Corp Reform - Not Tort Reform

Is there any societal woe trial lawyers aren't responsible for?

I was reading an article at Law.com about government investigation into CEO compensation.  The article had some interesting facts, such as explaining how Exxon Mobil's former CEO's compensation package of $400 million per year worked out to over $144,000.00 per day.  Exxon isn't the only company that believes in paying its executives outlandish salaries.  For example:

This Moneycentral article shows:

• During a five-year period, Pfizer's stock fell 35%, but it's CEO "earned" $15.5 million per year.
• AT&T's stock price dropped 40% over five years while its CEO received $17 million per year, plus a pension of $5.3 million per year for life... and unlimited use of the corporate jet.
• The CEO of Safeway has been paid $10.4 million per year during a five-year period in which Safeway's stock lost 54% of its value.

Another Moneycentral article explains:

• The CEO of Ciena was paid $41.2 million dollars during the same five year period that Ciena's stock lost 93% of its value.
• Sanmina-SCI gave its CEO a $19 million "performance bonus" after its stock lost 78% of its value.
• Albertson's has seen its stock prices decline by 39% in the same four-year period it paid its CEO $76.2 million.

And this article at Moneycentral explains that shareholders at Home Depot are so angry at CEO Bob Nardelli that they showed up at the annual meeting to protest.  What did he do wrong?  Under his "leadership," Home Depot's stock price dropped 9%, while he received over $20 million per year in salary.  The fact that Lowe's stock has gone up 185% during the same time Nardelli has run Home Depot surely didn't help matters.

Clearly, high CEO salaries are an epidemic.  Merely by showing up to work, CEOs are getting paid tens of millions of dollars per year, even while they run their companies into the ground.  Shareholders are getting soaked twice.  First, they lose billions as companies are mismanaged into the poorhouse.  And second, they stand helplessly by while these incompetent CEOs "earn" tens of millions of dollars and receive pensions that include corporate cars and corporate jet privileges.

Yet rookie legislator Patrick McHenry doesn't think that inept CEO's making millions of dollars hurt shareholders.  Instead, he believes, "Trial lawyers are the ones who are sopping up investor wealth in this country." 

That McHenry wouldn't see anything wrong with Exxon paying its CEO $400 million while we pay through the nose for gas isn't surprising... Exxon was one of McHenry's biggest campaign contributors.  And that McHenry has such a hatred for trial lawyers and a strong desire to end malpractice suits isn't, either... the American Medical Association was his single biggest campaign contributor.

None so blind as those who are paid not to see, eh Pat?

Lay, Skilling found Guilty!

I was already planning on having a good memorial day weekend.  It's even better now that Houston jurors found the architects of the Enron conspiracy guilty. 

Let's just hope these swindlers receive a sentence commensurate with the severity of their crimes against America.

What The Pump Tax Teaches Us About The "Tort Tax"

The central tenet of the argument for tort reform is that the costs of the tort system, which are claimed to be unnecessarily high, are passed on to consumers in the form of unnecessarily high prices.  There is even a clever name for the purported markup: “the tort tax.”  Reduce or eliminate the tort tax, and supposedly, businesses will pass the savings onto consumers by lowering prices.  The easiest way to illustrate the folly of the “repeal the tort tax and we all benefit” argument is to show that even those who make it acknowledge it is false.

Recently, Senate Democrats proposed a temporary gas tax holiday – a period of 60 or more days in which the .18 cent per-gallon Federal gas tax would be suspended.  The Democratic Senators offered this suggestion as a way to offer tangible relief from high gas prices to Americans.  They argued that by slashing .18 from the cost of gas, the average American would save money every time they purchased gas.  But the chances of the gas tax holiday going into effect are slim, because the Republican majority in the Senate opposes it. 

It’s surprising that many Senate Republicans, many of whom have yet to see a tax that isn’t a blasphemous blight upon humanity, would oppose eliminating the gas tax.  But what’s even more surprising is the reason why they oppose it.  According to the New York Times, they oppose it because the tax isn’t paid directly by consumers at the pumps, but by oil companies at the refineries.   What’s the problem?  They believe that the oil industry would simply keep prices where they are now and enjoy an extra .18 per gallon in profit. 

Yet many of the same legislators argue for tort reform on the grounds that businesses would pass on any savings derived from tort reform.  Their reaction to repealing the gas tax makes it clear: Even if businesses will save money from tort reform, they will not pass those savings onto the consumers unless they are forced to. 

Question about Karl Rove

When I did my stint in the Senate, it was a serious no-no for any Senate staff to work on ANYTHING campaign related while on the Senate clock.  Apparently, it's illegal for taxpayer dollars to support campaign activities.

Are the rules different in/for the White House & its staff?  I ask because virtually every news story about Karl Rove mentions that his new job is to work 100% on the November campaign.  If anyone knows why it's OK for taxpayer dollars to pay Rove's salary to be a political consultant for the Republican Party, please let me know.

Did The Insurance Industry Buy Off Your Senator?

People Over Profits just issued a press release detailing how Senators voted on the medical malpractice bills that were recently defeated in the Senate.  If you're not a member of People Over Profits yet, go join.

Here's the voting breakdown.  Note that only three Republicans had the courage to put the interests of their constituents ahead of the campaign contributions from the insurance industry.  For your convenience, I highlighted them.  If you live in their districts, it would be especially nice for you to drop them an email or call them to thank them for voting for your rights.

And if you live in Senator Rick Santorum's district, why not email or call him to tell him what a worthless hypocrite he is, and demand that he return the $500,000 he and his wife received in noneconomic damages from a lawsuit against a chiropractor who injured his wife so severely she had a hard time losing weight from her pregnancy?  And I thought Rick was opposed to obesity lawsuits!  But it's always different when you (or your wife) is the plaintiff....

Voted for the Rights of Victims

Voted with the Insurance Industry

Akaka (D-HI) Baucus (D-MT) Bayh (D-IN) Bingaman (D-NM) Boxer (D-CA) Byrd (D-WV) Cantwell (D-WA) Carper (D-DE) Clinton (D-NY) Crapo (R-ID) Dayton (D-MN) Dodd (D-CT) Dorgan (D-ND) Durbin (D-IL) Feingold (D-WI) Feinstein (D-CA) Graham (R-SC) Harkin (D-IA) Inouye (D-HI) Johnson (D-SD) Kennedy (D-MA) Kerry (D-MA) Kohl (D-WI) Landrieu (D-LA) Lautenberg (D-NJ) Leahy (D-VT) Levin (D-MI) Lieberman (D-CT) Lincoln (D-AR) Menendez (D-NJ) Mikulski (D-MD) Murray (D-WA) Nelson (D-FL) Nelson (D-NE) Obama (D-IL) Pryor (D-AR) Reed (D-RI) Reid (D-NV) Salazar (D-CO) Sarbanes (D-MD) Schumer (D-NY) Shelby (R-AL) Stabenow (D-MI) Wyden (D-OR)

Alexander (R-TN) Allard (R-CO) Allen (R-VA) Bennett (R-UT) Bond (R-MO) Bunning (R-KY) Burr (R-NC) Chafee (R-RI) Chambliss (R-GA) Coburn (R-OK) Cochran (R-MS) Coleman (R-MN) Collins (R-ME) Cornyn (R-TX) Craig (R-ID) DeMint (R-SC) DeWine (R-OH) Dole (R-NC) Domenici (R-NM) Ensign (R-NV) Enzi (R-WY) Frist (R-TN) Grassley (R-IA) Gregg (R-NH) Hagel (R-NE) Hatch (R-UT) Hutchison (R-TX) Inhofe (R-OK) Isakson (R-GA) Kyl (R-AZ) Lott (R-MS) Lugar (R-IN) Martinez (R-FL) McConnell (R-KY) Murkowski (R-AK) Roberts (R-KS) Santorum (R-PA) Sessions (R-AL) Smith (R-OR) Snowe (R-ME) Specter (R-PA) Stevens (R-AK) Sununu (R-NH) Talent (R-MO) Thomas (R-WY) Thune (R-SD) Vitter (R-LA) Voinovich (R-OH) Warner (R-VA)

$200 billion lawsuit against telcos

MSN Money reports that a class action lawsuit has been filed against all the major telcos over the probably-unlawful disclosure of telco records to the government.  I can't wait to see what comes out during this lawsuit... if anything.  Surely the DOJ will intervene and try and get this lawsuit dismissed due to national security concerns.

Rah rah to the war on terrorism, but this is ridiculous.  I'd rather live in a dangerous democracy than a safe dictatorship.

The Next Malpractice Crisis

Standard and Poor's recently issued a report (U.S. Medical Malpractice Enjoys Profitability, But Tort Reform Still Uncertain And Volatility Anticipated) that predicts a "soft" cycle in malpractice insurance prices.  Or, in other words, S&P predicts that malpractice premiums will decline.  However, a portion of the report concerns me:

"More and more medical malpractice business is being placed in alternative risk mechanisms, threatening the profitability of traditional medical malpractice insurers. A growing number of doctors are choosing to self-insure or opt out of the traditional insurance market by setting up RRGs and captives. In addition, more insurers are entering the medical malpractice market and putting pressure on established players. These start-ups are capitalized with $5 million or less, which leaves them with insufficient surplus to survive the more turbulent parts of the market cycle. The only way for new entrants to survive will be for them to grab market share and market to doctors who want better rates. Underfunded and underpriced, these companies have high rates of failure. As such start-ups falter, business should flood back into the traditional marketplace and possibly reverse market softening."

Translation: Fly-by-night insurers are going to setup shop and lure doctors in with artificially low rates.  When it comes time to pay claims, the insurers will fold like a cheap towel, leaving malpractice victims uncompensated, and doctors hung out to dry.  This will cause two things to happen.  First, traditional insurers will take advantage of the decrease in competition by raising their rates.  Second, trial lawyers and juries will be blamed for both the rise in premiums, and the failures of these boiler room insurers.  Check back in early 2008 to see if I was right.

Is it any coincidence, by the way, that insurance profitability is up while the whole economy is up... or that it was down when the whole economy was down?

"Reform" or Reform?

One of the most satisfying things in life is watching what happens when my political adversaries learn that their favorite sword has two edges.

Generally, it's conservatives who favor changes to the justice system that will reduce or eliminate the rights of injured citizens in order to protect excessively profitable corporations.  These changes are radical restructuring of a justice system that has served our country well for hundreds of years.  But instead of describing them as such, conservatives say they want to reform our justice system.

Those of us who value human life more than corporate profits bristle every time we hear these changes referred to as reform.  We know that they aren't reform, so we often throw quotes around tort "reform" or call it tort deform - two ways to show readers that we don't believe radically tilting the scales of justice is reforming it.  Conservatives generally laugh at both tactics, and undoubtedly pat themselves on the back for being such masters of doublespeak and stealing the word reform.

So it is with no small measure of joy that I've noticed many of the same conservatives who support tort reform strongly oppose the immigration bills in the legislature.  Why?  Because those who introduce the bills have referred to them as immigration reform.  And the opposition has begun to call the bills immigration deform and immigration "deform."

It's no fun to have to explain why you oppose "reforming" something, is it boys?

Phrase of the Day

Phrase of the day: "Rich mosaic."

Lawrence McQuillan, the author of the PRI's "study" of the tort system had the following to say when asked why Michigan's economy wasn't booming since Michigan has such a favorable legal climate:

"The business climate is a rich mosaic," McQuillan said. "It's not just one thing."

Or in other words, if your state's business climate is poor, tort reform won't help turn it around.  But pass it anyway.

Another Corporate "Study" Of the Tort System

The Center for Justice and Democracy issued a press release condemning another "study" paid for by the corporate front group The American Justice Partnership and the Pacific Research Institute:

"The Center for Justice & Democracy today called the newly released “U.S. Tort Liability Index” from The Pacific Research Institute (PRI) “unscientific and meaningless, relying on a combination of discredited studies from other corporate front groups and self-serving categories that have no bearing on a state’s business climate.”"

UPI points out that "the American Justice Partnership is an arm of the National Association of Manufacturers." (NAM) In case you missed my previous posts about the National Association of Manufacturers, its a special interest group run by former Michigan Governor John Engler.  I contacted Mr. Engler to urge him to strip imprisoned former U.S. Representative Randy Cunningham of the award NAM bestowed upon him for legislative excellence.

Shortly after contacting Mr. Engler, I had literally dozens of hits from the National Association of Manufacturers.  While they didn't formally strip Mr. Cunningham of his award - maybe it's in his jail cell with him today - they at least pulled most of their references to him from their web site.  And no, NAM never thanked me for pointing out how bad it looked that they still had Cunningham's smiling face on their web site even after his conviction.

What's even funnier about this study than who paid for it is the fact that it completely contradicts the American Tort Reform Association's famed "Judicial Hellholes" report.  While NAM and the PRI say that Texas has "the best legal climate in the nation" due to tort reform measures passed over the last several years, the Judicial Hellholes placed the Rio Grande Valley in Texas as the worst legal climate in the nation.

To my good friends at NAM, the ATRA, and PRI: Why don't you guys talk before you release your propaganda?  It really hurts the cause to have one group talking about how Texas has the best legal climate in the nation, while another says it's the worst judicial hellhole in the nation.  If you keep putting out contradictory information like this, the general public might figure out that everything else you claim is a lie, too. 

Jeez - I thought you guys were professionals.