The technology exists to prevent chil-dren from being injured or killed bypower windows and should be imple-mented without further delay. Therecent case involved a three-year-oldchild who died after the power windowon the family car closed on her neck,strangling her. Kids And Cars, a con-sumer advocacy group, has been alert-ing officials to this hazard for over 5years. American automakers use themore dangerous “rocker” or “toggle”switches in their cars that children canaccidentally activate by exerting down-ward pressure on the switch. On theother hand, foreign automobiles usesafer “pull-up/push-down” switches thatmust be lifted up to raise the windowand are difficult to activate inadver-tently.

Kids And Cars, a nonprofit organiza-tion dedicated to preventing nontraffic,noncrash vehicle related child injuriesand deaths, has been trying for years toget auto makers and the federal govern-ment to make changes to powerwindow switches and offer auto reversepower window technology. Over thepast two years, letters have been sent byKids And Cars to Detroit-based autocompanies requesting that they changetheir power window switch design tothe safer “pull-up/push down” type thatmost foreign automakers use. Janette E.Fennell, president and founder of KidsAnd Cars, believes that safer powerwindow switches and “auto reverse”technology would eliminate virtually all

fatalities.A petition requesting the needed

changes was filed with the NationalHighway Traffic Safety Administration inAugust of 2003 by the Center for AutoSafety, Advocates for Highway and AutoSafety, Public Citizen, Consumer Feder-ation of America, The Zoie Foundation,the Trauma Foundation, Consumers forAuto Reliability and Safety and KidsAnd Cars. Unfortunately, NHTSA hasnot responded even though over 7months have passed. The petition asksNHTSA to consider a rule that wouldrequire “push-down/pull-up” switchesand “auto reverse” or “anti-pinching”technology, similar to technology usedin garage doors. The Zoie Foundationhad filed an earlier petition with NHTSAin January 2003 that is still open andunder consideration. This follows athird petition that was filed way back in1996. This too is still under considera-tion by NHTSA, with no action, which isabsolutely shocking.

The federal government andautomakers are well aware of theserious nature of this problem. It isimpossible to justify their refusal tomake the necessary changes. BothNHTSA and the Detroit-based automak-ers have been put on notice that theswitches used currently pose a realsafety hazard. Predictably, the automo-bile industry continues to shift blameand responsibility to the parents forcareless behavior. The U.S. Senate haspassed a bill to address these dangers tochildren in and around cars, but Iunderstand the House of Representa-tives has no intention of taking up thoseprovisions. Congressman Peter King (R-NY) and Congresswoman JanSchakowsky (D-IL) have introduced leg-islation that would address these issuesin the House, but thus far there hasbeen no action on their bill, HR 3683.The House should adopt these child-saving provisions without any furtherdelay. These needless tragedies involv-ing children can be prevented, andCongress has an obligation to act.

Kids And Cars commissioned a HarrisInteractive national poll last year thatrevealed 75% of Americans wereunaware of the problem and 89%believed that Detroit-based automakers


should install the same safer powerwindows for the U.S. market that areavailable in their same models pro-duced overseas. The fact that parentsare largely unaware of the dangers,makes the inaction by automakers andthe federal government even moreshocking. How many more preventabledeaths of innocent little children will ittake to make Congress act?

Kids And Cars was founded in 1996.The national nonprofit organization isdedicated solely to the prevention ofinjuries and deaths to children. KidsAnd Cars stands for the right of everychild to be protected from disability ordeath caused by nontraffic, noncrashevents in and around automobiles, andthe right of every parent and caregiverto be free of worry and confident eachchild is protected from such sudden andpreventable dangers. Kids And Cars isheadquartered in Kansas City, KS. Formore information, visit www.kidsand-cars.org or call (913) 327-0013.

A LOOK AT THE UNINTENDED

ACCELERATION PROBLEM

A recent article in USA Today gives apretty good account of a safety problemthat has received very little attentionover the years. A serious question hasarisen concerning the unintended orsudden acceleration that occurs in somecars. Some 15 years ago federal autosafety officials blamed the problem ondrivers stepping on the gas instead ofthe brake. The National Highway TrafficSafety Administration (NHTSA) issued areport in 1989 that was in response towell-publicized complaints that modelssold by Audi and other automakerswould take off on their own from astandstill, travel several feet and thencrash. There has been a rash of carcrashes in recent months where thereappear to have been accelerations incars where the gas pedal wasn’tinvolved. Serious injuries and at leastone death have been reported.

Safety groups and the automobileindustry have debated the cause ofunintended acceleration. The debatealways centered over whether a cardefect or driver error caused the

crashes. The new rash of incidents hasprompted a renewed look at theproblem by safety advocates. As aresult, NHTSA has opened an investiga-tion into whether a new technology ismaking unintended acceleration morefrequent. The technology – electronicthrottle control – uses sensors to tell acar’s computer how much to open thethrottle, which lets in air, and howmuch fuel to inject into the engine tocontrol speed. The industry likes thetechnology, which replaces a mechani-cal cable, for reliability and cost savings,and because it helps fuel economy andimproves performance. But, somebelieve the new electronics may becausing the new rush of unintendedacceleration.

Specifically, NHTSA is investigatingthe electronic throttle control system inmore than one million 2002-03 ToyotaCamrys, Solaras and Lexus ES 300s. Ithas narrowed the probe to 11 com-plaints of engine surge, including 5 thatinvolved crashes. There have beenseveral recent unintended accelerationdevelopments, including:

• At least 16 drivers have told NHTSAthat their 1998-99 Audi A6 sedanspick up speed without help whilealready moving, mostly in subzerotemperatures in Northeastern states.Drivers said the only way to stop thecar was to turn the ignition off. Theagency is investigating.

• Subaru recalled 128,000 vehiclesbecause of a possible defect in thecruise control system that could leavethrottles sticking wide open. Thethrottle stayed open rather thanreturning to idle when the driverremoved his foot, NHTSA says.

• For more than a decade, decisions usu-ally favored car companies and blameddrivers in unintended accelerationcases, but some recent trials and courtdecisions reversed that trend. FordMotor Co. and General Motors Corp.each recently lost a high-profile case. After the surge of complaints in the

1980s, automakers added mechanismsknown as shift-locks, which force driv-ers to press the brake pedal if they wantto shift into drive or reverse. That cut

the number of unintended accelerationcomplaints considerably in the 1990s.However, from the mid to late 1990s,we begin to see problems relating tothe cruise control systems resulting innew unintended acceleration problems.Simultaneous and undetectable cruisecontrol failures can give cars power assoon as the ignition is turned on andcause the vehicles to accelerate on theirown. Automakers, as well as NHTSA,concede that cruise control systems canmalfunction. But, they discount this asthe reason cars take off on their ownfrom a stop. Typically, they blame driv-ers and especially elderly drivers fortheir own mistakes.

There have been several jury verdictsagainst automakers in cruise controlcases. Among those cases are:

• A Missouri jury last year orderedGeneral Motors to pay $80 million forthe crash of a 1993 OldsmobileCutlass, which accelerated 120 feet inreverse and into a tree while the driv-er was backing up. Faulty cruise con-trol was blamed. GM is appealing.

• The U.S. Court of Appeals for theSecond Circuit in New York in 2002reinstated a $1.1 million judgmentagainst Ford Motor Co. in the crash ofa 1991 Ford Aerostar. Jurors hadfound that the crash was caused part-ly by a “negligently designed” cruisecontrol system.From a historical perspective, cases

involving sudden and unintended accel-eration go back to the 1980s andinvolve Audi 5000s, Ford Thunderbirds,Mercury Cougars and Grand Marquis,and Ford Aerostar vans, as well asLincoln Town Cars. The complaintsand incidents covered a broad demo-graphic waterfront. Audi was linked formany years to unintended acceleration.The German automaker, owned byVolkswagen, was investigated for hun-dreds of complaints of unintendedacceleration in its 5000 sedan. Thecompany told the USA Today that it iscooperating fully with NHTSA’s newprobe into its A6 models. Audi deniesits cars are defective.


NEW TECHNOLOGY SHOULD HELP

We know that automakers are addingnew electronics to cars, including sys-tems that will control acceleration, brak-ing and steering if a vehicle gets tooclose to another. I hope these high-techadditions will help to make drivingsafer. New data-recording devices, sim-ilar to the black boxes on airplanes, arenow becoming fairly common on newvehicles. They show computer codesthat reveal whether the throttle controlsystem failed, whether the brakes wereused and numerous other details aboutcars before a crash. The often-missingelectronic footprints of what actuallycaused a crash will be available to crashinvestigators. I am hopeful all of thenew technology will help to make ourhighways safer.

SAFETY BELTS CAN FAIL IN ROLLOVER

CRASHES

Public Citizen is requesting thatCongress enact the vehicle safety meas-ures contained in S.1072, a comprehen-sive approach to making rollover crash-es survivable. Flaws in the design andperformance of safety belts leave vehi-cle occupants vulnerable to serious andoften fatal injuries in rollover crashes, anew Public Citizen report shows. Thereis no federal safety standard for beltperformance in rollover crashes, andthe auto industry has done little todesign belts to fully protect occupantsin these crashes.

As rollover-prone SUVs proliferate onU.S. roads, fatalities in rollover crasheshave climbed to one-third of all vehicleoccupant fatalities, or 10,600 each year.The three risks of rollover - roof crush,ejection from the vehicle and belt fail-ure - combine to make rollover crashesunnecessarily deadly. All three of therisks compromise or destroy occupants’survival space during a crash and areinterrelated. For example, roof crushbecomes more deadly as seat belt useincreases. The auto industry continuesto blame drivers and passengers for fail-ing to use safety belts, but belt use is atan historic high and rollover fatalitiesare not abating. The National HighwayTraffic Safety Administration activelypromotes belt use and that’s good.

NHTSA is requesting $150 million forthis program next year. But its mostrecent regulatory move on safety beltscame in 1999, when - under heavy pres-sure from automakers - it removed aportion of its 1967 standard thatdescribed a belt’s required position inrelation to the occupant’s pelvis in arollover crash. Public Citizen PresidentJoan Claybrook, who works night andday for safety and for consumers, madethis statement relating to the problem:

Safety belts are currently the mostimportant safety feature that wouldkeep people secure and inside thevehicle during a rollover crash. It isinexcusable to install belts that do notdo the job. The auto industry hasknown for decades how to design beltsto better protect occupants in rollovercrashes but has failed to do so.

Statistics show that while safety beltsusually keep occupants from beingcompletely ejected from a vehicle dur-ing a rollover, they often allow partialejection, which is deadly. Moreover, sixof 10 occupants who suffer serious orfatal injuries in rollovers inside the vehi-cle were wearing a safety belt, accord-ing to NHTSA.

Public Citizen’s report also pointed outa troubling discrepancy betweenobserved belt use and rollover fatalities.Average belt use by SUV occupants isslightly higher than passenger car occu-pants, but recorded belt use by SUVoccupants killed in rollovers is muchlower than passenger car occupantskilled in rollovers. The discrepancy sug-gests that some SUV occupants maycome out of belts during the crash, or thebelts may otherwise fail. The followingare ways in which belt failures exposeoccupants to serious and deadly injury:

• Most belt systems lack rollover sen-sors that would engage pretensionersand fail to pull slack in quicklyenough to prevent occupants fromcontacting hard vehicle surfaces.

• Current standard belt systems permitlateral movement of occupants’ headsand bodies during rollovers, allowingimpact with roof pillars or partial orfull ejection of occupants through

side windows or weakened doors.

• Belt straps are anchored to the door-frame instead of the seat, undercut-ting the belts’ effectiveness when theframe or door is deformed or torn offduring a rollover.

• Lap belts are anchored behind occu-pants’ hips, rather than directlybelow. Belts are not effective in pre-venting people in rollovers from com-ing up out of the belts and toward theroof. It would be better for belts towrap across the hips.

• Some safety belts unlatch duringrollovers, which occurs during inter-action with the vehicle interior oroccupants that unlocks the belt buck-le, leaving occupants without thebelt’s protection.

• The technologies and simple designimprovements to enhance belt per-formance already exist, the reportsaid. Manufacturers have the techni-cal ability to install pretensioners tosecure occupants in the seat; rolloversensors to prompt the tightening ofsafety belts at the start of a roll; beltbuckles that will not unlatch; and beltretractors that prevent the belt fromspooling out. The industry should be made by

NHTSA to do these things, and if theagency can’t, Congress needs to step inand do the job. Other simple suggesteddesign changes include adjusted beltanchor points to reduce occupants’ ver-tical movement, restraints integratedinto the seat and tightened shoulderbelt adjusters. Stronger roofs, interiorpadding of the roof, side head airbagsand improved door locks and latchesare also needed for protection inrollover crashes. As the Public Citizenreport reveals, roof crush is not the onlydanger in rollover accidents. Currentsafety belt systems are designed toprovide protection in frontal crashes,but victims of rollovers are not beingadequately protected. In fact, personshave a false sense of security about theeffectiveness of belts in rollovers. Theindustry has been unwilling to voluntar-ily incorporate rollover-safety technol-


ogy in a timely manner. It is, therefore,NHTSA’s responsibility to make themdo these things.

Safety provisions in the NHTSA reau-thorization bill, S.1072, passed by theU.S. Senate in February, address therisks of rollover, including safety beltperformance, requiring NHTSA to issuesafety standards in a type of crash longignored by automakers. But, the U.S.House did not include the safety provi-sions before passing its bill. The billswill now go to conference to reconcilethe versions. Consumers are told againand again to buckle up to save lives.Manufacturers and the governmentshould be doing everything in theirpower to ensure that we really can relyon belts to protect people in rollovercrashes. The complete report by PublicCitizen can be seen at:www.citizen.org/documents/beltreport.pdf.

NHTSA SHOULD REQUIRE STRONGER FUEL

INTEGRITY STANDARD

On January 15, 2004, the Center forAuto Safety (CAS) petitioned theNational Highway Traffic Safety Admin-istration to reconsider a final rule issuedDecember 1, 2003, regarding FederalMotor Vehicle Safety Standard No. 301,“Fuel Systems Integrity.” The CAS peti-tion cited a number of inadequacies inthe new rule, and made recommenda-tions for changes that would trulyprotect occupants from fire-relatedtrauma. In the petition, CAS noted thefollowing:

• Though the new rule is commonlyreferred to as an “upgrade” of the cur-rent standard, the rule’s test proce-dures are pitifully insufficient. In fact,they are so poorly formulated thatGeneral Motors’ C/K pickup passesmuster, even though it is the motorvehicle responsible for the most fire-related crash deaths in history.

• The rule is based on inadequate dataregarding the number of fatalitiescaused by fire crashes, and does notappropriately take into account thesocial and economic impacts of burninjuries, excluding and dismissing the

benefits that a reduction in these inci-dents would represent.

• Test regimens that would significantlystrengthen FMVSS 301 have beenextensively researched and devel-oped, and if implemented would rep-resent a true upgrade of the standard.

• The fuel system integrity goal ofNHTSA and the industry should be tomatch occupant survival from crashforces with occupant survival fromfire, i.e. if an occupant survives thetrauma of a crash, he or she shouldnot die by fire.We have handled a tremendous

number of cases, usually involvingdeaths, where a defective fuel systemdesign was the culprit. This is anotherexample of NHTSA failing to do its job.I hope the needed changes will now beimplemented. We can’t afford to waitany longer – as lives continue to be lost– for NHTSA to act.

IX.MASS TORTSUPDATE

CONSUMER GROUP SUES FDA FOR

FAILURE TO BAN SERZONE

On March 15, 2004, Public Citizenfiled suit against the U.S. Food andDrug Administration regarding its failureto act on a petition filed more than ayear ago by the consumer watchdogorganization. The petition had soughtto ban the antidepressant drug, Serzone(Nefazodone). The lawsuit asks thecourt to find the FDA’s delay illegal andto require the agency to act. This wasnot the first time the FDA had failed totake action regarding this drug when itappeared the federal regulatory agencyneeded to act. In March, 2003, PublicCitizen filed a petition with the FDAurging the withdrawal of Serzone basedupon reports of liver failure and deathsrelated to usage of the drug. To date,the FDA has not issued a decision onthe petition, nor has it taken action towithdraw Serzone from the U.S. market.

Serzone has been removed from the

market in Canada and Europe, and isscheduled to be removed from themarket in Australia and New Zealand inMay of 2004. The director of PublicCitizen’s Health Research Group, SidneyWolfe, MD, said, “It is grossly negligentfor the FDA to allow doctors to con-tinue to prescribe and patients to con-tinue to take Serzone . . It’s a shamethat we must sue to force the agency tofulfill its obligation to protect publichealth.” Clearly, the FDA has a legalresponsibility to protect the public fromunsafe drugs. It is difficult to under-stand how drugs can be taken off themarket in foreign countries and yet con-tinue to be sold to American citizens.

Unfortunately, this is not the first timethat the FDA has delayed taking actionthat would protect the public. At theend of December 2003, the FDAannounced that it was banning thedietary supplement, Ephedra. Thisaction was taken more than two yearsafter Public Citizen petitioned the FDAto remove ephedra from the U.S.market. In that case, the FDA failed totake action until it received reports ofmore than 155 deaths of Ephedra users.In a news release, Dr. Wolfe stated,“This is an inexcusable dereliction ofresponsibility by an agency that hasacted more like an ephedra sales exten-sion agency than the public healthagency it is supposed to be.” On March19, 2003, Public Citizen petitioned theFDA for the removal of the diet drugMeridia (Sibutramine) from the U.S.market due to the rising number of car-diovascular events and deaths associ-ated with use of the drug. InSeptember of 2003, Public Citizen sup-plemented its petition with additionalnumbers and new information. It hasnow been over two years since the firstpetition, and the FDA has yet to issue adecision.

Our FDA is supposed to protect usfrom bad drugs, not protect drugcompany profits. This is a disturbingtrend under an Administration that isalso spending a lot of time, effort andtaxpayer money pushing tort reformlegislation that would further protect thepharmaceutical industry. It is quiteobvious that this industry is as powerfulas any special interest group around.


Their political muscle in Washingtonhas never been more evident. Not onlydo they have powerful friends in Con-gress, they have real good friends in theWhite House.

LATEST FATALITY FROM LIVER FAILURE

CAUSED BY SERZONE

You may have seen a segment onCBS News recently concerning Cassie JoGeisenhof, a Minnesota teenager, whodied last month in a Minneapolis hospi-tal from liver failure as a result of takingSerzone. Even though we represent herfamily, and knew how Cassie Jo hadsuffered, watching the segment was stillhard. Considering that Serzone remainsa threat to U.S. consumers, the questionshould be asked, why hasn’t Serzonebeen taken off the market in the UnitedStates? Instead of removing the drug inthis country, the FDA in 2001 simplyissued a “black box warning.” Eventhough this is the most serious warningthe government agency can make, it issimply not enough. I sincerely believethe young lady from Minnesota wouldbe alive today had the FDA done itsjob.

We have already seen enough toknow that Serzone needs to be with-drawn from the market immediately.The only sure way to protect the publicin the U.S. is to pull this drug from theshelves. But, there is too much moneybeing made from sales of this danger-ous drug to expect this to happen. Wecurrently have over 30 active casesinvolving Serzone. We are told thatthese cases make up perhaps the largestgroup of persons seriously injured bythe drug in the country. The onlyreason drug companies like Bristol-Myers Squibb take any action at all isbecause they are forced to do so.When they do finally act, their actionsare said to be voluntary, but that’s notthe case. It takes somebody makingthese companies to take the neededremedial action. Tragically, there havebeen 21 deaths related to Serzone in theUnited States so far. I would ask theFDA, how many more have to diebefore this drug is banned?

SOME FACTS ON SERZONE

In addition to the above, the follow-ing is more pertinent information forour readers relating to Serzone. If youwould like to obtain further informa-tion, you can go to our website:www.BeasleyAllen.com.

• Serzone (nefazodone hydrochloride)is a prescription drug manufacturedby Bristol-Myers Squibb for the treat-ment of depression. Unlike other anti-depressant drugs, Serzone was mar-keted as an antidepressant less likelyto decrease sexual functioning orlibido. It was this marketing tool thatalso led to increased sales for thedrug. Since its approval by the U.S.Food and Drug Administration (FDA)on December 22, 1994, it is estimatedthat 8.3 million people worldwidehave been prescribed Serzone.Bristol-Myers reported worldwideSerzone sales of $409 million for2001.

• Bristol-Myers Squibb made a labelingchange to Serzone in June 2000, thatstrengthened its warning about thepossibility of liver necrosis and fail-ure, both of which may require trans-plantation or lead to death. InDecember 2001, the FDA instructedBristol-Myers to issue a “black box”warning label informing physiciansand patients of the drug’s propensityto cause life-threatening liver damage.And, on January 9, 2002, Bristol-Myers issued a manufacturer’s warn-ing advising patients of Serzone’s riskof causing life-threatening hepatic(liver) failure.

• There have been 109 serious injurycases reported as a result of usingSerzone since it appeared on the mar-ket in 1994. Of those 109 seriousinjuries, 23 resulted in liver failure and16 resulted in liver transplants. Theonset of serious liver damage usuallyoccurs within 4 months of initiation oftreatment. Cases of liver injury haveoccurred as early as a few weeks afterbeginning treatment with Serzone, orafter continuous use for up to 1-2years. In addition to the serious

injuries that have occurred as a resultof Serzone usage, there have been 13deaths attributable to Serzone.

• The possible side effects of Serzoneare: agitation, dizziness, clumsiness orunsteadiness, difficulty concentrating,memory problems, confusion, severenausea, gastroenteritis, abdominalpain, unusually dark urine, difficult orfrequent urination, fainting, skin rashor hives, yellowing of the skin orwhites of the eyes (jaundice), or aprolonged loss of weight or loss ofappetite.

A SHOCKING REPORT ON THE FDA

When concerns arose some 11months ago about a possible linkbetween children taking antidepressantdrugs and suicide attempts. Senior offi-cials at the Food and Drug Administra-tion ordered their leading expert tohead up an examination of the evi-dence. When the government scientistfiled his report last winter, however, hisbosses decided to keep it secret — eventhough it found that children who tookthe drugs were twice as likely to beinvolved in serious suicide-relatedbehavior as those who did not. Insteadof revealing the findings, senior FDAofficials ordered more studies, whichare not expected to be completed untilsummer. They also kept the author, Dr.Andrew Mosholder, from presenting hisconclusions to an FDA advisory com-mittee when it took up the issue in Feb-ruary. At this writing, Dr. Mosholder’sreport had not been made public. But,news of his conclusions first surfaced ina recent CBS News report. His findingswere detailed in an internal FDA docu-ment obtained by several newspapers,including The Los Angeles Times andNew Orleans Times-Picayune. Thesedocuments have now been authenti-cated by government officials.

In March, when the agency issued awarning about the possibility of prob-lems for young patients taking thedrugs, FDA officials said no conclusivescientific evidence existed on the linkbetween antidepressants and potentiallysuicidal behavior by children. Officialssaid they based their action on anec-


dotal complaints from doctors and fami-lies that had been presented to the advi-sory committee. They gave no hint thattheir own chief expert on the subjecthad examined the results of more thantwo dozen clinical trials conducted byantidepressant manufacturers and hadfound an unusually high correlationbetween their use by young patientsand potentially suicidal behavior. Injustifying their decision to hold backMosholder’s report, his superiors ques-tioned the reliability of the data onwhich he based his conclusions. Theysuggested the drug companies, whichmanufacture the antidepressant drugsand conducted the clinical trials in orderto market them, might have been tooquick to count some behavior as poten-tially related to suicide. What they arereally saying is that the companiesmight have been too eager to raisequestions about their “own products.”That is certainly an interesting conclu-sion, to say the least.

Among the kinds of actions these offi-cials said should not necessarily havebeen counted as potentially suicide-related were instances of children whodeliberately cut themselves. Some FDAofficials defended the decision to sit onthe report and seek more analysis of thedata, but some psychiatrists and con-gressional leaders who are followingFDA’s handling of the issue wereangered that the agency had kept Mosh-older silent. Senate and House commit-tees have ordered the FDA to hand overdocuments that might illuminate whatthe agency knew about the possiblelink between the drugs and suicidalbehavior. Clearly, there are publichealth and safety issues involved. Thisis a matter that must be fully investi-gated and appropriate action taken.That the FDA appears to have been lessthan truthful is most troubling. Givenwhat is at stake, the decision to keeppertinent information under wraps isinexcusable. Releasing the researchwould have given additional support tothe FDA’s warning, making it evenclearer to doctors and patients thatthese drugs must be used with cautionand careful monitoring.

FDA ADVISORY ON ANTIDEPRESSANTS

The FDA has issued an advisoryrequesting the manufacturers of certainantidepressant medications to addwarning labels recommending thatpatients treated with these drugs becarefully monitored for sudden signs ofbecoming suicidal. This will definitelyhave a good effect on pending “failureto warn” lawsuits against the drugmakers. The advisory was issued inresponse to recommendations from theFDA’s drug review committee. Con-cerns were addressed by the committeethat these drugs are linked to anincreased risk of suicide, suicidal ten-dencies and other violence. The advi-sory applies to ten commonlyprescribed drugs, including Paxil,Prozac and Zoloft. The warning willraise awareness of a possible risk andcause more persons to come forward.Most people, including doctors, werenot aware that suicide could be causedby the drug. The advisory will defi-nitely increase public awareness.

The drug manufacturers have knownfor years that the drugs referred tocould increase the risk of suicide, butmade the decision not to inform doctorsand their patients. The proof of thisfailure lies in internal company docu-ments, which indicate that the compa-nies knew that these drugs could causecertain individuals to become violent oragitated. The companies failed toinclude this information in their labelingor to inform doctors about it. Compa-nies failed to put the warnings on theirproducts because they didn’t want drugsales to suffer. The advisory will havethe effect of negating the industry’sassertion for over a decade that the FDAhas not found credible evidence to indi-cate there is a “link” between the drugsand suicide risk. But, lawyers whohave never handled a case involvingantidepressants and suicide should becautious in filing lawsuits. The scienceinvolved must be mastered beforedeciding to take on a powerful drugcompany.

EPHEDRA BAN TAKES EFFECT NATIONWIDE

The ban on ephedra has finally taken

effect. While it took the FDA almost 10years to ban the substance, at least theagency finally acted. Unlike medica-tions, which must be proven safe andeffective before they are allowed to besold, dietary supplements may be mar-keted under federal law without anysuch proof. To curb sales of a supple-ment, the FDA must show it poses asignificant health threat. The banresulted when a federal judge allowedthe nationwide ban on dietary supple-ments containing ephedra to take effect.A plea from two manufacturers wasrejected. Ephedra has been linked to155 deaths, and that is proof enoughthat the banishment of ephedra waslong overdue. U.S. District Judge JoelPisano refused to grant a temporaryrestraining order that would have pre-vented the Food and Drug Administra-tion from banning the products.

After years of fighting manufacturersover the risks, the FDA announced inDecember that it was banning the saleof the amphetamine-like herb — thefirst such ban of a dietary supplement.The ephedra products pose unaccept-able health risks. Any consumers whoare still using them should stop immedi-ately. The judge said the manufacturersdid not meet several legal requirements,including proving that they are likely towin the case and that they would sufferirreparable harm if the ban took effect.The court’s ruling means the ban willbe in effect at least until the lawsuit canbe heard on its merits. At this writing,no trial date has been set.

HORMONE REPLACEMENT THERAPY

We are currently investigating poten-tial claims on behalf of those injured byhormone replacement drugs such asPrempro, Premphase, Premarin andProvera. For years doctors have pre-scribed these drugs to relieve the symp-toms of menopause and to help womenmaintain a healthy hormone level toprevent future health problems. It wasbelieved that long-term use of thesedrugs was safe and protected againstosteoporosis and heart disease. But,recent studies now show that hormonereplacement therapy places women at ahigher risk for breast cancer, ovarian


cancer, heart attack, stroke and bloodclots. On July 9, 2002, the NationalInstitute of Health halted the Women’sHealth Initiative study, a 15 year multi-million dollar research programdesigned to address the most commoncauses of death, disability and poorquality of life in postmenopausalwomen, because the overall risks of thedrugs exceeded any health benefits.Specific study findings for womentaking hormone replacements com-pared to placebo include:

• a 26% increase in breast cancer;

• a 29% increase in heart attacks;

• a 22% increase in total cardiovasculardisease;

• a 41% increase in strokes; and

• a doubling of rates of blood clots.

Approximately 38% of post-menopausal women in the United Statestake hormone replacements. Thepurpose of healthy women taking thesedrugs is to preserve health and preventdisease. But, the results of the Women’sHealth Initiative study revealed that theopposite is happening. Any personwho has suffered from any of the con-ditions referred to above may have avalid claim and should first contact theirdoctor and then a lawyer. All claimsare subject to a statute of limitations,which means lawsuits that are nottimely filed are barred and can’t bepursued.

X.BUSINESSLITIGATION

U.S. SUPREME COURT WON’T HEAR

HALLIBURTON CASE

The U.S. Supreme Court has refusedto hear a patent dispute concerning adivision of Halliburton, the energy andgovernment contracting company for-merly led by Vice-President DickCheney. Lawyers for HalliburtonEnergy Services Inc. sought review by

the High Court after a lower courtordered Halliburton to pay $98 millionto a rival. A competitor, BJ Services Co.,had sued Halliburton for patentinfringement over a particular methodof extracting oil and natural gas.Although this case is unrelated to recentallegations of price gouging, bribes andkickbacks in Halliburton’s multibillion-dollar contracts to provide services forthe military in Iraq, it is another red flagrelating to how this company operates.Halliburton has multiple contracts tosupport the Army and repair oil fields inIraq, with a value estimated at $18billion dollars. The company hasdenied any wrongdoing.

MICROSOFT TO SETTLE MINNESOTA SUIT

Microsoft Corp. has settled a classaction case in Minnesota that accusedthe company of overcharging in viola-tion of state antitrust laws. The settle-ment’s dollar amount wasn’t releasedand some of its provisions will beresolved in binding arbitration. Thefinal settlement will be presented to thestate court judge by July 1st. The settle-ment will be made public when pre-sented to the judge for approval. Classaction antitrust cases against the soft-ware giant are still pending in Iowa,New Mexico, Vermont, Nebraska andMassachusetts. Cases in New York,Ohio, and Wisconsin have either beendismissed or denied class action statusand are currently on appeal. In earlyApril, Microsoft settled with rivalsInterTrust Technologies and SunMicrosystems. The Minnesota suitalleged that Microsoft had violated stateantitrust law by overcharging for itsWindows operating system and its Exceland Word programs. The company haddenied overcharging, saying the priceson its products had dropped. The set-tlement came during a jury trial that wasexpected to last several more weeks.The plaintiffs were seeking as much as$505 million – and if successful – Min-nesota law would have automaticallytripled that.

Microsoft had previously settled withnine states and Washington, D.C.,paying out a total of $1.5 billion, includ-ing $1.1 billion in California alone.

Cases in 16 other states were dismissed.A case brought by the federal govern-ment ended with a settlement in 2001after the trial court found that Microsoftused its operating system monopoly tostrong-arm competitors. The trial judgeordered a breakup of Microsoft, but afederal appeals court overruled thedecision. It did, however, uphold thejudgment that Microsoft held a monop-oly with Windows.

CORPORATIONS SUED FOR ALTERING

EMPLOYEE TIME CARDS

The practice of illegally altering orchanging hourly employees’ timerecords is a common aspect of today’sbusiness environment, according toexperts. In August 2003, Taco Bellreached a $1.5 million settlement infavor of Taco Bell employees of therestaurant in Oregon after a juryreturned a verdict finding that Taco Bellroutinely changed worker’s time cardsand required workers to perform dutiesafter they were “off-the-clock.” In addi-tion to Taco Bell, workers have suedToys R Us, Family Dollar, Pep Boys andWal-Mart alleging that those companiesdoctored employees’ time sheets ortime cards in an effort to cheat them outof their rightful wages. Recently, theU.S. Department of Labor reached twosettlements with Kinkos after learningthat managers for Kinkos in New Yorkand Massachusetts erased time record ofemployees.

According to wage and hour experts,many managers of retail stores andrestaurants face enormous pressurefrom their superiors to keep costsdown. In fact, experts say that oftenmanagers are compensated by way ofbonuses based on minimizing costs.Consequently, in an era where man-agers can change time records bylogging onto a computer, “shaving time”has become prevalent in the workplace.For example, employees in a suitagainst Wal-Mart allege that when theyworked more than 40 hours in a givenweek, Wal-Mart managers would trans-fer the extra hours worked to the fol-lowing week to avoid having to payovertime. Our firm is currently han-dling lawsuits on behalf of workers


who were not properly paid for theirovertime work. For more informationon those lawsuits, our readers can visitour website, www.BeasleyAllen.com.

XI.INSURANCE ANDFINANCE UPDATE

WADDEL AND REED FLEECING CASE

The National Association of SecurityDealers (NASD) is pursuing Waddell &Reed, Inc., one of the largest broker-dealer firms in the country, for convinc-ing its clients to exchange 6,700 variableannuity policies between January 1,2001 and August 30, 2002. As youknow, the NASD is the regulatory bodyhaving the duty to monitor the activitiesof firms who sell variable annuities andother security products. The complaintfiled by the NASD accuses Waddell &Reed of convincing their clients toexchange their current variable annuitypolicies for new policies without havinga reasonable basis for concluding thatthe transactions were suitable. Evenfurther, the NASD alleges that approxi-mately 1,400 of the Waddell & Reedclients were likely to lose money fromthe exchanges. Basically, the NASDaccuses Waddell & Reed of putting theirown interest and profit above the inter-ests of their clients.

Robert Hechler, former President ofWaddell & Reed, and Robert Williams,National Sales Manager for Waddell &Reed, were also named individually inthe complaint. These were the twohighest-ranking executive officers ofWaddell & Reed during the time periodin question. Ultimately, the responsibil-ity for the thousands of annuityexchanges fell on their shoulders.Waddell & Reed denies the allegationsbrought by the NASD and claims thatthe exchanges provided additional andtremendous value to their clients andwere suitable for their individual finan-cial needs. The annuity exchanges inquestion generated $37 million in com-missions for Waddell & Reed and costthe clients $9.8 million in unnecessaryfees. The NASD has asked Waddell &

Reed to reverse the commissionscharged to their clients, refund theclients’ losses, and pay a yet-to-be-determined fine.

Torchmark Corporation previouslyowned Waddell & Reed. Simultane-ously, Torchmark owned UnitedInvestors, another of its subsidiaries.United Investors had originally issuedthe variable annuities that Waddell &Reed convinced its customers to surren-der in exchange for annuities fromNationwide Insurance Company. Alawsuit was later filed by UnitedInvestors against Waddell & Reed inAlabama. This case went to trial andresulted in a jury verdict in JeffersonCounty, Alabama, of $50 million. TheAlabama Supreme Court overturnedthat verdict and sent the case back tothe trial court. Recently, the case wasre-tried and the new jury returned asecond verdict of $45 million againstWaddell & Reed.

The NASD cites three motives for theactions taken by Waddell & Reed:

• the $37 million in commissions toWaddell & Reed;

• the annual fees Waddell & Reedwould receive from Nationwide that itwas not earning from United; and

• the fact Waddell & Reed was con-cerned that United might allow theclients to invest their annuity valuesin mutual funds not related toWaddell & Reed.

The outcome of this case remains tobe seen but it appears to be a clearpicture of “churning.” As you probablyrecall, churning is a process by which asecurity instrument, such as an annuity,is exchanged for another product to thedisadvantage of the annuitant. Throughthe mid-1980s to the present, churninghas become a frequent practice of manyinsurance companies and financial insti-tutions. For Waddell & Reed, it appearsthe NASD is in the process of putting anend to their churning activities. If thatoccurs, that will be good for Waddell &Reed’s customers.

THERE REALLY IS AN INSURANCE CRISIS

Over the past several years, the insur-ance industry has worked very hard toconvince the American people, andespecially our political leaders, that acrisis exists in the insurance industry. Ihave to admit they have been correct allalong that a crisis does in fact exist.But, the industry leaders have been flatwrong on the reasons for the crisis.The insurance industry sectors are nowenjoying astronomical profits on thebacks of policyholders. Let’s take alook at the real facts.

• In 2003, major property/casualtyinsurers’ profits were up 89% from2002.

• In the first nine months of 2003, theproperty/casualty industry made $23billion in profits. That’s $12.2 billionmore than they made during sameperiod in 2002.

• In the first nine months of 2003, lifeand health insurer profits jumped437%, “the best third-quarter increasein a decade.”

• Insurance industry’s return on equityin 2004 is likely to soar above doubledigits for the first time since 1997.

While profits are soaring, some insur-ers have finally started to lower rates fortheir policyholders. Unfortunately,others are still refusing to do so, espe-cially for doctors. Some are even tryingto by-pass regulators who attempt tokeep a check on rate increases. Hereare some interesting facts to consider.

• One-third of all commercial proper-ty/casualty accounts experiencedinsurance premiums that either heldsteady or dropped during the lastthree months of 2003.

• On the other hand, the “non-profit”doctor-owned ISMIE MutualInsurance, the largest med-mal insur-er in Illinois (a state that does not reg-ulate insurance rates), is turning hugeprofits yet continues to hike premi-ums and executive salaries instead oflowering rates for its doctors.


• In 2003, the company turned a $20million profit and added $31 millionto its reserves.

• At the same time, rather than lowerrates in light of soaring profits, itraised premiums 35% for its doctors,who actually own the company.

• At the same time, two senior execu-tives received pay hikes of 12 to 18%,raising their annual salaries above$600,000.

Meanwhile, new data proves – with-out any doubt – that jury verdicts andlawsuit filings have been dropping dras-tically in the United States. These arethe true facts concerning lawsuits andverdicts.

• According to data released April 1,2004, median jury awards in person-al-injury cases “fell significantly,”dropping 30% in 2002 to $30,000,from nearly $43,000 in 2001.

• The top 10 jury verdicts dropped tothe lowest total amount since 1997,and the number one verdict was thelowest in a decade.

• Personal injury case filings havedropped 9% over the latest 10-yearperiod studied.

• According to data released April 1,2004, jury awards for medical-mal-practice cases have remained level inthe latest three years for which dataare available.

• Medical malpractice case filings percapita have been steady for 10 years,showing a slight overall decreasebetween 1992 and 2001.

The insurance industry – and thosepromoting the tort reform movement –have ignored the real facts relating tothe insurance crisis in the United States.When you check out the record, youwill find that the crisis came about fromfactors totally unrelated to lawsuits orjury verdicts. Yes, a crisis in the indus-try does exist – but the fault lies withthe industry itself.

INSURANCE INDUSTRY POSTS INCREASE INPROFITS OF 900%

We have been watching the State ofTexas because of claims that tort reformlegislation in that state would lowerinsurance rates. But, it appears thatcompanies are raking in windfall profitsin Texas and premiums haven’t beenreduced. In fact, rates have continuedto climb. Texas Watch, the nonpartisanconsumer research and advocacy organ-ization, urged Texas legislators and reg-ulators call for a full accounting ofinsurance industry practices and behav-ior. The industry should be made tomeet its responsibilities to Texas citizensand to state government.

New data, released April 14th fromthe Insurance Services Office Inc. andthe Property Casualty Insurers Associa-tion of America, document a 900%increase in profits for property andcasualty insurance companies between2002 and 2003. According to the newreports, insurers posted $29.88 billion inprofits in 2003 as compared to the $3.05billion profits they reported in 2002.This industry-wide information followsreports showing that Texas is currentlya highly profitable and predictablemarket. A Texas Department of Insur-ance report in March documents lossratios of 58% for the top Texas insurersin 2003. This means for every premiumdollar the companies brought in during2003, they paid out only 58 cents forclaims. Yet despite windfall profits, theinsurance industry refuses to pass thesebenefits along to Texas homeowners,doctors and other policyholders.

Texans are still waiting for lowerinsurance premiums, as well as for thepromised decreases in the cost of prod-ucts and services. You will recall thatreduced premiums were guaranteed iftort reform measures were passed. It istime to demand some accountability,cooperation and respect from thisindustry. The insurance companies arereaping billions of dollars in profits,while Texans are continuing to seeincreased premiums, higher deduct-ibles, lower coverage, weakened consti-tutional rights and a soft regulatorysystem.

Last year, the Texas Legislature passed

the insurance industry wish list curtail-ing the legal rights of Texas familieswith claims against insurance compa-nies, further tilting the scales of justicein favor of defendants and their insur-ance companies. Promises of lowercosts for health care and insurance havenot materialized. A Texas Watchspokesman stated that after 15-plusyears of pro-insurance industry changesin Texas law – weakening consumerprotections – Texas families need to askhard questions of their state elected offi-cials. Those questions should be askedin most other states, including Alabama.It is most significant that the passage oftort reform legislation and the use insome states of arbitration to resolveclaims hasn’t helped policyholders a bit.People and business owners are stillpaying too much for their insurance.

STUDY FINANCED BY INSURERS CALLS FOR

FEDERAL REGULATION

Researchers at the University of Mass-achusetts are releasing a study thatadvocates a strong federal role in insur-ance regulation, which has been theprovince of the states for more than 150years. The study, financed by insurersand an industry trade group at a cost of$300,000, notes that state regulation isregarded as inefficient, costly and adrag on the competitiveness of insurersas they compete with banks and mutualfund companies for customers. Thestudy contends that the states may notbe capable of an effective overhaul andconcludes that “federal action is neces-sary to prompt needed improvements.”The study was directed by Sheila C.Bair, a former Assistant Treasury Secre-tary in the Bush Administration, who isnow a professor of financial regulationat the University of Massachusetts inAmherst. State regulators disagree withthe federal takeover of insurance regu-lation. Any attempt to switch the focusof regulatory authority from the states tothe federal level will lead to more con-fusion and fragmentation.

While Ernst Csiszar, the President ofthe National Association of State Insur-ance Regulators, admits that the stateshave failed to adequately monitor the


insurance industry, he opposes the pro-posed creation of a federal insuranceregulator. At a hearing of the HouseSubcommittee on Capital Markets, Mr.Csiszar acknowledged complaints thatstate regulation has not always met theneeds of both insurance companies andtheir policyholders. Many of thenation’s largest insurers have been cam-paigning for a dual system. Such asystem would create a federal regulator,but also permit companies to choosewhether to be regulated by Washingtonor the states. That approach has metstrong resistance from the states, con-sumer advocates and some members ofCongress. Personally, I believe eachstate should retain the right to regulateinsurance companies and relatedmatters. I am convinced it would be amajor mistake to allow the federal gov-ernment to usurp state regulation of allinsurance matters.

GENERAL MOTORS FINANCE ARM SETTLES

RACIAL-BIAS LAWSUIT

General Motors Acceptance Corp.,one of the world’s largest consumer-finance companies, has reached a settle-ment in a class action lawsuit thatalleged African-Americans were chargedhigher interest rates than whites for carloans. As part of the agreement, GMACagreed to put tighter limits on theincreases car dealers can impose oninterest rates set by GMAC. Currently,GMAC allows dealers to add three per-centage points to the annual interestrate GMAC would offer to the con-sumer, based on creditworthiness. Thiscase was one of several class actionlawsuits filed against major car-loancompanies in the United States, allegingthat their practices discriminate againstminorities. At issue was how the $500billion U.S. car-loan business actuallyworks and how some customers aretreated.

XII.PREDATORYLENDING UPDATE

GEORGIA HAS NEW PAYDAY LOAN LAWS

The State of Georgia has stood upagainst the payday loan industry andtheir powerful lobbyists and passed agood piece of pro-consumer legislation.Governor Sonny Perdue signed a billinto law last month that caps interest onall small consumer loans, includingpayday loans, at 60% annually, which isGeorgia’s small loan usury rate. Thelaw, which goes into effect on May 1st,applies to lenders who make loans of$3,000 or less. Key provisions are:

• Borrower rights: Borrowers areauthorized to sue for 3 times theamount of all interest and charges,plus attorneys’ fees and court costs.Class actions are specifically author-ized. Illegal payday loans aredeclared void, and lenders are barredfrom collecting the debt.

• Tax penalties: A tax equal to 50% ofall proceeds from payday loans isimposed.

• Protections for military personneland their families. Lenders arebarred from garnishing wages of mil-itary personnel for unpaid loans, fromcontacting the commanding officer toreport delinquency, and from makingloans to military personnel when thecommanding officer has made thelender off limits.

• Ant i -br oker ing pr ov i s ions .Lenders are barred from offering pay-day loans on behalf of another lender,and are deemed de facto lenders ifthey make more money from the ille-gal loan than does the bank theyclaim to represent as an agent. Theseprovisions make SB 157 the first pieceof legislation to target the “rent-a-char-ter” subterfuge, under which lendersuse agreements with banks to claimexemption from state usury limits.

PAYDAY LENDERS TARGET MILITARY

MEMBERS

At a time when military families areunder tremendous stress and strain, wehave learned that payday lenders takeadvantage of military personnel. We allknow that men and women who servein our military are largely underpaid.Let’s look at a typical case. When Armyspecialist Myron Hicks returned toGeorgia from active duty in Iraq, hetook out a $1,500-dollar loan to fix uphis car. A few months later, the soldierwas in for a real shock. “I found out Iwas paying back $3,000, twice as muchas what I borrowed,” Hicks told FoxNews in Columbus, Georgia. Thestation did a good story on this situa-tion. Military towns located throughoutthe country have become magnets forpayday lenders. I don’t have to remindour readers how payday lendersoperate. They are businesses offeringfast cash in exchange for high fees andannual interest rates that often exceed700%. In fact, we have seen cases withannual interest rates as high as 1200%.

America’s men and women inuniform are attractive to short-termlenders. This is because of their smallbut steady paychecks. Folks in the mili-tary also have to answer to superiorofficers, whom lenders often contactdirectly if military personnel under theircommand fail to pay off their loans.The payday loan industry claims mili-tary communities are only a small per-centage of the industry’s overallbusiness.

Most consumer credit counselingexperts say borrowing money inadvance of payday is generally a badidea. In most cases, what happens isthe borrower has to roll the loan over.The payday lenders know the borrowerwon’t be able to pay the loan back inthe short time allowed, and the loan justbecomes a cycle. Lawmakers in severalstates are considering legislation tofurther restrict payday lenders. Georgiahas taken strong action. Unfortunately,Alabama is not among the number ofstates taking action. Whether it takesgovernment regulation or just educationin personal finance, the military shouldwork to keep America’s men and


women in uniform out of debt. Statesshould take action to go after those inthe industry that take advantage of themilitary.

THE SAD SITUATION IN ALABAMA

Since the payday loan industry wasable to get a most favorable piece oflegislation through the Alabama Legisla-ture last year, payday loan operationshave sprung up all over the state. InMontgomery, there appear to be dozensof new outlets popping up in all sec-tions of town. Obviously, the ownersmust like the new Alabama law. Whenyou consider rates as high as 25%monthly (300% annually) can now becharged, it is very to understand theireagerness to open new locations. Ihope the Governor and Legislature willtake another look at this industry anddo something to help consumers.

WHAT EXACTLY IS A PAYDAY LOAN?

I had assumed that all of our readersunderstood how payday loans actuallywork. Because not everybody has touse “payday loans” as a source ofmoney, I am not surprised to have beenasked for a better explanation. Paydayloans are small cash advances based ona personal check held for future deposit(or electronic access to a customer’sbank account). These loans of $100 toaround $500 are due in full on the bor-rower’s next payday or within a certainnumber of days. The fees charged resultin very large annual interest rates, withsome in the past exceeding 1,000%.The design of these loans leads to fre-quent rollovers and perpetual debt. Theholding of personal checks makes theloans inherently coercive, with over-extended borrowers faced with thechoice of allowing the check to bounce,paying to extend the loan or beingthreatened with “bad” check charges orprosecution.

This industry disproportionatelytargets vulnerable groups such as low-income people, welfare-to-workwomen, seniors and members of themilitary. According to one recent study,the typical customers were female,

average age was 39, average individualincome was $24,673 gross, and 60%were renters compared to 22% whoown homes.

While the situation in Alabama hasbecome a little better, it is still very bad.In the mid-1990s, payday loan opera-tions mushroomed in Alabama. TheConsumer Federation of America esti-mates that there were about 700 lendersaround our state before last year’s legis-lation. Labeling their transactions as“deferred presentment” or “deferreddeposit services” allowed the paydaylenders to circumvent the AlabamaSmall Loan Act, which prohibits lendersfrom charging more than 36% APR.Payday lending is a highly profitablebusiness that encourages people to“pawn their paycheck” and becometrapped in a “downward spiral of debt.”Now that the new law is in effect inAlabama, the industry is growing inAlabama by leaps and bounds.

THE NEED FOR MORE FINANCIAL LITERACY

EDUCATION PROGRAMS

Our firm has been actively involvedfor several years in helping consumersall across the country who have beenvictimized by predatory lending.Recently, we were invited to participatein a community seminar sponsored byThe Centennial Hill Gardening Project,Inc., New Providence Missionary BaptistChurch and AmSouth Bank to speak onthe topic of predatory lending and tohelp educate people on things theyshould look for when deciding whetherto finance the purchase of an item,whether it be a household item, car, orhome. This seminar is part of agrowing trend of community-mindedgroups that are undertaking the task ofeducating people about managing theirmoney and understanding what all isinvolved in the modern financial serv-ices industry. As evidenced by manyrecent studies, the “financial literacy” ofthis country is very poor. This is trueamong all socioeconomic groups, but itis especially true for those individuals atthe bottom of the economic ladder.Many experts, notably Alan Greenspanand former Secretary of the Treasury

Paul O’Neill, have endorsed these finan-cial literacy programs and stated thatthey will go a long way toward prevent-ing fraud and abuse associated withpredatory lending. They argue thatthese financial literacy programs caneven have a positive effect on theeconomy by producing more informedconsumers who will, in turn, makewiser financial decisions. Theseinformed decisions would allow indi-viduals to increase their wealth andmaintain it, rather than losing it to somedeceptive scheme. We are veryhonored to be involved in such a move-ment and encourage anyone with asimilar interest to get actively involved.

XIII.PREMISESLIABILITY UPDATE

JUDGE AWARDS $5.25 MILLION IN GAS

EXPLOSIONS TRIAL

A judge in Kansas City has awarded$5.25 million in punitive damages totwo Hutchinson businesses destroyedduring the first of a series of natural gaseruptions in 2001. A jury in Februaryhad awarded more than $1.7 million tothe businesses, to be paid equally byTulsa, Okla.-based ONEOK Inc., andMid-Continent Marketing Center Inc., anaffiliated marketing subsidiary. Aftertwo days of deliberations, the jury alsoawarded punitive damages against Mid-Continent. Under that state’s law, thetrial judge determined the amount ofthe punitive damages. State geologistsand investigators said the explosionswere caused by natural gas that leakedfrom an underground storage cavernowned by ONEOK. They say the gastraveled from the Yaggy storage fieldseven miles northwest of Hutchinson,Kansas, erupting from old brine wellsbeneath the city. The blasts destroyedseveral buildings and killed two people.

The explosion and fire in 2001destroyed the Woody’s Furniture andDecor Party Supplies buildings on thefirst day of the eruptions. The busi-nesses’ lawsuit was one of more than adozen that arose from the explosions.


Another explosion at a mobile homepark the day after the downtown firekilled a couple. That claim by theirfamily reached an out-of-court settle-ment with ONEOK. The largest lawsuit,a class action lawsuit, is scheduled fortrial this summer. It is brought onbehalf of all businesses and propertyowners in Reno County and seeks $350million in damages for loss of businessand property values.

XIV.WORKPLACEHAZARDS

CHEMICAL INDUSTRY FACILITIES REPORT

ACCIDENTS

Chemical facilities owned by compa-nies enrolled in an industry-sponsoredvoluntary safety program have hadmore than 1,800 accidents per yearsince 1990. This information comesfrom a new report released last monthby the U.S. Public Interest ResearchGroup. Responsible Care, a voluntarysecurity code subscribed to by compa-nies that are members of the AmericanChemical Council, has apparently notdone the job. The report criticizes theBush Administration plans to addresssafety and security at chemical facilitiesby industry-self-regulation. The indus-try plan is a classic example of “lettingthe fox guard the chicken house.” U.S.PIRG analyzed accident data compiledby the National Response Center, whichis the sole national point of contact forreporting oil and chemical dischargesinto the environment in this country,from 1990 through 2003.

The safety record of these companiesshows that voluntary measures simplydo not work. To protect both workersand the public, safety measures atthese facilities must be improved. BP,Dow, and DuPont are the worst offend-ers for the period since 1990. Facilitiesowned by these companies had nearlyone-third of the accidents since 1990.It is noteworthy that the EPA has identi-fied more than 120 chemical facilitiesthat each put more than one millionpeople at risk of injury or death

because of the hazardous chemicalsthey use and store on site. Currentlyno federal government regulationrequires industries to consider imple-menting inherently safer technology.

XV.TRANSPORTATION

1,000 DIE EACH YEAR IN HIGHWAY

CONSTRUCTION ACCIDENTS

Accidents in highway constructionzones kill more than 1,000 people, mostof them drivers, each year. For thou-sands of men and women who work onconstruction projects, their workplace isthe highway. According to statistics,1,181 people died and 52,000 wereinjured in work zone crashes in 2002.That was 53% more than in 1998. Fourout of five of those who die in workzone crashes are drivers and passen-gers, not highway workers. Unfortu-nately, the number of deaths is risingbecause highway construction isincreasing. We see signs along ourhighways in Alabama alerting motoriststo the fact that fines are doubled forspeeding in a construction zone.

Texas had the most work zone deathsby far in 2002, with 192. California hadthe second-highest number, 119, accord-ing to statistics from the American Asso-ciation of State Highway andTransportation Officials. In 2002,Alabama had 33 such deaths and in2003, the number had risen slightly to 35deaths. The government is trying toreduce the numbers by promoting theuse of long-lasting pavement that needsfewer repairs and encouraging total roadclosures when appropriate. But, thereare many highway systems that will needrepair and improvement in the comingmonths and years. According to thefederal government, rear-end crashes arethe most common type of accident inwork zones. This can be the result ofspeed, lack of patience, which causesdrivers to tailgate, and inattention causedby such things as cell phone use andobserving the work going on. In anyevent, the rate of accidents in construc-tion zones remains a major problem.

PROPOSED AUTO SAFETY REGULATIONS

Consumer groups are urging the U. S.House of Representatives to passvarious safety regulations contained inthe Senate version of the highwayfunding bill. The Senate bill wasdrafted by Senator John McCain (R-Ariz.). As previously reported, theMcCain bill was approved by the Senatein February, and it would require theNational Highway Traffic Safety Admin-istration to meet specific deadlines inaddressing a comprehensive list of auto-mobile safety issues. Some of theissues along with the deadlines foraddressing those issues as containedwithin the bill are as follows:

• By 2005: add 15-passenger vans tothe list of vehicles NHTSA tests todetermine their propensity to rollover.

• By 2006: require vehicles to includegovernment crash test ratings onstickers at dealerships.

• By 2007: upgrade tire “aging” and“performance” standards.

• By 2008: require door lock systemsthat reduce the chance that passen-gers can be ejected; establish mini-mum standards for vehicle resistanceto rollovers; and develop a new mov-ing crash test that realistically dupli-cates a vehicle rolling over.These measures address very serious

automobile safety issues. Our firmreviews cases involving these issues ona daily basis, often on behalf of individ-uals who have suffered serious bodilyinjury or death. The need to implementmore stringent safety standards is evi-denced by the rising number ofhighway deaths. In 2002, there were42,815 highway deaths, which was thehighest death toll since 1990. Dr.Jeffrey Runge, NHTSA’s Administrator,testified at a congressional hearing thathis agency’s safety priorities would becompromised because of ambitious,unrealistic deadlines set out in the pro-posed bill. In my opinion, all of theseproposed measures would result insafer vehicles and ultimately save lives.


I see nothing unrealistic or ambitiousabout the deadlines. In fact, thesemeasures should have been put inplace years ago to insure that automo-bile manufacturers put safe cars on thehighways.

ALCOHOL AND DRIVING DON’T MIX

The mother of a 19-year-old killed in atraffic accident has filed a civil lawsuitagainst Coors Brewing Co., claiming thatthe company promotes underage drink-ing. The mother, a Reno, Nevada, resi-dent, contends Coors has failed in itsduty to protect the country’s youth fromdrinking. Her son was killed in 2002after he drank Coors at a party and laterdrove his girlfriend’s car into a light poleat 90 mph. The lawsuit, which seeksunspecified damages, accused Coors of‘’glorifying a culture of youth, sex andglamour while hiding the dangers ofalcohol abuse and addiction.’’ Golden,Colorado-based Coors issued a statementsaying that althoug the company couldnot comment on pending litigation, thecompany “doesn’t want underage con-sumers - period.” It is difficult for me tobelieve that the beer companies don’tmarket this product to young people. Itis clear that much of their marketingefforts are directed at younger people.In fact, some advertising appears to bedesigned to appeal to teenagers. Under-age drinking and drunk driving is aproblem in this country and it may takemore lawsuits against those who marketthe products in order to help stamp outthe problem to the extent possible.There is one thing for certain, and that isalcohol and driving – at any age – don’tmix!

U.S. JETS MUST NOW HAVE

DEFIBRILLATORS ON BOARD

Every large jet in the U.S. fleet mustnow have a defibrillator on board. Thismay result in making an airliner one ofthe safest places to have a cardiacarrest. A Federal Aviation Administra-tion rule, four years in the making, hastaken effect as of April 12th, requiringan automated external defibrillator andmore advanced medical kits on all bigjets. But, commuter planes are exempt

from the requirement. A defibrillator isan easy-to-use device that delivers alifesaving shock when the heart devel-ops a deadly short-circuit known asventricular fibrillation. When the heart isquivering in this electrical chaos, ashock must be delivered within sixminutes to save the person’s life. Thedevices are becoming common inpublic places, largely because of lessonslearned in the air. We are putting adefibrillator in each of the 4 buildingsoccupied by employees of our firm.Having Dr. Jim Lauridson, a medicaldoctor, on staff helped us make thisdecision. We are currently providingtraining for all employees.

XVI.ARBITRATIONUPDATE

SOME COURTS DEAL WITH THE EVILS OF

ARBITRATION

A federal district court in Georgia hasrefused to change its order in a paydaylending case that was good for con-sumers. In that case, the court struckdown an arbitration clause in a paydaylending contract on mostly proceduralunconscionability grounds. The courtfound, among other things, that theclass of people who are so desperate asto go to payday lenders are in a particu-larly vulnerable contract position. Thecourt upheld its original ruling bydenying a motion to reconsider. Thecourt’s order included some good lan-guage about the history of paydaylenders, and how “arbitration is justanother means for high-cost lenders tocircumvent state laws.”

The payday loan industry is a multi-billion dollar enterprise nationwide.People who have to do business withthis industry usually have few, if any,alternatives. However, that fact doesn’tjustify the payday lenders taking advan-tage of their customers. It is govern-ment’s responsibility, both at the federaland state levels, to protect thosepersons who deal with payday lenders.If I had the authority to do so, I wouldclose down the payday loan operators

or at the very least require them tocharge reasonable interest rates.

ARBITRATION STILL A CONSUMER

NIGHTMARE

Even though courts on occasion –such as the federal court mentionedabove in Georgia – will strike down anarbitration agreement, those decisionsare still too few and far between. In myopinion, the courts in our state andelsewhere have an obligation to protectconsumers from the evils of pre-disputearbitration of a mandatory and bindingnature. However, the obligations ofboth the U.S. Congress and state legisla-ture bodies are much stronger. No legalscholar can justify the transformation ofthe Federal Arbitration Act, from what itwas intended by Congress to be, into adevice used by large corporations to“stick it to consumers.” Clearly, basedon the history of the FAA, it was neverintended by Congress to apply to con-sumer transactions.

Unfortunately, legislative action hasalso been slow in coming. Consumershave no chance to get justice frommandatory, binding arbitration thatcomes about from an agreement theywere forced to sign before any disputeever arose. Politicians who take cam-paign funding from proponents of arbi-tration have not seen fit to take on theirdonors. I think it is time for that tochange! Congress should amend the FAAto take all consumer transactions andpersonal injury and death cases out ofthe Act. State legislatures should passlocal legislation to curb the use of pre-dispute arbitration to the extent possible.

XVII.NURSING HOMEUPDATE

SETTLEMENT BY KINDRED HEALTHCARE

Kindred Healthcare, a national health-care services company operating hospi-tals and nursing homes across thecountry, recently agreed to settle claimsresulting from a four-year investigation


of conditions at four nursing homes itoperates in the state of Kentucky. TheKentucky Attorney General’s MedicaidFraud and Abuse Control Division con-ducted the investigation, which involvedproblems at these facilities includingdehydration, untreated or delayed treat-ment of infection, injuries, lack of sup-plies to treat life-threatening conditions,failure to treat wounds. and failure toadminister medication. Kindred oper-ates more than 260 skilled nursingcenters in more than forty states, provid-ing care to approximately 28,000nursing home residents every day.

This is not the first time that thesetypes of claims have been made againstKindred’s Kentucky facilities. In 2003,federal and state authorities ordered aplan of correction at Kindred’s BowlingGreen facility in response to a patient’sdeath from accidentally strangling on awheelchair restraint. In 2002 a suit wasfiled against Kindred’s Lexington facilitybased on allegations that a resident hadto have her feet amputated because ofnegligent care for diabetic foot ulcers.Another 2002 lawsuit out of the corpora-tion’s Winchester facility alleged the neg-ligent death of a resident from infection.

Kindred agreed to make numerousimprovements to resolve the KentuckyAttorney General’s claims, includingspending $450,000 to have a monitor;$1.38 million on geriatric nursing prac-titioners; $900,000 on training; $500,000for nursing scholarship funds; $357,752to reimburse Kentucky Medicaid pro-grams; and $96,853 for repayment ofthe costs of the investigation. Kindredis the successor business to VencorInc., a nationwide chain of nursinghomes that went bankrupt in 1999.Vencor filed for Chapter 11 protectionafter struggling amid mounting debt,federal probes, lawsuits and allegationsof illegalities. In Vencor’s bankruptcycase, the United States governmentsubmitted a claim for $1.3 billion forMedicare fraud.

FIRE ANT ATTACKS IN NURSING HOMES

Over the past two years there havebeen numerous reports concerning fireant attacks in nursing homes of all places.University of Mississippi researchers were

able to document at least six attacks bythe South American fire ant in nursinghome facilities. However, for somereason, those attacks received little – ifany – news coverage. Arkansas isamong the states where the fire ant pop-ulation flourishes. The study documentedattacks in other nursing homes – twoeach in Texas, Florida and Mississippi –as well in a state institution in Alabama.At least four nursing home residents havedied after attacks resulting from compli-cations because they are already infragile health. Clearly, fire ant attackspresent a serious problem. Fire antsinflict a painful sting, far out of propor-tion to their size. Large numbers willswarm onto the body and then stingalmost simultaneously. Anybody who hasever been stung by fire ants knows howpainful the bites can be. Nursing homepatients who were attacked by the ants,according to the study, had physical ormental ailments that kept them frommoving away or shouting for help. Inci-dents involving fire ants attacking nursinghome residents can’t be tolerated. Therereally can be no excuse for this sort ofthing occurring in a nursing home.

EMERGENCY “WATCH LIST” IN GEORGIA

The federal government has recog-nized that it is difficult for residents andfamily members to compare the poten-tial services that area nursing homescan provide. Indeed, it is much moredifficult for the average person tocompare the potential medical care thata loved one may receive at a nursinghome than it is, for example, tocompare the benefits of one particularmake or model of automobile toanother. The federal governmentattempted to assist the citizens of thiscountry by developing the Nursing Home Compare website,www.medicare.gov/NHCompare.But, the Nursing Home Comparewebsite does not alert potential resi-dents and their family members to theexistence of nursing homes that haveeither provided substandard care in thepast or have continuous care problemsaccording to their surveys.

The national magazine Consumer

Reports has attempted to address thisproblem. They now conduct a bi-annual survey that lists problem nursinghomes in each state. The most recentsurvey for the state of Georgia is for theyear 2002. Amazingly, there are thirty-seven nursing homes listed on the Con-sumer Reports nursing home watch list.These thirty-seven nursing homes con-stitute approximately 9% of the totalnursing homes in Georgia. This is atroubling number indeed. The nursinghomes placed on the Consumer Reportsnursing home watch list are determinedby reviewing the surveys conducted ateach facility. More specifically, nursinghomes in Georgia are subject to bothstate and federal surveys to determinetheir compliance with state and federalregulations governing the level of careprovided at the nursing homes. If thesurveyors conducting these inspectionsfind that the care at the facility violateseither the federal or state regulations,then a “deficiency” is awarded to thatfacility. The potential for actual residentharm from each of the deficiencies isalso determined.

Consumer Reports takes into consider-ation both the number of deficienciesand the severity of the deficiencies indeciding which nursing homes in a par-ticular state, if any, are to be placed onthe nursing home watch list. Accordingto Consumer Reports, potential residentsand their family members need to bewary of the nursing homes listed. Thenursing homes listed below are thoseincluded on the most recent ConsumerReports nursing home watch list forGeorgia:

• Integrated Health Services of AtlantaBuckhead

• Savannah Rehab & Nursing • Sunbridge Care & Rehab for

Riverdale• Salem Nursing & Rehab of Angus• Marietta Health & Rehab Center• Florence Hand Home• West Lake Manor Health Care Center• Ashton Woods Rehab Center• Heritage Park of Savannah• Sunbridge Retirement & Rehab

(Rome, Georgia)• Lafayette Nursing & Rehab Center• Laurel Baye Health Care of Macon


• Riverside Health Care Center• Beverly Healthcare-Tifton• Roswell Nursing & Rehab Center• The Heritage of Old Capitol

(Louisville, Georgia)• Decatur Health Care Center, Inc.• Shamrock Nursing & Rehab Center• Mariner Health of Northeast Atlanta• Athena Rehab of Clayton• CLC Jonesboro• Beverly Healthcare of Jonesboro• West View Nursing & Rehab Center• Midway Health Care Center• Mountain View Health & Rehab

Center• Meadowbrook Nursing Home• Fountain City Care & Rehab• Autumn Breeze Health Care Center• Pinewood Manor• Premier Subacute & Rehab Center• Warner Robins Rehab & Nursing

Center• Palmyra Nursing Home• Clinch Healthcare Center• CLC Fort Valley• Emorywood Nursing Center• Fountainview Center for Alzheimers• Banks-Jackson-Commerce Medical

Center Nursing Home

If you are considering placing a lovedone in a nursing home in Georgia, youshould obviously think twice beforeusing one of the nursing facilities listedabove. There are many nursing homesin Georgia that provide excellent care.In contrast, based upon the informationthat Consumer Reports has developedin its investigation of the listed nursinghomes, the care provided by those facil-ities would appear to be less than ade-quate. It is recommended that personslooking for a nursing home shouldalways do their homework beforechoosing a facility. Unfortunately, it isdifficult to obtain the needed informa-tion in some states.

FLESH EATING BACTERIA CAUSING

PROBLEMS

The Centers for Disease Control(CDC) are looking into a deadly out-break of “Flesh Eating Bacteria” in aGeorgia nursing home. In late March,two patients at the Bell Minor Home inGainesville, Georgia, got necrotizingfasciitis and one of them died. The

CDC is testing samples from the victimstrying to find out where the bacteriacame from. The disease is a skin andtissue infection brought on by the samebacteria that causes strep throat. Thereare approximately 600 cases reported inthe U.S. every year. Symptoms includesevere pain, swelling, and redness onthe skin. The bacteria are contagiousand can be passed on by coughing orsneezing. I hope this will prove to bean isolated occurrence. It doesn’tappear at this time that the nursinghome facility bears any legal responsi-bility for the outbreak.

FORMER PRESIDENT OF NURSING HOME

CHAIN INDICTED ON FRAUD CHARGES

The Associated Press has reportedthat a federal grand jury indicted theformer president of a defunct nursinghome chain. Darrell C. Tucker isaccused of stealing more than $100,000from employee retirement and healthplans. Tucker is being charged withembezzlement and health care fraudrelated to missing 401(k) and healthplan money at Newcare Health Corp. ofAtlanta, according to the report. Thefacility filed for bankruptcy in Worces-ter, Massachusetts, in 1999 and laterceased operations.

Authorities say Tucker failed toforward $16,282 in employee contribu-tions to the Newcare 401(k) plan cover-ing 856 participants and another$90,000 in employee contributions tothe Newcare Group Health Plan cover-ing 1,494 participants. Newcare pro-vided senior residential care services inAlabama, Georgia, Florida, Kansas,Massachusetts, Tennessee, and Texas.In September 1999, a federal bank-ruptcy judge cleared the way for thesale of 22 nursing homes owned byNewcare to a Nevada firm. At the time,several state and federal agencies saidthey had launched inquiries into allega-tions that NewCare pocketed moneywithheld from workers checks forhealth insurance, failed to pay payrolland other taxes, and quietly emptied a$500,000 escrow account it had beenrequired to post to get an operatinglicense in Massachusetts.

XVIII.HEALTHCAREISSUES

DRUG PRICES ARE MUCH TOO HIGH – WHO

IS TO BLAME?

A typical Alabamian will spendapproximately $180 a month to pur-chase a thyroid and asthma medication.Unfortunately, many Alabamians haveno health insurance to cover the cost ofpurchasing these medications. If thesefolks could purchase the same twomedications in Canada, their prescrip-tion bill would be approximately $56for the same two prescriptions. ManyAlabamians are asking, “Why do wehave to pay so much more than the restof the world?” We know that retailpharmacies are not the problem – theyoperate on a very small margin ofprofit. So, where does the problem lie?

Not every medication is cheaperoutside of the United States. On thewhole, however, Americans pay morefor their prescription drugs than anyother developed country in the world,according the U.S. Food and DrugAdministration. Experts point to severalfactors for price disparity, includingresearch costs borne by U.S. drug com-panies. The main reason for higherU.S. drug prices, many experts agree, isthat governments in Canada and Europeregulate the price of drugs or use theirclout to negotiate lower prices. Unfor-tunately, the U.S. government doesneither. Since the United States is theonly country that does not regulate theprice for prescription medications, theprice can double or triple for a certainmedicine and there is no mechanism tostop the drug companies from raisingtheir prices. Because price controlsexist in other countries, drug companieslook to the United States to maximizetheir profits. As health insurance costsskyrocket, the governors of severalstates and other government officialsare considering government sanctionprograms to re-import lower cost drugsfrom Canada.

U.S. prescription drug costs rose 17%from 2000 to 2001, according to theNational Institute for Healthcare Foun-


dation. It was the fourth consecutiveyear of 17% growth or higher. TheFoundation has determined that two-thirds of the spending increase from$131.9 billion to $154.5 billion camefrom the sales of 50 highly popular andheavily marketed drugs. These drugsincluded cholesterol reducers Lipitorand Zocor; arthritis drug Vioxx; ulcerdrug Protonix; painkiller OxyContin;antipsychotic drug Zyprexa; and antide-pressant Celexa. Sales for each of thesedrugs were up 25% or more. In themeantime, most drug companies haverecorded healthy profits. Pharmaceuti-cal companies have averaged 18% to20% net profit over the last twodecades, making this the most prof-itable industry in the United States.

The pharmaceutical industry claims itspricing policies are based on how muchit costs to develop a new drug. Clearly,a new drug’s journey from test lab tothe pharmacy shelf can be costly.However, the drug companies getextensive tax credits to offset researchand development costs. As a result, thecompanies are taxed at about half therate of the average U.S. family. In addi-tion, the National Institutes of Healthprovide millions of dollars in grantseach year for new drug development.Many believe the pharmaceutical indus-try spends an excessive amount eachyear in marketing prescription drugs.Over the past five years, the pharma-ceutical companies have intensifiedtheir marketing tactics. According toPublic Citizen, the drug industry’sadvertising costs rose from $791 millionin 1996 to $2.5 billion in 2001. Frankly,I find it hard to justify advertising by theindustry. It seems that medical doctors,working with pharmacists, shoulddecide what medications to prescribe.That is why direct advertising to thepublic by the companies makes nosense and can’t be justified.

Some believe that the U.S. govern-ment will eventually have to do whatother industrialized countries in theworld have done one way or the otherand regulate the price of prescriptionmedications. But, because the drugmakers are among the nation’s mostpowerful political interest groups, Idoubt this will happen. Public Citizen

found the drug industry spends morethan $60 million each year on lobbyingpoliticians, and that does not includepolitical contributions and money spentlobbying at the state level. The localpharmacists are on a very low margin ofprofit, the consuming public is payingmore than ever, and the drug industry ismaking record profits. Who is theguilty party? Groups such as AARP arehelping spearhead the fight to lowerdrug costs, but it will be a long, hard-fought battle.

VETS STRUGGLE TO OBTAIN BENEFITS FOR

AGENT ORANGE EXPOSURE

While litigation is pending for Viet-namese victims, Vietnam veterans arestill struggling to collect federal benefits.A Navy veteran, stationed off the coast,was denied benefits for cancer of thelarynx because his ship did not keeprecords of who went ashore unless itwas for an extended period of time.Others have been automatically deniedcompensation because their disease isnot recognized as Agent Orange-relatedby the Veteran’s Administration. Forexample, an aircraft maintenanceveteran was denied benefits for testicu-lar cancer. He also suffers from brainand lung cancer, staph infection,blocked bowel, seizures and eye prob-lems. The federal government has obvi-ously not adequately responded to theveteran’s needs.

The Veteran’s Administration (VA)organized the Agent Orange RegistryExamination Program in 1978. By 2000,according to the agency, 297,194 vetshad taken exams, 99,226 had filedclaims and only 7,520 had received dis-ability compensation for Agent Orange-related causes. That same year theGeneral Accounting Office issued areport stating that the Air Force’s studyof Operation Ranch Hand “has hadlimited impact on decisions affectingveterans’ compensation” despite taking18 years and spending $100 million.Operation Ranch Hand was the codename of the Air Force’s program tospray herbicides, primarily AgentOrange, to reduce vegetation that couldhide enemy forces.

Vietnam veterans did win a major

battle two years ago when a San Fran-cisco federal appeals court upheld aVietnam veterans and survivor classaction victory against the VA. The courtordered the department to pay disabilitypayments retroactive from that date towhen the veterans applied for benefits,but not before September 25, 1985. Thisorder nullified a government rule-making procedure that affected morethan 30,000 veterans who were suffer-ing from diabetes or prostate cancer asa consequence of exposure to AgentOrange. The court found that theagency had been systematically violat-ing a previous court order by limitingpayment of retroactive benefits to onlythose widows and Vietnam veteranswho had specifically identified AgentOrange as the culprit for the veteran’scancer when they first applied for VAbenefits.

In 1989 this same court had ruled thatthe VA’s standard of scientific proof wasillegally high. The VA had concludedthat there was no link between AgentOrange exposure and any disease otherthan a minor skin condition. When theagency reevaluated, nine major types ofcancer were added to the list. Thecurrent list includes cancer of the lung,bronchus, larynx, and trachea; multiplemyeloma, Hodgkin’s disease, non-Hodgkin’s lymphoma, soft tissue sarco-mas, type II diabetes, chroniclymphocytic leukemia and spina bifida(a birth defect) occurring in children ofVietnam veterans. A veteran must besuffering from one of these recognizeddiseases in order to receive federal ben-efits. A veteran who wishes to applyschedules an appointment at the Veter-ans Administration hospital to take anAgent Orange Registry examination.The agency confirms the specific dis-ability, when it appeared, and theseverity. The veteran must show evi-dence of service in or near Vietnam,diagnosis of a VA-recognized disease,and the date of manifestation within theparticular deadline for certain diseases.If denied, the veteran has the right toappeal by sending a Notice of Disagree-ment to the Board of Veterans’ Appeals.Approved veterans may receive disabil-ity compensation and medical services.Veterans may receive $106 to $2664 per


month for disability compensationdepending on level of disability.Medical services include hospital care,nursing home care and outpatient carefree of charge. More of our veteransshould be receiving these benefits.

ASBESTOS RELATED DISEASES RISING

The first-ever analysis of federal mor-tality records has found that 10,000Americans die each year from asbestosexposure. The Environmental WorkingGroup, an environmental researchgroup, has reported that 10,000 Ameri-cans die each year from asbestos-related diseases. Asbestos was widelyused for fireproofing and insulationuntil the 1970s. Scientists have con-cluded that inhaled asbestos fibers arelinked to cancer and other diseases.Since 1979, more than 43,000 Americanshave died from asbestos-related dis-eases. This study gets down to thelocal level, and that is good. It gives usa better understanding of the problemareas.

The more troubling news, however, isthat the number of deaths appears to beincreasing, and research groups arereporting that the growing numbercould lead to a public health crisis. TheEWG has projected that more than100,000 people in the United States willdie of one of four asbestos-related dis-eases – mesothelioma, asbestosis, lungcancer and gastrointestinal cancer –over the next ten years. The researchgroup has called for an immediate banon asbestos. In addition, they wantfederal asbestos health screening and afair measure of assistance for victims ofasbestos exposure.

Although many Americans believethat asbestos has already been bannedand its victims have been compensatedby the courts, the EWG study found thatthe conventional wisdom about thisdeadly material is almost completelywrong. The Environmental WorkingGroup has concluded that we are at thebeginning of a tidal wave of asbestos-related diseases and mortality thatneeds to be brought to the attention ofthe public, federal policymakers andhealth officials. Many believe that thefibrous mineral is no longer a threat.

Unfortunately, asbestos is still with us. Federal legislation designed to

replace asbestos lawsuits with a victims’fund supported by asbestos companiesand insurers was being considered byCongress as this issue was going to theprinter. Many environmental groups arevery concerned about the proposed leg-islation being pushed by Senator OrrinHatch of Utah. Several have labeled theSenator’s proposal as “grossly insuffi-cient.” Clearly, Congress should beworried more about the public healthissues involved. Instead, it appears thatmany in Congress are more concernedover the welfare of asbestos firms andhave largely ignored their victims.

While we have reduced exposure inthis country, and that’s a step in theright direction, we still haven’t had aneducational campaign and public healthcampaign to educate people thatasbestos still exists. A great deal of mis-information has been put out by theindustry. Asbestos is not an economicissue, but a public health crisis – onethat has yet to reach its peak, accordingto the EWG. The study reports that 30million pounds of asbestos are used inthe United States each year. It also listsdozens of widely-used consumer prod-ucts that still contain it. Finally, thestudy says more than one millionworkers are exposed every year.EWGAction Fund’s interactive website showsAmericans how close they live to a sitewhere asbestos was shipped orprocessed. The study lists sites nation-wide where asbestos cleanup is mostcritical and finds that more than 100,000people live within half a mile of such asite.

The Bush Administration and theRepublican leadership in Congressappear to be taking a position that pro-tects industry and does little for victims.As this report was being written, I wasinformed that an effort to bring theHatch bill up to a Senate vote had beendefeated. This is good for victims andtheir families. I hope the currentversion won’t come up again.

XIX.MONSANTOUPDATE

THE MONSANTO SETTLEMENT

There has been a great deal writtenand said concerning the settlement ofthe PCB cases in Anniston. I am wellaware that the federal portion of thesettlement is taking longer than mostresidents anticipated it would. This isbecause of the number of claimantsinvolved and the fact that blood testingof all 18,000+ claimants (includingnearly 3,000 claimants who were blood-tested previously as part of our case) isrequired to find out who all actuallywill have valid PCB-related claims.Unfortunately, many of the financialbenefits of the settlement haven’t beenfully reported, and I must confess wehaven’t done a good job of getting themessage out. For example, the healthclinic required in the federal (Tolbert)case, combined with a health studyfunded by the federal government, is avaluable part of the settlement. Expertscan be brought in to identify the sourceof the problems and provide lastingsolutions for the area affected. Thenew health clinic will deal with thecause of the health problems, as well asthe treatment, and that’s good for allpeople involved. Obviously, a healthclinic was badly needed and should beoperational by later this year.

The global agreement in the PCB liti-gation also included a package ofhealth programs and initiatives spon-sored by Pfizer with an estimated valueof up to $75 million over 20 years. Aspart of the settlement, Pfizer agreed topay $2 million to establish a healthclinic in western Anniston to be oper-ated by the University of Alabama-Birm-ingham or a similar entity. The clinicwill be funded by 10 annual install-ments of $2.5 million to operate thefacility. UAB (or a similar entity) will beresponsible for setting up and runningthe clinic. In conjunction with theclinic, Pfizer will also establish a$500,000 fund for health screenings andprovide free prescription drugs to low-income, uninsured patients of the clinic


through UAB. The drug program’svalue is estimated to be up to $23million over twenty years. Edgar GentleIII, claims administrator for the TolbertPCB case, has said the health clinicwould be customized to fit the commu-nity’s needs and have some environ-mental and research aspects. Afeasibility study to determine the clinic’slocation is currently being carried outand should be completed by the middleof this month. The architectural firmperforming the study has built moremedical clinics in the Southeast thanany other firm in the Southeast.

The other portion of Pfizer’s healthprogram was for Calhoun County resi-dents to sign up for the company’s pre-scription drug discount card, which, ifevery eligible resident applies, couldsave up to $50 million over twentyyears. Since the settlement announce-ment, Pfizer has been marketing itsShare Card in Calhoun County. Thusfar, about 1,500 of 4,000 eligible resi-dents have signed up. The Share Cardis available to low-income and Medicarerecipients for a fee of $15 per month foreach prescription. However, low-income residents of Calhoun Countycan apply for free medicine through theSenior Rx program at no charge. InCalhoun County, Interfaith Ministries, anonprofit, processes the paperwork forthe drug company’s free assistance pro-grams. The clinic and the health studyare most significant because they willaddress the health issues caused byPCBs.

The $3.2 million health study, whichis separate from the lawsuits, shouldprove a lasting benefit to those whobelieve their health problems are aresult of PCB exposure. The three-yearstudy, funded by the federal Agency forToxic Substances and Disease Registry,will look into the effects of PCBs on thehealth of local residents. The study isbeing headed by the Jacksonville StateUniversity College of Nursing andHealth Sciences and involves leadingPCB experts from hospitals and univer-sities around the country. These studiescan be the foundation for further long-term studies.

Another important aspect of thefederal court settlement involved the

required property clean-up. This wasrequired as a part of the settlement andwill have a cost to Solutia and Mon-santo of between $50 and $75 millionfor just those initial phases under thecurrent consent decree, with furtherstages to follow. Because of the settle-ment, it will be a real clean-up of thePCB contamination, rather than thesuperficial one proposed by the EPAand the corporate entities. The federalcourt will monitor the clean-up untilcompleted.

We are hopeful that the settlement ofthe federal case will continue on a fasttrack and be completed as soon as pos-sible. Our firm has dedicated a numberof personnel – including lawyers – tokeep things on track. At one time, wehad 9 lawyers and 50 support personnelworking on the Tolbert case. This wenton for well over a year. At present, westill have a good number of folksworking to complete the settlement.

SOLUTIA GETS EXTENSION TO FILE

BANKRUPTCY REORGANIZATION PLAN

Unfortunately, the threat of a Solutiabankruptcy that came up during settle-ment negotiations became a reality. Afederal bankruptcy judge has now givenSolutia Inc. another three months todetail how it expects to emerge frombankruptcy. On April 13th, the judgegave the St. Louis-based company anadditional 90 days — until July 14 — tofile its bankruptcy plan. The extensionwas labeled as being “necessary andappropriate to carry out the provisionsof the bankruptcy code.” When it filedfor Chapter 11 federal bankruptcy pro-tection in December, Solutia by law wasrequired to draft a new business plan inthe first 120 days of bankruptcy to showits lenders how it intends to return toprofitability. That “exclusivity period,”which would have expired last month,allows Solutia to formulate its ownrestructuring and won’t allow compet-ing plans from outsiders. The rulinggave Solutia until September to solicitcreditors’ votes to approve whateverplan emerges.

Solutia sought bankruptcy protectionafter struggling under heavy financial

obligations assigned to the companywhen it was spun off by Monsanto Co.as a separate company seven years ago.Solutia had warned for months prior tofiling for bankruptcy that such a movewas probable. After its 1997 spin-offfrom the former Monsanto, Solutia wasleft with the PCB problems accrued byMonsanto over several decades of man-ufacturing. In 1999, Monsanto wasacquired by Pharmacia & Upjohn tocreate Pharmacia Corp., which last yearcompleted a spin-off of its biotechnol-ogy and agricultural businesses to formthe current Monsanto Co. Pharmaciawas acquired by Pfizer Inc. in April. Wedon’t expect the bankruptcy of Solutiato adversely affect the settlementreached in either the federal case or thestate case. We are working to see thatour clients are protected under the set-tlement agreement.

XX.ENVIRONMENTALCONCERNS

BUSH ADMINISTRATION MERCURY

STANDARDS DESERVE CRITICISM

During the past several weeks, theBush Administration’s plan for reducingmercury emissions from power plantshas come under heavy criticism. Nearlyhalf of the members of the U.S. Senateand 10 State Attorneys General haveurged the Environmental ProtectionAgency to propose stronger Mercuryregulations. EPA Administrator MikeLeavitt has given assurances that he willre-examine the proposed plan.Presently, the Bush Administration’sproposal envisions a 70% cut inmercury emissions from coal-burningpower plants by the year 2018. Theplan has been sharply criticized becauseof the time given to utilities to reduceemissions and because the EPA wouldlet some companies buy pollutioncredits from utilities rather than substan-tially cutting contaminants.

The government’s mercury proposalsappear to fall far short of what the lawrequired. The proposals fail to protect


the health of our children and our envi-ronment. The group of 45 lawmakerscomplaining included seven RepublicanSenators. Leavitt is being urged to scrapthe proposed regulations and “takeprompt and effective action to clean upmercury pollution from power plants.”

The EPA proposal does not meet theminimum requirements of the federalClean Air Act and should be withdrawnimmediately. The EPA proposal ignoresthe Clean Air Act’s provision thatrequires each plant to make strict reduc-tions in mercury emissions. Powerplants account for 48 tons of mercury ayear. These emissions are unregulatedat the present time. The scientific andmedical community have clearly estab-lished that mercury is a toxic substancethat can cause neurological and devel-opmental problems, especially in chil-dren. Once in the environment,mercury can remain an active toxin forthousands of years. Even with all of themounting criticism concerning the EPAregulations, the White House hasplayed down the toxic effects ofmercury. I strongly urge all of ourreaders to contact their Senators andRepresentatives and urge them to voicetheir opposition to the Bush Administra-tion’s mercury emissions plan. If we donot take active steps right now to stemthe flow of this toxic pollutant into ourrivers, streams and communities, I amafraid that our children and grandchil-dren will suffer the consequences formay decades to come.

The proposal largely tracks sugges-tions from the energy industry. TheWhite House almost uniformly mini-mized the health risks in instanceswhere there could be disagreement.The proposed regulations are availableon the EPA website, www.epa.gov.Coal and utility groups lobbied inten-sively to help shape the regulations,which will cost billions of dollars. Para-graphs in the proposed rules areinserted nearly verbatim from memo-randa from the law firm of Latham &Watkins, where two top political offi-cials in the EPA’s office overseeing airregulations, Bill Wehrum and JeffreyHolmstead, once worked. Mr.Wehrum, the chief counsel of EPA’s airregulation office, said that the handwrit-

ten changes were prompted by hisagency’s desire to use more preciselegal language from the Clean Air Act.

U.S. PLANS STUDY ON ENVIRONMENT AND

CHILDREN

The U.S. government is preparing thelargest study of U.S. children to ever beperformed. The study will track100,000 children from birth to age 21and seeks to increase understanding ofhow the environment affects young-sters’ health. The National Children’sStudy, according to pediatric specialists,is coming at a crucial time. Rates ofautism, asthma, certain birth defects andother disorders are on the rise, as isconcern about which environmentalfactors play a role. And, technology hasfinally advanced enough to allow studyof multichemical and gene-environmentinteractions that might explain whysome children seem at greater risk. Iam hopeful the study will help deter-mine the environmental causes of theseconditions. It’s a quest to prove bothwhat’s harmful and what’s not.

The study, ordered by Congress in2000, is in its late planning stages.Enrollment of pregnant women is setfor 2006, although proponents hopethree pilot sites could begin work latenext year. Already, families alerted byinterested patient-advocacy groups areasking how to participate. Scientists saythey need $27 million to $50 millionnext year to ramp up, including hiring alaboratory big enough to store morethan 2 billion anticipated biological andenvironmental samples — from partici-pants’ blood and DNA to dust fromtheir houses, soil from their yards andair from their neighborhoods. Congresshas provided roughly $12 million annu-ally for three years of study preparation.

The study will help fight diseases thatcost billions in treatment and othercosts every year. The last major child-health study took place in the 1960s. Ittracked the children of 55,000 pregnantwomen until age 7 to learn the causesof cerebral palsy. It also yielded otherimportant discoveries, such as thatdoctors at the time weren’t properlytreating infants’ fever-caused seizures.The National Children’s Study is to be

far more encompassing and has amongits overall aims the following:

• To measure environmental exposuresof concern and hunt differences bydegree of exposure. Chemicals andpollutants top the list. Dr. PeterScheidt of NIH’s National Institute ofChild Health and HumanDevelopment cites a Minnesota studythat found signs of pesticide exposurein the urine of 85% of children tested,but exposure equals harms. Anotherexample: chemicals such as phtha-lates, which soften plastic, may affecthormones so as to cause male birthdefects or encourage early puberty.Other environmental influences stud-ied may include day care, diet, early-life infections and television.

• To study health problems specificallysuspected of environmental links, inhopes of pinpointing risk factors. Forexample, studies of genetically identi-cal twins show when one twin getsType 1, or juvenile, diabetes, theother has just a 50% of getting it.Genes put these children at risk, butsomething else, perhaps a virus,pushes them over the edge. Braindevelopment is another huge con-cern, and some substances can harma developing brain in subtle ways andtiny amounts. Only recently have sci-entists learned to measure low-levelcontaminant exposure and to shownot only that a person was aroundsomething toxic, but it actuallyabsorbed into their DNA. And thenthere are windows of vulnerability:An exposure may harm during onemonth of pregnancy but not another.

• Storing genetic and other health andexposure data long-term to test futurequestions without starting fromscratch. “The kinds of informationwe’ll be collecting ... will provide anenormously valuable resource fordoing this kind of research fordecades to come,” Scheidt says.

MOVIE STAR SETTLES TOXIC MOLD SUIT

Many of our readers will rememberLou Ferrigno, the former bodybuilderwho was the star of “The Incredible


Hulk” television series. Mr. Ferrignorecently settled a lawsuit filed againsthis insurance company over toxic moldat his home. Mercury Insurance andFerrigno reached a settlement for anundisclosed amount. Ferrigno and hiswife had sought more than $250,000. Itwas claimed by Ferrigno that in 2002 aninspector with Mercury failed to prop-erly locate and repair a water leak in hishouse that caused damage in severalrooms and led to the mold growth.They had to live in the house the entiretime it took to do the repair work,which was well over a year.

COUNTIES FAIL AIR STANDARDS

The Environmental Protection agencyhas announced that 31 states mustdevelop new pollution controls. Theaction by the EPA came as a result of afinding that the air in some 474 counties– home to more than 150 millionpeople – does not meet air quality stan-dards. The EPA, acting under courtorder, identified all or parts of a total of474 counties. The localities weremostly in the eastern third of thecountry and in California. Most of theproblems dealt with a failure to meetthe federal health standard for smog-causing ozone. Officials have 3 years inwhich to develop plans to come intocompliance. States in our area thatfailed to meet the federal test includedparts of eastern Tennessee, Georgia,North Carolina, and the Dallas,Houston, and San Antonio areas inTexas. I guess the good news is that2,668 counties met the standard and 19states had all counties in compliance.Unfortunately, those states did notinclude Alabama. I understand that Jef-ferson and Shelby County are the onlytwo Alabama counties included in thelist of 474 referred to by the EPA.

XXI.TOBACCOLITIGATIONUPDATE

TOBACCO LAWSUIT REINSTATED

The family of a woman who died after35 years of smoking will have the oppor-tunity to sue cigarette manufacturersunder a federal appeals court order rein-stating her family’s lawsuit. A districtjudge in Birmingham had originally dis-missed the wrongful death suit. The U.S.Court of Appeals for the Eleventh Circuitagreed to review the case. After receiv-ing advice about state law from theAlabama Supreme Court, the appealscourt ruled in late March that elements ofthe suit should proceed. Carolyn Spainof Birmingham began smoking cigarettesin 1962, when she was 15 years old andunaware that she was becomingaddicted to nicotine. She smoked “multi-ple packs” a day and continued tosmoke even after being diagnosed withlung cancer in 1998. Her husbandclaimed in the lawsuit that tobacco com-panies Philip Morris, R.J. Reynolds andBrown & Williamson were legallyresponsible for his wife’s death becausethey manufactured dangerous productsand did not adequately warn consumersabout the dangers. The companies hadargued that Mrs. Spain’s right to sue hadexpired, and along with it her husband’sright to file a wrongful death suit. Theyalso contended that health warningsrequired by the federal government weresufficient and precluded consumers fromsuing cigarette manufacturers.

The three-judge panel of the appealscourt upheld the dismissal of six ofSpain’s claims, but said the companiesshould face a civil trial for four others,including negligence in manufacturingand marketing the cigarettes. BarryRagsdale, a Birmingham lawyer whorepresented the family, told the Associ-ated Press that “the claims that havebeen allowed will allow us to litigatethe central issues in the case, whichinclude the fact that the tobacco com-panies sold to an unsuspecting public aproduct that included spiked and adul-terated contents.”

CALIFORNIA COURT OVERTURNS SMOKER

VERDICT

A California appeals court has over-turned a $21.7 million verdict against cig-arette makers Philip Morris and R.J.Reynolds. In a ruling last month, the keysmoker lawsuit was sent back to a lowercourt for retrial. The California Court ofAppeals reversed the March 2000 awardon grounds the trial court issuedimproper jury instructions in the caseagainst Altria Group’s Philip Morris andR.J. Reynolds Tobacco Holdings. Thetobacco industry is claiming a significantvictory because the case was the firsttime cigarette makers were held respon-sible for people who began smokingafter the U.S. surgeon generalannounced the dangers of smoking in1965 and health warnings began appear-ing on cigarette packages in 1969.

Leslie Whiteley originally sued thecigarette makers in San FranciscoCounty Superior Court, charging theyacted with malice, knew about thehazards of smoking and deliberatelymisled the public about those dangerseven though the companies had beenprinting health warnings on packages.A jury in March 2000 awarded Whiteley,who died of lung cancer soon after thetrial, $10 million in punitive damagesfrom each company as well as $1.7million in compensatory damages, in adecision later upheld by a San Franciscojudge.

The appellate justices found the trialcourt erred by refusing to instruct thejury that it could not base liability onconduct that occurred from 1988 to1998. During those 10 years, Californiahad given the tobacco companiesimmunity. The justices noted Whiteley’slawyers in closing arguments chargedthat the defendants had misled thepublic from the 1950s through the late1990s in an “uninterrupted course ofblameworthy conduct” about thedangers of smoking. The three-judgepanel found evidence the companiesmisled and deceived consumers, but thejustices nevertheless sent the case backfor retrial due to the improper juryinstructions. “A proper instructionadvising the jury that it could not finddefendants liable for fraud or negli-


gence based upon its conduct duringthe last 10 years of that period wouldhave made such arguments impossible,”the panel ruled unanimously.

WARNING AGAINST CHEWING TOBACCO

While professional athletes may notbe placed on the same pedestals theyoccupied back when I was growing upin Barbour County, they are still lookedup to as role models by many youngpeople. As a result, their activities –good and bad – are followed by thou-sands. Healthcare professionals arehopeful that new education programswill prevent teenagers from gettinghooked on smokeless tobacco. Dentistsaround the country say they’re seeingmore children — rural and suburban —using the same chewing tobacco andsnuff generally associated withfarmhands and baseball players.According to reports, medical doctorspredict a dramatic rise in oral cancers inthe next several decades as a result ofyoung people using smokeless tobacco.The widespread use of smokelesstobacco has been described as the“sleeping-giant health risk” at this pointin time. In many cases, users start inmiddle school and don’t realize thatsmokeless tobacco poses a health risk.A recent survey by the U.S. SurgeonGeneral revealed that although mostteenagers are said to recognize thedanger of cigarettes, only 40% knowchewing tobacco can hurt them. Forexample, the use of smokeless tobaccoby baseball players sets a very badexample for our nation’s young people.

One of the things that’s remarkableabout oral cancer is that it still remainsdifficult to treat. Survival rates haven’tchanged much in the past severaldecades. Oral cancer grows in the lips,cheeks, tongue, throat, gums, larynxand esophagus. Those who survive itcan be disfigured after surgeons removecancerous bone and tissue. The firstsigns are white patches in the mouth,often discovered in the dentist’s office.Slightly more than half of patients withoral cancers live five years, according tostatistics from the American CancerSociety. Doctors diagnose oral cancer inmore than 18,000 people in the United

States each year. Clearly, strong educa-tion programs are needed to let youngpeople know that smokeless tobacco isa very serious health risk. Professionalathletes can do a great deal to help thesituation by not only kicking theirhabits, but also by speaking out on theevils of the product.

XXII.THE CONSUMERCORNER

MORE ON THE DANGEROUS 15-PASSENGER

VANS

I am still amazed that churches,schools, daycare centers and othergroups continue to use 15-passengervans. I have to believe this is simplythe result of a lack of information. Thehigh-risk of rollovers involving thesevans has the government re-issuingwarnings. The National TransportationSafety Board is urging schools of allkinds to stop using 15 passenger vans.But, the message on these vans is notnew. The agency is reiterating its 1999safety recommendation that says schoolbuses, not passenger vans, should beused for all school-related travel. Ofcourse, the warning applies equally toany organization or group that trans-ports people. It is my opinion that allof the 15-passenger vans should berecalled before they cause further lossof life. They are top heavy, unstable,and extremely dangerous.

SOME WAYS TO STOP IDENTITY THEFT

In the last issue, we mentioned themounting problems relating to identitytheft. Several months ago, I had theinteresting experience to meet and hearFrank W. Abagnale, a reformed thiefwho wrote, “Catch Me If You Can,”when he spoke in Montgomery. Mr.Abagnale offers insights into the pre-vention of identity theft, a crime that’seasier to commit than most folks seemto realize. Identity theft again tops thelist of consumer complaints, accordingto a report from the Federal Trade Com-mission. Mr. Abagnale is a respected

authority on identity theft and otherforms of fraud. As you probably know,his book, which details his criminalescapades, was made into a movie. Mr.Abagnale wrote this commentary forBankrate.com:

Identity theft is one of those thingsyou’re probably not very concernedabout if it hasn’t happened to you.But, in my career, I don’t know of anycrime that’s easier - and easier to getaway with – than identity theft.

In 2001, there were approximately500,000 identity theft victims; that’speople who actually filed a policereport. It cost banks and credit cardcompanies about $5 billion becausethey ultimately pick up the tab. Butthe consumer doesn’t get away scot-free. The average victims will spend$1,374 and 175 hours cleaning uptheir credit reports. That’s a great dealof time and money out of their ownpockets. It’s so simple to assume some-one’s identity today. If you go to thegrocery store and write a check for$52, the check has your full nameand address, and maybe your phonenumber. It also has the full name andaddress of the bank where the check isdrawn, as well as your account num-ber. Maybe the clerk asks for your dri-ver’s license number, which in 19states is your Social Security number.So, they write your Social Securitynumber on the face of the check, andthen they ask for a date of birth and awork phone number. Now they cancall and find out where you’reemployed.

Hundreds of people can see thischeck: people at the grocery store andthe check-clearing house. Then it goesback to the payee bank, and if youdon’t get your checks in your state-ment, it goes to a company that shredsthem. (We hope they get shredded anddon’t make copies.) So much informa-tion on just that little piece of paper,and that’s just one way. ID theft start-ed years ago with, “If I can get enoughinformation, I can apply for a Visa.I’ll use the card for two weeks andthrow it away.” But now it’s, “If I canget enough information, I can get acell phone, I can get a car, a mort-gage, I can go to work for a company


under contract labor and have some-body else pay the taxes.” Criminalsrealize it’s the simplest scam in theworld. No one has to see your face orknow who you are.

Only amateurs hack into comput-ers; pros hack into people. If I want adatabase in a bank, I’m not going tobreak into their database when all Ihave to do is sit in front of a bankwhere people are smoking, walk up tosomeone and ask where they work inthe bank. Then I say, “How would youlike to make a lot of money? Give methis information off the screen and I’llgive you $5,000.” If you did that to 10people 25 years ago, two would say yesand eight would report you. Peoplehad more ethics and character then.Now, if I can do it and get away withit, it’s OK. It’s a lot easier to approachsomeone and get the informationthan break into the database. We livein a time when if you make it easy tosteal from you, chances are someonewill. Consumers have to be muchsmarter.

It has been widely reported that iden-tity thieves rob more than 500,000Americans every year. I am amazed thatso few people have any real under-standing of what identity theft is allabout and how it can affect them. Allof us must become educated on theproblem and how it works. The follow-ing steps were recommended by CNBCand are designed to help folks reducetheir risk of identity theft:

• The most important step is to guardyour Social Security number – it is thekey to your credit report and bankingaccounts and is the prime target ofcriminals. Do not print your SocialSecurity number on your checks.After applying for a loan, credit card,rental or anything else that requires acredit report, request that your SocialSecurity number on the applicationbe truncated or completely obliterat-ed and your original credit report beshredded before your eyes orreturned to you once a decision hasbeen made.

• Monitor your credit report. Creditreports can alert you to activity in

your financial records. A monitoringservice, such as Privacy Guard, willnotify you whenever someoneapplies for credit in your name orchecks your credit history.

• Buy a crosscut shredder and use it.Identity thieves may use your garbageto obtain personal information. Shredall old bank and credit statements, aswell as “junk mail” offers, beforetrashing them.

• Remove your name from marketinglists. The three credit-reportingbureaus – Equifax, Experian andTransUnion – all maintain marketinglists that may contain your informa-tion. Contact the agencies to removeyour name from the lists. Add yourname to the name-deletion lists of theDirect Marketing Association’s MailPreference Service and TelephonePreference Service used by banks andother marketers. Removing yourname from these lists reduces thenumber of pre-approved credit offersyou receive.

• Restrict what you carry in your walletor purse. Don’t carry your SocialSecurity card with you except whenneeded.

• Keep duplicate records of everythingin your wallet or purse. Copy bothsides of your license and credit cardsso you have all the account numbers,expiration dates and phone numbersif your wallet or purse is stolen.

• Always mail payments from a safelocation. Don’t put bill payments andchecks in your mailbox to be pickedup. They can be stolen from yourmailbox and washed clean in chemi-cals.

• Monitor your Social Security activity.Order your Social Security Earningsand Benefits statement once a year tocheck for fraud.

• Monitor your credit-card activity.Carefully examine your credit-cardstatements for fraudulent chargesbefore paying them. If you don’t needor use department store or bank-

issued credit cards, close theaccounts. My advice is to limit thenumber of credit cards.

• Know whom you are talking to.Never give your credit-card numberor personal information over thephone unless you have initiated thecall and trust that business.

All of these recommendations makesense. I hope identity theft won’t hitany of our readers, their families orfriends. But, each of us is a potentialvictim, and for that reason I hope someof the suggestions set out above will behelpful in avoiding serious problems.

LEADER OF ID THEFT SCHEME SENTENCED

TO PRISON

Talladega native Bittrell Scott, whoadmitted he led a scheme to steal iden-tities and set up fraudulent credit cardaccounts, has been sentenced to prisonand home detention. The 23-year-oldadmitted he applied for credit cardsusing names taken from telephoneaccounts, then stole the cards out of thevictims’ mailboxes. A federal grand juryindicted 3 persons, including Scott, lastyear on charges of credit card fraud andmail theft. Scott admitted he was behindthe scheme, according to his pleaagreement. Scott said he worked atNextel in Oxford and applied for thecards with information from the tele-phone applications of customers. Hewould then check the victims’ mail-boxes to see whether the cards hadarrived, or would have the credit cardsmailed to vacant houses. The menwere arrested October 25, 2002, afterU.S. Postal inspectors received com-plaints that mail was being stolen frommailboxes. Authorities found creditcards, convenience checks, a directionsmap, Nextel subscriber agreements,mail and handwritten notes containingpersonal information. Scott was sen-tenced to 10 years in federal prison andfined $7,600. The remaining men arestill awaiting prosecution.


CHOOSING APPROPRIATE TOYS FOR

CHILDREN

The Consumer Product Safety Com-mission is one federal agency that takesits role seriously and in the processworks hard to protect consumers. Onearea where the CPSC has done goodwork deals with toys for children. Mostof us don’t realize how dangerous sometoys can be for small children. Often,toys are purchased with no real concernover potential hazards that exist. Manyof these toys are extremely dangerousand present life-threatening hazards.The CPSC offers the following safetytips that will help consumers chooseappropriate toys:

• Select toys to suit the age, abilities,skills, and interest level of the intend-ed child. Toys too advanced may posesafety hazards to younger children.

• For infants, toddlers, and all childrenwho still mouth objects, avoid toyswith small parts, which could pose afatal choking hazard.

• Look for sturdy construction on plushtoys, such as tightly secured eyes,noses, and other potential small parts.

• Avoid toys that have sharp edges andpoints, especially for children underage 8.

• Do not purchase electric toys withheating elements for children underage 8.

• Be a label reader. Look for labels thatgive age and safety recommendationsand use that information as a guide.

• Check instructions for clarity. Theyshould be clear to you, and whenappropriate, to the child.

• Immediately discard plastic wrap-pings on toys before they becomedeadly playthings. Plastic wrappingscan cause suffocation.

You can find this and other helpfulinformation at the CPSC website,www.cpsc.gov. You owe it to childrenin your family to take a look at this

website and then put into practice whatyou learn. The time you spend couldsave a young life!

BEWARE OF SECOND-HAND DANGEROUS

ITEMS

We all know that toys, clothes andfurniture are some of the most soughtafter second-hand products. Those arealso the most frequent items on theConsumer Product Safety Commission’srecall lists. Items like old cribs withbroken wooden bars, children’s jacketswith drawstrings, and baby walkerswithout wheels can be dangerous foryour family. As part of the spring recallroundup, the government has partneredwith non-profit safety groups and theNational Association of Resale andThrift Shops to educate retail ownersabout dangers of second-hand prod-ucts. I understand the online auctionsite E-Bay is now working with theCPSC to minimize the resale of defec-tive products. Those placing itemsonline are reminded to check theproduct’s safety warnings before puttingthe item online.

HIDDEN FEES A PROBLEM

For a number of years, hidden feeshave shown up in bills from companiesin the telecommunications industry. Iknow that I have looked at my tele-phone bills on occasion and have won-dered whether all the charges werelegal. Like most folks, however, I neverchecked to find out. This billing prac-tice involving hidden fees often uses theword “regulatory” somewhere in thetitle. For some time, persons havereceived these hidden fees in cellphone and regular telephone phonebills. Now these fees are turning up onbills for high-speed Internet service.These fees have absolutely nothing todo with any requirement by the govern-ment. The addition of the charges isnothing but a hidden rate increase,which benefits the industry. The WallStreet Journal reported on this problemlast month and supplied a great deal ofgood information.

The Wall Street Journal reported some

new charges being added to cell phonebills. The industry says the charges arethe result of new rules that require themto let customers who change providerskeep their current phone numbers. Forexample, BellSouth Corp., one of thenation’s largest phone companies, hasstarted to levy a “regulatory cost recoverfee” of $2.97 a month for new DSL cus-tomers. The company, according to theWSJ, advertises that service for $29.95 amonth – or about 10% less than what itwill really cost after the new fee isadded. SBC Communications Corp., thenation’s largest DSL provider with 3.5million customers, added a similarcharge of $1.84 a month in February.SBC calls the fee “Federal UniversalService Fund Fee.”

Several other companies are using thehidden method to increase their rev-enues. All 6 national U.S. cellular oper-ators are attaching such add-ons. Thismeans consumers are pretty welltrapped. Among wireless carriers, AT&TWireless Services Inc. charges thehighest fee for many customers. TheWall Street Journal report can be foundonline at www.WSJ.com. Consumeradvocates need to become active in thisarea of concern. In March, the NationalAssociation of Cellular Consumer Advo-cates filed a petition with the FCCasking it to look into the new fees thatare popping up on wireless phone bills.All persons who use any of the servicesfrom the telecommunications industryshould check their bills to see exactlywhat is being charged. I suspect somecharges will be legitimate and otherswill not.

XXIII.RECALLS UPDATE

MAZDA, GM RECALL SPORT UTILITY

VEHICLES

Mazda is recalling 106,000 Tributesport utility vehicles because they canstall without warning, the NationalHighway Traffic Safety Administrationsaid Thursday. Separately, GeneralMotors announced a recall because ofseat belt defects that could affect up to


1.8 million SUVs. Involved in the Mazdarecall are Tributes from the 2001-2003model years with 3-liter, V6 engines. Ina letter sent to NHTSA in May 2002,Mazda said the engine stalling didn’tpresent “an unreasonable risk to motorsafety.” At that time, Mazda said it hadreceived 2,087 reports of stalling andthat accidents resulted in three cases.The Tribute is similar to the FordEscape, which was recalled earlier thisweek for the same defect. Ford saidengine stalling in the Escape had causedeight minor accidents.

Mazda dealers will reprogram theTribute for free as part of the recall.General Motors Corp. announced it willalso recall some of its 2001 and 2002Chevrolet TrailBlazer, GMC Envoy andOldsmobile Bravada SUVs because theirseat belts don’t meet federal safety stan-dards. A GM spokesman said thecompany is still determining which ofits SUVs need to have their seat beltsreplaced, but the recall could affect upto 1.8 million vehicles. GM said the seatbelt defect wouldn’t affect safety, butfortunately for GM customers, NHTSAdisagreed.

FORD RECALLS MORE THAN 363,000ESCAPE COMPACT SUVS

Ford Motor Co. is recalling 363,440Escape compact sport utility vehiclesfrom model years 2001-2003 becausethe engine may stall at certain speeds.Ford said some Escapes with a 3-liter, V-6 engine may experience an intermittentstall when decelerating at speeds below40 mph. In most cases, the automakersaid, the driver is able to restart immedi-ately. Ford said its automotive safetyoffice has identified eight minor acci-dents that may have occurred becauseof the engine condition, three of whichinvolved minor injuries. Customers willbe notified of the safety recall by mail.Or, they may elect to call their localdealer or Ford’s toll-free hot line (800-392-3673) for more information.

HONDA RECALLING 600,000 VEHICLES

Honda is recalling 600,000 minivansand sport utility vehicles, many of them

made in Alabama, because of a defectthat can cause their transmissions to fail.Honda says that it has received noreports of deaths or injuries due to thedefect. The recall includes 2002-2004Honda Odyssey minivans, 2003-2004Honda Pilot SUVs and 2001-2002 AcuraMDX SUVs. The recall is the first forOdysseys made in Lincoln. Honda saidinsufficient lubrication can lead to heatbuild-up and broken gears in the trans-mission. Gear breakage could lock upthe transmission. Honda said it hasconfirmed 10 cases in which the trans-mission failed, but says all were vehi-cles with high mileage. Honda dealerswill inspect gears for free and replacethe transmission if necessary.

JOHN DEERE TRACTOR RECALL

Approximately 300 John DeereCompact Utility Tractors manufacturedin Moline, Illinois have been recalled.Some of the steel bolts used to secureRoll Over Protective Structure (ROPS) tothe tractor’s real axle can shear off,decreasing the strength of the ROPS andits ability to protect the operator in theevent of a roll over incident. JohnDeere is aware of three incidents wherethe bolts have sheared off, all whichwere discovered during factory inspec-tions. There have been no reported

injuries. These vehicles are small agri-cultural tractors that are green withyellow seats and wheels. The followingmodel and serial numbers can be found

on the serial number plate on thetractor’s frame:

Authorized John Deere dealersnationwide sold the units duringJanuary and February 2004 for between$18,000 and $21,500. The company isdirectly notifying purchasers. Con-sumers should stop using their tractorsimmediately and contact a John Deeredealer for a free repair. For more infor-mation, contact John Deere’s CustomerCommunications Center at (800) 537-8233 or at the John Deere Web site atwww.johndeere.com.

TV – VCR CARTS RECALLED

An Ohio company is recalling some592,000 te levis ion-v ideocasset terecorder carts because they can tip overand have caused injuries and at leastone death. Sauder Woodworking Co.,of Archbold, Ohio, has received at least13 reports of tipping carts. A 19-month-old girl from North Wales, Pennsylvania,suffered a fractured skull and died inFebruary 2001. Four other people havebeen injured in separate instances,according to the Consumer ProductSafety Commission. The CPSC receiveda report of the death from the companylast year. The recalled wooden cartshave model numbers 2655 and 2755,located on the cart’s instruction booklet.Department, discount and home elec-tronic stores sold the unassembled cartsnationwide from January 1993 toDecember 1999 for about $100. Con-sumers are advised to stop using thecarts and remove all contents. The cartsshould be turned over and the fourcasters removed from the bottom. Moreinformation and a free repair kit is avail-able by calling the company at (888)800-4590.

PACIFIC CYCLE RECALLS MOUNTAIN BIKES

Pacific Cycle Inc. is recalling about14,000 Mongoose mountain bikesbecause the frame can bend and break,causing risk of injury to riders. TheMadison, Wis., company has received atleast two reports of the aluminumframes breaking, resulting in abrasionsand bruises to riders. The recall coversthe silver and red Mongoose 20-inch


Model Serial Range

4210 CUT withHydrostatic

Transmission

LV4210H320674through

LV4210H320773


Transmission


LV4310H331359

4310 CUT with PowrReverserTransmission

LV4310P335452through

LV4310P335550


Transmission


LV4410H340592

4410 CUT withPowrReverserTransmission

LV4410P345138through

LV4410P345179

wheel “D-XR AL” dual-suspensionmountain bike with model number“R1590WMET.” Steel-framed bikes arenot recalled. Bike and departmentstores sold the bikes from September2003 to March for about $99. The rearshock absorber allows the aluminumframe to bend and break, according tothe Consumer Product Safety Commis-sion. Consumers are advised to stopriding the bikes and call the companyfor a free replacement rear shock.Pacific Cycle can be reached at (877)564-2261.

COMPANY RECALLS RIDE-ON TOYS

A Grapevine, Texas, company isrecalling approximately 70,000 of itsride-on toys because of a possiblechoking hazard. A screw and nutassembly attaching the steering wheelcan come loose, posing a chokinghazard to children. Tek Nek Toys Inter-national, L.P. received six reports of thescrew and nut coming loose, includingone that resulted in the death of an 18-month-old boy. The ride-on toys weresold under five model names includingButterfly Girl, Fire Rescue, Mermaid,Police Car and Tonka ConstructionCrew. The toys can be used as a ride-onor push walker toy, with a handle onthe back of the seat rest. The toys havebuttons on the dashboard that producesounds when activated. They were soldfor children age 1 to 3 years old. Therecalled ride-on vehicles have a datecode from 20021127 to 20030319. Thecode can be located in the battery com-partment on the top panel next to thesteering wheel. Wal-Mart, Toys “R” Us,Kmart, Meijer and Shopko sold the ride-on toys nationwide. Consumers areadvised to take the toy vehicles awayfrom children immediately and contactTek Nek Toys for free replacement partsat (877) 661-0222.

MORE TOYS RECALLED

Hundreds of thousands of BatmanBatmobiles by Mattel are being recalledafter reports that more than a dozenchildren have been hurt by the toys,according to the Consumer ProductSafety Commission. Mattel, based in El

Segundo, Calif., agreed to recall 314,000of the blue-and-gray toy cars. The reartail wings of the Batmobile are made ofa hard plastic that rises to a sharp pointand poses a hazard to young children,the Commission said. According to theCPSC, Mattel has received 14 reports ofcuts, scrapes and other injuries from theBatmobiles with 4 of the injuries requir-ing medical treatment.

The agency announced the toy recallsas it launched an awareness campaignabout older recalled products that maystill be lurking in consumers’ homes.Among some of the biggest hiddenhazards: children’s jackets with draw-strings that present a strangulationdanger and baby cribs that do not meetfederal safety standards. Quite oftenthe oldest products present the mostserious hazards. Hand-me-downs andold children’s products may have senti-mental value to parents and consumers,but more importantly they may nolonger be safe to use. Resale, consign-ment and thrift stores should checktheir stocks to make certain that theseolder products aren’t being sold to con-sumers.

XXIV.FIRM ACTIVITIES

BEASLEY ALLEN SPONSORS PRAISEFEST AT

JUBILEE CITYFEST

Again this year, our firm is excited tosponsor PraiseFest. PraiseFest is part ofJubilee CityFest, the Memorial Dayweekend event held annually in Mont-gomery. PraiseFest is a day of praisewith four great Contemporary Christianartists. Entertainment begins at 2:00p.m. on May 29th. Don’t miss Plus Onescheduled for 5:30 p.m. This Contem-porary Christian band made their debutin 2000 with the release of the album,

The Promise. In 2001, they won aDove award for New Artist of the Year.Since 2000, five of their singles havereached #1: “Written On My Heart,”“God Is In This Place,” “The Promise,”“My Life,” and “Forever.” Other hitsinclude “Run To You” and “SoulTattoo.”

At 7:00 p.m., be sure to see Jars ofClay. This Contemporary Christiangroup of four young men cametogether in 1994. Their first single“Flood” hit #1 on Christian and secularradio. This band won its first GrammyAward for best Gospel album of theyear in 1997 with the album, “If I Leftthe Zoo.” This Multiplatinum sellingband has since won several GrammyAwards. Their #1 hits include: “Unfor-getful You,” “Collide,” “I’m Alright,”“Fade to Grey,” “Five Candles,” and“Crazy Times.”

Music entertainment is a huge part ofJubilee CityFest, but it offers muchmore. Children have an opportunity tolearn and play in the KidsFest area,which boasts of 100,000 square feet offun! Attendees will have an opportunityto see unique arts and crafts in theArtFest area. Other exciting eventsincluded in the Jubilee CityFestweekend are a Symphony PopsConcert, Jubilee Run, “Thunder Overthe River” fireworks spectacular, NCAADivision II Baseball Championship andFunFest.

Tickets are $32 for a weekend pass or$22 per day. Children 10 and under areadmitted free with paid adults.Weekend passes are available at areabanks, the Eastdale Mall CustomerService Center, Food World locations,Maxwell/Gunter ITT, the MontgomeryCivic Center or online atwww.jubileecityfest.org.

BEASLEY ALLEN CAR WINS 100-LAP LATE

MODEL CHALLENGE RACE

You may recall that our firm is spon-soring a racecar. We are pleased toreport that the Beasley Allen car, drivenby Grant Enfinger, took the checkeredflag last month in the 100-lap PalmerToyota Late Model Challenge race atMobile International Speedway. The19-year-old University of South Alabama


freshman termed the win “the biggestrace win of my career. We beat some ofthe best race teams in the southeast andwe did it the hard way.” Grant was jus-tifiably ecstatic after his exciting win.While in victory lane, he woke up GregAllen with a late night victory phonecall. Our law firm is the primarysponsor for the 2004 Late Model Chal-lenge races the 82 will compete in. Wehope to see Grant go to the next leveland I sincerely believe he will. In anyevent, we are really proud of whatGrant has accomplished so far.

EMPLOYEE SPOTLIGHTS

GRAHAM ESDALE

Graham Esdale began his legal careerwith the Jefferson County District Attor-ney’s office where he was involved inover 150 criminal trials. He left there in1994 to enter civil practice specializingin products liability and workplace liti-gation. In 1996, we were most fortu-nate to have Graham join our firm.Graham primarily works in the area ofproduct liability and workplace injurycases. He has been involved in manynotable cases, including a $114.5million verdict against a bucket truckmanufacturer. Graham recentlyobtained a $3 million verdict for hisclient against Alabama Power Companyinvolving an electrical accident. Thatcase is now on appeal.

Graham has become a regularspeaker at many different legal semi-nars. He speaks on topics related topretrial discovery and trial strategies in personalinjury cases. Graham has also authoredseveral papers. Graham is married tothe former Leigh Ann Hibbett of Flo-rence, Alabama, and they have two chil-dren, Whitney and Robert. Graham andhis family attend the Episcopal Churchof the Ascension in Montgomery.

MELISSA PRICKETT

Melissa Prickett, who practices in theMass Torts Section of our firm, is cur-rently working on the Baycol litigation.She has clients throughout the UnitedStates with filed cases pending in threestates. Melissa graduated from JonesSchool of Law in 2001. While attending

law school, Melissa was a member ofthe Law Review Board, held the posi-tion of First Year Senator and was alsoVice-President of the Student Bar Asso-ciation. She was recognized for BestScholastic Achievement in LegalResearch & Writing and as an Outstand-ing First Year Student. Melissa is amember of the Alabama State Bar, theDocket Committee of the MontgomeryCounty Bar Association and theWomen’s Section of the Alabama StateBar. She is married to Michael Prickettand they have twin sons, Jake and Sam.Melissa does an excellent job for thefirm and her clients in a most challeng-ing part of our practice.

VALERIE SCROGGINS

Valerie Scroggins, who has now beenwith us for almost four years, started asa receptionist for the 272 buildingbefore moving to the position of data-base manager. In that position, Valeriehandled the mailing list for this report.During the past year, she moved over tothe Fraud Section and now works as alegal secretary. Valerie is married toMike Scroggins and has two children.Her daughter, Shanna Culp, was anemployee with the firm, but nowresides with her husband, Jud, inClarksville, Tennessee. Jud is stationedthere after completing a tour of militaryduty in Korea. Valerie’s son, TrevorStange, is a 9th grader at Prattville HighSchool. Valerie is a very goodemployee.

BONITA FOSTER

Bonita Foster has been with our firmfor over two years and works in ourToxic Torts Section. She currently servesas staff assistant to David Byrne, whohas kept her busy working on the Mon-santo case. Bonnie handled daily clientcontact and database maintenance onthose cases. Bonnie, who grew up inAtlanta, moved to Montgomery in 1997to attend Faulkner University. Graduat-ing from Faulkner Magna Cum Laudewith a Bachelor of Science in CriminalJustice in December of 2000, Bonnie iscurrently working on a master’s degreein political science at AUM. Bonnie isvery active at Landmark Church of

Christ. In June of this year she will begoing to Malawi, Africa for 17 days on amedical mission trip with a group fromher church. Bonnie does very goodwork for us and we are glad to haveher with the firm.

KWANZA WHITE

Kwanza White has been with us foralmost three years. The Opelika nativeis the receptionist for the 272 Com-merce Street building and answersincoming calls from a switchboard andgreets visitors as they come in and outof the building. Kwanza started as arelief receptionist (helping out withlunches, breaks, and vacations) beforemoving to the 272 receptionist desk inMay 2003. Kwanza received her Bache-lor of Arts in Liberal Arts from AuburnUniversity Montgomery in 1999. Sheand her husband, James, currentlyreside in Montgomery with their 18-month-old daughter, Alexandra.Serving as a receptionist in a firm with avery heavy volume of contacts is a chal-lenging job. Kwanza handles thingsextremely well and is a very goodemployee.

STEPHANIE JACKSON

Stephanie Jackson works in our MassTorts Section as a medical advisor toMelissa Prickett. In this position,Stephanie reviews medical records andhelps to determine medical causationfor product liability injury cases involv-ing prescription medications and otherpotentially toxic substances. For thepast two years, Stephanie has focusedmostly on Baycol cases. She is nowhelping to review cases involvingwelding rods, Crestor, and hormonereplacement therapy. Stephanie gradu-ated from high school in Eufaula,Alabama, attending Lakeside School.She then attended the University ofAlabama in Tuscaloosa, where shegraduated with a Bachelor’s of Sciencein Nursing in 1995. While at the Uni-versity, Stephanie was inducted intoSigma Theta Tau, the National HonorSociety of Nursing. Stephanie has pre-viously worked in clinical settings,including hospitals, home health, andmanaged care. While in managed care,


Stephanie earned certifications in CaseManagement and Utilization Review.Stephanie, who has a 10-year-olddaughter, Joy, is a most valuableemployee. We are most pleased tohave her with us.

REGINA ELROD

Regina Elrod celebrates her two-yearanniversary with the firm this month.She came to the firm originally to fill avacant receptionist position. But after afew months, Regina was moved to theNursing Home Section as a legal secre-tary. Last December, she was promotedto legal assistant. Regina currentlyworks as legal secretary and legal assis-tant for Les Pittman. Besides nursinghome cases, she also works on personalinjury and dram shop cases. Regina,who studied English and French atMiddle Tennessee State University, hasa six-year-old son, Colt. We are veryglad to have Regina, who doesextremely good work with our firm.

XXV.25THANNIVERSARY

THERE HAVE BEEN A FEW CHANGES OVER

THE YEARS

In early 1979, after receiving a strongmandate from the voters to leave thepolitical arena on a permanent basis, Iopened a one-lawyer law firm on SouthHull Street in Montgomery. I rented afew rooms from my friend, IrvingWinter, and started to work with onesecretary. Karen Lewis, who hadworked with me in the Lieutenant Gov-ernor’s office, was brave enough tomake the move. Wanting to pick upwhere I had left off as a lawyer in 1970when I got on the “political bug” andran for office, I expected clients to findmy office. I enjoyed my years in gov-ernment, but was really ready to getback in the courtroom. I must confessthat I was a pretty bad politician and iteventually caught up with me. I wasextremely happy to get back in the “realworld.”

At the outset of my new practice, I

had some difficulty in getting to dowhat I really wanted to do,and that wasto try lawsuits on the side of victims.That’s what I had done prior to 1971with some success. Unfortunately, in1979, many folks thought that I was a“corporate lawyer” since I had been instate government,and most couldn’tbelieve that I was actually a “triallawyer” who had wandered away intothe weird world of Alabama politics. Ittook about a year to let folks know Icouldn’t be a corporate lawyer even ifthat had been my desire. That’s whenwe started to get a few clients who hadbeen victimized in some fashion andneeded a lawyer. The rest is history.

Frank Wilson, who had clerked forU.S. District Judge Bob Varner, took achance and came to work as oursecond lawyer in 1980. A few monthslater, Greg Allen joined the two-manfirm as our first “law clerk.” Greg wasto become our fourth lawyer in April of1983. The late Jim Traeger had joinedthe firm, coming from the District Attor-ney’s office, as our third attorney andworked with us until his untimely andtragic death in 1987. Frank now has hisown successful practice in Montgomeryand Greg, who I believe is the bestproduct liability lawyer in the country,is number two on our letterhead. Wecontinued to add new lawyers andsupport personnel as our practice grew.Several of our “alumni” have gone on to“better things.” For example, therehave been several good lawyers whocame through the firm and who noware practicing law in locations through-out the state. You will recognize suchnames as Kenny Mendelsohn, MaysJemison, Randy James and DavidVickers, to name a few. Another is JimMain, who is now a key member ofGovernor Riley’s Administration. Oneof these days, I would like to have areunion of this group. We have triedhard to maintain an excellent relation-ship with all of these lawyers. I hopeall of them benefited in some small wayfrom hanging around Beasley, Allen fora time. I just hope none of thempicked up any of my “bad” traits.

Obviously, the firm has grown duringthe 25 years of its existence. We cur-rently have 39 lawyers and 182 employ-

ees on the payroll. While there havebeen some bumps along the way, Godhas greatly blessed our efforts. Wehave operated as a firm representingonly persons who have been injured ordamaged in some manner. We alsohave some corporate clients who wantto be plaintiffs. In other words, victimsare our only clients – by choice – andthat won’t change. I hope we havetruly made a significant difference inour section of the country – I believewe have. It has been a labor of love forme, and I plan on hanging around forseveral more years before I retire to thefarm.

XXVI.CLOSING REMARKS

On April 15th, while attending ourfirm’s weekly devotion, I received anemergency phone call. I knew from thelook on the person’s face who calledme out, that the news was going to bevery bad. I soon learned that one ofour young lawyers had been killed in amotor vehicle accident earlier thatmorning. We had been celebrating justminutes before the call – discussing theramifications and benefits from the res-urrection of Jesus Christ and how it hadaffected all of our lives. In fact, wewere all rejoicing over the fact that theresurrection over 2000 years ago madeit possible for each of us to have thepromise of eternal life. When I heardthat Ron Canty, a truly good youngman, who was a believer, had tragicallylost his life, it initially caused me tothink – why? Then I remembered thatRon was now with the same Jesus whohad died for Ron and for me and Whohad risen from the grave with a promiseof eternal life for those who wouldaccept it. That immediately took awaysome of my initial sadness, but not theshock of the news. I went back intothe room and had the sad duty to reportthat we had all lost a co-worker, whowas also a good friend.

Ron’s death cut short the career of avery good lawyer. He was proud to bea lawyer and extremely proud to be apart of our firm. I remember speaking


to Ron’s law school graduation. I willnever forget the smile on his face thatSunday afternoon. I knew then thatRon Canty was going to be a finelawyer. We have received an outpour-ing of condolences from persons whoknew and dealt with Ron from all overthe state. We will miss him – both as avery special lawyer, and also a verygood friend. Our prayers go out to hisfather and mother, Mr. and Mrs. JamesCanty, to his siblings, and to otherfamily and friends. When bad thingshappen to good people, we all have todepend on God’s love and comforting

spirit to get us through the ordeal. Thefuneral in Gordonsville, located in ruralLowndes County, was actually a cele-bration of Ron’s life and his accomplish-ments rather than a down time for hisfamily and friends. My real regret isthat his work as a trial lawyer, wholoved his work and his clients, was cutshort. But, I do know for a fact that hisacceptance of Jesus Christ as his Lordand Savior assured Ron of eternal life.That is something that each of usshould desire. Ron’s untimely andsudden death also is a reminder that lifeon this earth is fleeting and certain deci-

sions simply can’t be put off and dealtwith on another day.

A scholarship fund has been set up inmemory of Ron at Jones School of Law.If anyone is interested in making a tax-deductible donation to this fund, pleasesend it to: Ms. Norma McGee, JonesSchool of Law, Faulkner University,5345 Atlanta Highway, Montgomery,Alabama 36109. Checks should bemade payable to Jones School of Lawand make a note that it is for the RonaldA. Canty Memorial Scholarship Fund.


To view this publication on-line, add or change an address,or contact us about this publication,

please visit our Website: www.BeasleyAllen.com

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The Jere Beasley Report May 2004