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News - February 2001
Reuters - February 28, 2001
New York Life Insurance Co. was sued on Wednesday by a group of current and former sales agents claiming the giant U.S. life insurer held back retirement benefits and fired more than 1,300 agents unfairly.
New York Life did not immediately return calls for comment on the suit, which could cost the New York-based insurer hundreds of million of dollars.
The group of 10 agents claimed in the suit that New York Life has not paid benefits it promised when it introduced a new retirement plan for agents in 1991. Sales agents represent the insurer but are not considered employees.
The agents alleged that the insurer did not pay benefits to agents who had served less than 20 years at the firm, and arbitrarily applied quota systems as a pretext for firing agents before they reached 20 years of service.
The agents claimed that this was part of a fraudulent scheme to evade the Employee Retirement Income Security Act (ERISA), which regulates retirement benefit plans.
The insurer also faces a lawsuit filed last year alleging that it illegally invested hundreds of millions of dollars from its employees' pension plans in its own range of mutual funds.
Business Wire - February 28, 2001
After a four-week jury trial in federal court in New Haven, Connecticut, the Connecticut Carpenters Pension Fund has been awarded a judgment of $39.9 million against Watson Wyatt & Company, one of the largest actuarial firms in the United States.
The jury found that Watson Wyatt was negligent, committed malpractice and breached its contract with the Fund, which provides pension benefits to several thousand unionized carpenters and their families in the State of Connecticut. The Fund charged that Watson Wyatt made serious errors in calculating the Fund's pension liabilities.
Speaking on behalf of the Trustees, Fund Director Richard S. Monarca said that the Fund is "extremely pleased that the jury recognized the serious injuries that were inflicted on the Fund by Watson Wyatt's misconduct."
The Fund was represented by Lewis R. Clayton of the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison. For further information, contact: Lewis R. Clayton, 212-373-3215, firstname.lastname@example.org.
Poughkeepsie Journal - by Craig Wolf- February 21, 2001
A group of IBM Corp. employee shareholders says executives collect millions in extra pay because of a pension fund surplus management fattened by cutting benefits. A stockholder attempt to block this practice by putting a proposal up for a vote at IBM's annual meeting April 24 was shot down last week by the federal Securities and Exchange Commission, whose staff said the proposal was about ''ordinary business'' and inappropriate.
The attempt sheds light on the issue of how executives may realize personal financial benefits from trimming pension benefits for employees. Hundreds of companies have shifted to cash-balance pensions as IBM did in mid-1999, and some employees say the changes shrank the value of their retirement assets.
Heading the movement is James Leas, an IBMer in Burlington, Vt., who is also a lawyer. He represents Donald Parry of Florida, the lead proponent on the proposal, and 162 others. Leas disagreed with the SEC ruling but said no court challenge is planned.
"I think our effort was worthwhile if a number of people better understand how slashing retirement pay for employees allows the company to report a higher profit under an accounting rule, even though no money is transferred to the company, and how executives take millions for themselves since executive incentive compensation depends on the report of profit,'' Leas said.
Leas and Parry sought to have future executive incentive pay based on ''real company operations'' not including pension fund surplus, and that IBM give ''transparent'' financial reporting of profit from real operations.
Leas points to IBM's public financial reports for his argument that executives get incentives for creating ''vapor profits,'' his term for accounting-rule profits that don't come from basic business operations, like selling computers and services.
In its 1999 annual report, IBM disclosed in a footnote that its pension plans produced a ''net periodic benefit'' of $762 million, based on an overall surplus in the plans of about $17.2 billion.
In its quarterly reports to the SEC for 2000, the company characterized the $762 million as expense reductions. ''The conversion to the amended U.S. pension plan, the Personal Pension Account... contributed an estimated $167 million,'' IBM management said.
That was the cutback that sparked the reform movement.
The $762 million carried over to become part of the company's 1999 bottom-line earnings, which amounted to $7.7 billion net income, or profit.
And that profit helps determine how top executives get compensated. The 1999 proxy statement disclosed about $16 million paid to the top five in 1999 under the Long-Term Performance Incentive plan that is tied to specific financial performance goals -- most of it for earnings per share and the rest for cash flow. Chairman and CEO Louis V. Gerstner Jr. got a 1999 payout of $5.25 million, the statement said. His salary was $2 million.
Gerstner's total compensation for 1999 was $14.8 million. At the end of the year, Gerstner held ''performance stock units'' and ''restricted stock units'' having a combined value of $42 million.
How did pension funds get linked to executive compensation? That story goes back two decades.
By federal law, companies have to run pension funds for the benefit of employees and pensioners, and such monies can't be used by the company for anything but pension expenses. But in the 1980s, many plans were underfunded, jeopardizing pensions and straining the federal Pension Benefit Guarantee Corp. So in 1985, the Financial Accounting Standards Board, an accounting industry group, ruled management had to report such deficits on the bottom line.
That dragged down earnings -- effectively penalizing companies for failing to fully fund pension plans. Because top executives typically get large parts of compensation from performance, they had an incentive to shape up the plans.
Then, with rising stock market prices, plan assets burgeoned, and an era of surpluses dawned. Just as deficits had dragged down the earnings, surpluses pumped them up. This was only fair, companies argued.
The practice took on a sharp edge when executives began to reduce pension obligations, much of it in the form of conversions to cash-balance plans, critics argue.
''They are engaged in an activity that personally benefits them but does not benefit the company or the stockholders,'' Leas said. ''It's a legal form of pillage.''
Robert Djurdjevic, president of consultant firm Annex Research in Phoenix, said the inclusion of pension fund surplus on the earnings line is another form of ''financial engineering'' that generates ''the illusion of prosperity.''
These include the effects of large stock buybacks and other activities that don't reflect sales. ''All of those put together should cause concern and the need to scrutinize,'' he said.
''Clearly, this has been part of the smoke and mirrors game that Armonk plays in order to make itself look better,'' Djurdjevic said.
There will still be a shareholder proposal on the proxy statement to be sent out in March by IBM before the April 24 meeting in Savannah, Ga. That's Leas' 2001 version of one that made it onto last year's ballot, despite IBM's opposition. It calls for the board to give all employees the option of keeping the old pension plan.
Though it was defeated, the resolution won 28.2 percent of the vote, exceeding the typical tally for shareholder proposals. This year, Leas said, approaches are being made to more institutional investors to build support for the resolution.
Smart Money - February 21, 2001
Troubled office equipment company Xerox Corp. has been named in a lawsuit accusing current and former executives of securities violations, the company revealed in a government filing.
In an report to the U.S. Securities and Exchange Commission filed on Tuesday, Xerox said the complaint alleges that in an attempt to inflate its stock price, certain executives made false statements and employed improper accounting practices as well as other infractions.
The suit, filed in Connecticut, names the company's chairman and chief executive, Paul Allaire; former CEO Richard Thoman; Chief Financial Officer Barry Romeril; former Controller Philip Fishbach; and current Controller Greg Tayler, and charges them with violating securities law.
Lawyers for the plaintiffs said they seek damages for those who bought stock between February 1998 and February 2001.
A Xerox spokeswoman said the company vehemently denies any wrongdoing and will vigorously defend itself.
Earlier this month, Stamford, Conn.-based Xerox said investigators it had hired concluded that senior management acted responsibly in regard to an accounting debacle at its Mexico unit. Xerox then said that any fiscal irregularities were limited to its Mexico operation.
The probe uncovered ineffective collection actions and billing inaccuracies, insufficient bad-debt reserves and improper transaction classifications on the sale, lease or rental of equipment. Managers in Mexico, whom the company said engaged in collusion, were fired in June 2000.
Xerox's stock remains under pressure as it deals with lingering questions about its management, even as it attempts to remedy other problems that have bruised its reputation, such as shrinking margins and bad debts from customers.
"Court Says Some Veterans Owed Lifetime Medical Care" moved to a new location
Public Citizen - Press Release - February 19, 2001
Two Web Sites Critical of Pacifica Foundation are Subject of Lawsuit Threats; First Amendment Protects Critics, Public Citizen Says
WASHINGTON, D.C. - In a move that is widely viewed as an attack on First Amendment rights on the Internet, Pacifica Foundation has said it will sue to force two groups embroiled in a controversy over the radio network to dismantle Web sites critical of Pacifica.
A lawyer representing Pacifica sent letters last week to Friends of Free Speech Radio in California and WBAI Listener Network in New York, demanding that the two groups abandon the use of their domain names and relinquish all rights to those names by today, Feb. 19, or face legal action. Pacifica is claiming that the groups, which operate www.savepacifica.net and www.WBAI.net, are violating trademark laws.
Representatives of the two groups have said they will not dismantle the sites. Public Citizen, which champions First Amendment rights on the Internet, will represent the groups if Pacifica sues, as expected. A Pacifica attorney has told Public Citizen that it will indeed go to court.
"We cannot sit by idly while corporations try to silence people using illegal intimidation tactics," Public Citizen President Joan Claybrook said. "The law is quite clear about First Amendment rights, which apply on the Internet as much as in traditional forms of print."
The controversy stems from a conflict between Pacifica's management and station employees and members over the network's future. Management is viewed as seeking to sacrifice programming for profits, while employees and many community activists say they don't want to give up the progressive programming for which Pacifica is noted.
In its Feb. 14 letters, Pacifica Foundation attorney Tanya Vanderbilt, of Epstein Becker & Green, P.C. in Washington, D.C., claims that the use of the Web site domain names is a trademark infringement, could confuse people who go to the Web to look for Pacifica's site and restricts Pacifica from conducting business on the Internet under its own name.
But Paul Alan Levy, an attorney with Public Citizen Litigation Group who has represented people in several similar cases, said Pacifica's threats would not hold up in court. Trademark infringement occurs when a company's name is used in a misleading way to profit from consumer confusion about whether the company has sponsored the message, he said. This clearly didn't apply in this case, because both sites are clearly non-commercial, he said.
"The First Amendment fully supports the kind of speech that is posted on these Web sites," Levy said. "It's unbelievable that Pacifica has to resort to bullying tactics, rather than addressing the internal problems that have led to this dissension."
Said Friends of Free Speech Radio member Robbie Osman, "Savepacifica.net and wbai.net are legal and valuable Web sites. They offer information about the actions of the present Pacifica board. They make no pretense to being anything else." He added that "Pacifica historically has defended free expression and encouraged fair and open debate. We must not allow it to descend into thuggishness and censorship."
Patty Heffley of WBAI Listener network said, "Pacifica is trying to stifle free speech on their own broadcast network and now in some Orwellian fashion they are trying to silence those who listen as well."
In a similar recent case, Public Citizen represented an airline passenger who was so upset about how Alitalia handled his lost luggage complaint that he launched a Web site entitled www.alitaliasucks.com. The airline sued for trademark infringement, among other things, but dropped the suit shortly after a judge demanded that a top company official, such as the president, come to court to explain why the company brought the case.
The Atlanta Journal-Constitution - By Nancy Fonti - February 16, 2001
Two Delta Air Lines pilots have filed a lawsuit claiming the company incorrectly calculated the value of their pensions, which reduced the amount of retirement pay to which they were entitled.
Lawyers for the pilots are seeking class-action status for the lawsuit, filed against Delta's pension fund. They say it could cover 17,000 pilots and be worth up to $1.6 billion.
Delta is reviewing the suit and is confident that the structure of its pension plan is correct, a spokesman said.
In the lawsuit, filed this week in the U.S. District Court for Southern Illinois, Herbert Johnson Jr., a current pilot, and John Waeltz, who retired in 1997, allege that changes Delta made to its pension plan during a 1996 cost-cutting effort violated Internal Revenue Service rules. The suit also alleges that Delta, by offering pensions in lump sum distributions, also did not fully compensate workers.
For pilots hired before 1972, Delta provided a pension based on a formula linking the value of a pension to the return on the Standard & Poor's 500 index. Alternatively, pilots could receive a pension based on 60 percent of their average earnings, if the value exceeded that calculated under the formula.
In 1996 Delta changed the way it calculated pilot pensions, freezing the value of the link to the S&P return and using that value to calculate the pensions of retiring pilots hired before 1972. The change eliminated the potential for growth based on rising S&P returns, according to the suit.
That part of the suit doesn't apply to pilots hired after 1972, whose pensions are based only on 60 percent of their average earnings.
The Air Line Pilots Association, which is in heated contract talks with Delta, hasn't taken a position on the suit but is monitoring the case, said Karen Miller, a spokeswoman.
She said the case is similar to one filed in an Atlanta court on behalf of four retired pilots.
New York Times - By STEVEN GREENHOUSE - February 15, 2001
The administration has told union leaders that President Bush will soon issue an executive order effectively reducing the amount of money that goes to organized labor's political campaign coffers, union officials said today.
The officials, concluding a meeting of the A.F.L.-C.I.O. executive council here, said the order, long sought by many Republicans, was one of four opposed by unions that administration officials had told them the president was planning to issue.
Another of the four will reverse a Clinton administration policy that has often given unionized construction companies priority on federally financed projects.
The order affecting labor's campaign war chests will require federal contractors to post a notice telling workers they have a right not to pay that part of union fees used for political activities.
That right was established in a 1988 Supreme Court ruling, and the fight over notification of it has been heated, with many Republican politicians arguing that such a notice is the only way a large number of workers will learn about it.
Union leaders voiced immediate consternation today.
"It's very in-your-face," said Denise Mitchell, the A.F.L.-C.I.O.'s communications director. "This shows they're intending to send a clear signal to unions that they have no intention of respecting their work or contribution."
Stuart Roy, a Labor Department spokesman in Washington, declined to comment tonight. Scott McClellan, a White House spokesman who handles labor issues, said, "I can't help you."
The Labor Department, Ms. Mitchell said, told Gerald Shea, a senior A.F.L.-C.I.O. official, about the planned executive orders today, just a day after Secretary of Labor Elaine L. Chao promised the federation's executive council that she would listen to union leaders' views and convey them to the White House before major decisions were made.
Ms. Mitchell said that Labor Department officials had told union leaders that they had asked the White House to delay the executive orders so that the department could first hear the unions' views, but that officials there had rejected any postponement.
The administration's move will restore two orders that President Bush's father issued as president but that the Clinton administration revoked.
In one of those two, the new president would make it easier for workers employed by a federal contractor to withhold part of the fees paid to the union representing their workplace. That move seeks to enforce a 1988 Supreme Court ruling, Communications Workers of America v. Beck, that guarantees a right not to pay any union dues that go to political activities. Workers who choose to belong to the union must pay their full dues; workers who decide not to belong pay a fee typically equivalent to the dues. Only by choosing not to join the union can a worker invoke the right under the court's ruling to withhold the part of the fee that would go to political activity.
Many Republicans have pushed for such an executive order because it will reduce contributions to union campaign coffers, and for the same reason many Democrats have opposed it.
As for labor's position, Ms. Mitchell said: "People certainly have Beck rights. But this is obviously intended to be an indirect comment on unions' role, when there is no posting of people's rights to join a union."
Restoring another order that his father once issued, Mr. Bush will bar a type of agreement, known as a project labor agreement and employed at the discretion of the individual states, requiring that contractors in many federally financed projects be unionized.
A third order to be issued by the president will dissolve the National Partnership Council, a Clinton-era effort in which government managers and unions representing federal workers sought to resolve their differences.
The fourth order, revoking another Clinton administration policy, will eliminate job protections for employees of contractors at federal buildings when the contract is awarded to another company.
The order cutting into union campaign coffers follows the huge role that organized labor played in Vice President Al Gore's presidential campaign. Tens of thousands of union members made phone calls and distributed fliers, help that was pivotal for Mr. Gore in large swing states like Michigan, Wisconsin and Pennsylvania.
Unions are forbidden by law to donate money from their treasuries — including dues or fees from workers — directly to candidates. Such money can be used for political purposes only in get-out-the-vote drives, issue advertising and so forth.
Like corporations, however, many unions set up political action committees and ask their members to donate. This money can go directly to a candidate's campaign.
Wall Street Journal - By Norihiko Shirouzu - February 15, 2001
A group of salaried workers at Ford Motor Co. has sued the auto maker, charging that it used an employee-evaluation system to weed out older workers.
The complaint by nine workers comes against the backdrop of unease inside Ford about the new review policy, which marks a sharp change from the company’s previous practices and is a highly visible symbol of Chief Executive Jacques Nasser’s crusade to overhaul the 98-year-old company’s culture. The policy, a merit-based review system, was instituted at the beginning of last year.
Under Mr. Nasser’s evaluation system, which affects some 18,000 Ford salaried workers around the world, employees are graded A, B or C. Last year, 10 percent of salaried workers received A grades, 80 percent got B’s and 10 percent received C’s. The auto maker altered the system, analogous to the grading system on a curve used in school, for this year’s evaluation so that only 5 percent of the affected workers would receive C’s, and 85 percent B’s and 10 percent A’s. According to the company, those who receive C’s are not eligible for pay raises or bonuses, and those who get a C ranking for two years straight may be asked to accept demotion or leave the company.
Ford spokesman Ed Miller declined to comment specifically on the age-discrimination case, but noted that the new evaluation system is not biased against older executives and engineers. “This suit attacks diversity, but we see diversity as being diverse in race, gender and age,” he said. Ford is committed to becoming “a diverse company, racially, ethnically and along gender lines, age and sexual orientation.”
The suit highlights the obstacles that corporations face when they use personnel policies to affect culture change. Mr. Nasser, a Lebanese-born Australian who became Ford’s chief executive in 1999, has championed a drive to increase diversity at the company and build a younger, more diverse management team that is capable of embracing new technology and other changes in the marketplace.
But lawyers for the plaintiffs in the age-discrimination complaint, filed earlier this week in the Wayne County Circuit Court, say Ford is using the evaluation system to systematically pluck out older managers.
“We believe the new evaluation system was deliberately designed to reduce Ford’s work force based on age,” said Sue Ellen Eisenberg, one of the three principal lawyers for the plaintiffs. “Ford Motor Company — and I analogize this to ethnic cleansing — is trying to assess its workers by stereotypes such as beliefs that older people are slow to embrace new learning opportunities, or slower to upgrade skills, or reluctant to become involved with change initiative.”
One of the plaintiffs in the age-discrimination case, John Wyrwas, 60 years old, said he has successfully completed training for Ford’s “six sigma” quality-improvement program and was carrying out a project last year to improve the product-prototyping process as a “black-belt” candidate in the quality initiative when he received a C grade. Ford has said the black-belt status is intended for top-performing employees with leadership and extensive knowledge in math and statistical analysis.
The process under which he was given a C grade was “devoid of any objective criteria,” Mr. Wyrwas said.
Dow Jones - By Phyllis Plitch - February 8, 2001
Armed with stock in their former companies, some retirees are widening their offensive in the corporate pension wars.
Charging that they're being shortchanged in their pension benefits, the retirees are ganging up on old employers - seeking to tie their pension-related grievances to executive pay packages.
Specifically, the increasingly activist pensioners have floated a set of shareholder proposals at several blue-chip companies, taking aim at their incentive-based compensation plans. At issue are "pension credits" generated by overfunded pension plans that flow to income.
International Business Machines Corp. (IBM), Verizon Communications Inc. (VZ), Qwest Communications International Inc. (Q) and General Electric Corp. (GE) have each been hit with versions of the non-binding resolutions, which recommend that pension gains not feed into performance-based compensation awards.
Because companies booking pension gains are following generally accepted accounting principles, the process isn't about to change anytime soon. But some retirees see the issue as a way to gain leverage in their fight to draw higher benefits, including more frequent cost-of-living increases.
Still, how many of the resolutions will eventually come to a vote remains a question. So far, two of the companies have received an okay from the Securities and Exchange Commission to exclude them from their proxies.
Increased attention to pension credits comes at a time when such gains are receiving greater scrutiny. Of late, however, much of the focus has been on the potential impact for investors if they were to suddenly evaporate.
In December, after Northrop Grumman Corp. (NOC) warned that its 2001 earnings might be affected by a drop in pension income, questions arose about what other bottom lines might meet a similar fate, if the market continued taking a beating.
Retirees are approaching the issue with a very different perspective, complaining that the setup produces a perverse result if pension plan contributions help line executives' pockets, while they forego cost-of-living increases.
"They're walking to the banks on the backs of retirees," said Donald Parry, a 67-year-old former IBM systems engineer, who retired over a decade ago.
The shareholder proposals are also just the latest reflection of frustration among retirees and employees over the way pension funds are being handled by corporate caretakers.
One of the more prickly issues to emerge in recent years is the conversion to cash-balance plans, which reduces benefits for longer-service workers.
IBM stoked employee anger when it announced in 1999 that it was switching to a cash-balance plan from a defined-benefits plan. Despite the company's more than doubling the number of employees eligible to choose between the two plans, an employee-led insurrection resulted in a shareholder resolution requesting that all employees be given a choice. The resolution won more than 28% of the vote in 2000 and is expected to once again appear on IBM's ballot this year.
The gray shareholder activists may be ready to rumble at this year's annual meeting, but some corporate officials are successfully erecting legal hurdles to keep the resolutions out of their proxy materials.
For the second year in a row, the SEC staff backed GE's challenge, saying they wouldn't recommend enforcement action if the proposal, submitted by a former GE electrical assembler turned union official, was excluded from the proxy.
Similarly, the SEC has issued a so-called no-action letter to IBM, though the sponsors have asked for a commission review of the decision, which is still pending.
In all three cases, the SEC's decision was based on a proxy rule that allows companies to exclude proposals related to "ordinary business."
An SEC challenge by Qwest raising questions about a number of the proponents' conclusions - including some related to the purported link between pension income and performance-based compensation plans - is also pending. But lawyers advising the retirees say the proposal stands a chance of passing muster with agency staff because it was drafted in such a way to avoid fatal flaws.
A Qwest spokesman provided no immediate comment about the shareholder proposal.
The IBM resolution, for instance, was apparently tripped up by an accompanying recommendation that called for "transparent financial reporting of profit from real company operations," which the SEC considered ordinary business.
Confirming only that the no-action letter was granted, IBM declined further comment. But in an 11-page letter to the SEC, Big Blue tore into the resolution, arguing that it was vague and indefinite as well as false and misleading - grounds for omission under the proxy rules.
IBM zoomed in on suggestions the company is manipulating its profits, among other things.
"By stating that IBM 'boosted its 1999 profit' ... the proponent is intimating, falsely, that IBM is acting in a manipulative manner," an IBM lawyer wrote, also noting that any losses from pension assets would also be expensed under the same rule. "IBM is not 'boosting' anything. IBM is complying with the terms of a well established financial accounting and reporting standard."
Shareholders of at least one company, it seems, will get to weigh in on the issue. Verizon, which declined to comment before shareholders received the company's proxy, has made no effort to omit the resolution, sponsors said.
Submitted by C. William Jones, president of the Association of BellTel Retirees, it requests that Verizon's board adopt a policy "that determines future awards of performance-based compensation for executive officers using a measure of earnings per share that does not include non-recurring accounting rule income, particularly 'pension credits' resulting from increases in the employee pension fund surplus."
A 62-year-old former managing director of corporate planning, Jones said he hasn't seen a cost-of-living increase since retiring from Verizon predecessor New York Telephone nearly a decade ago. Pension minimums were raised in recent years, and a lump-sum payment was made last year, he said.
A company official couldn't immediately be reached to confirm Jones' assessment.
Jones and fellow retirees started organizing in 1996 and are now 48,000 strong. But after realizing several years ago that it wasn't so easy to get management's attention at annual meetings, the group decided to become more " brazen" with the help of shareholder resolutions, including two he expects will be voted on again this year, concerning golden parachutes and board makeup.
Anticipating three retiree-sponsored proposals on the proxy card, Jones envisions a corporate takeover of sorts at Verizon's annual meeting.
"We will be taking over the entire meeting this year," Jones said. "We'll let the chairman make opening remarks and we'll take over from there."
New York Times - By MARIA NEWMAN - February 7, 2001
An electrician was finishing work on an electrical switchboard at William Paterson University in 1996 when two live wires connected and the device exploded into a ball of flames, lifting him off his feet, throwing him across the room and leaving him near death.
Now, a New Jersey jury has ordered the manufacturer of the switching device to pay $50 million to the electrician, Patrick Horan, who was burned and scarred over more than half of his body. The jury, returning its verdict on Friday in State Superior Court in Paterson, also awarded his wife $5 million.
Gary Bagin, a spokesman for Jury Verdict Research, an organization that maintains a nationwide database of verdicts and settlements, said he believed that the award was the largest in a product liability case in New Jersey.
Mr. Horan and his lawyer, Alfred D. Dimiero, said the accident was caused by a design defect that allowed a live wire in the back of the refrigerator-size switching device to pass through a gap in the device and bring it into contact with another wire. The device was manufactured by the Cutler-Hammer Corporation of Pittsburgh, a wholly owned subsidiary of the Eaton Corporation of Cleveland.
A spokesman for Eaton said yesterday that his company would appeal the verdict and ask for a new trial.
The six-person jury came back with the unanimous verdict after a two-week trial that featured testimony from Mr. Horan, 55, who lives in Lafayette, in northwest New Jersey, and from experts on pain and electrical equipment.
Mr. Dimiero said his client, who was working on construction of a building at the university, was burned on his torso, neck, arms and hands and required months of treatment and more than a year of therapy.
When Mr. Horan was in the hospital, he was twice given last rites by a Roman Catholic priest.
Mr. Dimiero said Mr. Horan was disfigured in the chest, arms and neck. Because he lost strength and dexterity in his hands, and the sense of touch in his fingertips, he can never work as an electrician again. "He will be in constant pain the rest of his life," Mr. Dimiero said.
Renny Romain, a spokesman for Eaton, said the company never offered to settle with Mr. Horan because it never believed that it had been negligent.
"We're sympathetic to Mr. Horan and his family, but we just believe this case is without merit," he said. "We feel there was no negligence on the part of Eaton and no defect in our product."
Public Citizen - Press Release - February 7, 2001
Alitalia Drops Suit Against Man Whose Lost Luggage Prompted Him to Establish www.alitaliasucks.com
WASHINGTON, D.C. ? In a victory for First Amendment rights on the Internet, Alitalia has dropped its lawsuit against an irate airline passenger whose lost luggage complaint prompted him to set up a Web site critical of the airline, www.alitaliasucks.com.
The airline sued in December, accusing the passenger of violating a 1999 anti- cybersquatting law.
The airline had asked the court to order passenger William Porta to dismantle his site and prohibit him from using the Alitalia name in any Internet domain name or registering such a domain name with any search engines. Public Citizen intervened in the case because of its long interest in defending people's First Amendment rights.
"Alitalia brought this case assuming that it could push an individual consumer around," said Paul Alan Levy, the attorney with Public Citizen Litigation Group who defended the passenger. "This man initially felt intimidated and probably would have dropped the matter. Once we stepped in, though, the airline apparently realized it had no case and cut its losses. I'm pleased that we taught a very big company not to mess around with the First Amendment."
Added Porta, the New York state business owner who launched the Web site, "This great country was founded so that the liberties of common patriotic citizens like me could not be steam-rolled by a bunch of thugs with money and power. I will continue to examine the rules and assert myself vigorously until I am satisfied that enough people are aware of what Alitalia has done."
The case began when Porta, who runs a gift delivery business, traveled to India last year to be best man in a friend's wedding. When en route, however, Alitalia lost a bag containing his clothes. Porta attended a black tie event in the two-day old casual clothes he traveled in, and his hosts had to scramble right before their wedding to find suitable attire for him. Porta sent a letter of complaint to the airline in October, but the airline failed to live up to its promises for compensation, he said. In fact, to this day, Porta has not been paid for his lost luggage.
In December, Porta established "www.alitaliasucks.com," on which he posted a copy of his letter. The airline then sued Porta in U.S. District Court, the Southern District of New York, alleging that he was violating trademark law and the 1999 Anticybersquatting Consumer Protection Act, passed in response to a rash of people snapping up Internet domain names using trademarked names of companies and organizations.
Trademark infringements occur when a company's name is used in a misleading way to profit from consumer confusion about whether the company has sponsored the message. This clearly didn't apply in this case, Public Citizen told the court. Porta's site carries no advertising, sells no goods and doesn't link to any commercial sites. And Alitalia's claim that Porta broke the anti-cybersquatting law also was misguided, Public Citizen said. When they wrote the law, congressional lawmakers specifically noted that they did not intend to enable companies to sue people who establish Web sites for the purpose of commenting on companies.
"The law is quite clear about the First Amendment rights of consumers," Levy said. "In fact, the law specifically protects the information Mr. Porta posted."
On a recent Minnesota Public Radio show, an Alitalia spokesperson admitted that the suit was brought to prevent customers from finding Porta's site through search engines. At a recent hearing, the judge indicated the company ought to consider settling. The company, however, made no settlement offer. Late last week, Judge Richard Berman told both sides he wanted them to return to court and demanded that a top company official, such as the president, show up and explain why the company brought the case. Late Tuesday, before the hearing could be held, Alitalia dismissed the suit.
Porta was also represented by Nina Morrison and John Cuti of Emery Cuti Brinckerhoff & Abady PC in New York City.
New York Times - By STEVEN GREENHOUSE - February 6, 2001
Workers at a factory in American Samoa that made apparel for the J. C. Penney Company and other retailers were often beaten and were provided food so inadequate that some were "walking skeletons," a Labor Department investigation has found.
The plant, which was closed in January, belonged to Daewoosa, a small Korean-owed clothing manufacturer. The inquiry found an extraordinary variety of abuses there, ranging from frequent violation of the Samoan minimum wage to the beating of workers who returned to the factory compound after evening curfew.
The Labor Department's report, dated Dec. 14, was obtained by The New York Times from an anti-sweatshop activist working to expose poor conditions at overseas factories and to pressure retailers to improve conditions at plants that turn out goods for them.
The Daewoosa plant in American Samoa, a Pacific territory of the United States where most federal labor standards are supposed to apply, had about 300 workers, most of them women brought from their native Vietnam.
The factory, the report noted, was at one point cited by the Occupational Safety and Health Administration for an extremely rare violation: withholding food from workers.
"The diet, consisting primarily of a watery broth of rice and cabbage, is of a type and quantity that may lead to malnutrition." the report said. "Management admits that they withhold meals from employees as a form of punishment when workers complain about food."
In 1999, the report said, three workers sought refuge at a Christian missionary center after not being fed for two days.
One federal investigator likened the factory compound to a prison, saying workers had lived 36 to a room, had received bare-bones meals, had not been free to come and go and had often been forbidden to have visitors. They often slept two to a 36-inch-wide bed.
Women employed there, the report added, accused managers of routinely entering their barracks to watch them shower and dress.
"This was one of the worst sweatshop cases I've seen in the 15 years I've been investigating sweatshops," said Charles Kernaghan, president of the National Labor Committee, a labor rights group based in New York.
Tim Lyons, a spokesman for J. C. Penney, said that in December, immediately after learning about problems at the factory, Penney executives stopped selling apparel obtained from it and canceled contracts with a supplier that was getting goods there. Mr. Lyons said the supplier had dealt with the plant without making sure that Daewoosa met Penney labor standards.
"We didn't know they were planning to manufacture the goods there," Mr. Lyons said. "We have a strict policy on factory inspection and certification. The supplier did not follow that policy."
In a trial taking place in Samoa this week, workers from the factory are suing Daewoosa for hundreds of thousands of dollars, accusing it of nonpayment of wages and of violating a contractual promise to provide them free room and board. The workers earned about $400 a month but were often forced to pay $150 to $200 a month for food and rent, bringing net pay to just over $1 an hour.
Marie Lafeule, a lawyer representing Daewoosa, said it would be inappropriate for her to comment on either the litigation or the Labor Department's report before the trial was over.
Three weeks ago a judge in American Samoa placed the factory in receivership after it failed to pay $600,000 in back wages and penalties that had been ordered by the Labor Department as a result of the investigation. The department found that the factory had sometimes not paid workers for months at a time and had often paid them less than Samoa's $2.60-an-hour minimum wage.
Congressional investigators are looking into whether Daewoosa and several travel companies kept the workers in debt bondage and violated a federal law that bars trafficking in humans. With many deductions taken from their pay, some workers made little headway in repaying the $2,000 to $7,000 that many had borrowed to acquire their jobs and to fly from Vietnam to Samoa.
Peter Le, an engineer in North Carolina who went to American Samoa last fall to do charity work, said he was appalled by what he heard from the Daewoosa workers. Every day, he said, they were fed the same thing: some rice and watery chicken broth with a bit of cabbage thrown in.
"Some of them were really very, very skinny," said Mr. Le, who speaks fluent Vietnamese and was a translator for federal investigators. "The women had to be back by the 10 p.m. curfew, or else they got hit, slapped or kicked by the guards."
Vietnamese workers maintained that the Samoan police were reluctant to investigate their complaints of being beaten by the factory's guards and managers, who were most often native Samoans.
Among the instances of violence cited by the department's investigators was one last November in which a worker lost an eye, apparently having been beaten with a pipe.
"Investigators have documented numerous incidents that indicate a trend of institutionalized workplace violence and corporal punishment by the owner," the report said.
With the factory closed when it was put in receivership, more than 200 Vietnamese workers appear to be stranded and unable to repay the money they borrowed to get their jobs and fly to Samoa.
Charles Alailima, a lawyer for Morgan Cooper, an apparel maker based in New York, said that company was negotiating to buy the factory, reopen it and put the Vietnamese back to work.
Dow Jones - By FOWLER W. MARTIN - February 1, 2001
Senator Hillary Rodham Clinton, D-NY, has signaled a strong interest in pension issues, a development that delights groups representing rank-and-file beneficiaries and intrigues plan providers.
"We very much welcome her voice on this," said Gerald Shea, an AFL-CIO official who follows such matters. "She's a terrific advocate for the kinds of issues our members are concerned about."
Karen Ferguson, who heads the Pension Rights Center, a watch-dog organization for rank-and-file workers, was even more enthusiastic. "This is so exciting," she said. "These aren't easy issues and what we've seen is most policy makers running away."
Everyone agrees Clinton has the intellectual horsepower to tackle what is, indeed, an extraordinarily complex subject. They also agree that with a national following and keen media interest in her every move, Clinton's voice will be widely heard when she chooses to express her views.
But at the same time, some worry she may be more interested in using those advantages to exploit the politics of retirement security - an issue that appears to be coming to the fore as the big Baby Boom generation ages and the solvency of Social Security remains in question - than in applying herself to the grueling chore of making substantive new policy in a delicately balanced and often bewildering equation.
Describing Clinton as extremely gifted in understanding complex issues and talking about them in a way people can understand, Shea said that whether others agree with her or not, they are going to find her a formidable advocate.
"She certainly has a reputation of really getting into the substance of the issues she cares about and on those issues, she is certainly going to draw attention," said Brian Graff, executive director of the American Society of Pension Actuaries. Sensitive to her potential clout, Graff visited Clinton's office earlier this week to introduce himself and express his group's views.
Most recently, long-serving and older workers at a number of large companies, most notably International Business Machines Corp., which is based in Clinton's adopted state of New York, have complained bitterly about broken promises when traditional defined-benefit pension plans were converted to what is known as cash-balance arrangements.
Although companies making such changes have said the conversions were necessary for competitive reasons and advantageous to the younger workers they need to retain and attract, many of those hurt claim to be victims of illegal age discrimination. Various critics also maintain the real reason companies have made the changes is to shift pension assets considered to be surplus away from employees and toward shareholders.
While cash balance conversions are clearly an issue of keen interest to Clinton, an aide said she is also particularly interested in the difficulties many women have in accumulating adequate retirement security assets and in the small business aspects of pension policy.
Clinton made her interest in retirement-security matters known at a recent session of the Senate Committee on Health, Education, Labor and Pensions (HELP). The panel chaired by Sen. Jim Jeffords, R-Vt, was conducting a confirmation hearing for Labor Secretary Elaine Chao, and Clinton, a new member, surprised many by saying she wanted to focus her opening comments on pension matters.
"Pension reform is for me a moving issue," the senator said. She then went on to express concerns about unfunded or underfunded plans, about companies using pension assets for purposes other than providing promised benefits to employees, about inadequate portability of pension assets as workers change jobs, and about the adequacy of legal protections for retirement plan beneficiaries.
Later, when it came time for her to ask questions, Clinton sought Chao's views on the cash-balance conversion controversy, noting some of her constituents have been affected. There, she wanted to know how workers who start under one plan can have a voice in the decision-making process when a company decides it needs to change its retirement-security arrangements.
Martin Corry, director of federal affairs at AARP, an organization that represents millions of retirees and persons nearing retirement, said Clinton's interest squares with an emerging trend in Congress. Pension issues tend to be arcane and, historically, not many legislators have taken much interest in them, he explained. But that appears to be changing as more women are elected to serve in Congress, Corry said.
Many women who have had the experience of moving in and out of the workforce for family reasons are sensitive to the current inadequacies of retirement security in such situations, the AARP executive said.
He termed Clinton's interest in the topic "a positive development."
Clinton is adequately, although not ideally, positioned to weigh on in pension issues as a result of her assignment to the Senate HELP committee.
"The tax-writing committees drive the bus when it comes to pensions," said Ferrigno, of Profit Sharing/401k Council. "The HELP committee has a voice."
The controversy on cash-balance conversions - still unresolved with the Internal Revenue Service maintaining a moratorium on qualifying such plans for tax benefits - is fundamentally an ERISA issue.
It is also an issue HELP committee Chairman Jeffords has taken a keen interest in - many disgruntled IBM employees live and work in his home state of Vermont - as has another panel member, Sen. Tom Harkin, D-Iowa.
At Chao's confirmation hearing, Clinton said she was concerned about pension-plan decisions that remove the reliability workers thought they could count on as they go through life. Conversions to cash-balance arrangements move away from rewarding workers for longevity of employment, and that is not what the affected employees thought they were buying into, she said.