Every fall, Perrin Conferences  runs a huge and excellent asbestos-litigation seminar I love to attend.  This fall's conference is Sept 19-21 in San Francisco. The full agenda is here. 

This year's conference includes a material focus on science and disease, including genetics. The conference also includes significant presentation time from Dr. Victor Roggli, author of  this authoritative treatise on the pathology of asbestos-disease and one of the few experts respected and hired by both plaintiffs and defendants.  

Event Agenda Day 1 

10:30 AM – The Latest Advancement in Asbestos Medicine 

 Latest medical advances in causation and treatment 

 The pathology of an asbestos disease – do genetics have a role in determining individual causation? 

 Epidemiology update 

 Alternative causes of mesothelioma 

 Breaking down the single fiber theory 

Moderators: Sharla Frost, Esq., Powers & Frost, LLP, Houston, TX 

Anne Kearse, Esq., Motley Rice LLC, Mt. Pleasant, SC 

10:30 – 11:00AM- Defense Discussion: 

Michael A. Graham, MD, Professor and Co-Director, Division of Forensic and Environmental Pathology, Saint Louis University School of Medicine, Chief Medical Examiner, St. Louis, MO 

Victor L. Roggli, MD, Professor of Pathology, Duke University Medical Center, Durham, NC 

11:00 – 11:30AM- Plaintiff Discussion: 

Arnold R. Brody, Ph.D., Professor, Department of Molecular Biomedical Sciences, North Carolina State University, Raleigh, NC 

John C. Maddox, MD, Pathologist, Riverside Regional Medical Center, Newport News, VA 

_________________________________________________________________________

Event Agenda Day 2 

11:15 AM – Secondary No Longer: The Growth of Bystander and Take Home Exposure Claims 

Industrial Hygiene and Asbestos Disease Causation: 

 Relative Fiber Release Associated with Various Asbestos-Containing Products 

 Calculating Dose 

 Bystander Exposure

 Take Home Exposure 

 Friction Products Exposure 

Victor L. Roggli, MD, Professor of Pathology, Duke University Medical Center, Durham, NC 

Bernard Silverstein, M.S., CIH, Medical Science Affiliates, Columbia, MD 

John Spencer, CIH, CSP, Environmental Profiles, Inc., Columbia, MD 

John Templin, Senior Consultant, MAS, LLC, Seal Beach, CA 

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Update

This August 29, 2011 Financial Times article by Andrew Jack  provides an update on big pharma, litigation, disclosures and graphics on disclosed payments to doctors.

____________________________________________________________________

Kudos to two Duane Morris defense lawyers for this  pragmatic, new  National Law Journal article about industry sponsored research. The entire article should be read.  Hopefully you can be enticed to do that by this excerpt from their concluding section:

"To potentially alleviate concerns and criticisms of corporate-funded research, researchers may be required to share data and support the study's reliability in regulatory and judicial proceedings. Such openness about funding, methodology and results can help curb common criticisms regarding lack of transparency. By increasing access to privately funded data with appropriate safeguards, corporations can improve their standing with the public as well as in courtrooms across the United States. 

Corporate-sponsored research has in many instances become an indispensable aid to the advancement of knowledge in the scientific community. The stigmatization of corporate-sponsored research should not dissuade corporations and industries from continuing to invest in research, both inside and outside of the litigation context. Corporate litigants should consider taking on courts and opposing parties directly and challenging the judicial system to evaluate the merits of the studies under the standards set forth by the Supreme Court in Daubert and its progeny — regardless of the financial backing. 

Kenneth M. Argentieri is the co-chairman of the products liability group at Duane Morris and is based in the firm's Pittsburgh office. Gerald J. Schirato Jr. is a litigation associate in that office."

Sponsored research is a topic many times covered on this blog, with an emphasis on the need for disclosure and transparency - click on the "sponsored research"  topic (to the right) to see the collection. Some of the posts collect scientific articles on the subject. 

Transparency is indeed crucial. Transparency builds trust, and today, trust is a waning asset for much of corporate America, as well as government.  Over the next few years, it will be interesting to see how many such entities will follow the Duane Morris advice to share research data and disclose all payments. 

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Some parts of history increasingly involve science. Last month there was news of "museumomics" - using DNA from museum samples to look back in time by obtaining and analyzing old DNA from museum samples of Tasmanian Devils, an animal now facing a vicious cancer spread by a virus.  Now there is news from ScienceDaily of scientists finding and analyzing remnants of 600 year old human teeth in order to find and prove the pathogen responsible for "the Black Death."  

The full article is available here through the genius of freely available scientific information provided by the Proceedings of the National Academies of Science. Here are key excerpts from the ScienceDaily summary:

"Previous genetic tests indicating that the bacterium was present in medieval samples had previously been dismissed as contaminated by modern DNA or the DNA of bacteria in the soil. Above all, there was doubt because the modern plague pathogen spreads much more slowly and is less deadly than the medieval plague -- even allowing for modern medicine.

The international team of researchers has for the first time been able to decode a circular genome important for explaining the virulence of Y. pestis. It is called pPCP1 plasmid and comprises about 10,000 positions in the bacterium's DNA. The sample was taken from skeletons from a London plague cemetery. The working group in Tübingen, led by Dr. Johannes Krause used a new technique of "molecular fishing" -- enriching plague DNA fragments from tooth enamel and sequencing them using the latest technology. In this way, the fragments were connected up into a long genome sequence -- which turned out to be identical to modern-day plague pathogens. "That indicates that at least this part of the genetic information has barely changed in the past 600 years," says Krause.

The researchers were also able to show that the plague DNA from the London cemetery was indeed medieval. To do that, they examined damage to the DNA which only occurs in old DNA -- therefore excluding the possibility of modern contamination. "Without a doubt, the plague pathogen known today as Y. pestiswas also the cause of the plague in the Middle Ages," says Krause, who is well known for his DNA sequencing of ancient hominin finds, which help trace relationships between types of prehistoric man and modern humans."

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First, do no harm. 

In litigation, some try to treat history as a science. But in the hands of most people, it's not, even if it involves medicine. Telling or teaching history depends on perspective, judgment, and extensive knowledge of then-extant practices and facts. Then the story-teller must choose which facts to present in the allotted time and/or space.  For an example, consider the telling the history of John Charles Cutler, M.D., a man who ended up as Assistant Surgeon General in 1958.

Dr. Cutler died in 2003. At that time, a newspaper reporter wrote the following glowing story of a beloved professor: 

Obituary: John Charles Cutler / Pioneer in preventing sexual diseases

Wednesday, February 12, 2003

By Jan Ackerman, Post-Gazette Staff Writer

Long before AIDS became an international health problem, Dr. John Charles Cutler led the way in trying to prevent and control sexually transmitted diseases around the world.

Dr. Cutler, a former assistant surgeon general of the U.S. Public Health Service, was part of a group that in 1944 worked out the ways penicillin could be used to treat syphilis.

As one of the founders of the Family Health Council of Western Pennsylvania in 1971, he worked tirelessly to find better ways to provide affordable reproductive health-care services to women who need them.

"He thought every person should have access to these services, regardless of income," said Richard Baird, acting president of the Family Health Council.

"To him, health was more than simply studying microbes. It was life," said Ravi Sharma, professor of demography at the University of Pittsburgh Graduate School of Public Health.

Sharma said Dr. Cutler looked at the study of health in a "holistic" fashion, relating it to social, political, economic and cultural customs.

"He was a pioneer who had firsthand experiences of living and working in the Third World," he said.

Dr. Cutler, of Point Breeze, a retired professor at Pitt's Graduate School of Public Health, died Saturday at West Penn Hospital of pneumonia following a heart attack. He was 87.

His wife of 60 years, Eliese S. Cutler, said he was modest about his personal accomplishments but resolute in his mission.

Interviewed in 1988, Dr. Cutler told a reporter for The Pittsburgh Press that the AIDS problem was a replay of venereal disease scenarios of bygone years.

"The control of AIDS will come only when there's a shift from a preachy, moral approach to a medical viewpoint," he said.

"The kind of education that worked during World War II is needed again. The military services provided education about venereal disease and backed it up with making condoms and prophylaxis kits readily available."

Dr. Cutler was born and raised in Cleveland and graduated from Western Reserve University Medical School in 1941 with a Phi Beta Kappa key. In 1942, he joined the Public Health Service as a commissioned officer and remained active until 1967. During World War II, he was a medical officer on convoy duty in the Coast Guard.

His interest in the prevention and control of sexually transmitted diseases began in 1943 when he worked as a medical officer in the U.S. Public Health Venereal Disease Research Laboratory in Staten Island, N.Y. That led to his appointment to head a venereal disease research program for the Pan American Sanitary Bureau in Guatemala in 1948.

In 1949, the World Health Organization asked him to lead a venereal disease demonstration program for Southeast Asia that was based in India, which had won its independence from the British crown in 1947.

"There were 80 Americans in all of India," said Dr. Cutler's wife, who accompanied him there and to other international posts. She said her husband was always proud that he was able to raise the Indian flag in Simla, India, after the independence.

After returning to the States in 1950, Dr. Cutler continued to rise in rank until he became assistant surgeon general of the U.S. Public Health Service in 1958.

In 1960, he worked for the Allegheny County Health Department, organizing the final polio vaccination program in the Hill District. From 1961 to 1967, he was an assistant and then deputy director of what later became the Pan American Health Organization in Washington, D.C.

He returned to Pittsburgh for good in 1967 when he was recruited as professor of international health to head the population division in the Graduate School of Public Health at Pitt. In that post, Dr. Cutler was instrumental in getting funds for a major international health project in West Africa. With federal funding, he organized a program that enabled obstetricians and gynecologists from Third World countries to come to the United States for training in reproductive health technology.

He served as chairman of Pitt's department of health administration and was acting dean of the Graduate School of Public Health in 1968 and 1969.

Dr. Gordon MacLeod, professor of health policy and management at the graduate school, said Dr. Cutler had continued to return to the school on a weekly basis until a few weeks ago.

"He was a much beloved professor, both at the graduate school [of Public Health] and at the Graduate School of Public and International Affairs," MacLeod said.

In addition to his wife, Dr. Cutler is survived by a sister, Elizabeth Cobb of Manson, Wash.

Friends will be received at John A. Freyvogel Sons Funeral Home, 4900 Centre Ave. at Devonshire Street, Shadyside, from 7 to 9 p.m. today and one hour prior to an 11 a.m. memorial service tomorrow.

______________________________________________________________________________

The reporter missed some facts, which at that time were buried. Here's today's Wikipedia entry for Dr. Cutler:

John Charles Cutler, M.D. (June 29, 1915 – February 8, 2003) was a senior surgeon, and the acting chief of the venereal disease program in the United States Public Health Service.^[1][2] He was involved in several controversial and unethical medical experiments regarding syphilis, including in Guatemala and the Tuskegee syphilis experiment.

Cutler was born on June 29, 1915 in Cleveland, Ohio, to Grace Amanda Allen and Glenn Allen Cutler.^[3]

He graduated from Western Reserve University Medical School in 1941, and joined the Public Health Service in 1942. In 1943 he worked as a medical officer in the U.S. Public Health Venereal Disease Research Laboratory on Staten Island.

Cutler oversaw the syphilis experiments in Guatemala in the 1940s, during which doctors deliberately infected an estimated 1500 Guatemalans, including orphans as young as nine,^[4] soldiers, prisoners and mental patients with syphilis without the informed consent of the subjects.^[5][6] This study not only violated the hippocratic oath but it echoed Nazi crimes exposed around the same time at the Nuremberg trials.^[4]

In 1954, Cutler was in charge of experiments at Sing Sing prison to see if a vaccine made from the killed syphilis bacterium, would protect prisoners against infection when he later exposed them to the bacterium. Those infected were later treated with penicillin.^[2][7]

Cutler became assistant surgeon general in 1958.

In the 1960s, Cutler was involved in the ongoing Tuskegee syphilis experiment, during which several hundred African-American men who had contracted syphilis were observed, but left untreated.^[5][6]

In “The Deadly Deception”, the 1993 Nova documentary about the Tuskegee experiments, Cutler states, “It was important that they were supposedly untreated, and it would be undesirable to go ahead and use large amounts of penicillin to treat the disease, because you’d interfere with the study.”^[8][9]

In 1967 Cutler was appointed professor of international health at the University of Pittsburgh, where he also served as chairman of the department of health administration and acting dean of the Graduate School of Public Health in 1968–1969.^[1] He died on February 8, 2003 at Western Pennsylvania Hospital inPittsburgh.^[1] 

 ____________________________________________________________________________

Now, even more of Dr. Cutler's history is being told as a US Presidential Commission discloses - and apologizes for - his human experimentation. The  NYT includes this AP story.  The commission's website is here.

The AP story includes the following excerpts illustrating the vast gulf between practices in the "civilized" worlds of the past and today: 

"[The commission] revealed that some of the experiments were more shocking than was previously known.

For example, seven women with epilepsy, who were housed at Guatemala's Asilo de Alienados (Home for the Insane), were injected with syphilis below the back of the skull, a risky procedure. The researchers thought the new infection might somehow help cure epilepsy. The women each got bacterial meningitis, probably as a result of the unsterile injections, but were treated.

Perhaps the most disturbing details involved a female syphilis patient with an undisclosed terminal illness. The researchers, curious to see the impact of an additional infection, infected her with gonorrhea in her eyes and elsewhere. Six months later she died.

Dr. Amy Gutmann, head of the commission, described the case as "chillingly egregious."

During that time, other researchers were also using people as human guinea pigs, in some cases infecting them with illnesses. Studies weren't as regulated then, and the planning-on-the-fly feel of Cutler's work was not unique, some experts have noted.

But panel members concluded that the Guatemala research was bad even by the standards of the time. They compared the work to a 1943 experiment by Cutler and others in which prison inmates were infected with gonorrhea in Terre Haute, Ind. The inmates were volunteers who were told what was involved in the study and gave their consent. The Guatemalan participants — or many of them — received no such explanations and did not give informed consent, the commission said."

______________________________________________________________________________

Today, there's little or no excuse for ignorance of facts because  we have the Internet - the world's great access point. For example, care to see Dr. Cutler's work? Go here to the National Archives page with images of his papers. One can read here his 1947 correspondence.

As to changes in standards, consider an additional fact. The papers tell us and show us that the then-sitting Surgeon General was most interested in Dr. Cutler's work. And, according to this article, the papers include the following statement attributed to then Surgeon General Thomas Parran:  “’You know, we couldn’t do such an experiment in this country.” (citing G. Robert Coatney to Cutler, February 17, 1947, Box 1, Folder 17, Cutler Papers.)

Conclusion? Ask lots of questions when investigating the past, and do not take anything for granted. 

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Funny how things work out. This morning's first post addressed scientific research, data sharing and full disclosure as a means for corporations and governments to acquire trust, and change minds. The post was written last week and scheduled to appear this morning.

The point was further highlighted over the weekend by a series of events tied to politics and science. Specifically, John Huntsman went on national media shows to call out some other Republican candidates as "anti-science."  Why ? Because some of the candidates are following the tobacco industry tactic of proclaiming there are "issues" about science when in fact there are no real issues. Think global warming, and think evolution. He did not raise it, but also think stem cells. The raw video is here.  A YouTube version is here.  Paul Krugman then piled on with his  NYT opinion piece titled "Republicans Against Science." Even Karl Rove is offended by Mr. Perry's extreme statements, as explained here. 

Ignoring data and reality should not work. Ultimately, the tactic failed the tobacco industry. Time will tell whether the tactic works for polticians. 

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Opinio Juris brings another out of the ordinary post, this time from Kevin Jon Heller. This post calls attention to a proposed new law in China permitting detentions for up to six months. The post contrast China's proposed new law  to international law prohibiting "enforced disappearance of persons." Here are key excerpts from the news article:

"Chinese police will gain new legal powers to detain suspects for up to six months without telling their families where or why they are held, according to a state newspaper's account of planned reforms.

Human rights activists and legal scholars warned that the change would legitimise an alarming pattern of detentions under the residential surveillance law, which was initially intended as a less punitive measure than formal detention.

Most of those who went missing in a crackdown on activists, dissidents and lawyers this year were taken to secret locations chosen by police. They were held for weeks or even months under residential surveillance. The law does not specify that relatives must be informed, presumably because it was assumed suspects would be held at their homes. In comparison, police must inform relatives within 24 hours of detention and must seek prosecutors' approval for arrest within 30 days."

The Opinio Juris posts addressing civil rights are striking reminders of the value and relative rarity of the freedoms we enjoy in the United States. The posts also highlight the struggle to mesh concepts of law and justice with the varying conditions in different nations. 

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Go here. Or, with a hat tip to the Lede blog at the NYT, go here to see Google stuff that allows you to add or subtract layers of data. 

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There are some out of the ordinary topics and thoughts in this Opinio Juris  post by Kenneth Anderson. The post identifies a new interview of a senior CIA official. It then goes on to brief but pointed thoughts on the topic of targeted killings (i.e. covert action) and applicable standards. 

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Settling mass tort lawsuits is not easy. It's even harder if conflict of interest rules are followed. The conflict of interest rules are illustrated by a brand new 2d Circuit opinion rejecting a proposed class action settlement in copyright infringement litigation brought by various groups of freelance writers against major publishers. The topic becomes more timely by the day as NY's AG faces pressure to settle claims against the uber banks regarding some of their activities.  Gretchen Morgenson's August 21, 2011 NYT article details new pressures - this time from the Obama Administration.

The bottom line of the freelancer opinion is that it rejected a class action settlement based on inadequate representation of one subclass.  Bloggers are starting to look at and discuss the opinion in its  broader context, so I will not repeat their analysis. A very defense-side post is here, and Alison Frankel's insightful analysis is here. 

Three further points, though, deserve mention. One is that the opinion arises in a formal class action. Therefore, some would say the opinion only applies in a formal class action. But others would argue the opinion applies to any case involving mass torts because the fundamental issue of inadequate representation cuts across legal pigeonholes. So, one can easily envision settlement opponents citing this case for the proposition that a settlement cannot be crammed down on (that is, binding on) persons who were not adequately represented in the settlement negotiations. Someone in Mr. Schneiderman's position presumably would make that argument. 

The entire set of issues raises the point that old issues return and become new issues, and that's true of the issues arising regarding class actions, finality and conflicts of interest. Indeed, Judge Rakoff's class certification ruling against B of A causes one to think again of the days in which "issue predominance" was considered the key to class actions. See here for a brief but pointed history, once again tied to product liability claims. The finality issues also bring to mind the Second Circuit's Agent Orange opinion holding that new personal claims could not be deemed settled by the prior class action litigation (an article is here as the case went up), an opinion the Supreme Court did not change after a 4-4 tie when Justice Stevens recused himself, apparently because his son served in Vietnam. Here is IIT Kent's compilation of Supreme Court argument materials and the opinion from its Oyez site.  Here is a 2010 defense-side summary of 30 years of Agent Orange litigation. And, here is an interesting article comparing habeas proceedings to class actions in terms of finality.  

Another interesting part of the opinion involves whether the settlement could be deemed fair based on evidence submitted by mediators and others. The dissent points to the mediator  and his affidavits as providing a basis  to approve the settlement.  See the Dissent, at 10. On the other hand, could we really expect involved persons to testify that they reached an unfair settlement ? The majority was not persuaded that the evidence should control.  The relevant evidence included Kenneth Feinberg swearing to the opinion that all interests were adequately represented. According to the opinion, Mr. Feinberg stated in a sworn declaration that “[a]ll members of 14 the defined class   . . . were adequately represented during the lengthy course of the mediation” and that “[a]ll sides exhibited great skill and determination . . . resulting in a comprehensive settlement of a very complex matter which [he] believe[s] is the fairest resolution which could be obtained.”  The participation of mediator Feinberg in this case, while by no means ensuring fully adequate representation, does make it more likely that the parties reached the limits of compromise.  See generally D’Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2001) (“This Court has noted that a court-appointed mediator’s involvement in pre-certification settlement negotiations helps to ensure that the proceedings were free of collusion and undue pressure.”).  

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Hard to believe. Banks do face pressures these days, and B of A is under particular pressure with its stock price down 53%.  But now B of A is responding to generalized blog comments by Henry Blodget (if that name rings a bell, think back to the dotcom bubble and recall that he was sanctioned with a lifetime ban from the securities industry). Stories are here and here, and Henry's take is here. Hopefully B of A's management team can do better.

At present, B of A credit default swaps are becoming expensive and some see a "downward spiral," as described here. Some compare CDS contracts to asbestos, saying both are toxic. There also are economics papers analyzing CDS and related risks of bankruptcy, including the impacts of mass tort risks. See also this paper on hedges, CDS and the financial fiasco. All this takes me back to the days when CDS rates for "asbestos companies" were a major topic. And, even after a chapter 11 filings, investors bet on how reorganization plan outcomes will vary depending on the amount of the estimated liability, as illustrated by this presentation, especially its page 16.

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Here's a summary of an interesting Illinois opinion in Zangara v. Advocate Christ Medical Center . Nos. 1–09–1911, 1–09–1914 (June 10, 2011). The opinion rejects a claim of medical act privilege for statistical data on hospital infection rates. The opinion is to me interesting because data often matters more than opinions (or spin) about the data. 

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Opinio Juris includes this interesting post on a high-level pro bono effort to focus on confronting the growing problem of piracy. One recommendation involves creating a specialized court to confront the pirates.

How bad is the problem? According to the article:

"After 200 years of quiescence, Piracy has re-emerged as a major problem for world shipping.  A recent report has documented that Piracy has resulted in more than $12 billion in losses in the past twelve months alone.  According to an August 11, 2011 article in the Guardian, Piracy is also significantly hampering food aid to drought-stricken Somalia, resulting in thousands of deaths.  Somali pirates have recently seized more than fifty vessels and taken over 1,000 crewmembers and passengers hostage. And the problem is getting worse."

The possible court is explained as follows: 

"The August 11, 2011 Working Group meeting began with a detailed briefing by Jennifer Landsidle (DOS) of recent developments at the United Nations, including relating to the UN Secretary-General’s June 15 Report on “The Modalities for the establishment of Specialized Somalia Anti-Piracy Courts.”  The proposed Specialized Court would be loosely modeled on the Scotish Court that prosecuted the two Libyan Pan Am 103 bombing defendants at Camp Zeist in The Netherlands.  It would apply Somali and International Law, and have its seat at the ICTR Courthouse in Aurusha, Tanzania."

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Class actions and mass filings raise the stakes for mass tort defendants. Back in the day, before "free fall" descents into chapter 11,  several "asbestos defendants" felt enormous pressures from mass trial proceedings. The names include Cimino, West Virginia's several "mass trials," and the New York Powerhouse Litigation, and at a time, the federal asbestos MDL. 

Today, financial firms face more and more of those pressures from massive financial fraud claims. AmLaw's Litigation Daily includes this new Victor Li story on - and links to - a pair of recent class certification rulings against financial houses. The rulings include Judge Rakoff's opinion explaining his class certification decision against Merrill. Here's a key excerpt from his ruling, at 18:

 "The common questions presented by this case -- essentially, whether the offering documents were false or misleading in one or more respects -- are clearly susceptible to common answers." 

Now the financial houses face major pressures, including media stories which create more stock price pressure. Can a financial house risk appealing and losing?  Can it risk trying a class action trial and losing? Can it risk class-wide discovery and resulting testimony that may be widely publicized? If a case is tried and lost, can it afford an appeal bond?

Financial houses also face the problem arising from the weakest member of the herd. That weakest member of the herd may lose a trial (think any mass tort) or may capitulate and settle (think tobacco litigation). More pressure follows, despite claims that the remaining members of the herd are stronger.

For a recent example of pressure, note this DealBook story on Goldman's stock falling 5% on news that its CEO hired a criminal defense attorney.   

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Suppose you are a crisis manager worried about your public company's falling stock price due to massive tort claims and/or regulatory changes. As you weigh options and public statements, consider this August 28, 2011 Financial Times article by Phil Davis. Mr. Davis' article  suggests that hedge funds are increasingly seeking out "event-driven" investing, such as taking short or long positions in companies facing mass tort claims or regulatory changes (or engaging in m & a events).

There are various unpleasant realities to "event-driven" investing. One is that crisis managers need to understand that some investors have absolutely no interest in the merits of a business or its defenses to litigation or regulation. Instead, they simply hope to use information better than others to make money as stock prices rise or fall based on perceptions (which may or may not have anything to do with reality). 

Here are some excerpts from the article - the entire article is worth reading:

"Event-driven is one of the least recognised hedge fund strategies and yet, over the long term, 25 per cent of hedge fund assets are allocated to it. Its diversification benefits from mainstream indices are the principal reason for its prevalence in hedge fund portfolios.

Carl Ludwigson, associate director at Paamco, which runs a $10bn multi-strategy fund, says: “We see a move towards more event-driven strategies because they can extract idiosyncratic risk and less market-driven returns.

The event-driven strategy embraces bankruptcies, recapitalisations, spin-offs, asset sales, leadership transitions, litigation and regulatory changes. There are potentially thousands of strands, all of which have little correlation with broad share or bond benchmarks. 

***

The number of investor surveys indicating that event-driven is at the top of many institutional investors’ shopping lists is a clear warning signal that overcrowding will continue. There are even exchange traded funds on the market that replicate the vanilla M&A arbitrage activities of event-driven funds."

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Artist's view. The basis of amyotrophic lateral sclerosis (ALS) is a broken down protein recycling system in the neurons of the spinal cord and the brain. (Credit: © CLIPAREA.com / Fotolia)

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DealBook this morning drew attention to the finally-emerging numbers published by Bloomberg on the loans granted to Wall Street and others. Anyone paying attention has known for some time that the numbers are large, and now the size becomes even clearer. The numbers are even more interesting to read against the backdrop of Gretchen Morgenson's NYT story on the Obama Administration and the NY Fed pressuring Eric Schneiderman to settle with the ultra-banks,  and to stop investigating what happened. 

The entire Boomberg article deserves a read - here's the introduction:

"Wall Street Aristocracy Got $1.2 Trillion in Secret Fed Loans

By Bradley Keoun and Phil Kuntz - Aug 22, 2011 7:19 AM CT

Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits.

By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret.

Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.

“These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.”

(View the Bloomberg interactive graphic to chart the Fed’s financial bailout.)"

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If at first you don't succeed, try try try again. That old proverb is relevant to understanding the world of change through legislative lobbying and litigation. The basic point is simple for any interest group:

get what you can by lobbying, and then use litigation to block or delay laws you oppose. 

An example of this part of the litigation industry is presented in this NYT article by Ben Protess. The article explains part of the process for  "big business" entities working through the US Chamber of Commerce to bring suits seeking to block portions of the Dodd-Frank Act. This type of litigation is big business, and one of its top advocates is Eugene Scalia from Gibson Dunn, son of Justice Scalia. Set out below are key excerpts - the entire article is well-worth reading for anyone naive seeking examples of using litigation to block legislation. 

"In recent weeks, lawyers and Wall Street trade groups have gathered in Washington to ponder the next big case. Lawyers branded one meeting, held by the United States Chamber of Commerce, as “Dodd-Frank Excesses,” according to two people who were notified of the meeting.

Until now, Wall Street relied largely on an army of lobbyists to chisel away at 300 new rules flowing from the S.E.C. and the Commodity Futures Trading Commission, among other agencies. But while lobbying might yield the occasional loophole, judicial rulings can halt new rules altogether.

“I would hope the agencies are taking to heart the potential consequences for Dodd-Frank rules,” said Eugene Scalia, the lawyer who won the proxy case on behalf of the Chamber of Commerce.

Hal S. Scott, a professor at Harvard Law School and a director of the Committee on Capital Markets Regulation, a research group that has been a critic of Dodd-Frank, said, “I do see lots of challenges coming down the pike.”

Regulators, reluctant to give in to industry pressure, are rushing to safeguard their rules from legal action. The commodity commission, having already delayed several Dodd-Frank rules for six months, is now studying the proxy case and considering adjustments to some proposed regulations, according to a person close to the agency. Earlier this month, the agency dispatched several staff members to meet with S.E.C. officials about the recent court decision."

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Update on A Long Swim

Doug McConnell is now the 48th person over 50 to swim the Channel - go here for a look !! The thirty mile swim took just over 14 hours. In honor of his father, almost $150,000 has been pledged for ALS research.

The power of human will never ceases to amaze. 

______________________________________________________________________

ALS is one of the world's miserable diseases. It's also known as Lou Gehrig's disease. More research is needed to stop the disease.

To that end, a friend from college fraternity days has embarked on a remarkable fundraiser which goes forward today: the journey is swimming the English Channel, starting in Dover today at about 1:00 (UK time).  

He is Doug McConnell, and the project is called A Long Swim. Doug's twenty-one mile journey is to honor his father (a victim),  to raise money for ALS support and research through the Les Turner ALS Foundation, and to embrace a great challenge and adventure after more than a year and a half of arduous training.

The Les Turner ALS Foundation sponsors cutting edge scientific research. For anyone so inclined, donations can me made through its web page. 

Doug's progress can be tracked online www.ais-doverstraits.co.uk. The boat accompanying him is called Sea Satin. 

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Amazing. Scholars have digitized thousands of pages from trials in the Old Bailey. The story is told here in a NYT article by Patricia Cohen. The introduction is pasted below. 

"For 240 years the grand parade of human greed, love, cruelty, longing, and foolishness was captured in the Proceedings, the published record of trials that took place at the Old Bailey, the central criminal court, in London.

 Now, powerful digital tools developed by an international team of researchers to search these trial reports and summaries have begun to offer new insights into the evolution of the justice system, the institution of marriage and changing morals.

 The Old Bailey offers a unique window into the criminal justice system and, by extension, British culture. The free searchable online archive, oldbaileyonline.org, contains accounts of nearly 198,000 trials between 1674 and 1913. “It’s the largest body of accurately transcribed historical texts online,” said Tim Hitchcock, a historian at the University of Hertfordshire in England and part of the team. “All of human life is here.”"

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Update

Doug is now the 48th person over 50 to swim the Channel !! The journey was over thirty miles and 14hours. 

The ALS fundraising also is a success. It's approaching $150k. 

__________________________________________________________________________________

ALS is one of the world's miserable diseases. It's also known as Lou Gehrig's disease. More research is needed to stop the disease.

To that end, a friend from college fraternity days has embarked on a remarkable fundraiser which goes forward today: the journey is swimming the English Channel, starting in Dover today at about 1:00 (UK time).  

He is Doug McConnell, and the project is called A Long Swim. Doug's twenty-one mile journey is to honor his father (a victim),  to raise money for ALS support and research through the Les Turner ALS Foundation, and to embrace a great challenge and adventure after more than a year and a half of arduous training.

The Les Turner ALS Foundation sponsors cutting edge scientific research. For anyone so inclined, donations can me made through its web page. 

Doug's progress can be tracked online www.ais-doverstraits.co.uk. The boat accompanying him is called Sea Satin.    

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Last year, RAND issued a phase 1 report on its study of asbestos bankruptcies.  Now, RAND has issued its phase 2 report. I've not yet read it. Set out below is the press release from RAND, which includes a link to the new study.

FOR RELEASE

Thursday
August 18, 2011

A new study by the RAND Corporation explores the way that asbestos bankruptcy trusts—created to compensate people injured by the mineral—may be influencing tort cases.

The study finds that the current way that the trusts and the tort cases are linked together may result in payments that are not consistent with the basic principles of the tort liability system.

Researchers say that, in some cases, the trusts may allow some plaintiffs to receive more compensation than if all of the companies involved in asbestos litigation had remained financially solvent. In addition, the study finds that payments by defendants that remain solvent might not be fully adjusted to account for the payments available from the trusts.

"Asbestos-related litigation is expected to continue for some time," said Lloyd Dixon, lead author of the study and a senior economist with RAND, a nonprofit research organization. "Both plaintiffs and the defendants that remain solvent have a great deal at stake with regard to how payments from trusts enter into the determination of injury awards."

Asbestos litigation in the United States began in the 1970s and grew rapidly. As payments for injuries mounted, many of the primary asbestos defendants declared bankruptcy, leaving behind personal injury trusts that pay future asbestos claims. During the past three decades, 56 asbestos personal injury trusts have been established; the largest 26 of these paid $10.9 billion to settle 2.4 million claims through 2008.

Over the past 10 years, payments by the asbestos bankruptcy trusts have played an increasing role in compensation for asbestos injuries, but there is no standard system to coordinate payments from trusts and lawsuits. The RAND study examines how the asbestos trusts may influence the tort case and how trust payments may be factored into tort awards in different states.

Researchers selected six states to examine closely, most of them with high numbers of asbestos cases: California, Illinois, New York, Pennsylvania, Texas and West Virginia. The statutory laws and court procedures vary considerably across the states examined.

Dixon, who wrote the study with Geoffrey McGovern, an associate behavioral/social scientist at RAND, said the potential effects of the trusts vary across states, depending on the type of legal principles used to determine liability, as well as court rules and procedures. A state's liability standard determines who can be sued and for what share of the total harm.

Researchers say the key to determining how trusts affect compensation in asbestos lawsuits is whether evidence is developed about a plaintiff's exposure to the asbestos produced or used by the bankrupt companies. If this sort of information is developed, then a plaintiff's compensation will not be inflated and payments made by the solvent defendants will be adjusted to reflect compensation available from the trusts.

When such information is not developed, plaintiffs in some circumstances can recover, in effect, once for their injuries in the tort system and then again from asbestos trusts. Under some circumstances, solvent defendants may be required to pay more than their share of the harm.

"The development of evidence about a plaintiff's exposure to the products and practices of the bankrupt firms is an important determinant of the effect of the trusts on the total plaintiff compensation and payments by the remaining solvent defendants," Dixon said. "The creation of the trusts poses a new challenge to the tort system and courts have responded in very different ways."

Researchers say an increase in total compensation would benefit current plaintiffs, but reduce the trust resources available to future plaintiffs. This reduction in trust resources is particularly of concern to plaintiffs who were exposed only to the products and practices of bankrupt companies, and are thus solely reliant on the trusts for compensation.

The study, "Asbestos Bankruptcy Trusts and Tort Compensation," can be found at www.rand.org.

Research for the study was funded by the RAND Institute for Civil Justice and contributions from the following asbestos defendants, insurers and others: Bondex International; Coalition for Litigation Justice; Crane Company; Dow Chemical Company; E.I. Dupont De Nemours and Company; Exxon Mobil Corporation; Garrison Litigation Management Group; General Electric Company; Georgia-Pacific; The Hartford; Herzfeld & Rubin; Owens-Illinois General; Saint-Gobain Corporation; Swanson, Martin & Bell; and the U.S. Chamber of Commerce.

The RAND Institute for Civil Justice helps make the civil justice system more efficient and equitable by supplying government leaders, private decision-makers and the public with the results of objective, empirically based, analytic research.

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Multidistrict litigation panels manage mass claims. The legal community is used to seeing MDLs involving product liability claims related to drugs, implants, and toxins. But MDL proceedings are in fact underway as to financial institutions. An example is In re: Countrywide Financial Corp. Mortgage-Backed Securities Litigation, No. 2265.  A  new order of August 15, 2011 coordinates many but not all of the cases against Countrywide with respect to sales of mortgage-backed securities. The MDL does not include other types of claims, such as claims of fraud in selling shares of the bank's stock. 

An initial, primary consequence of MDL proceedings usually is coordinated or consolidated discovery. For both sides, the streamlining of discovery saves money and effort. For example, employees of the defendant(s) are deposed once or twice, and the testimony is designated as useable in all cases. Similarly, images of documents to be produced by the parties are usually deposited into an online depository accessible to many. 

Consolidated discovery raises the stakes for defendants because a few sentences of testimony can be a game changer for multiple cases. The game also can be changed by one or a few "bad" documents. Defendants also face more risks that the plaintiff's lawyers share investigation efforts and think creatively together.

For plaintiffs, an MDL takes away some individual lawyer or law firm control of how a case is conducted for discovery, and oftentimes, for settlement. The loss of control may be favorable or unfavorable. For a weak claim, joining an MDL can be helpful because the weight of all the cases may lead to discovery that improves a weak claim by revealing more examples of tortious conduct by a defendant. For settlement, MDL proceedings may produce a settlement that pays everyone at a blended rate instead of a premium payment to strong claims and a lesser payment (or no payment) to weak claims.    

For all sides, an MDL often leads to greater media focus, as exemplified by this NLJ story on Countrywide. Reporters with low budgets and tight schedules find it difficult to track many cases, dates, pleadings and hearings. MDL's reduce the burden of following proceedings, and hearings bring together lead lawyers often willing to offer insights into their positions as the parties jockey for control of the media spin and the resulting consequences for perception of the merits of the claims.  Messaging can become more important than reality. And, stock analysts follow media. 

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Public companies feel pressure through stock price, and mass tort litigation can put stock price under enormous pressure. Stock price pressures arise from ordinary investor concerns, and myriad other traders who could do not care about the company but seek to profit on the stock price uncertainty. Back in the day, these principles were most visible in massive chapter 11 filings by so-called "asbestos companies." Back in the day, hedge funds and others hired toxic tort lawyers to better understand the depth of the issues for certain companies (e.g Halliburton), and then they shorted and profited. 

Today, some financial service companies have been accused of massive, global torts with enormous financial and human impacts. Bank of America is one target for massive claims, and its stock price has fallen sharply. DealBook previously reported on insolvency, as covered in this prior post which builds on Dealbook. Now, Bloomberg reports the bank has taken huge reserves for liabilities ($ 30 billion) and wants to cut a massive settlement to resolve most if not all issues. According to Bloomberg:

"Chief Executive Officer Brian T. Moynihan, seeking to reverse a 44 percent stock slide this year, has booked about $30 billion in settlements and writedowns to clean up mortgage liabilities at the biggest U.S. bank since the start of 2010. One of the largest legal matters still pending is the multi- state probe into whether firms servicing mortgages used bogus documents to justify foreclosures.

“They need to resolve this because it’s looming out there as an unknown liability,” said Brian Chappelle, a partner at mortgage-finance consultancy Potomac Partners LLC in Washington and former executive at the 

Mortgage Bankers Association. ….

Bank of America executives, concerned that a delay in resolving the case is hurting the firm’s stock, are open to a deal that would resolve most of it, even if some mortgage investigations continue, said one of the people. The bank has been pushing for liability releases for loan activities besides servicing, such as securitization and lending."

Lessons to be applied here?  One lesson relates to conflicts of interest between claimants. Back in the day of massive asbestos settlements, the US Supreme Court rejected massive asbestos settlements because of divergent, conflicting interests of different claim holders, and a lack of separate, vociferous legal counsel representing the divergent interests. The seminal decision is Amchem, and the opinion highlighted conflicts between, for example, holders of the strongest claims and holders of the weakest claims. Also in conflict are claims held by current claimants (my loss has occurred now) and future claimants (I may have a loss in the future). On the latter, see this prior post and the great, linked article by Professor Todd Brown.

The same conflicts exist here, and the proceedings to date do not appear provide a cure for the conflicts. More process and procedure will be needed to obtain 100% peace. But the bank may find that price too high. It may accept 90% peace because it eliminates most of the danger that the risk might destroy the enterprise.  

Another lesson relates to settling, if that's to be done. The asbestos plaintiffs figured out the share price issue pretty well, and decided that one of their best options was to ask for less settlement cash and to instead take shares of stock in the settling company. By taking stock, they could participate in the upward share price "pop" expected to occur (and it usually did) after public announcement of the settlement. Also participating in the upside were insiders who bought stock based on knowledge of impending settlement deals. Application here?  Settling states here may or may not demand - and obtain -  a large amount of stock as a price of settlement.

More tomorrow. 

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The importance of stem cells in cancer continues to emerge. Cancer Cell's latest issue (Cancer Cell, 2011; 20 (2): 246-259 DOI:) includes new research suggesting that blood system stem cells include the cue (or a cue) for development of the blood cancer known as CLL. The research focused on HSCs, which is the term for hematopoetic (blood) stem cells. That is, these are not original stage pluripotent stem cells that could take on any role. Instead these stem cells have developed a couple of stages, and have taken on the characteristics that make them HSCs dedicated to generating all the different types of cells found in the blood system.

As always, ScienceDaily provides a strong summary, and key excerpts are set out below. In short, the new study used an experiment to seek evidence on the  hypothesis that mature cells derived from HSCs carry a cue for malignancy. Thanks to new tools that allow researchers to find and collect HSCs, they collected HSCs from people without CLL and with CLL. They then injected both types of HSCs into mice. The mice with the HSCs from CLL patients developed B cells with characteristics similar to B cells that develop in a phase of CLL, which some might call "pre-cancer." Conclusion? The HSCs in CLL patients are different than the HSCs in most people. Now the question are: how are they different, and why ? Answering the former question will save lives. The answer(s) to the latter question will lead to future lawsuits and liabilities. 

Is this paper dispositive proof on the HSC hypothesis? No. Important? Yes - that's why the paper made into Cancer Cell, part of the prestigious family of Cell publications. Here's how ScienceDaily and the researchers phrased it:

"Taken together, the findings suggest that HSCs are involved in the pathogenesis of CLL, even though CLL is a malignancy of a mature cell type. "Our data suggest that the propensity to progress to CLL is already acquired at the HSC stage," concludes Dr. Akashi. "Identification of the intrinsic abnormality of HSCs in patients with CLL should be the key to finding the ultimate therapeutic target in human CLL." (emphasis added). 

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Where will science take us, and how fast ? Do legislators, courts and lawyers really need to think today about scientific changes promised for tomorrow?  

Every day, ScienceDaily brings new articles with incremental progress in many areas. And, sometimes, the world's great science journals - and free online science such as the Public Library of Science (PLoS)  - bring news of profound breakthroughs. But should we believe predictions?

For a positive answer as to the accuracy of predictions for future science, take a look back at this page and its  imbedded string of AT&T videos. Make sure to look at the embedded predictive AT & T ads from 1993 (need help remembering 1993 - the narrator is Tom Selleck). Each ad precisely predicts and portrays one or more technologies now used everywhere. So, yes, there are indeed sound reasons to read and believe current predictions of future scientific possibilities. 

Also worth looking at is this page,  with an imbedded look at the success and failure in a newspaper's 1994 prediction of the future of newspapers, and the thing we today call an Ipad, or more generically, a tablet computer. 

Kudos to Peter Kafka at All Things Digital for posting the various the past predictions and ads regarding technology, and note his credits to Richard Raucci for pointing out that an even larger collection of seven A T & T predictive videos is here on Youtube.

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Going some place new and looking for a way to visualize the area and see hotels in the area? Try out Google's experimental application called hotel finder. It's here. It's useful and cool. Much easier than the websites for Expedia, etc. 

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A NYT story by Donald G. McNeil, Jr.  provides an update on a trust created by Pfizer to resolve alien tort claims arising from drug testing in Africa. This prior post provides the background from a post on Foley Hoag's CSR blog. The claims arose  from drug testing in Africa, and:

"Pfizer faced pressure as the result of a recent increase in the level of media attention to the case. The heightened scrutiny came about, at least in part, as the result of disclosures in certain diplomatic cables released by Wikileaks, which called into question the propriety of Pfizer's efforts to settle two related cases brought in Nigeria. Those cases were settled in July 2009 for a total of $75 million and attorneys fees.

Mr. McNeil's article explains, among other things:

"Four families received $175,000 each from a $35 million fund created under the settlement between Pfizer andNigeria’s northern Kano State, where the brief trial of the experimental drug, Trovan, took place. The four families had DNA evidence proving they were related to children who died during the trial.

In all, 11 children died in the trial: five after taking Trovan and six after taking an older antibiotic used for comparison in the clinical trial. Others suffered blindness, deafness and brain damage.

Although Pfizer said that only 200 children had been given Trovan or the older antibiotic, 547 families sued.

Despite having settled the case, the company still contends that meningitis, not its drugs, was responsible for the deaths and injuries, a Pfizer spokesman said Thursday. Epidemics sweep Africa’s arid “meningitis belt” on dust-filled winds during the dry season every year, and more than 12,000 Africans died of meningitis in 1996; in addition, the drugs in the trial were given only to children who were already very sick."

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The SEC's new online whistleblower office is open for tips on securities law violations. Good - let's hope they ferret out more fraudsters before we get another Bernie Madoff, and the many others who've been missed.  

DealBook's entry on the subject describes fervent opposition from the US Chamber of Commerce.  The Chamber  tie its opposition to the supposed evils of fees being earned by  lawyers who represent plaintiffs in lawsuits. The Chamber's argument cannot be squared with the reality that lawyers representing plaintiffs include legions of lawyers who represent corporations against insurance companies, myriad legions more insurance company lawyers who bring lawsuits and cross-claims pursuant to subrogation rights, and, for example, AIG (here), Allstate (here), states (here) and others filing fraud lawsuits against financial houses in the US. There's also the burgeoning collection of lawsuits against indisputable frauds in securities offerings related to Chinese entities. 

The plaintiff's bar also includes an increasing number of inside lawyers working for corporate America. The trend to "revenue-enhancing litigation"  has been obvious for quite some time, and is described in this May 13, 2011 WSJ article . Some key quotes are below but the entire article merits a read: 

"By VANESSA O'CONNELL

Companies are warming to a new way of generating revenue: suing for it.

Ford Motor Co., Tyco International Ltd. and Michelin SCA, among others, say their lawyers are devoting more time and effort to bringing in extra cash by thinking like plaintiffs.

Following in the footsteps of several big drug and technology companies, which have aggressively pursued alleged patent infringers, companies in a range of industries have stepped up legal action, not only in the patent arena but also against suppliers, insurers and even utilities they think have done them wrong or owe them money.

The sums they win from these "plaintiff recovery" lawsuits usually aren't big enough to be singled out in earnings statements. Nor do individual cases typically have a material impact on the bottom line. But, taken together, they can produce hundreds of millions of dollars in added revenue for a company in a single year, potentially turning its legal department into a profit maker.

"It adds up to real money over time," says Tom Sager, general counsel at chemical makerDuPont Co. In one case, DuPont won roughly $92 million in a settlement with its insurers, which it had sued in Texas seeking reimbursement of asbestos claims against the company."

Lawsuits are a fact of modern life, which is why we have a litigation industry. One could argue the Chamber would be more credible if it acknowledged the realities of the litigation industry, and  welcomed the use of the free enterprise model. To do so, it could say something accurate, such as: 

"Our members are collectively hurt when corporate fraud diminishes trust and confidence in our nation's corporations. So long as the SEC exercises care in screening tips and decision-making, we applaud and welcome the new whistleblower office."   

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Will litigation liabilities overwhelm Countrywide and/or Bank of America and force one or more entities into insolvency? That's the question posed by Steven Davidoff in a DealBook post which presents  various allegations drawn from AIG's recent lawsuit against the bank. AIG's complaint details various inter-bank transactions which could be characterized as fraudulent transfers. 

Wall Street used to watch and bet on share prices as litigation claims took down former manufacturers facing mass tort claims from past asbestos-containing products. Now the scene has changed as Wall Street firms are themselves targeted as having committed massive, tortious frauds. If there is an insolvency, the liability estimation hearing certainly would be interesting. 

Set out below are some of the key excerpts as culled by DealBook:

"The complaint filed by A.I.G. against Bank of America describes these transactions: On June 2, 2008, Countrywide Home Loans, a subsidiary of Countrywide Financial, sold Countywide Home Loans Servicing, another subsidiary, to NB Holdings, another subsidiary that was wholly owned by Bank of America. Bank of America paid Countrywide Home Loans for this sale by issuing it a note for $19.7 billion. Countrywide Home Loans Servicing was the actual subsidiary of Countrywide that serviced almost all of Countrywide’s mortgage loans. Countrywide Home Loans also sold a pool of residential mortgages to NB Holdings for $9.4 billion. On Nov. 7, 2008, Countrywide Home Loans sold the rest of its assets to Bank of America for $1.76 billion.

Separately, Bank of America also acquired notes worth $3.6 billion from Countrywide Financial’s bank and the equity in a number of other Countrywide subsidiaries. Bank of America also assumed $16.6 billion of Countrywide’s debt and guarantees.

If the A.I.G. complaint accurately describes these transactions, it means that the net effect was to leave Countrywide Financial and Countrywide Home Loans without assets, except the $11.16 billion payment and the $19.7 billion and $3.6 billion notes ($34.46 billion total). Countrywide’s liabilities stayed with the Countrywide.

Bank of America turned Countrywide into a shell with assets of $34.46 billion, part of it in the form of loans from Bank of America. Once the settlements exceed this amount, Countrywide is out of money. Again, the exact amount is uncertain and this is an approximation, but it appears that Countrywide’s remaining assets are rapidly being subsumed by litigation claims and other liabilities related to the financial crisis."

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Chapter 11 asbestos trusts are uniquely suited for and too often used for implementing lousy public policy.

 How so? Years after most agreed that it’s social folly to pay compensation to a pure non-malignant claimant, many of the trusts are used to attract and pay material amounts of non-malignant claims. 

 Proof ? This prior post covered the topic back in June, 2009.  Recent examples are the most recent pair of the Manville Trust’s quarterly, minimalist reports to the Court.  The first quarter report is here, and the second quarter is here.  You also can obtain quarterly reports online at this page of the Manville Trust, but they are posted to the website no little time after submission to the Court. 

 The reports make plain that non-malignant claims continue to be asserted and paid significant amounts of money that should instead be paid to persons with cancers or other conditions. 

The first quarter report, for example, states: 

"For the first quarter of2011 the Trust settled approximately 11,600 claims for $38.4 million compared to 5,400 claim settlements for $27.9 million for the same time period in 2010.

The average settlement amount for the first quarter of2011 and 2010 was approximately $3,300 and $5,100, respectively. The lower average settlement amount in the first quarter of2011 is dueto settling a larger percentage of non-malignancy claims when compared to the first quarter of2010, though 76% of all claim payments during the quarter were paid to claimants with a malignancy disease." 

The second quarter report states: 

For the second quarter of 2011 the Trust settled approximately 8,700 claims for $39.5 million compared to approximately 4,000 claim settlements for $29.0 million for the same timeperiod in 2010. The average settlement amount for the second quarter of 20 II and 2010 was approximately $4,600 and $7,200, respectively. Claim filings for the second quarter 2011 were  approximately 9,300 compared to 4,600 for the second quarter 2010. Year to date the Trust has received over 20,800 claims compared to 8,900 claims for the first six months of 2010.

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Some think that asbestos use is is over or dwindling all across the world. Not true.

For example, this new press release from Eternit S.A. reports on the company's better than expected quarter of asbestos mining, and manufacturing of various asbestos-cement products.  

"SAO PAULO, Aug. 9, 2011 /PRNewswire/ -- Eternit S.A. (BM&FBOVESPA: ETER3; OTC: ETNTY), a company with 71 years of activity and the market leader in roof coverings, panels and cement slabs, today announces its  results for the 2nd quarter 2011 (2Q11).

Although 2Q11 is seasonally the weakest period of the year, Eternit operated at full capacity in its chrysotile mining business, above 90% in fiber cement production and in excess of 80% in concrete tiles.

At this page, Eternit SA's website  also provides this information on asbestos fiber production: 

"Chrysotile asbestos and amphibolic asbestos
There are two main groups of asbestos, chrysotile and amphibolic. Amphibolic asbestos has hard fibres which are straight and pointed, as well as having a high concentration of iron in their composition. Chrysotile asbestos has curved fibres which are silky and have a high concentration of magnesium in their composition. The characteristics of these fibres is one of bio-persistence, which signifies the amount of time that they remain in the lungs before being eliminated. Chrysotile fibre remains a maximum of two and a half days in the lungs, whereas amphibolic fibre remains more than a year.

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The invitation/appeal pasted below also is online here. In short, it's an invitation/appeal  to be part of an expert prediction team as part of an experiment on smart people making predictions, versus using data to make predictions without judment. 

The invitation/appeal arrives with a hat tip and thanks to the Marginal Revolution, a blog focused on progress through marginal changes, to use a very short label. 

To whet your interest in the research and one of the acclaimed researchers seeking your input, set out below is Wikipedia's entry on Philip Tetlock, and his findings/view that data create better predictions than do human judgments. Then read on below to see more on the study, and the invitation itself. But,  again, the link is here to join. 

_______________________________________________________________________________

 From Wikipedia:

Philip E. Tetlock is Leonore Annenberg University Professor of Psychology at the University of Pennsylvania. He has also written several non-fiction books on politics, including Counterfactual Thought Experiments in World Politics (with Aaron Belkin; 1996) and "Expert Political Judgment: How Good Is It? How Can We Know?".

His Expert Political Judgment: How Good Is It? How Can We Know? (2005) describes a twenty-year study in which 284 experts in many fields, from professors to journalists, and with many opinions, from Marxists to free-marketeers, were asked to make 28,000 predictions^[1][2] about the future, finding that they were only slightly more accurate than chance, and worse than basic computer algorithms which was the recipient of the 2008 University of Louisville Grawemeyer Award for Ideas Improving World Order. Dr. Tetlock was awarded the Woodrow Wilson Award for best book published on government, politics, or international affairs and Robert E. Lane Award for best book in political psychology, both from American Political Science Association in 2005. Forecasters with the biggest news media profiles were especially bad. The study also compared the records of "foxes" and "hedgehogs" (two personality types identified in The Hedgehog and the Fox).^[3][4]

The Value of Statistics

Tetlock's conclusion about expert opinion is that statistics when properly used are more reliable than human judgement in every sphere of activity.^[5]

In 2000 Tetlock was awarded the NAS Award for Behavior Research Relevant to the Prevention of Nuclear War from theNational Academy of Sciences.^[6]

_______________________________________________________________________________

Philip Tetlock requests your help

Posted: 03 Aug 2011 02:28 PM PDT

 ______________________________________________________________________________

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Some history may come to light fairly soon.  A DC District Judge has now ordered the release of President Nixon's grand jury testimony, as described here.   The opinion is here.  The issues are resolved under Federal Criminal Law Rule 6(e), and not, for example FOIA rules.  An appeal may follow, but one wonders  how continued secrecy could be justified for such a well-known event described in so many books and speeches. Indeed, John Dean is out teaching ethics courses about his destruction of evidence. 

The opinion includes the following interesting set of citations to historic cases allowing release of grand jury testimony:

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Who says Americans are afraid of sharing genomic information, especially when it's analyzed in bits? 100,000 Kaiser Permanente patients contributed saliva for DNA analysis as to a subpart of the genome. The subpart  - telomeres - is fairly newly discovered and seems important in several ways as to how we age and how cells die (or not). Now, thanks to new technology not available three years ago, the genomic work was completed in less than 15 months, and the data is being linked to health records and California environmental data. The resulting database will be online next year. Set out below are excerpts from UCSF's online description of the project. 

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"The genotyping project was made possible by a two-year, $24.8 million grant awarded in September 2009 to the Kaiser Permanente RPGEH and UCSF by the National Institutes of Health. Funding for the grant came from three sources: the National Institute on Aging, the National Institute of Mental Health, and the Office of the Director.

”The completion of genotyping on this large and diverse population marks an unprecedented milestone in population-based genetics research,” said Richard J. Hodes, MD, director of the National Institute on Aging at the National Institutes of Health. “The genetic information, combined with the longitudinal clinical and health data that are already part of the Kaiser Permanente database, along with California environmental data, will create a unique and powerful resource to help answer research questions about aging, health and disease.”

To complete the genotyping project in two years, as required by the funding, Kaiser Permanente first had to build a new, high-throughput laboratory in Oakland, Calif., to extract DNA from more than 100,000 saliva samples in 15 months. The extracted DNA was transferred to UCSF’s Institute for Human Genetics, which worked with Affymetrix to create custom Axiom® arrays for genotyping 675,000 to 900,000 genetic markers – comprised of single nucleotide (SNPs) and insertion-deletion polymorphisms – across all 100,000 samples.

“This project reflects the incredible advances that have occurred in the past decade in the field of genomics and the speed and cost-effectiveness of genotyping technology,” said UCSF professor Pui-Yan Kwok, MD, PhD, who led the SNP genotyping work at UCSF. “Three years ago, we could never have undertaken a project of this size, much less completed it in only 15 months.”

Separate samples of DNA from the same 100,000 individuals were also analyzed in the laboratory of UCSF Professor Elizabeth Blackburn, PhD, who received the Nobel Prize in Physiology or Medicine in 2009 for her discovery of telomeres. The Kaiser Permanente/UCSF project will create the largest resource of telomere data available and will be the first such resource linked to health records of this number and diversity through Kaiser Permanente.

Data from the genotyping project will be processed and cataloged by RPGEH and UCSF scientists over the next year so it can be made available to researchers in late 2012."

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The SEC's whistleblower rules become final on August 12, 2011. The rules to the process are explained here by lawyers from a whistleblower firm known as Katz,  Marshall & Banks. 

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Sheri Qualters authored this interesting article in the National Law Journal on changing dynamics in a specific portion of today's litigation industry. The article focuses on the large number of health fraud whistleblower cases pending in Boston and other venues, and apparent judicial decisions to unseal cases earlier as a means for addressing long delays and pushing cases forward. In short, judges appear to lifting seals on the cases to force the parties to move forward, one way or the other. The apparent judicial tactic highlights the reality that litigation is indeed an industry, and the judiciary can and does influence how the industry unfolds. Ms. Qualters article goes on to cover various aspects of the larger issues and some case specific issues. The following touches on some points raised in the article, and some broader points about the litigation industry. 

The article includes some useful data to provide some perspective on the significance of the healthcare fraud subpart of the litigation industry, and whistleblowers as a force within that subpart:

"Justice Department data show a steady climb in recent years of whistleblower fraud cases in which the U.S. Department of Health and Human Services is the primary client agency, from 202 new matters filed in fiscal year 2007 to 383 in fiscal year 2010. The District of Massa­chusetts has unsealed three of 25 pending False Claims Act cases before the government decided whether to jump in. One was unsealed more than two years ago, but the government has yet to make an intervention decision. The government declined to intervene in the two other cases shortly after they were unsealed. Of the remaining cases, the government has declined to intervene in a dozen, intervened in five and not made an intervention decision in five others."

Health care industry lawyers can view earlier unsealing as a positive or a negative. Earlier unsealing may give them a better chance at winning a Twombly/Iqbal pleading motion based on a lack of "enough" detail if it can be launched and won before government intervention adds an imprimatur and perhaps fact investigation. On the other hand, for a liable/guilty company, early unsealing may make it harder to control the dynamics of settlement and related media spin and attention, thus increasing reputation risk and financial risk. Other variables of course also exist. 

For private plaintiffs, earlier unsealing can be a negative in raising the effort level but that may be offset be creating settlement leverage for a case. For government lawyers, the delays highlight the need for NOT cutting budgets, and for creating specialist lawyers who can quickly analyze evidence and law, as is done in private litigation boutiques on both sides of issues. One might argue the feds should embrace a model of creating national specialists who could "parachute in" to a case in any district and avoid concentration of cases in specific courts. On the other hand, some would argue that having specialist courts is desirable, and inevitable because of physical concentration of industry businesses. 

Taxpayers also have a stake. Some might say that long time frames for sealing are not a good idea, and that the public should know the issues immediately, especially as the health care debate continues and costs increase, with fraud playing some part in the gaming of the system, in some instances. On the other hand, sealing may discourage cranks wrongly seeking to punish a company (there probably are some cranks), and at least for some amount of time, sealing may encourage taking a case forward to the point that guilty/liable defendants will settle quickly if they can avoid a long string of bad press and efficiently clean up a problem. Ms. Qualters' article includes some insightful quotes from some judges. 

Overall, the litigation industry dances highlight the need for smart, savvy, and experienced judges who can find the right line between dictating outcomes and pushing cases forward. Hopefully the judges can help the parties focus on key issues, and produce outcomes which approximate something that most of us perceive as "justice" in general and in a specific case. 

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As trust breaks down, demands increase for disclosure. Accordingly, fascinating things are happening in the US as Dodd-Frank act regulators involved with financial institutions are required to disclose meetings with constituents, such as the regulated entities and "public interest groups."  The Conglomerate blog includes this informative post to provide a primer - and much more - on the developments.  In the post, Kim Krawiec ( a Duke law professor) provides a great overview of the nature of the disclosures and the big picture view of the information revealed as of early this month. This is interesting work on an area that undoubtedly will grow in prominence. 

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