Wednesday, March 28, 2007

Time For Sherwin-Williams (SHW) Shareholders To Go On Offense

"I got the best deal that was available," Patrick Lynch, RI Attorney General commenting on Lead Paint settlement with DuPont

“What makes this announcement so gratifying is that this money will go straight to cleaning up the mess". Lynch commenting to
press at announcement

"Just.....follow the money" Deep Throat, All The President's Men

Have you ever turned over a compost pile? The more you dig and the deeper you get into it, the more it smells. I am getting the same whiff as I dig deeper into the Rhode Island Lead Paint litigation.

The first trial against lead paint manufacturers ended in a hung jury in 2002, before the start of the second trial, Patrick Lynch, Rhode Island’s Attorney General, announced that he settled the State’s claims against the DuPont Co. Interestingly,however, it appears that the settlement may not be a ‘‘settlement.’’ Both Lynch and DuPont (DD ) say the deal was not a legal settlement but simply an agreement. Because it is not a settlement, DuPont is not giving money to the state. In return for dropping DuPont from its lawsuit, DuPont agreed to donate $12.5 million to charity. Moreover, because it was not a ‘‘settlement,’’ Lynch’s private law firms had to agree to waive their customary attorneys’ fees. Specifically, the settlement requires DuPont to donate $9 million to the Children’s Health Forum, $1 million to Brown University and $2.5 Million to the Dana-Farber/Brigham and Women’s Cancer Center in Boston. Lynch’s office described the DuPont deal as a major victory for the state because at the time of the agreement, it was unclear whether Rhode Island would ever see a penny from the lawsuit that already had one trial end with a hung jury. At first blush, this settlement appears to be a reasonable deal for Rhode Island.

However, as the old saying goes, ‘‘the Devil is in the details’’– and those details came to light in 2006. At the time of the settlement, Attorney General Patrick Lynch described Children’s Health Forum (‘‘CHF’’) as a national nonprofit organization focused on preventing childhood exposure to lead. He failed to mention, however, that:

  1. The Washington-based Children’s Health Forum was founded in 2002 by a lawyer hired by DuPont to work on lead poisoning issues.
  2. It has received most of its funding from DuPont
  3. Most of its board members have ties to DuPont.
  4. CHF leases its office space from the Dewey Square Group, a high-powered Washington lobbying and public-affairs firm that DuPont uses as its consultant on ‘‘communications’’ issues, including lead paint.
If that was not enough, CHF’s executive director, Olivia Morgan, is a partner in the Dewey Square Group. Lynch’s spokesman claims that the attorney general did not know the group had a relationship with DuPont when he struck the deal, and DuPont is silent about whether it ever informed the attorney general about its relationship with CHF. While Lynch may have been ignorant about DuPont’s relationship with CHF, his chief of staff, Leonard Lopes, who sat in on talks with Du-Pont, was aware that there was a relationship between the two. Thus, $9 million of the $12.5 million ‘‘agreement’’ is being controlled by a Washington, D.C., based charitable group with extremely close ties to DuPont. Interestingly, there is no written agreement stating how CHF is to spend the DuPont donation.While CHF is supposed to dole the monies out to groups in Rhode Island, that apparently will seek it through an advisory commission set up by Lynch, CHF could arguably spend the money in any manner it chooses.

The International Mesothelioma Program at Brigham and Women’s Hospital.

Although DuPont was unwilling to allow any money to be used as attorneys’ fees, it was willing to donate an equivalent amount ($2.5 million) to charity and asked Lynch to identify which charity he wanted to receive the money. Instead of deciding which Rhode Island charity should benefit from the $2.5 million DuPont gift, Lynch asked Jack McConnell (Motley Rice’s lead lawyer in the lead-paint case) if he had a favorite charity. Mr. McConnell identified the International Mesothelioma Program at Brigham and Women’s Hospital in Boston, Massachusetts. Lynch honored Motley Rice’s request and told DuPont to make the gift to that program. As a result, the money is not going to a Rhode Island hospital, it is going to a Boston hospital. Moreover, mesothelioma is not related to any lead-based health hazard. Mesothelioma is a deadly cancer of the tissue surrounding the lungs that is caused by exposure to asbestos. Hence, millions of dollars generated by resolution of claims against a major defendant in a "Rhode Island public nuisance case involving lead are going to a Massachusetts program that addresses asbestos related illnesses.

How such a diversion serves the public interest or benefits the public health of Rhode Island citizens is an unfathomable mystery. Motley Rice identified that charity because when the law firm joined the executive advisory board of the International Mesothelioma Program, it made a $3 million pledge to the program; a pledge that could be funded with monies raised from other sources, as opposed to a check written by the law firm or its lawyers. Thus,while Motley Rice agreed to waive its attorneys’ fees, it saw no problem with using equivalent monies to fund the majority of the firm’s financial obligation to the mesothelioma program. Motley Rice, however, is not the only law firm wanting monies to go to this program. It turns out that another law firm Lynch hired to serve as co-counsel on this case — Thornton & Naumes — also sits on the board of the mesothelioma program and also has a $3-million pledge to the same program. Neil Leifer, a Thornton & Naumes lawyer who worked on the lead case, said it ‘‘seems reasonable’’ that his firm should also receive a credit toward its $3 million pledge to Brigham and Women’s.

Both Motley Rice and Thornton & Naumes attempt to justify the monies being used to settle their pledges because they both waived their legal fees associated with the Rhode Island case. Donald A. Migliori, an attorney with Motley Rice, told the press that: ‘‘[w]e’tr not ashamed – this money isn’t going to pay our legal fees.; Our law firm’s work in asbestos litigation over the years has enabled us to finance the lead-paint litigation for the past nine years.’’Neil Leifer echoed a similar sentiment when he said it ‘‘seems reasonable’’ that his firm’s share of the waived legal fee should be credited toward the $3 million that it has pledged to Brigham and Women’s. ‘‘I’m not sure why it would be inappropriate.’’Some people, however, see things a bit differently. Leonard Decof, one of the state’s original lawyers in the lead-paint case, argues that $2.5 million is a‘‘de facto’’ legal fee, and that he is therefore entitled to a portion of this money for his past services. At this time, it is not certain whether any of the $2.5 million DuPont gift will be credited toward Motley Rice’s $3-million pledge. A spokesman for Brigham and Women’s said hospital officials have had no conversations with Motley Rice about whether the $2.5 million from DuPont will be credited toward the law firm’s pledge. According to DuPont’s spokeswoman, the company was not aware of Motley Rice’s ties to the mesothelioma program, but simply agreed to donate the $2.5 million to Brigham and Women’s as the charity designated by Lynch. DuPont has released a statement saying that it ‘‘has instructed the hospital that its payment should not be credited to any pledge or obligation of Mr. McConnell, his law firm, or any other entity.’’

The basis of tort law is the compensation of victims for wrongs committed against them. Everyday thousands of plaintiffs lawyers across the country fight for their clients. These are real people with real injuries. These lawyers do us all a service in that they assure our workplaces are safer, drivers exercise more caution, environmental laws are followed, the products we consume are made as safe as possible and when we are injured through the preventable negligence of others, we are compensated. Across our country each day people who's lives would be ruined and left penniless due to injuries caused by another have it essentially saved by a plaintiffs lawyer fighting for them and assuring that those responsible are not allowed to just walk away from their actions. You cannot fully appreciate the service these honest people perform until the day comes you are lying in a hospital bed, unable to work and provide for your family because of the careless actions of another and your lawyer prevents your total financial destitution. The Rhode Island lead paint litigation encompasses none of these scenarios and in one fell swoop tarnishes the situations of all tort victims. The genesis of the RI legal action was the "harmful effects of lead on the children of Rhode Island". Yet when an "agreement" or "settlement" with a manufacturer is reached, not only does this money evade managing to find its way to the hands of these alleged "victims", 92% of it does not even stay in the state of RI, and what did manage to stay there went to a private university, Brown (why not a public one like URI?) for research, not clean up efforts. The Brown University website makes no mention of the funds.

Recently, Lynch commented: "today's ruling has enormously positive ramifications on the health, safety, and welfare of Rhode Island's children." It is a great sound bite, if only it were true.
I am sure this is not the result the people of RI hoped for when they read about the settlement in the newspapers. Where is the voter outrage in RI? Do they enjoy being duped? Why aren't they demanding the money be returned to Rhode Island? I have been unable, despite Mr. Lynch's claims, to find any evidence that any of this money has actually been used to clean up a single Rhode Island home.

I was recently sent what I consider to be the most comprehensive lead paint analysis to date. Please read it here. It should also be noted portions of this post were taken from that report. A very interesting part is a section showing where lead currently exists in our lives and how that may be poisoning the children of Rhode Island, not paint.

Recently shareholders of corporation have become very aggressive legally with those inside the company who, through questionable or dubious actions, destroy shareholder value. It is time that we at Sherwin-Williams (SHW) get as equally aggressive with those outside the company. Let's take the bull by the horns here. If not the state of RI, then the AG or theirlaw-firm, Motley Rice. Time to go on offense. I for one am getting sick of being on defense all day.

An interesting comment from a Wall St. insider in Jane Genova's blog Law and More: ..."damages from an unconstitutional act such as a contingency-based-lawsuit can be addressed to the plaintiff firm of Motley Rice and to possible Rhode Island parties who deemed to benefit. This could be highly likely given the possible missteps of Rhode Island Attorney General Patrick Lynch in what I perceive as alleged preferential treatment of DuPont. I will add this: The state of Rhode Island has a major hurdle to get past the contingency issue. From that, there could well be an onslaught of litigation directed at Attorney General Patrick Lynch and the plaintiff law firm of Motley Rice."

Mr. Lynch, this is not over by a long shot.....


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