Names In the News

Tosco Gets Off Cheap

Tosco Corporation will pay approximately $2 million in fines and penalties related to a February 1999 refinery explosion that killed four workers. Tosco pled no contest in January to charges that it violated California's labor code by failing to comply with safety regulations at the company facility in Avon, California where the blast occurred.

"I appreciate that our resolution of this case does not make the families whole who lost loved ones in this terrible accident," said Contra Costa County District Attorney Gary Yancey. "However, under the law that existed at the time of the event, these were the most severe charges that could be brought given all the facts and circumstances."

California labor law was amended last year and as of January 1, 2000, industrial accidental death cases, or cases where serious injury occurs, can result in substantially stiffer penalties.

In August 1999, the California Division of Occupational Safety and Health fined Tosco $810,750 for 33 alleged violations of workplace safety rules related to the accident, accusing it of willful negligence.

The February accident was the latest in a string of fire incidents at Tosco facilities.

Beverly's Medicare Fraud

Beverly Enterprises, the nation's largest nursing home chain, will pay $175 million to resolve civil and criminal charges that it defrauded Medicare.

Beverly agreed to plead guilty to mail fraud and false statement charges filed in federal court in San Francisco.

In addition to the $175 million in payments, the company agreed to divest itself of 10 nursing homes.

The $175 million represents the largest settlement ever in a nursing home case.

The case focused on a Medicare rule that the Medicare program reimburses only costs of caring for Medicare patients, including nurses' salaries.

Federal officials alleged that the Ft. Smith, Arkansas based company in 1992 began to charge Medicare improperly for the salaries of nurses caring for non-Medicare patients at 10 homes owned by Beverly-Enterprises-California and other Beverly facilities.

Instead of recording the true time spent on Medicare patients, Beverly-California fabricated nursing cost figures based on set formulas designed to maximize profits while avoiding detection by Medicare auditors. The phony cost figures were backed by false documents, such as phony nurse sign-in sheets, that appeared to support Beverly's claims for payment.

"By its conduct, Beverly victimized not only the Medicare program, but American taxpayers whose dollars fund government health care programs," says U.S. Attorney Robert Mueller III.

"There were no surprises in the terms of the settlements. We worked diligently to ensure that any agreements we reached did not impede our ability to continue providing quality care for our residents under a new government payment system," says David Banks, chair and CEO of Beverly. "We ... want there to be no confusion -- these settlements were in no way related to the quality of patient care."

While the company acknowledges that "errors were made by individual employees" in the submission of 10 cost reports to Medicare, it says that the 10 cost reports represent .8 percent of the 1,370 Medicare cost reports filed by Beverly subsidiaries in 1996 and 1997 and .2 percent of the 4,680 cost reports filed by Beverly subsidiaries for the period investigated by the government.

No Hogging the Market

Iowa Attorney General Tom Miller in February filed suit to block Smithfield Foods Inc. -- the world's largest pork processor -- from acquiring the Iowa pork-production assets of Murphy Farms Inc.

"We allege the acquisition would violate Iowa's Corporate Farming law, which prohibits any pork or beef processor from owning, controlling or operating a feedlot in Iowa," Miller says.

"Our argument is straightforward," Miller says. "Processors may not control hog production facilities in Iowa, and Smithfield is a processor. In fact, Smithfield is the largest pork processor in the world."

Smithfield reported sales of $3.8 billion last year.

"If Smithfield acquires Murphy Farms, it will retain essential control of pork production at about 300 sites in Iowa where Iowa producers have swine production contracts with Murphy Farms," Miller said. "Those contracts specify today that Murphy Farms has authority over most important management decisions, from ownership, source and marketing of the hogs, to the hogs' sex, feed ration, medication and transportation."

"We allege that adds up to control -- and a violation if Smithfield acquires Murphy's assets in Iowa," Miller said. "That is important because Iowa's Corporate Farming law was enacted in order to preserve free and private enterprise, prevent monopoly and protect consumers."

On September 2, 1999, Smithfield Foods, of Smithfield, Virginia announced that it had reached agreement in principle to acquire Murphy Farms, Inc., which is headquartered in Rose Hill, North Carolina.

Smithfield said acquisition of Murphy Farms would roughly double Smithfield's own hog production capacity. Smithfield said the acquisition would increase the company's level of domestic vertical integration to 60 percent (the company would produce 60 percent of the pigs it requires for processing).

-- Russell Mokhiber