The president's insurance carriers are seeing him through the Paula Jones sexual-harassment lawsuit, but why are they paying millions to defend $300,000 in claims? Experts suspect an attempt to curry favor.
It pays to be president. Facing a four-count lawsuit based on alleged sexual harassment, requesting $75,00 in compensatory damages and $100,000 in punitive damages for each count, Bill Clinton needed quick cash and couldn't get it because of fund-raising scandals. He had to look no further than the deep pockets of State Farm Mutual Insurance Co. and Pacific Indemnity Co. for $2 million or so to pay his ace attorneys And Clinton didn't have to wait years to get the lump sum, as private citizens often do when they find themselves fighting about money with insurance giants. He even selected his own attorney, Robert Bennett, at $495 an hour -- a far cry from the $225 most insurance companies are willing to pay for legal defense.
Maryland attorney Fred Joseph, whose firm handles hundreds of insurance cases, says insurance companies fight to get out of such cases. "If Joe Blow or Harry Homeowner were under a similar circumstance, I would be extremely surprised if the insurance companies would cover my legal fee, and usually, if insurance companies do cover the case, they insist on using their own lawyers." Nearly three months before Jones claims she was sexually harassed, Clinton had purchased a $1 million insurance policy for less than $200. However, it wasn't until about a year after the lawsuit was filed that the Clinton legal team learned of the pair of personal-liability "umbrella" policies which offer extra protections beyond homeowner or renter policies. Insurance agents and lawyers tell Insight those policies sometimes cover slander and defamation of character but do not cover sexual harassment, and that neither the Chubb Group of Insurance Cos. nor State Farm offer sexual harassment insurance. A policy with Pacific Indemnity, a division of Chubb was in effect from Feb. 5, 1988 through Feb 5, 1992: State Farm carried the ball from that day forward.
Insurance attorneys also say Jones' lawsuit does not contain the elements that usually are necessary to trigger an insurer's obligation to pay legal expenses, such as allegations of negligence. As all the acts in the lawsuit are alleged to be intentional, this raises questions among insurance attorneys about why State Farm and Chubb ever agreed to pay the huge legal bills.
Insurance companies normally do not insure individuals against the consequences of their intentional misdeeds: To do so would make no economic sense. It also socially would be perverse because it would encourage commission of volitional misdeeds.
Sometimes, in cases in which a negligence theory is offered in addition to an intent-based theory, a defendant's insurance company will defend the suit on the understanding that it will not have to pay if the court finds the defendant's act was intentional. Could that be the basis for State Farm and Chubb's involvement" Not so --- because, again, no negligence theory is included in Jones' complaint.
Chubb spokesman David Duffy declined to comment about Clinton's case other than to say that decisions to represent policyholders are made on a "case-by-case" basis. But industry sources say Chubb's personal-liability insurance does not cover sexual harassment claims.
State Farm spokeswoman Mary Moore says her company only is responsible for paying the legal fees under the single defamation count. That means State Farm has spent $1 million to defend a $75,000 claim. "The president is entitled to a defense just like any other citizen," Moore asserts.
But that is the question: Are these insurers legally bound to defend the president? If not, then why would a pair of insurance companies dump millions into Clinton's legal defense, especially when it is obvious from the pleadings that the case could be settled with a $700,000 check?
Larry Klayman, president of Judicial Watch, a Washington public-interest law firm, claims that even if the insurers were rewarded by avoiding bad publicity, it still amounts to an illegal gift. According to Klayman, it's more likely that the quid pro quo is to buy influence in regulatory matters by helping out with Clinton's political objective to delay the case until after the election.
Klayman notes that more political jockeying has been occurring, with Clinton attorney Bennett threatening to sue the insurance companies if they don't pay a settlement. "It's like Al Gore calling from the White House," Klayman says, in reference to the vice president's dialing-for-dollars fund-raising campaign. "When the president calls on you and leans on you and [Clinton's attorneys] say pay the settlement, you pay: Otherwise the only alternative is a shakedown." Klayman filed a lawsuit earlier this year in U.S. District Court in Washington on behalf of State Farm policyholder Tom Flocco, a Pennsylvania music teacher, seeking return of the funds. "Even if State Farm has a duty to defend Mr. Clinton, it has no duty to spend money merely to cause delay for Mr. Clinton's and the insurance industry's political benefit," the lawsuit states. "Spending such large sums for that purpose was not a permissible exercise of business judgment. It was instead, a waste of State Farm's assets." Insurance attorneys predict Klayman will not get far with his lawsuit, but it raises some ethical questions, Mark Levin, president of Virginia-based Landmark Legal Foundation, a political watchdog group, and once chief of staff to former Attorney General Edwin Meese III, says the Office of Government Ethics should take a look at the insurance action to determine if the policies are gifts. Neither of the policies are listed on Clinton's 1995 or 1996 financial-disclosure forms. "If they are gifts, they are illegal," Levin argues.
Flocco became incensed that State Farm raised its rates due to an unprecedented number of claims last year -- and decided to cover Clinton's litigation fees after the president's legal-defense fund dried up following revelation of large contributions from foreign sources. Flocco's policy states it will not provide coverage for "willful and malicious acts or illegal discrimination" and requires claims to be filed within a time certain, such as 60 days. "The president filed a claim some 398 days after the suit was filed. That's a deal that the average citizen couldn't get. It's impossible," Flocco says.
True, say insurance attorneys: Insurers usually give their policyholders a reasonable time limitation for filing a complaint. Failure to give notice within such a period results in denial of coverage. Insurers usually fight hard to enforce these limitations, and they usually win.
Klayman since has refiled the suit in Superior Court in Washington, naming Clinton and the president's attorney as defendants, along with previous defendant State Farm. Part of Klayman's argument is that the $1 million paid by State Farm is not going to defend the case itself but instead is paying for litigating collateral issues and appeals, including the issue of blanket legal immunity for the president while in office. The Supreme Court ruled unanimously against Clinton on that issue last month.
"In the eyes of a reasonable man, if this was Ma and Pa Kettle, would they cut a check to pursue a tangential issue of law? Why is State Farm financing these legal issues?" Klayman asks. "These payments were of an illegal nature to buy influence." Consumer
The Dietary Supplement Health and Education Act was passed to stop plans to regulate dietary-supplement manufacturers. Instead the hands of such companies were tied, and many are crying foul.
Goat glands, electrical helmets, ultraviolet light and patent medicines laced with cocaine, opiates, caffeine and alcohol once were popular quackery. By the early nineties, more than one-third of Americans had turned to alternative medical treatments, according to the New England Journal of Medicine. But, critics of the laissez-faire market for herbs and vitamins still point to the nation's history of snake-oil quackery as evidence of the need for further government regulation of natural products with long histories of efficacy.
In Mid-June the FDA warned consumers to be wary of dietary supplements and nutritional products made with "plantain," a common weed. This herbal ingredient in natural laxatives contains traces of herbal digitalis -- one of their ingredients in prescription heart medication. But texts such as the Time Life Medical Advisor list side effects of plantain treatment as "none expected." In 1994 Congress passed the Dietary Supplement Health and Education Act, or DSHEA, to stop government plans to regulate manufacturers of dietary supplements long in use. Instead, they created a special category for supplements such as vitamins, minerals, herbs and other botanicals, asked manufacturers to place disclaimers on product labels and prohibited health claims for such products on the packaging even when documented by reputable studies.
Government health officials fought the legislation and demanded more regulatory authority, citing occasional unproved claims, but lost the battle. The legislation was well-received by those dedicated to alternative and natural therapies, but it fell short of their hopes.
"The Food and Drug Administration has effectively restricted the proliferation of alternative therapies. Only large pharmaceutical companies can afford the time and expense currently required to gain FDA approval of a treatment," Oregon Democrat Peter DeFazio wrote to congressional colleagues on Jan. 7, 1997. He added that most alternative treatments are a combination of natural products and thus are ineligible for patenting. This makes recovery of investments made to test natural products almost impossible.
Doubts remain in the industry about whether manufacturers have enough freedom under DSHEA to communicate the health-related information consumers need properly to use vitamins and similar products. "It didn't get us much closer to the free flow of information," says Candace Campbell, executive director of the American Preventive Medical Association, or APMA. "The FDA is violating the Firs Amendment." The APMA has taken the FDA to court alleging violation of the constitutional right to free speech.
DSHEA changed the way the FDA could regulate nutritional products by redefining them. It also placed the burden of proof of product safety on the government. The FDA may seek out products that mislabel or present a significant risk of illness when taken as recommended by the manufacturer, but it must prove its case rather than acting by fiat or placing a huge burden on a manufacturer.
Controversies continue to arise. Cholestin, a new product from Pharmanex Inc., is supposed to help the body maintain a healthy level of cholesterol. The FDA has questioned the product as a dietary supplement, claiming it crosses the fuzzy line between natural supplement and drug.
"Right now, we are looking into the whole matter of Cholestin and the issues surrounding it with promotion. The essential question is its proper status: whether a dietary supplement or something else," explains FDA spokesman Brad Stone.
Pharmanex filed a complaint against the FDA in a Utah court after a Washington meeting with the agency alarmed the natural health-care company. "There were comments made that caused us to be concerned that [the FDA] might want to view Cholestin as a drug," Gerald Swerling, director of communications for Pharmanex, tells Insight. Recently, Pharmanex dropped the case and opted instead for negotiations with the FDA.
Pharmanex's product is said by its manufacturer to be a formula containing rice and yeast that has proved efficacious for centuries in China. Swerling consistently emphasizes that Cholestin is only intended to be used as a dietary supplement and not to treat or cure disease. "Frankly, we don't want to be at war with the FDA," he says.
Cholestin has enjoyed a favorable and strong consumer response, according to Swerling. Pharmanex, working with the University of California at Los Angeles, is running a clinical trial it believes will show skeptics that even under rigorous testing Cholestin meets U.S. standards.
"A lot of folks are feeling their way through the application of DSHEA. When our product came along people didn't know what to make of it. The real issue is that is being defined and it is evolving as products come out on the market." Swerling says.
But supplements do not enjoy the same advertising privileges as pharmaceuticals. Supplement promoters can make claims just as food promoters, but supplement promoters can't say their products will help to prevent a disease even if hundreds of studies support such a claim. The FDA describes the difference in the marketing this way: Prescriptions must be sold through doctors, but supplements are sold over the counter. Perhaps so, critics note, but every drugstore in the land has hundreds of nonprescription drugs about which manufacturers make tested claims. Why not do the same for vitamins, minerals, and medicinal herbs?
The big difference is in the packaging. Packages and inserts for supplements are not permitted to contain health claims, such as "Vitamin E has been shown to be useful in maintaining cardiovascular health," explains Campbell. Manufacturers are restricted to explaining what role a supplement plays in the body's structure of function -- factors of dubious practical interest to an ordinary consumer. "I would like to see manufacturers of dietary supplements allowed to make health claims that they can prove." says Campbell. A company can supply truckloads of well-documented information, only to be told by the FDA that it isn't enough, because the FDA will not give manufacturers a benchmark for any such proof, she adds. Clearing a new drug through the FDA can cost as much as $400 million.
Meanwhile, each state is home to a board of medicine responsible for meting out punishments to doctors who "deviate from standard care." For instance, cancer patients in California only can be treated with chemotherapy, radiation or surgery. "If a practitioner recommends nontraditional therapy (dietary or nutritional) for something conventional medicine thinks should be treated only with drugs," explains Campbell, then state boards "call him in and force him to defend himself." Doctors' offices have been raided and physicians carted off in handcuffs for providing unapproved vitamin therapies as treatment sought by sick patients.
"Conventional medical treatments have monopolized the market and shut out complementary and alternative treatments," says DeFazio. The congressman is sponsoring the House version of the "Access to Medical Treatment Act," which would free patients and doctors to use medical treatments about which they agree, but which have yet to be approved by the FDA. The FDA contends that it does not regulate doctors; Campbell muses, however, that the agency uses a backdoor system for regulation, including its influence on state medical boards and by controlling the movement of medicinal products across state lines.
The law that DeFazio proposes would make available low-cost beneficial medical treatments that are blocked by the FDA for reasons that critics say may have more to do with profiteering and medical politics than medical safety. It generally takes six to 12 years and at least $225 million to secure FDA approval for a product, according to congressional researchers. "The FDA is behind the curve," says Campbell. "There is a need for an FDA, but the system should be forced to change to accommodate the shift in the health-care paradigm." It could happen. As of last month, 45 congressmen had signed onto DeFazio's medical-freedom bill. The two leading opponents are Massachusetts Democrat Ted Kennedy in the Senate and California Democrat Henry Wasman in the House, according to APMA. Their concern is paternalistic, says Campbell, adding, "They were both huge opponents of DSHEA, and their concern stems from the fact that they believe that if consumers are allowed to make their own decisions they will make the wrong one and will be taken advantage of." The future of medical freedom hinges upon the flow of information and the ability of educated doctors and informed patients to make personal health decisions unencumbered by government regulators. Although the U.S. public stands to save money with natural and alternative treatments and much is to be gained by alternative emphasis on disease prevention, most medical practitioners agree that a delicate balance must be struck between consumer protection and market freedom.
[Editor's Note: In the opinion of this editor, the proposed legislation should be closely examined to see that it does not contain inadvertant or intentional traps such as those contained in the last bill disallowing proven claims to be made for natural products.]
Muckraking journalists uncovered many abuses of power, both in government and private industry, at the turn of the century. They helped save lives and unmask corruption. But they also contributed to the growing power of the federal government and to the mind-set that looks to Washington for the solution for America's problems.
The muckrakers gave Americans exposes of corruption in high places and exposed the extreme suffering of some of the nation's poor. In the process, they provided American journalism with what many regard as one of its finest hours. Their name, bestowed by an angry President Roosevelt, doesn't sound pretty and wasn't meant to. Roosevelt was comparing the kind of journalism they did to the raking of dung into a heap.
It was a moniker they nonetheless relished, for it described what it was they believed they did. Lincoln Steffens, one of their number, began his expos of large- scale corruption in the St. Louis city government and the governments of other major cities, later published in book form as The Shame of the Cities, and in McClure's magazine in October 1902.
The following month the indefatigable Ida Tarbell published the first installment of her "History of Standard Oil Company" in the same magazine. Behind the innocuous-sounding title was news as Americans rarely had experienced it: a close look at the activities -- often questionable and sometimes illegal -- of high officials and officers of one of America's biggest corporations.
Tarbell quickly won the name "Terror of the Trusts" and was dubbed, perhaps inevitably, "a modern-day Joan of Arc." In any case, she made her editors and reading public happy. Within a short time, McClure's circulation rose from 350,000 to more than 500,000.
Bad food and bad drugs were other issues the muckrakers seized upon and made their own: the mass manufacture and canning of food, for example, which had led to the misuse of preservatives on a large scale and to food tainted -- "poisoned" was a favorite word of the muckrakers -- in a variety of ways, one of which was by the bodies of meat plant workers who allegedly fell into processing vats and weren't removed until their flesh became part of the food later sold to consumers.
Another target was patent medicines, an industry that often made nearly $100 million a year, selling alleged cures for cancer, "female complaints," tobacco addiction and panaceas of all sorts. The problem was that the medicines usually contained large amounts of alcohol and often cocaine and morphine, described on the containers as "soothing substances," Rodger Streitmatter tells Insight . Streitmatter teaches at American University's communication school in Washington and is author of the recently published Mightier Than the Sword: How the News Media Have Shaped American History.
Edward Bok, editor of Ladies' Home Journal, launched the first attack on patent medicines in 1904, railing against advertisements he believed misled the public and endangered health. Other magazines joined in the fray. In 1905, after finding that patent medicine manufacturers believed they could control the press by depriving them of advertising dollars, Collier's announced they would not be bought -- and promised readers to drop all advertising from patent-medicine companies. This cost them income but gained them a reputation for hard-knuckled integrity and many new readers. It was an example quickly imitated by McClure's, Saturday Evening Post and Everybody's.
In 1905 the Socialist weekly Appeal to Reason began publishing Upton Sinclair's The Jungle. Sinclair, who later admitted to never having set foot in a packing plant, charged that workers fell into the vats and that Americans who bought the meat canned in Chicago, were eating human flesh.
Sinclair's critics attacked The Jungle, but the author defended it ardently. One reader who was impressed was Roosevelt, who had denounced Sinclair's kind of journalism, says Streitmatter. By now a "trust buster," the curious Roosevelt sent his own team of investigators to Chicago to look into Sinclair's charges. The team said The Jungle was on target.
A powerful activist president's attention was welcome. But the muckrakers had other ways to achieve their goals. In 1906, Ladies' Home Journal's indefatigable editor Bok challenged his readers by publishing a bill for federal regulation of the patent-medicine industry, which he and his associates had drawn up. Bok urged his readers to clip the sample bill out of the magazine and send it of to their congressmen and senators and to Roosevelt in Washington, along with a clear statement of their own support for the legislation.
Bok's readers responded quickly "and in great number," notes Streitmatter. Roosevelt responded in turn by asking in his annual message to Congress that the federal government regulate both the food industry and drug manufacture. In the Senate, legislation complying with the president's wishes immediately was introduced, along with proposals for federal meat inspection. This legislation was in direct response to the articles published by Bok, Sinclair, Adams, and others according to the Weinbergs in their book.
The first Pure Food and Drug Act, passed in 1906, required all medicines to be investigated and approved by the Department of Agriculture. The Meat Inspection Act, passed the following year, said that all meat sold in the United States had to be checked by federal inspectors. The new legislation was based on the constitutional right of Congress to pass laws regulating interstate commerce, the same clause that later was used to expand federal powers so enormously during the New Deal. A precedent had been set.
[Editor's Note: The Roosevelt spoken of in this article is Theodore Roosevelt.]
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