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

www.BeasleyAllen.com

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

AUGUST 2004

A NATIONAL LAW FIRM LOCATED IN MONTGOMERY,ALABAMA

I.CAPITOLOBSERVATIONS

AN ALABAMA SOLDIER DIESA PREVENTABLE DEATH

On October 21, 2003, 19-year-oldDaphne, Alabama, resident Paul Buechewas killed while serving at United StatesCamp Anaconda Base in Balad, Iraq.Paul was not killed by a stealthy insur-gent, a hidden bomb or even a mortarround fired over the fencePaul waskilled when the two-piece rim of a UH-60 Blackhawk helicopter tire explodedduring routine maintenance. A fellowsoldier working with Paul lost botharms in the same explosion. Nearly ninemonths after Pauls death, the Armyfinally released the first of several long-overdue investigative reports into theincident. The findings of the report leftthe Bueche family in shock and askingfor more answers.

Rather than air, as is customarilyused in filling tires, UH-60 Blackhawktires are filled with nitrogen. The tirefill procedure requires the use of aspecial nitrogen cart, which is speciallyequipped to provide pressure sufficientto fill the tire but not overfill it. Thecart is divided into two sides: one sideproduces approximately 170 poundsper square inch (sometimes referred toas the low pressure side) of nitrogen,while the other side can produce up to4,000 pounds per square inch (highpressure side). Blackhawk tires are tobe pressurized to approximately 160-170 pounds per square inch, and onOctober 21st, Paul and other soldierswere ordered to utilize a nitrogen cartto refill and replace the tires on thesubject helicopter. But, the low-pres-sure side of the cart they were givenwas broken, and incredibly they wereordered by a supervisory officer to usethe high-pressure side of the cartinstead. Also, a tire-fill-kit, whichwould have offered additional overfillprotection, was not available to theyoung soldiers. When Paul and hisfellow soldiers used the cart as

ordered, the Blackhawk tire immedi-ately over-pressurized and the split rimexploded into several lethal pieces.Although he was standing several feetaway from the tire, Paul was killedinstantly.

The Army report properly concludedthat several pieces of vital equipmentwere not available and/or not in properworking condition, resulting in theover-pressurization of the tire. Further,the report acknowledged that seniorofficers ordered Paul and the other sol-diers to use the high-pressure side ofthe cart in direct violation of severalwritten manuals and safety procedures.The officers who gave the orders werenot injured, their names were blackedout in the report, and there is no evi-dence whatsoever that they were evereven reprimanded. Rather than theArmy being immediately forthcomingwith these troubling facts, the familyhad to beg repeatedly for the reportbecause the Army failed to assign abriefer after the report was completed.As if to add insult to injury, on the daythat Ms. Bueche received Pauls autopsyin the mail, she also received anotherArmy envelopeit contained a requestfor Paul to rate any medical care pro-vided by the military during his last fewmonths of service, including a demandfor an immediate response.

Mike Andrews of the Products Liabil-ity Section in our firm is working withMr. and Mrs. Bueche on this case. Mikeattended the Army briefing on July 5that the Bueche home in Daphne. TheArmy briefer, who also works for heli-copter manufacturer Sikorsky, wasquick to assure the family that nothingabout the design of the Sikorsky Black-hawk caused this incident. According tothe Sikorsky representative, the soldierswere killed because they followedorders. Several local and national pressagencies are following this story and forgood reason. At the request of severalmedia outlets, we issued the followingstatement on this case:

Based on what we have seen so farin our review of the military inves-tigation into Paul Bueches death,

there was a clear lack of leader-ship, control and accountability inthe chain of command at U.S.Camp Anaconda, Balad, Iraq inOctober 2003. The military investi-gation confirms this - in fact, theArmy/Sikorsky representative whodelivered the briefing said asmuch. We are investigating anypossible claims that may exist forthis family, but we know that tradi-tionally the Courts have decided allsimilar cases in favor of the gov-ernment. Even under our weakworkers compensation laws, which

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IN THIS ISSUE

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

II. Court Watch . . . . . . . . . . . . . . . . . . 4

III. The National Scene . . . . . . . . . . . . . 7

IV. The Corporate World . . . . . . . . . . 12

V. Congressional Update . . . . . . . . . . 15

VI. Product Liability . . . . . . . . . . . . . . 17

VII. Mass Torts Update. . . . . . . . . . . . . 19

VIII. Business Litigation . . . . . . . . . . . . 23

IX. Insurance and Finance Update . . . 25

X. Premises Liability Update . . . . . . . 28

XI. Workplace Hazards. . . . . . . . . . . . 28

XII. Transportation . . . . . . . . . . . . . . . 30

XIII. Arbitration Update . . . . . . . . . . . . 31

XIV. Nursing Home Update. . . . . . . . . . 32

XV. Healthcare Issues . . . . . . . . . . . . . 34

XVI. Environmental Concerns . . . . . . . . 39

XVII. Predatory Lending Update. . . . . . . 40

XVIII. The Consumer Corner. . . . . . . . . . 41

XIX. Recalls Update . . . . . . . . . . . . . . . 43

XX. Firm Activities . . . . . . . . . . . . . . . . 44

XXI. A Personal Perspective . . . . . . . . . 45

are structured in favor of busi-nesses, if this death had occurredwhile working for a privateemployer in the State of Alabamathis family could clearly seek recov-ery directly from the employer - infact, under these facts the local Dis-trict Attorney might even beinvolved. However, in this case, weunderstand that the officers whogave orders to use the equipment inthe manner in which it was beingused, in the manner that led toPaul Bueches death and PeteDamons tragic injuries, have noteven been reprimanded.

Finally, after months of pleadingwith the Army to release the inves-tigation report so that the familycould learn the facts surroundingthe death of their only son, Mr. andMrs. Bueche received Paulsautopsy report along with a letterrequesting Paul to rate anymedical care provided by the mili-tary during his last few months ofservice - including a demand foran immediate response. We areobviously curious to see how theArmy intends to sanction PaulBueche when he fails to respond tothe questionnaire. The fact thatthese two reports arrived the verysame day is appalling and isfurther proof of a lack of clearleadership, control and accounta-bility in this chain of command.There has to be accountability atsome level, and we have not seen itin this case. We intend to ask Con-gress to launch a congressionalinvestigation into the lack of lead-ership, control and accountabilitythat led to Paul Bueches death.

To date, over 900 U.S. soldiers havebeen killed in Iraq. We do not have abreakdown yet how many have beenkilled by enemy forces and how many,like Paul Bueche, were needlesslykilled or maimed by following ordersto use faulty equipment. We willupdate this story as our investigationcontinues, but one thing is already

cleara death such as this demandsaccountability at some level. Histori-cally the laws have been interpreted toshield the government from suchaccountability. We will be asking Con-gress to review those laws and tocreate an exception for such circum-stances when an order to use faultyequipment results in an entirely pre-ventable death or injury.

GOVERNOR RILEY APPOINTS JIM MAIN ASFINANCE DIRECTOR

Governor Bob Riley has appointedJim Main to one of the most importantpositions in state government. Jim willserve as Director of the Department ofFinance. The long-time friend of theGovernor has an extensive and variedbackground in the fields of law, smallbusiness and public service. Jim under-stands the enormous fiscal challengesfacing Alabama and also knows thereal reforms of state government thatare needed. He should also know howto help bring them about.

The new Finance Director says thathe plans to work to bring greateraccountability and transparency to theStates budget process. I believe he hasthe ability and background that willassist him greatly in achieving thosegoals. Governor Riley has confidencein Jims ability and has turned over amajor job to him. The goal is todevelop a budget process that enablesour citizens to know not only howmuch each agency of governmentreceives, but also how they spend themoney.

Jim, who has practiced law for 25years, was a partner in our law firm forseveral years. He subsequently servedin the Administration of former Gover-nor Fob James as Chief of Staff andLegal Advisor. The Bullock Countynative is also a licensed pharmacist andoperated Main Drug Store in UnionSprings after earning his pharmacydegree in 1968 from Auburn University.Jim received his law degree from theUniversity of Alabama in 1972. Interest-ingly, he is a past president of the

American Pharmaceutical Association,past president of the Alabama Pharma-ceutical Association and Chairman ofthe Deans Council at Auburn Univer-sitys School of Pharmacy.

In my opinion, Jim Mains appoint-ment will be good for the State. He isextremely intelligent, works hard,understands the workings of state gov-ernment, has tremendous peopleskills and is a good family man. Earlyreports from legislators concerning theappointment were extremely favorable.I sincerely believe this will prove to beone of the best appointments made byGovernor Riley during his tenure.

ATTORNEY GENERAL FORMS UNIT TOPROTECT FAMILIES

Attorney General Troy King plans toget tough on criminals who target fami-lies, and thats good news. The Attor-ney General announced that he isforming a Family Protection Unit. Thenew unit will fight crimes that hurtAlabama families, such as identity theft,welfare fraud and crimes against chil-dren. Existing staff and resources willbe utilized to form the new unit.Deputy Attorney General William Dillwill head the new unit. As I understandit, the Family Protection Unit will con-centrate efforts in the following areas:

Child abuse and exploitation

Elder abuse and exploitation

Consumer protection

Welfare fraud

Identify theft

Each category listed above is mostimportant and concerns all Alabamians,directly or indirectly. I certainly believethat there is a great need to protectAlabama citizens from wrongfulconduct, and protecting families is agreat place to start. The new AttorneyGeneral is to be commended for takingthis step.

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HOSPITALS SUE OVER LOW MEDICARE RATES

Seventy-eight Alabama hospitals,along with other hospitals fromLouisiana and Mississippi, have filed alawsuit against the U.S. Department ofHealth and Human Services. The hos-pitals are seeking more than $261million in back Medicare paymentsthey say they are owed. According tothe complaint, the Medicare agencyillegally used an incorrect formula tocompute the hospitals rates, loweringtheir payments in fiscal years 2003 and2004. The lawsuit was filed in federalcourt in Washington, D.C. The AlabamaHospital Association, which is coordi-nating the suit, says the practice hasbeen going on for years. The methodby which the federal insuranceprogram for the elderly and disabledcalculates labor costs at hospitalsacross the country will be the issuebefore the court.

Medicare grossly underestimatesthe true labor costs of the hospitalsbecause of irrelevant geographicalboundaries. The agency then relies tooheavily on those labor costs to deter-mine how much the hospitals are paidper procedure. I understand thatAlabama hospitals have long beenamong the countrys worst-paid byMedicare because of the flawedformula. For example, while hospitalsin Alabama get paid significantly lessthan hospitals in Georgia, their cost ofdelivering care is not correspondinglylower. Since there are 106 general hos-pitals in Alabama and only 78 are par-ticipating in the lawsuit, I expect othersto join in this litigation.

SPECIAL SESSION

It appears that a Special Session willbe called by the Governor before theend of the year. I only hope that carefulplanning will take place and a real plandeveloped before bringing the legislatorsto Montgomery. As I have stated onnumerous occasions, it is very easy tospot our problems. Unfortunately,finding real long-term, permanent solu-

tions is another thing. Sometimes, theonly folks who benefit from a specialsession are the lobbyists and theirspecial interest bosses. I hope this oneif it becomes a realitywill be different.

POLITICAL JOCKEYING

I predict that over the next severalmonths the political sheep will get sep-arated from the political goats. Thecandidates for elections to statewideoffice in 2006 are already lining up.Interestingly, the special interestgroups and their lobbyists are alreadyseeking out their candidates for Gover-nor and Lt. Governor. I have hadaccess to some early polls that indicatea number of potential candidates arebeing considered for the two posts. Inaddition to the current Governor, thereare several potential candidates for thestates top job. Some of the names thathave surfaced are Lucy Baxley, LowellBarron, Ron Sparks, Roy Moore andJeff Sessions. Each of these potentialcandidates appears to have significantsupport around the state. In addition,former Governors Don Siegelman andJim Folsom do fairly well in some ofthe polls. Interestingly, Siegelman hasbeen traveling the state meeting withgroups and speaking wherever he can.I was sort of surprised when the nameof Dr. Paul Hubbert as a potential can-didate surfaced last week. My under-standing is that a group of fairlyprominent citizens met with Paulrecently and encouraged him to run.

Seth Hammett was among thosebeing mentioned, but he took hisname out of the hat on July 15th. Sethhas done an outstanding job asSpeaker of the House and would havebeen a strong candidate. But, his lead-ership and experience are needed inthe Legislature. I believe Seth madethe right decision. I do believe,however, that he will make the run forGovernor in the future.

I suspect the person who emerges asthe front-runner in the Governors racewill be the man or woman who makesthe fewest political mistakes over the

next 12 months. I believe the expertswho counted Governor Riley out afterthe failed tax referendum may havebeen jumping the gun. The Governorappears to have made a comeback andat this point would have to be consid-ered the person to beat. In any event, itwill be most interesting to watch thepolitical posturing that will occur duringthe next few months. There is one thingfor certain in this state and that is thereis nothing like Alabama politics!

II.COURT WATCH

JURY AWARDS $2.9 MILLION VERDICTIN FRAUD CASE

A Henry County jury awarded arecord $2.9 million verdict in a securi-ties fraud case handled by our firm. Thejury awarded $900,000 in compensatorydamages and an additional $2 million inpunitive damages against World CapitalBrokerage of Tampa, Florida. Ray andShirley Robinson, who live in Abbeville,invested $275,000 with the defendant.The funds were to be invested in com-modity futures with a guarantee that theinvestments were totally safe. A 12.5%annual return was guaranteed on theinvestment. Evidence at trial revealedthat the Robinsons did not receive theguaranteed return and instead lost theirentire investment. World Capital Bro-kerage could not tell the jury what hap-pened to the Robinsons $275,000.00investment or even whether it wasinvested at all.

World Capital Brokerage and its agentsare guilty of not only stealing our clientsmoney, but also stealing their future.The conduct exhibited by this companyis nothing less than reprehensible.Unfortunately, when corporationsaround the country read about howEnrons bosses were lying, cheating andstealing, that tale did nothing butencourage them to follow suit. GibsonVance and Chris Sanspree from our firm,along with Chris Money of Abbeville,represented the Robinson family.

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SUPREME COURT JUSTICES RULE FOR THEBAD GUYS

The U.S. Supreme Court has blockeda law clearly designed to shield Web-surfing children from pornographicpictures and on-line come-ons. TheHigh Court, in a 5-4 ruling, stated thatthe law would cramp the free speechrights of adults to see and buy whatthey want on the Internet. The majoritydidnt want to be accused of muzzlingfree speech. Justice Anthony M.Kennedy wrote for the majority: Theyimpose selective restrictions on speechat the receiving end, not universalrestrictions at the source. I had hopedthat the Court would recognize theevils of pornography and how it isundermining mortality in this country.

The 1998 law, signed by then-Presi-dent Clinton, and backed by the BushAdministration, would require adults touse access codes or other ways of reg-istering before they could see objec-tionable material on-line. The lawwould punish violators with fines up to$50,000 or jail time during the courtchallenge. Artists, bookstores, an on-line sex therapist, a gynecologicalinformation site and others hadbrought the lawsuit. The AmericanCivil Liberties Union argued on appealthat the law could make criminals outof anyone who offered racy or explicitmaterial to adults. In the ruling, amajority of the Court said that thefederal judge who initially blocked theChild On-line Protection Act six yearsago rightly found that the law wasmost likely unconstitutional. JusticeKennedy wrote: There is a potentialfor extraordinary harm and a seriouschill upon protected speech if the lawtakes effect. Justice Kennedy wasjoined by Justices Stevens, Souter,Ginsburg and Thomas.

In dissent, Chief Justice Rehnquistand Justices OConnor, Scalia andBreyer disagreed with a majority of theCourt and felt the law should beupheld. The case was sent back tolower courts in Philadelphia. I hope,the government will continue todefend the law (which is known as

COPA). Material that is indecent, butnot obscene, is protected by the FirstAmendment. Whether we agree or not,adults may see or purchase pornogra-phy, but children must be protectedand shielded from the filth found onthe Internet. Unfortunately, most Inter-net web sites, chat rooms and otherInternet venues are available to adultsand minors alike. Congress has triedrepeatedly to find a way to shieldyoungsters from the Webs dark sidewithout running afoul of the FirstAmendment. I had hoped that the U.S.Supreme Court would have comedown on the side of children in thiscase. Unfortunately, they didnt see fitto do so.

The justices previously had unani-mously struck down the first version ofa child-protection law passed by Con-gress in 1996. At that time, the Internetwas just becoming a common means ofcommunication, research and entertain-ment. After that defeat, Congressresponded by passing COPA, sayingthe new law was designed to go afterpornographers or others who placematerial deemed harmful to minorswithin their easy reach. Free speechadvocates wanted the Court to strikedown the law outright. However, theyhave to be highly pleased with thislatest ruling. A Justice Departmentspokesman told Associated Press:

Our society has reached a broadconsensus that child obscenity isharmful to our youngest genera-tion and must be stopped. Congresshas repeatedly attempted toaddress this serious need and theCourt yet again opposed thesecommonsense measures to protectAmericas children.

Frankly, I cant see how free speechcan protect raw pornography that ismade available for children. People allacross this country should be shockedby this decision. I believe the churchesshould be up in arms and get involvedin the fight. The two political partiesshould join hands on this issue and doeverything possible to protect our chil-

dren. I encourage our readers to contactboth the Bush and Kerry campaigns andask them to take a strong stand on thisissue. It would also help to contact Sen-ators Shelby and Sessions and themembers of Congress in your district.

JURY PATRIOTISM ACT NEEDED

With juror turnout levels sinking tocrisis levels across the country, theAmerican Legislative Exchange Council(ALEC) is calling on state legislatures topass the Jury Patriotism Act. I havealways felt that jury service was arequirement of citizenship, and thatview hasnt changed a bit. This ismodel legislation designed to increasejuror participation rates. Avoidance ofjury service has seriously jeopardizedthe rights of litigants and the fight forfair juries must continue, according toKristin Armshaw, ALECs Civil JusticeTask Force Director. ALEC has foundthat no-show rates among summonedjurors in several jurisdictions havereached alarming levels. A number ofstates, including Arizona, Colorado,Mississippi, Missouri, Oklahoma, Utahand Vermont, have recently introducedlegislation based on ALECs proposal.The Jury Patriotism Act proposes:

Providing jurors one automatic post-ponement of service;

The elimination of occupationalexemptions, which currentlyexempts professionals, includingpodiatrists in New York, pharmacistsin Missouri, and acting professors inTennessee;

Greater protection for employeescalled to jury service;

Tightening of hardship excuses fornot serving;

Tougher penalties for failing toanswer a summons; and

Establishment of a lengthy trial fundto relieve the financial burden onjurors serving on prolonged civilcases.

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I believe that the Jury Patriotism Actshould be passed by the Legislature inAlabama. It simply balances civic dutywith the realities of everyday life. Theright to trial by jury is a fundamentalright that dates back to the introductionof the Constitution. Surveys indicateAmericans continue to overwhelminglysupport the jury system. To make thesystem work as it should, we mustensure that the jury pool accuratelyreflects society. If you agree, contactGovernor Riley and your local legisla-tors and ask them to help on thisproject.

CATTLEMEN APPEAL DECISION

Cattlemen who won a price-fixingverdict against the nations largest beefpacker in a Montgomery federal court,have filed an appeal to the U.S. Courtof Appeals for the Eleventh Circuit.You will recall that the landmark juryverdict was thrown out by a federaljudge on post-verdict motions. The cat-tlemen will contend on appeal that thejudge wrongfully substituted his judg-ment for that of the jury. This case isbeing watched very closely by cattle-men around the country.

U.S. SUPREME COURT REJECTS3MS APPEAL

On the final day of its term, the U.S.Supreme Court refused to take up aclosely watched antitrust case in whichoffice supply giant 3M Co. had been hitwith a $68 million verdict. LePagesclaimed in the suit that 3M set out todrive the company out of the marketfor transparent tape by offeringbundled rebates to large retailers forreaching sales goals in several cate-gories of 3M products. In reality,according to the suit, the rebates couldbe earned only by removing LePagesproducts from their shelves. A juryagreed, and in an October 1999 verdictawarded LePages $22,828,899 indamagesa figure that was automati-cally trebled by the federal districtjudge for a total judgment of

$68,486,697. Interestingly, the appealbond has now grown to more than $90million during several years of appeals.In its first appeal, 3M prevailed whenthe U.S. Circuit Court of Appeals forthe Third Circuit overturned the verdictby a 2-1 vote.

The case was later reargued before a10-judge en banc panel (all of thejudges on that court). The en bancpanel reinstated the verdict by a voteof 7-3. 3Ms argument that the theory ofLePages case was fatally flawed sincethere was no evidence that 3M eversold any of its products at below-costprices was rejected. Instead the evi-dence showed that 3M had set out tokill the niche market LePages hadcreated for discount private label orstore-brand tape with customers suchas Kmart and Staples.

3M was able to put together animpressive group of friends in urgingthe U.S. Supreme Court to take thecase up. Among those joining in filingamicus briefs in support of 3Ms peti-tion were Procter & Gamble Co., Coca-Cola Co., Honeywell International,Xerox Corp., Verizon Communications,Johnson & Johnson, Morgan Stanleyand Eastman Kodak Co. A team oflawyers in the Attorney Generals officerecommended that the highest Courtrefuse to hear the case. Their brief saidthat, while the business communitycould use some guidance on the appli-cation of antitrust law to the practice ofbundled rebates, the LePages casedoes not present an attractive vehiclefor this Court to attempt to providesuch guidance. The order denying3Ms appeal appears to have been thecorrect result. I wonder if the U.S.Chamber of Commerce considers thiscorporation suing another corporationa frivolous lawsuit.

CHAMBER OF COMMERCE PULLS OUTOF DEBATE

Back in March, Public Citizen Presi-dent Joan Claybrook invited TomDonahue, who is President of the U.S.Chamber of Commerce, to a debate in

front of the national press. The subjectof this debate was to be the anti-con-sumer overhaul of the class actionsystem. As we all know, the Chamberwas one of the prime pushers of thisill-fated measure in Congress. Had itpassed, the legislation would have dra-matically curtailed the rights of con-sumers to file and pursue state-lawclass action claims by shifting them tothe federal courts.

The debate was to bring together theheads of two organizations with differ-ing views on the subject. Certainly, alively discussion by knowledgeablefolks would have been a good thingfor the uninformed. The debate wouldhave allowed journalists to betterunderstand the reasons for either sup-porting or opposing the legislation. Atentative date for the debate was set formid-June. However, without warning,the Chamber President pulled out ofthe debate with no explanation. Itwould certainly appear that if the billpushed by the Chamber is actuallygood for the public, Mr. Donahuewould have been willing to discuss itspros and cons in front of the nationalpress. Unfortunately, the man duckedout and nobody in the national mediaseemed to care. Where is Fox Newswhen the country needs them?

SETTLEMENT FALLS THROUGH IN CREMATORYLAWSUIT

A proposed settlement between aGeorgia crematory operator and asmany as 1,600 plaintiffs has apparentlyfallen through. You will recall that hun-dreds of bodies had been hidden awayat the Georgia facility instead of beingcremated. A $39.5 million settlementwas announced in March. It nowappears that the defendants liabilityinsurance company has pulled out ofthe deal. As a result, a trial in the classaction lawsuit has been set for August23rd in a federal court. I had beenunder the impression that the insurancecompany, Georgia Farm Bureau, hadagreed to pay the settlement. It nowappears that there was no coverage for

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the wrongful conduct. A criminal trial isalso scheduled to begin in October forthe operator who faces 787 felonycounts, including theft by deception,abuse of a corpse, making false state-ments and burial service fraud. Morethan 330 sets of uncremated humanremains were found on the operatorsproperty in February 2002.

III.THE NATIONALSCENE

A GOOD CHOICE FOR VICE-PRESIDENT

The choice of John Edwards for thesecond spot on the Democratic ticketwas a very good decision by JohnKerry. If all of his choices are of thatnature, our country will be in verygood shape in the near future. I reallybelieve this may turn out to be the bestmove Senator Kerry has made in hisquest for the presidency. I have knownJohn Edwards for several years and Iknow firsthand what sort of man he is.As they say where I come from, hewill do to hunt with!

John Edwards is a good family manwho has the right values for America.John has the uncanny ability to framehis positions in the language of moral-ity and traditional American values. Noone can question his intellect or hisintegrity. The thing that I really likeabout John is the fact that he is a truechampion for middle-class Americansand those struggling to reach themiddle class. He hasnt forgotten wherehe came from and understands theproblems faced on a daily basis byAmerican citizens. When all the GOPcan say about the Senator from NorthCarolina is that he is a trial lawyer andinexperienced, thats good news for theKerry-Edwards ticket.

THE GOVERNMENTS DEFICIT SOARS

The federal governments deficit hasballooned to $326.6 billion in the first

nine months of the 2004 budget year.Thats more than 20% larger than the$269.7 billion shortfall for the corre-sponding period last year. The biggestspending categories are: programs fromthe Health and Human Services Depart-ment (including Medicare and Medic-aid)$407.1 billion; Social Security$397 billion; military$322.3 billion;and interest on the public debt$274.9billion. Some private economists havepredicted that the budget shortfall forthis year will be about $450 billion. Thiswould set a new record in dollar terms.The government produced a record$374 billion deficit last year. I have towonder when it will sink in to the folksin charge that we have to get thingsunder control. Its no longer possible to blame the Democratic Party for the problem.

FORMER ENRON BOSS INDICTED

I must admit that I was shockedwhen I learned that Kenneth Lay hadfinally been indicted by a federal grandjury in Houston. I, like a number ofothers, had decided that Lays politicalclout would shield him from any crimi-nal charges. I doubt that any Americancitizen is unaware of the fact thatEnrons collapse in 2001 wiped out theretirement, savings and jobs of thou-sands of employees. It also devastatedthe companys own stockholders. Mostsignificantly, the Enron collapse led aparade of corporate accounting scan-dals that set off investigations all acrossthe country and in the nations capital.I was also surprised to learn that ourPresident says he hardly knew KennyBoy. Lay and other Enron executiveshad contributed more than $600,000that can be traced to the Bush cam-paigns. Enron was the second largestcontributor to the Presidents politicalcareer. Only credit card giant NDAtopped the Enron giving. Lay had beenconsidered as a prime candidate for atop Cabinet position before the Enronproblems surfaced. In fact, he told themedia recently that he was still consid-ering such a move.

The former Enron Chairman andCEO was indicted on 11 criminalcounts. The indictment includescharges of securities fraud, wire fraudand making false and misleading state-ments. You will recall that severalformer Enron officers and executives,including former CFO Andrew Fastow,have already pleaded guilty to criminalcharges arising from the Enrondebacle. As part of Fastows pleaagreement he confessed to his part inEnrons fraudulent schemes and agreedto cooperate with the government inexchange for a 10-year prison sen-tence. Another former Enron CEO,Jeffrey Skilling, was also indicted but has pleaded not guilty. The indict-ment of Lay is significant because itshows that the corruption at Enronreached the highest level of authorityat the company.

Thus far, the federal government haslaunched 30 separate prosecutionsrelated to Enron, including a criminalcase against Arthur Andersen andcriminal investigations concerning 20former Enron employees. I dont knowwhat effect the indictment will have onthe elections this fall. Clearly, theserious problems in Corporate Americaand all of the known scandals shouldbe discussed. The fact that corporatecorruption has become so commonhas made it a political issue. There area number of politicians who clearlywant to sweep the Enron story underthe rug. But, this wont happenbecause of the fact that Lay and Bushappear to have been more than justcasual friends.

BUSH CAMPAIGN CONTINUES TO PULL INTHE BIG BUCKS

The largest of President Bushs big-money backers were revealed lastmonth when the Republican NationalCommittee released the names of 62Super Rangers. These are fundraiserswho have collected at least $28.5million for Bushs re-election efforts.The Super Rangers are high-poweredfundraisers who have collected at least

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$300,000 for the RNC. Most of theserainmakers already ranked amongBushs largest financial backers. Forty-five of the Super Rangers previouslyhad been crowned Rangers afterraising at least $200,000 for the 2004Bush-Cheney campaign - meaning theyeach have raised at least $500,000 thiscycle. Nine more had achievedPioneer status by collecting at least$100,000 for Bush. Public Citizen hasdone an analysis of the Bush fundrais-ing efforts. It is most interesting to seethe sources of the Bush funds. PublicCitizen President Joan Claybrook madethis observation:

The fact that any individual isallowed to bundle half a milliondollars for the President is anaffront to our democracy. But theBush Administration has madeclear from day one that it willshower its supporters with specialfavors, insider access and plumappointments. No wonder so manyexecutives and lobbyists are com-peting for these titles.

As of July 1st, the Bush campaignhad raised $216 million, which isabsolutely shocking. Since early April,the GOP has shifted its fundraisingfocus from the presidential campaignto what is called the RNCs VictoryFund. While donations to the Bushcampaign are capped at $2,000, indi-viduals can give a maximum of $25,000to the RNC. The Bush campaign mustspend all of its money before theRepublican National Convention. ThePresident will then opt into the presi-dential public financing system andpocket $75 million to be used duringthe two months prior to Election Day.

WhiteHouseForSale.org, a websitecreated by Public Citizen in conjunc-tion with Texans for Public Justice totrack contributors to Bushs 2004 re-election campaign, has posted thenames of all 62 Super Rangers, alongwith their home states, employers andoccupations. It also features chartsshowing the 24 states that are home toSuper Rangers - led by California with

nine - and detailing which industrieshave collected the most cash for Bushand the RNC. Nearly a third of theSuper Rangers are from the financesector. Frank Clemente, director ofPublic Citizens Congress Watch,observed that the need to fix the presi-dential public financing system hasnever been greater. He believes weneed to rescue our election processfrom the fat cats and return it toaverage Americans. I totally agree withFranks perspective and believe thatmost folks in our country do.

SPECIAL INTERESTS STILL BUY INFLUENCEBY THE MILLIONS

The Birmingham News had an excel-lent editorial in its July 7, 2004 edition,concerning the upcoming national con-ventions for the two major parties. Ibelieve it is worth passing on. Theamounts given to political party con-ventions should be subject to strictcampaign spending restrictions. Unfor-tunately, thats not the case. The fol-lowing is the News editorial:

The federal McCain-Feingold cam-paign finance reform law in 2002banned so-called soft moneypolitical contributions. Soft moneyis unlimited corporate, union andindividual contributions to thenational political parties, whichthen filtered the dollars to theirlocals, which used it for politicalads. Candidates didnt have toworry about claiming the money asdirect contributions, but still bene-fited from the friendly TV ads. Inreturn, special interests that gaveliberally were likely to get prettyliberal access to the members ofCongress they supported. Buttheres no more of that sinceMcCain-Feingold, right? Well, notso fast. As the national politicalparty conventions near - the Demo-cratic National Convention inBoston in late July and the Republi-can National Convention in NewYork in late August - its becomingclear the special interests still have

a huge gateway to buy influence.Many companies dont care aboutwhich party they are buying influ-ence with, either. For example, 21corporationsincluding telecom-munication companies AT&T andVerizon, pharmaceutical firmsPfizer and Bristol-Myers Squibb,and Marriott, Microsoft and insur-ance giant AIG - have given to bothconventions this year.

Theyre not giving just a tad, either.Verizon has donated $3 million toeach of the conventions. Companiesplay both sides because they arebuying influence, not a philosophy.Another way special interests willbuy access this year is by hostingspecial parties honoring one partic-ular member of Congress oranother at the conventions. Banks,a union, a defense contractor anda pharmaceutical company haveput up $100,000 each to host atribute to Senator Ted Kennedy, D-Mass. The Bank of America isputting on a lavish event in NewYork to honor Representative DavidDreier, R-Calif. Senator JohnMcCain, R-Ariz., said he wantedMcCain-Feingold to stop the flow ofall soft money, even the donationsto the political conventions. Thatprohibition, however, never waswritten into the bill. With no realnews coming from either of thepolitical conventions, theres notmuch else for the politicians to doexcept be honored. There still areplenty of special interests willing topay big bucks to honor and cele-brate those politicians, too, fornothing more than a little facetime, of course.

Unless we can find a way to con-vince the next President and membersof Congress to address the politicalspending problems in our country, thepowerful special interests will continueto run our government. I am convincedthat the bosses in Corporate Americahave no real allegiance to any politicalparty. They simply buy their way and

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deal with both parties, giving more toRepublican candidates currentlybecause they are in power. Theywould give to Ralph Nader if he hadany chance of becoming a viable can-didate. The motivating factor for Cor-porate America is greed and takingcare of their own special interests,regardless of whats good for America.I hope and pray that mentality willchange one of these days. Manythought all of the corporate scandalswould have caused some changes.Instead, the political giving hasincreased.

CONSUMERS UNION, SUZUKI SETTLETHEIR LAWSUIT

The publisher of Consumer Reportsmagazine and Suzuki Motor havesettled their lawsuit that had beenongoing for over 8 years. The Japan-ese automaker claimed the magazinedoctored road tests in 1988 that foundthe Suzuki Samurai tipped over tooeasily. Suzuki filed the suit in 1996 a year after it quit selling the smallsport utility vehiclein U.S. DistrictCourt for the Central District of Califor-nia. Consumers Union, which pub-lishes Consumer Reports, and Suzukimade a joint announcement last monththat the lawsuit had been dismissed.Interestingly, Suzuki said it had notdemanded or received monetary com-pensation. The two parties had goodthings to say about each other in settling their differences.

Even with the settlement in place,Consumers Union and Suzuki said theystill disagree on the validity of Con-sumer Reports avoidance maneuvertests on the Samurai in 1988. Asexpected, Suzuki disputes the findingsand Consumers Union stands by them.Consumers Union President Jim Gueststopped short of calling the resolutiona victory for the nonprofit organization,but told the media that were certainlyvery pleased with the way the lawsuitsbeen resolved. From our point of view,the case has been dismissed, weveissued no retractions or corrections,

paid no money and fully stand by...thearticle we published. You will recallthat the Consumers Union had statedthat the SUV was not acceptable afterrunning the tests.

News groups, including the Associ-ated Press, had urged the SupremeCourt to review the appeals court deci-sion. These groups believed the publichas been protected over the years byreports on the dangers of certain prod-ucts. Consumers Union had stated thatit had never questioned the safety ofany other Suzuki model it has tested. Itsaid the statement that the Samuraieasily rolls over in turns was limitedto severe turns in Consumer Reportsshort course avoidance maneuver. Ihope that the lawsuit doesnt put adamper on the reporting of consumersafety issues in the future. If thathappens, the public will be the losers.

NADER AID COMES FROM INTERESTINGSOURCES

A watchdog group has filed a com-plaint with federal election officials,accusing two conservative organiza-tions of illegally helping Ralph Naderspresidential campaign. The Nader andBush campaigns were named in thecomplaint. It is widely believed thatNaders campaign is being supportedby President Bushs re-election cam-paign. Citizens for Responsibility andEthics in Washington filed its complaintwith the Federal Election Commission.It says the Oregon Family Council andCitizens for a Sound Economy violatedelection laws by telephoning peopleand urging them to help Nader get onOregons ballot for the general elec-tion. As expected, the groups deniedany wrongdoing.

According to an Associated Pressreport, the two groups acknowledgetrying to influence Naders petitiondrive in Oregon, in hopes that gettinghim on the ballot would take votesaway from John Kerry and help Bushwin the battleground state. Accordingto the watchdog group, the conserva-tive organizations are also corporations

that are prohibited by election lawfrom making campaign donations. Citi-zens for a Sound Economy is a bigplayer in political races around thecountry. The group brings in tremen-dous amounts of money that, in myopinion, it uses for political purposes.It appears that the Bush-Cheney cam-paign was involved to some extent,according to media reports. This sort ofthing has the smell of none other thanthe man who directs all facets of theBush Administration and also thedirecting the campaign, Karl Rove.

SHAME ON THE U.S. CHAMBEROF COMMERCE

I was shocked to learn that the Presi-dent of the U.S. Chamber of Commerceis promoting overseas outsourcing ofjobs as a way to boost the economy. Ihave to wonder how jobless white-collar workers, particularly in the tech-nology industry, feel about his move.The Chamber apparently believesexporting high-paid tech jobs to low-cost countries such as India, China andRussia is the right thing to do. Frankly,that makes no sense to me.

In early June, the Bureau of LaborStatistics downwardly revised projec-tions for white-collar job growth for2002-2012, based on accelerated jobmigration. The agency reported thatseven of the 10 occupations expectedto gain the most ground are low-wageoccupations that do not require acollege degree. A well-respected tech-nology-consulting firm, Gartner Inc.,estimates that 10% of computer serv-ices and software jobs will be movedoverseas by the end of this year. Arecent survey released by the staffingfirm, Hudson Highland Group, Inc.reveals that 18% American workers areworried about losing their jobs. Peoplewho have lost jobs to offshoring - anestimated 250,000 a year, according togovernment estimatesare reallyhurting. Tom Donohue, the Presidentof the Chamber of Commerce, wasquoted as having said that peopleaffected by offshoring should stop

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whining. That is about as callous astatement as any person who has agood job, making big bucks, couldhave made.

Over the past two years Americancompanies have exported high-payingjobs in research and development, soft-ware engineering, chip design andbiotechnology startups to India andChina. For example General ElectricCo., which offshores about 70% of itstechnology work, designs medicalequipment in its Chinese researchcenter and studies nanotechnology at alab in India. Motorola is hiring 5,000researchers for a global research anddevelopment center in Beijing, whileIntel employs hundreds of researchersat its Russia Software DevelopmentCenter in Nizhny Novgorod.

Its no surprise that the ChamberPresident, who tripled the Chamber ofCommerces lobbying team and aggres-sively promotes pro-business policies,endorses offshoring. The organization,which represents 3 million businesses,champions tax cuts, free trade andmore liberal trade deals with China.One observer stated: The jobs go off-shore today and the economic benefitsdont come around for years. For any ofthe unemployed in this country toaccept this business leaders position ashelping them is like believing RichardNixon saying, `Trust me, Ill take care ofit all. Things will be fine. I dontbelieve sending our jobs overseas helpsour people. Neither do I believe worry-ing men and women in our countryagree with the Chambers position.

ARE MILLIONS BEING WASTED IN IRAQ?WHISTLEBLOWERS SAY SO!

New testimony from former Hallibur-ton workers and congressional auditorsreleased in Washington, D.C., hasrevealed millions of dollars worth ofwasteful practices, major overbillingand virtually no oversight of thecompanys work to support the U.S.invasion and occupation of Iraq inMarch 2003. Under an agreement forlogistical support for Operation Iraqi

Freedom, Kellogg Brown and Root(KBR), a Halliburton subsidiary, hasreceived $4.5 billion for activities inIraq and Kuwait since the invasion ofIraq. This includes more than $3 billionto import fuel and repair oil fields. Iunderstand the full contract may even-tually be worth as much as $18 billion.The testimony, submitted to membersof Congress, paints a bad picture ofhow Halliburton and its subsidiariesare billing the U.S. government andtaxpayers. A labor foreman said dozensof workers were told to look busywhile doing virtually no work forsalaries of $80,000 a year. An auditorrelated how the company was spend-ing an average of $100 for every singlebag of laundry and $10,000 a monthfor company employees to stay in five-star hotels.

David Walker, head of the GeneralAccounting Office, the investigativearm of the Congress, told members ofthe Congress who attended a hearingat the Government Reform Committeein the House of Representatives: Wesaw very little concern for cost consid-erations. There are serious problems,they still exist, and they are exacer-bated in a wartime climate. WilliamReed, director of the PentagonsDefense Contract Audit Agency, alsoreleased a report to members of Con-gress that stated: In our opinion, thecontractors billing system is inade-quate in part. We also found systemdeficiencies resulting in material invoic-ing misstatements that are not pre-vented, detected, and/or corrected in atimely manner.

I believe most American taxpayerswill be shocked to learn that Hallibur-ton has a costplus contract with thegovernment. Critics say that the Hal-liburtons contract with the military hasbeen especially problematic for thatreason. Under a cost-plus contract,the company is repaid for all expendi-tures, plus a percentage fee and possi-ble bonus on top of that. Jim Donahue,coordinator for Halliburton Watchstated: While the Bush Administrationfailed to adequately plan for the safety

of our troopsas proven by its failureto provide sufficient body armoritmade certain that Halliburton wouldmake a killing long before the warbegan.

In January and February 2004, aseries of articles in the media, especiallyin The Wall Street Journal, chronicledthe overcharging and fraud in Hallibur-tons operations. In response Hallibur-ton hired what it dubbed the TigerTeam to audit and correct problems.Not only did the Tiger Team notcorrect anything, the team continuedquestionable auditing and administra-tion practices. The teams sole purposewas to close as many subcontracts aspossible, under the mistaken assump-tion that everything that was closedprior to the arrival of the governmentaudit team would be exempt fromfurther scrutiny. For three months, thisTiger Team occupied waterfront villasat the Hilton hotel and shuffled papers,but did nothing to effectively clean upold subcontracts. It had been reportedthat Halliburton housed the Tiger Teamat the five-star Kempinski Hotel for$10,000 per employee per month. Atthe same time, soldiers were requiredto live in tents at a cost of $1.39 a day.The military requested that Halliburtonemployees move into the tents, butthey refused. The Halliburton corporateculture has been described as one ofintimidation and fear. I have to wonderwhere that mentality comes from?

GOVERNMENT KNEW OF INDICTMENT BUTAWARDED CONTRACT ANYWAY

Federal government officials knewthat Reliant Energy Services was underindictment when they awarded arelated Reliant company a $35.9 millioncontract. This was admitted in a recentletter to Public Citizen. But the officialsrationalized the award by falsely claim-ing that the two subsidiaries are geo-graphically separate entities and thatthe actions of one cannot be attributedto the other. In truth, Reliant EnergyServicesthe indicted subsidiaryandReliant Energy Solutions East, which

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got the contract, are owned by thesame parent company (Reliant Energy)and share top officers. The two sub-sidiaries do business with each otherand are controlled by Reliant Energy.The close relationship between the twocompanies has been documented byPublic Citizen. The governmentclaimed that Reliant Energy Servicesoperates in the West and that ReliantEnergy Solutions East operates on theEast Coast, and concluded the twowere separate. However, Reliant Ser-vices conducts most of its operationson the East Coast and sells large quan-tities of electricity to its East Coast sistercompany, according to PublicCitizen.Joan Claybrook, Public CitizenPresident, stated:

All available data contradict the governments explanation forawarding a contract to people whoare at the helm of an indictedcompany. These subsidiaries arelike peas in a pod. The governmentshould review the contract andbegin debarment proceduresimmediately.

On April 8, Reliant Energy Serviceswas charged with conspiracy tocommit wire fraud and manipulation ofthe price of electricity. Additionally,Reliant Energy Services agreed to pay$125 million to government authoritiesin fines, settlements and refunds forintentionally shutting down powerplants to create blackouts that drove upprofits. On May 19, the Department ofDefense awarded the contract to theReliant Energy Solutions East. Prece-dent has been set for barring compa-nies from new contracts when they areeither under investigation or have beenconvicted of a federal crime. BothEnron and Arthur Andersen werebarred from federal contracts whenthey were indicted. Public Citizen hascalled on the federal government todebar Reliant Energy Solutions Eastfrom this and future contracts. It ismost difficult to see how the officialswho will make the decision could dootherwise.

According to the Code of FederalRegulations, 48 CFR 9.400, governmentagencies can prohibit companies thathave been indicted from receivingfederal contracts. The American tax-payers should be up in arms over thissort of thing. With all of the corruptionbeing uncovered in Corporate America,doing business with a corporation thathas been indicted on a criminal chargesends a bad signal.

WINNING CONTRACTORS AN UPDATE

The American people are beginningto realize that lots of money is beingmade as a result of the war in Iraq byprivate companies. More than 150American companies have receivedcontracts worth up to $48.7 billion forwork in postwar Afghanistan and Iraq,according to the latest update of theCenter for Public Integritys Windfalls ofWar project. The Center has continuedto file Freedom of Information Actrequests with, among others, theDepartment of Defense, the StateDepartment and the U.S. Agency forInternational Development in order tosee who is profiting from the war effort.

Much of the work in Iraq continuesto be uncoordinated within federalagencies, and no agency seems to havea full picture of all the postwar con-tracts. Reports and hearings regardingthe Iraq war and occupation effortpainted a picture of undermanned andoverworked contracting staffs withoutsufficient knowledge of the contractingprocess. It appears that contractingrules were stretched for the sake ofexpediency, particularly in the earlydays of postwar reconstruction. Thislack of resources has also resulted ininadequate oversight of the currentcontracts, according to publishedreports by the General AccountingOffice and the Inspector General, (IG)of the Department of Defense.

Problems with awarding contractshave plagued the Iraq reconstructionprocess from the very beginning. In theearly days, the Office of Reconstructionand Humanitarian Assistance (which

became the CPA in May 2003) sufferedfrom a lack of personnel. In oneinstance a contract for $15 millionwound up costing over $91 million todate, with more to come. There was noformal contracting plan to purchaseequipment. A specialist from theDefense Contract Management Agencytold IG investigators from the Depart-ment of Defense that officials of theOffice of Reconstruction and Humani-tarian Assistance neither followed nortried to learn the acquisition process.In addition, ORHA wanted quickresults and, yielding to pressure, con-tracting officers from the Defense Con-tracting Command-Washington did notcorrectly award or manage the con-tracts. Of the 24 contracts awarded bythe DCC-W that the Defense Depart-ments IG investigated, 22 did notfollow the Federal Acquisition Regula-tion, part of the official guidelines gov-erning the contracting process. Thislack of structure in the contractingprocess, coupled with the need to startwork as quickly as possible, led to con-tractors providing draft statements ofwork and cost estimates to contractingofficers, when the government usuallyprovides this information, according toGAO. In addition, contracting officersoften allowed contractors to beginwork before key terms of the contracts,including price, had been agreed on.

FORMER WORLDCOM EMPLOYEES SETTLEFOR $51 MILLION

A settlement has been reached thatwill help WorldCom employees, but itsjust a drop in the bucket as comparedto their actual losses. MCI Inc., formerWorldCom Inc. chief Bernard Ebbersand 18 ex-WorldCom officials will payabout $51 million to settle a suit byemployees who lost billions of dollarswhen the long-distance telephonecompany collapsed. The agreementleaves 401(k) fund trustee Merrill LynchTrust Co. of America, a subsidiary ofMerrill Lynch & Co., as the only activedefendant in the pending lawsuit. Theemployees of WorldCom, which

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emerged from bankruptcy in April asMCI, are seeking about $100 millionfrom Merrill.

IV.THE CORPORATEWORLD

JUSTICE DEPARTMENT FUNDING

Because of all of the corporate cor-ruption, one would think that Congresswould be pumping more funds into theJustice Departments budget. It is undis-puted that the Justice Department stilllacks adequate resources for prosecut-ing and deterring corporate crime.Some observers even question theirfocus. Certainly, it never should havetaken almost 3 years to bring a criminalindictment against Kenneth Lay. TheDepartment needs adequate fundingand resources so that it can do its job. Apush from the White House is alsobadly needed, but dont hold yourbreath on that one. The President andCongress must give the Department ofJustice adequate funding so that corpo-rate crime can be effectively prosecutedin the criminal courts. Prosecutors arefinally going after executives at thehighest levels, and thats long overdue.Before Enron, corporate executives feltsecure and almost immune fromscrutiny from the Justice Department.Clearly, we must clean up CorporateAmerica, and for that reason, there canbe no letup by the Justice Department.

BANK OF AMERICA SETTLES SUIT OVER THECOLLAPSE OF ENRON

The Wall Street Journal reportedrecently that Bank of America Corp.became the first bank to settle a classaction lawsuit alleging that some of thetop U.S. financial institutions partici-pated in a scheme with Enron Corp.executives to deceive shareholders.The Charlotte, North Carolina, bank,the third-largest in the U.S. in assets,agreed to pay $69 million to investors

who had billions of dollars in losses asa result of Enrons collapse amidscandal in 2001. It should be noted,however, that Bank of America was nota major player in the Enron scandal.There are bigger fish to fry. Otherbanks and securities firms, which arestill defendants in the suit, cant feeltoo good about their prospects.

Bank of America had relatively small-scale financial dealings with Enroncompared with other banks. As Iunderstand it, the Bank was suedsolely for its role as an underwriter forcertain Enron and Enron-related debtofferings. Bank of America wasnt actu-ally accused of defrauding the energycompanys shareholders. Other remain-ing defendants in the class action suit,which is in a U.S. District Court inHouston, are alleged to have helpedEnron with phony deals to inflate theenergy companys earnings, potentiallyexposing those banks and securitiesfirms to much steeper damages.

MORE CORPORATE CONVICTIONS

John Rigas, the founder of AdelphiaCommunications, was found guilty lastmonth of conspiracy and securitiesfraud for his role in the diversion ofhundreds of millions of dollars fromthe cable television company anddriving it into bankruptcy. A New Yorkjury also found Rigas son, Timothy, thecompanys former chief financialofficer, guilty of conspiracy. But,another Rigas son, Michael, a formerexecutive vice-president, and Adelphiaexecutive Michael C. Mulcahey, formerhead of internal financial reporting,were acquitted of conspiracy charges.The jurors were not able reach a deci-sion on several other charges facingMichael Rigas. The original chargesinvolved 24 counts of conspiracy, secu-rities fraud, bank fraud and wire fraud.As you probably know, Adelphia Com-munications was a very large cable TVcompany.

This trial lasted for over threemonths. Federal prosecutors apparentlyproved that the Rigas family used the

company as a personal piggy bank tofinance a lavish lifestyle at the expenseof shareholders. The defendants hadtried to cover up the financial abusesby manipulating the companys finan-cial reports to banks, investors andgovernment regulators. Some of theitems purchased by the Rigas withAdelphia funds included a $25 milliontract of timberland to protect the viewfrom a family mansion, a $13 milliongolf course, and hundreds of millionsof dollars of company stock andbonds. Adelphia gave the elder Rigas,79, cash advances of as much as $1million a month without any documen-tation or agreement to repay, accordingto prosecutors. The defendants haddenied any wrongdoing, saying thattheir transactions were legitimate andproperly disclosed. Apparently, thejurors didnt buy that and neither willthe companys shareholders.

SCHERING-PLOUGH SETTLES MEDICAID-FRAUD CASE

According to the Wall Street Journal,Schering-Plough Corp. will pay the U.S.government $350 million in fines tosettle charges it defrauded the Medic-aid health program for the poor. Atpress time, the particulars of the settle-ment, including the amount of the fine,were still being negotiated with theU.S. Attorney in Philadelphia. Ulti-mately, any settlement will have to beapproved by a federal judge. Under theagreement, the company is expected toplead guilty to a criminal charge. Thesettlement, if finalized, would bringSchering-Plough a step closer to resolv-ing a host of government investigationsthat have plagued the company. Butother investigations remain outstand-ing. Other drug companies could bestung by settlements on similar allega-tions of overcharging Medicaid. I amhopeful, the Schering-Plough settle-ment, which is believed to include aplan to overhaul the companys proce-dures and practices to avoid futurewrongdoing, will establish a new com-pliance standard for other companies.

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According to a story in The New YorkTimes, the government has alleged thatSchering-Plough failed to give the bestprices for its drugs to Medicaid pro-grams, a requirement under federal law.The crux of the case, according to theTimes and Wall Street Journal, concernsalleged kickbacks paid to private-sectorpurchasers of Schering-Plough drugs.The kickbacks allegedly lowered the netprice of the drugs below the price paidby Medicaid. The payments were some-times labeled as educational grants.Because federal and state governmentsjointly fund Medicaid, they are expectedto share the fine collected from Scher-ing-Plough. Last year, the drug makerpaid the balance of a $500 million fineto the U.S. Food and Drug Administra-tion that was part of a 2002 consentdecree with the government afterinspections had found violations ofmanufacturing practices at four facilities.

It is most unfortunate that drug com-paniesand otherswho make goodmoney as a result of federal programsbelieve they can cheat the governmentand U.S. taxpayers and get away withit. This corporate mindset is apparentlyso deeply rooted that it is hard to makethe cheating stop. I hope, the govern-ment will keep up its good work.However, most of the credit may haveto go to the whistle-blowers, who areexposing the fraud and corruption.

BANK ONE TO SETTLE HEDGE FUNDALLEGATIONS

Bank One Corp. has reached a settle-ment over improper mutual-fundtrading practices. This came before themerger with J.P. Morgan Chase & Co.The nations sixth-biggest bank agreedto a deal that will cost the company$90 million. The breakdown calls for$40 million in civil penalties, $10million in restitution and $40 million infee reductions for investors over thenext five years. The agreementinvolved Bank Ones investment unit,Banc One Investment Advisers. Clearly,fund investors must be protected. NewYork Attorney General Eliot Spitzer was

responsible for the settlement and hewas joined by the SEC. The markettiming practices were discovered lastsummer during Spitzers investigationof hedge fund Canary Capital PartnersLLC. Dozens of fund companies weresubpoenaed and a handful of othershave already agreed to multimillion-dollar settlements to resolve accusa-tions of wrongdoing, including AllianceCapital Management and Bank ofAmerica. Market timinga type ofquick, in-and-out-tradingis notillegal, but is prohibited by many fundsbecause it tends to skim profits fromlong-term shareholders. Regulators sayfunds that allowed selective market-timing committed fraud. I agree withtheir assessment.

RITE AID TO PAY $7 MILLION TO SETTLEDRUG CASE

Over the past few issues we havehad lots to write about concerning RiteAid Corp., the third-largest U.S. drug-store chain. Now the drug chain hasagreed to pay $7 million to settle alle-gations that it submitted false prescrip-tion claims to government healthinsurance plans. Rite Aid billed govern-ment health care programs for drugsthat were never delivered to beneficiar-ies of the government health card pro-grams and were later returned to stock.Under the settlement agreement, RiteAid will pay $5.6 million to the U.S.government and $1.4 million to 28states and Washington, D.C. The settle-ment covers a five-year period (1997through 2001).

Corporations doing business with theU.S. government cant be allowed tocheat and get away with it. Americantaxpayers shouldnt be burdened withthe costs of improper or false billingssubmitted to the government. Compa-nies that make such billings must beprosecuted. I was shocked to read RiteAids response. A spokesperson statedthat Rite Aid was simply involved in aonce-common industry practice andthat at least three other major drug storechains had entered into similar settle-

ments in recent years. A portion of thesettlement will go to settle whistle-blower complaints filed against RiteAid. Under the False Claims Act, privateindividuals who bring lawsuits againstcompanies can receive a portion of therecovery if the government agrees totake part in the suit.

WAL-MART SETTLES DRUG INSURANCE SUITS

Maybe Rite Aid was right when itsaid what it was doing was a commonpractice. We now learn that Wal-MartStores, Inc. settled a lawsuit allegingthat the company billed governmentinsurance programs for unfilled pre-scriptions. Wal-Mart, the worlds largestretailer, agreed to pay $2.9 milliondollars to resolve allegations its phar-macies billed insurers for full prescrip-tions, but delivered only part of anorder during the period 1990 through2000. I hope, the government willclamp down on companies that lie,cheat and steal. I happen to believecheating is cheating, regardless of whois committing the wrongful actsandthat includes large corporations.

WORLDCOM SUITS CONTINUE

The June deadline for 17 remainingbank defendants to settle a lawsuitbrought by investors under the termsalready agreed to by CitiGroup, Inc.has passed. The failure of theseremaining bank defendants to reach asettlement, however, wont necessarilyprevent them from settling the lawsuitbefore it goes to trial. The case is cur-rently scheduled for January 2005. Thelargest remaining defendants, J.P.Morgan and Chase & Company,Deutch Bank AG, and Bank of AmericaCorp. were given a deadline to settleunder a formula used to calculate thesize of CitiGroups payment. Citigroupwas to pay $2.65 billion dollars underthe settlement. The formula assigneddamages based on the portion of $17billion dollars of WorldCom bonds soldby each underwriter.

CitiGroup agreed to settle the class

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action lawsuit on May 10. It wasalleged that CitiGroup and 17 otherunderwriters of WorldCom bonds didnot conduct adequate due diligencebefore bringing the securities to marketin 2000 and 2001. Later, the plaintiffs,led by the New York State CommonRetirement Fund, indicated that the 17other underwriters would owe a totalof $2.85 billion dollars under theformula. Reports indicate that none ofthe large remaining underwriters haveboosted their litigation reserves.However, that may have changedwhen the banks announce theirsecond-quarter earnings in July. Wehadnt seen those reports when thisissue went to the printer. Reports indi-cate that some members of the under-writing group are in disagreement thatthey should be treated the same as Citi-Group. They argue that they were notas deeply involved with WorldCom asCitiGroup. It should be noted that partof CitiGroups settlement related not tobond underwriting, but to the actionsof Jack Grubman, its former startelecommunications analyst.

AMNESTY FUELS CRIMINAL ANTITRUST PROBEOF CHEMICAL INDUSTRY

A two-year old price-fixing probe thatbegan in an obscure corner of thechemical industry has snowballed into aseries of international investigationsinvolving industry giants such as DowChemical Co., DuPont Co. and BayerAG, the Wall Street Journal reportedrecently. U.S. and European investiga-tors currently are looking into allegedconspiracies to fix prices in a half-dozenchemicals used in plastics, rubber andsynthetic materials in the U.S., Canada,Europe and Japan. The commodities areused in industries from automobiles tofurniture and flooring.

At least four grand-jury investigationsstemming from the investigations cur-rently are under way in San Francisco.Among the latest markets underscrutiny are a widely-used plastic, ure-thane, and a synthetic rubber known asneoprene, the Journal reported. In pur-

suing the alleged conspiracies, U.S. andEuropean prosecutors are showing thatgranting amnesty from criminal chargesto the first company to blow thewhistle on a conspiracy can be apotent weapon against cartels. Compa-nies granted amnesty can escape hugefines and sometimes avoid jail time forexecutives, according to the Journalreport. So far, the inquiry has resultedin one guilty plea and a $50 millionfine for UniRoyal and its parent,Crompton Corp., of Middlebury, Con-necticut, in the case that initiallyspurred the investigations.

In a plea agreement announced inApril, Crompton acknowledged con-spiring with others to artificially boostprices of chemical used to makerubber, a $1 billion annual market,between 1995 and 2001. It had beenfingered for illegal conduct by a rivalthat had gone to the Justice Depart-ment. Those initial charges, though, arenow viewed as just the tip of theiceberg as U.S. and European investi-gators turn their attention to other com-panies and new markets, the Journalreported. Crompton brought other alle-gations of price-fixing to the attentionof U.S. and European investigators,gaining criminal immunity in thosemarkets. Other companies soon linedup, racing to be the first to report morealleged price-fixing in exchange forlenient treatment or amnesty.

BAYER TO PAY $66 MILLION TO SETTLEPRICE FIXING CHARGE

Bayer, Germanys second-biggestdrug and chemical maker, has agreedto pay $66 million to settle a U.S.charge it participated in a global con-spiracy to fix prices of chemicals usedto make rubber. Bayer agreed to assistthe governments investigation that hasalready netted the guilty plea ofCrompton Corp., which was fined $50million for its role in the cartel. Euro-pean Union and Canadian authoritiesare also investigating the cartel. Bayeragreed to plead guilty in federal courtin San Francisco to one charge of con-

spiring with other participants to fixprices between 1995 and 2001. Thecartel has harmed millions of Americanconsumers who use a broad spectrumof products manufactured with rubberchemicals. Bayer will likely face civillawsuits brought by tiremakers andother purchasers of chemicals formaking synthetic rubber.

FLORIDA RADIOLOGISTS SETTLEFRAUD CASE

When it comes to cheating the gov-ernment, not all of the cheaters are largecorporations. For example, RadiologyRegional Center (RRC), a group of radi-ologists in southwest Florida, will paythe United States more than $2.53million to settle allegations that it sub-mitted false claims to the MedicareProgram. Federal officials allege thatRadiology Regional Center knowinglysubmitted claims to Medicare for whichit was not entitled to payment. It isalleged that during part of the 1990s andearly 2000s, RRC billed Medicare forultrasound procedures, reconstructionprocedures and magnetic resonanceimagings (MRIs) that had not beenordered by the patients treating physi-cians. Federal officials alleged that RRCbilled for two venous or arterial studiesfor the same patient on the same datealthough only one of the procedureswas properly billable as a diagnosticprocedure and, instead, should havebeen billed as a screening mammogram.The civil settlement arises from awhistleblower suit brought by a formerRRC employee. As I have said repeat-edly, it is most distressing to seeanybody cheat the government. This isespecially true when you realize themassive money problems that our gov-ernment is experiencing.

MCI SUES FORMER CEO EBBERS FOR$408 MILLION

MCI Inc. has filed suit against itsformer CEO Bernard Ebbers. MCIwants him to repay $408 million thecompany loaned him over two years.

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The suit, filed in U.S. Bankruptcy Courtfor the Southern District of New York,also seeks to void Ebbers resignationagreement, which promised him a life-time pension of $1.5 million a year, anoffice and computer, and use of thecompany jet. Ebbers was forced fromthe company in April 2002 after theloans became public. The companyfiled for bankruptcy in July of that yearafter internal investigators uncoveredan accounting fraud that ultimatelytotaled $11 billion. The company cameout from bankruptcy protection in Aprilof this year. MCI is totally acting out ofan obligation to its shareholders torecover as much of the money owedthe company as possible.

Ebbers, who is charged with fraudand conspiracy connected to theaccounting fraud, has pleaded notguilty. MCI, then known as WorldComInc., made the loans to Ebbers begin-ning in the fall of 2000 and ending withhis resignation in April 2002. The loanswere restructured when Ebbersresigned in April 2002. Under theterms, Ebbers was allowed to repay theloan over five years at a below-marketinterest rate. But he missed the first $25million payment in April 2003. Theloans came about because Ebbers hadused more than 5.7 million shares ofWorldCom stock as collateral for bankloans he used to buy a shipyard, aranch and interest in timber compa-nies. When his banks called in hisloans, the company loaned him themoney to keep him from selling thestock. Thus far MCI has recovered$70.4 million from Ebbers. The Sar-banes-Oxley Act, a securities lawpassed in response to the WorldComfraud, Enron Corp.s collapse and othercorporate scandals, prohibits compa-nies from lending money to their exec-utives and directors. A formerexecutive of the company, CFO ScottSullivan, has pleaded guilty to fraudcharges and agreed to testify againstEbbers.

CHEMICAL COMPANIES SETTLE

DuPont Dow Elastomers LLC, a jointventure of the two largest U.S. chemi-cal companies, has agreed to pay $36million to settle antitrust claims by cus-tomers it overcharged for neoprene, asynthetic rubber. A federal judge inWashington has given preliminaryapproval to the settlement. DuPont Co.,based in Wilmington, Delaware, hasagreed to pay 100% of any liability ofthe joint venture up to $150 millionand 75% of any amount exceeding thatfigure.

V.CONGRESSIONALUPDATE

BRING DEMOCRACY INTO THE HALLS OFCONGRESS

All of the feuding and fussing in ourNations Capitol would make thefounders of our Republic turn over intheir respective graves. It is also gettingthe attention of folks around thecountry today. I received a statementfrom Public Citizen President JoanClaybrook recently that I feel is worthbeing read by every American wholoves our country and wants to pre-serve it. The following is Joans state-ment:

Democracy is a dearly cherishedway of life, but sometimes its rulesare hard to live by. Principles offree speech and tolerance for othersare particularly difficult rules tolive by for those who are in themajority and in control. WhileCongress works so hard at protect-ing the principles of democracy athome and abroad, it frequentlyignores those same principles forhow Congress works. That is why Iam delighted to be here toannounce Public Citizens supportof Representative Marty MeehansDemocracy in Congress Act. Con-gress has long had a history of par-

tisan bickering leading to func-tional breakdown, in which theparty in control attempts to squelchthe speech of the minority partyand derail full and open delibera-tion of public policies. Democrats,when they were the majority party,attempted to muzzle Republicansthrough unfair rules and proce-dures in the 1990s. Republicansare doing the same against Democ-rats today.

It is time to stop the bickering andfunctional breakdown, and bringdemocracy into the halls of Congress.Republicans proposed exactly this backin the 1990s; Representative Meehanproposes it today. Lets finally listen,recognize the value of democracy inthe policymaking process and get Con-gress on track in addressing thenations and the worlds problems.Some of the problems of a Congressthat operates in an undemocratic wayhave become ever-so obvious in recentyears. Touching upon some of themost critical legislation passed by Con-gress, these problems include: First, anabsence of full deliberation on legisla-tion. Today, the minority party is notallowed under the rules of Congress toconduct formal hearings on legislativematters or offer a full minority alterna-tive bill to proposed legislation. Evenmore alarming, congressional rulesallow the majority party to fundamen-tally re-write legislation in conferencecommittee behind closed doors andwithout any accountability. Republi-cans inserted a variety of special-inter-est giveaways in the HomelandSecurity Act - such as the exemptionfor the Eli Lilly Company from lawsuitsfor faulty products - that were whollyunrelated to homeland security. Noone even knew who inserted thesespecial-interest provisions, even afterTomPaine.com offered a $10,000reward for the identity of the Congressmemberor lobbyistwho insertedthe Eli Lilly giveaway.

The Democracy in Congress Act willend these back-door, secretive deals by:

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Guaranteeing that the minority partymay introduce full alternative billsand amendments to pending legisla-tion for consideration by the House

Requiring that final text of bills,amendments and conference reportsbe in print and publicly available on-line for three days before a final vote;

Creating a stand by your earmarkrule that would require each amend-ment to a bill in conference commit-tee to be publicly recorded andattributed to a specific lawmaker; and

Stopping the practice of extending thetime period for congressional votesfor the purpose of lobbying membersto change their vote beyond 30minutes. The time period for castingvotes should not be changed when-ever the majority party thinks it mightbe losing the votecount.

A second structural problem is thelack of public accountability for lobby-ists. Lobbyists have proven instrumen-tal in shaping, if not drafting, thelegislation that comes out of Congress.Yet, the public knows very little aboutwhat these lobbyists do and who theyrepresent. Sure, there are some generaldisclosure requirements imposed uponlobbyists: They report how much theyare getting paid and the general issueareas they work on to the Clerk of theHouse and the Secretary of the Senate.The Senate Secretarybut not theClerk of the Househas at leastscanned some of these reports onto itsWeb site, but even professionalresearchers can make little heads ortails of these scanned reports.

The lobbyist reports on the Secretaryof the Senates Web page are notsearchable or sortable by bill numberor special-interest group and are noteasily downloadable to be placed intoa more useful database program. Quitefrankly, if you do not live in Washing-ton and have a lot of free time on yourhands, you cannot figure out who islobbying for what and on behalf ofwhom. Adding to the veil of secrecywhen it comes to lobbying, whole cate-gories of lobbying activity known as

grass-roots lobbying, in which aspecial interest group buys TV adsacross the country to muster publicopposition to legislation, is notreported at all.

The Democracy in Congress Act willhelp tear down the veil of secrecy inlobbying by:

Requiring lobbyists to file theirreports electronically and the Houseand the Senate to disclose thosereports in a searchable, sortable anddownloadable format on the Inter-net, like the Federal Election Com-mission does for campaigncontributions;

Requiring lobbyists to disclose theirone-on-one contacts in person or byphone with members of Congress orthe executive branch;

Requiring lobbyists to report the totalamount spent on grass-roots lobby-ing activity intended to influencefederal legislation; and,

Requiring members of a lobbyingcoalition to disclose how much theycontributed to fund the lobbyingactivities of that coalition. Currently,only the coalition reports its total lob-bying expenditures, while the contri-butions by members of the coalitionremain cloaked from public view.

Congress will function well onlywhen it learns to value the principlesof democracy and operate under openand fair procedures. The Democracy inCongress Act brings Congress a longway toward the democratic ideal.

STATE ATTORNEYS GENERAL HELP STOPCLASS ACTION BILL

As we all know, the class action billin the U.S. Senate was derailed lastmonth. I consider that to have been avictory for American consumers. Thewarning letter sent to congressionalleaders by New York Attorney GeneralEliot Spitzer and Oklahoma AttorneyGeneral W.A. Drew Edmondson onbehalf of 11 other Attorneys Generalplayed a big part in stopping the

Senate from acting on the bill. Thegrave threat to consumer rights posedby the so-called Class Action FairnessAct, was graphically pointed out bythe letter. The act, which was pendingbefore the Senate, was effectively killedwhen it was put off again on July 8th.Sponsors couldnt garner the requirednumber of votes to bring it up, and thatreally wasnt much of a surprise. TheAttorneys General stated that passagewould have denied millions of con-sumers the ability to hold companiesaccountable for unscrupulous businesspractices. The Attorneys Generalwanted the bill amended to provide fornationwide class action lawsuits. Thebill, S. 2062if passedwould removethe class action lawsuits from statecourts and place them instead in thefederal courts. The power to adjudicatemany consumer lawsuits againstcompany wrongdoing would havebeen denied to the state courts. Therecan be no justification for passage ofthis bill. The federal courts are alreadyloaded with work and couldnt handlethe influx of cases from all parts of thecountry. A coalition of corporationsand business groups has lobbiedrelentlessly for passage of the bill.

ASSAULT RIFLES SHOULD BE BANNED

The recent killing of three Birming-ham police officers by a man using anassault rifle has put a hot political issueback in the spotlight. Personally, Ireally believe that all assault riflesshould be banned in this country. A billin Congress, supported by top lawenforcement officers, will address thisproblem. I hope, this bill will becomelaw. The SKS, a semiautomatic riflewhose rounds can penetrate the protec-tive vests worn by most police officers,has been used to kill a number ofpolice officers around the country. TheSKS and similar semiautomatic riflesshould not be available to the generalpublic. I understand that the SKS, aSoviet-made rifle that preceded the AK-47, is the semiautomatic rifle most oftenused against police officers. I strongly

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oppose gun control, but I also supportlaw enforcement and the men andwomen who put their lives on the lineevery day, and I cant justify allowingthese military rifles to be on the streets.

The three officers in Birminghamwere wearing protective vests whenthey were shot while trying to arrest aman on a misdemeanor assaultwarrant. The SKS is readily available atgun stores throughout Alabamabecause they are not among theassault weapons banned by Congressin 1994. A federal bill that would makepermanent the current ban, which endslater this year, also would broaden thedefinition of assault weapon toinclude the SKS, Bushmaster (which ismuch like the U.S. Armys M16) andsimilar models.

In March the U.S. Senate narrowlyapproved a 10-year extension of theban without the broader weapon defi-nition. Apparently, there are millionsof these rifles in circulation at present.The SKS is popular because its a light-weight, easily concealable weapon thatcan be bought for about $200. At somepoint, the politicians who oppose allforms of gun control must realize thatwe must protect law enforcement offi-cers who have become the targets ofassault rifles in the hands of criminals. Ihave never heard a good explanationfor letting this happen.

IDENTITY THEFT LEGISLATION PASSES

A bill has been passed in Congressthat will require five-year prison sen-tences for people convicted of using orproviding fake IDs to help terrorists.The bill was approved with bipartisansupport and was signed by PresidentBush. The ability of judges to give pro-bation, reduce sentences or give con-current sentences for identity theftlinked to felony crimes will be takenaway. This will give prosecutors bettertools to punish identity theft, especiallywhen it is used to commit terrorist acts.I have not read the new law, but basedon what I have been told by friends inthe U.S. Senate, it is a good one.

VI.PRODUCTLIABILITY UPDATE

CHRYSLER LOSES IN SEATBACK CASE

On March 24, 2004, after a 5-weektrial, a jury found that the front seat-back in a Chrysler Plymouth Voyagerminivan was defectively designed. Theseatback had collapsed in a 25-30 mphrear impact. The plaintiff, a 48-year-oldfemale at the time, alleged traumaticbrain injury, TMJ (jaw) dysfunction,two herniated disks and other prob-lems, which totally disabled her. Daim-lerChrysler Corporation basicallyargued that the vast majority (perhaps95%) of the cars on the road havesimilar seatback strength and that it farexceeded the federal standard for seat-back strength. The carmaker alsoclaimed any injury that occurred wasdue to the crash itself, not the seatbackyielding rearward. The defense alsotried to say that certain of the plaintiffsinjuries existed before the accident orwere not as severe as plaintiff alleged.Plaintiff did not dispute the first twodefenses. The jury found that the seat-back was defectively designed andawarded $2,160,000. DaimlerChrysler isliable for $1,296,000 of the award. Theother defendant was the driver of thevehicle that struck the plaintiffs car onMarch 21, 1999. That defendants insur-ance carrier settled early in the trial for$600,000.

DCX MINIVAN AIRBAG CLASS ACTIONGETS THE GO-AHEAD

The U.S. Supreme Court has refusedto stop a national class action over thesafety of minivan airbags. Oklahomastop appellate court had ruled that alawsuit against DaimlerChrysler Corp.could proceed on behalf of a class. Theclass would include up to 1 millionowners of 1996 and 1997 minivans inOklahoma. The case was filed under aMichigan law. The nations highestcourt declined, without comment, to

consider the appeal. The claim was thatfront passenger seat airbags in the mini-vans deploy in low-speed accidents andwith excessive force, potentially hurtingchildren or small adult passengers. Astate judge who supported giving thecase national class action status, notedthat it would cost $300 to $500 toreplace airbags in each vehicle.

The Oklahoma Supreme Court ruledlast year that the lawsuit could goforward, under Michigan law becausethats where DaimlerChryslers NorthAmerican headquarters are based. In itsappeal, DaimlerChrysler argued thatthe Oklahoma Supreme Court violatedthe commerce and due process clausesof the U.S. Constitution by approvingthe class. The automaker said class cer-tification occurred only because thelower court improperly presumed thatMichigan breach-of-contract law wouldapply, rather than the law of each carowners home state. The company con-tended that such a trial would beunconstitutional.

The suit, which seeks unspecifieddamages, says the passenger airbagsdeploy too forcefully in 1996 and 1997Chrysler minivans, including the Ply-mouth Voyager and Dodge Caravan.The lawsuit claims that the companysdecision to install the airbags hascaused death or serious injury in anumber of cases. The plaintiffs lawyersstated in their brief: Neither technol-ogy nor governmental regulationrequired it to use the defective, over-powered airbag it chose. This caseinvolves folks whose airbags haventdeployed and caused injuries. TheU.S. Chamber of Commerce led thefight against the lawsuit on appeal.

HOW TO SAVE YOUR NECK IN A REAR-ENDCOLLISION

Finally, a long overdue vehicle safetyimprovement is actually happening.The designs of head restraints in moreand more passenger vehicles are finallybeing improved so that many occu-pants are better protected from what iscommonly referred to as whiplash

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injury. For years, head restraints werepoorly designed. Most of them wereadjustable, but even when they wereadjusted to their highest positions, theystill werent behind and close to thebacks of the heads of many occupants.Safety experts tell us thats where therestraints need to be in order to protectthe neck in a rear-end collision. Today,more head restraints can be positionedcorrectly and the geometry is gettingbetter. But, many people still dontadjust the positions of their restraints.In 1995, the Insurance Institute forHighway Safety began to rate headrestraint geometry, finding only 3% ofvehicles had good head restraints,while those in 82% of new passengervehicles were poor. Since that timethese proportions have been changingsteadily for the better. By the 2003model year, 45% of passenger vehicleshad head restraints rated as good. Atthe same time, the percentage of vehi-cles with poor restraints had droppedto 10. Institute chief operating officerAdrian Lund says: This improvementshows automakers have gotten themessage. It used to be that unless youwere short, youd have trouble findinga vehicle with head restraints thatextended high enough to protect you.Now automakers are making improve-ments so that in many vehicles eventaller people can position the headrestraints where they need to be.

A well-designed head restraint, inconcert with the seatback, can reducethe risk of whiplash injury by reducingthe differential motion of an occupantshead and torso in a rear-end crash.Unsupported, the head will lag behindas the torso is accelerated when a car ishit from behind. This differentialmotion can cause the neck to bendbackward in a motion that resemblesthe lash