APRIL 1996 · VOLUME 17 · NUMBER 4
N A M E S I N T H E N E W S
APRIL 1996 · VOLUME 17 · NUMBER 4
N A M E S I N T H E N E W S
DEFENSE CONTRACTORS and health care companies are planning a legislative assault on the Federal False Claims Act, the "qui tam" provisions of which allow persons with evidence of fraud against federal programs or contracts to act as "private attorneys general" and sue the wrongdoer on behalf of the federal government.
Karen Hastie Williams of the law firm Crowell & Moring has organized a business coalition to support a legislative proposal, currently being shopped around to a number of members of Congress, but she says she cannot disclose the members of the coalition. The business proposal would raise the standard of proof in fraud claims, and require prosecutors to show defendants had a specific intent to commit fraud.
In response to the business initiative, a coalition of public interest groups, including Public Citizen and Taxpayers Against Fraud, is being organized to defend the law.
"Qui tam" actions have returned more than $1 billion to the U.S. Treasury since the False Claims Act was amended and revitalized in 1986.
The largest qui tam recovery to date was $150 million from United Technologies Corporation. The company paid that amount to settle a lawsuit filed by a former vice president alleging that the company overstated progress payments submitted by its Sikorsky Aircraft Division and misrepresented the facts in reporting the fraud to the government through the voluntary disclosure program.
The whistleblower in the case received $22.5 million, the largest recovery by a whistleblower to date.
Freedom to Puff
ADVERTISERS SUCCESSFULLY HAVE BEAT back proposed changes to the Uniform Commercial Code (UCC) -- legislatively adopted in states as the rules governing merchandise contracts -- that would have taken the wind out of "puffery."
Reformers, led by Ivan Preston, a professor of advertising at the University of Wisconsin-Madison, last summer proposed changing current law so that puffs -- claims such as "Nestle makes the very best chocolate" -- would be treated as warranties, making advertisers liable for breach of claims made.
But the new UCC proposed revision issued in February is seen as a victory for freedom to puff and a defeat for reformers.
"The revision now states that the buyer must prove that an affirmation of fact (as opposed to mere puffery) was made, that the buyer was aware of the advertisement, and that the affirmation of fact became part of the agreement with the seller," attorney Jeffrey Edelstein told Advertising Age. Edelstein, who represents the American Advertising Federation in the matter, called the proposed change "a big victory" for advertisers.
Advertisers have argued that buyers know to reject puffing claims. But Preston says research shows that consumers interpret puffery factually. "Puffery works, otherwise advertisers wouldn't use it," he says.
Mitsubishi Moves, a Bit
THE FIVE-YEAR BOYCOTT of Mitsubishi Corporation for its alleged destruction of world rainforests is yielding results.
In return for Rainforest Action Network (RAN), the San Francisco-based group that is spearheading the boycott, agreeing to halt civil disobedience at Mitsubishi's auto shows, Mitsubishi Motor Sales America and Mitsubishi Electric America have paid Rocky Mountain Institute of Snowmass, Colorado $200,000 to conduct a series of studies on how to make forestry more sustainable.
RAN and executives from Mitsubishi Japan are meeting periodically in an effort to resolve the boycott, which has spread onto 22 campuses across the United States.
The Rocky Mountain Institute (RMI) has convened a panel of experts to conduct "the most fundamental study to date of forest-related practices and alternatives that are both sustainable and profitable," according to RMI president and executive director Hunter Lovins.
Even if Mitsubishi were "wildly successful in cutting down all the trees, in the end, they would have to do something else," says Lovins. "This effort is to point out to them sooner rather than later that there are other things to do while there are still some forests left."
Lovins sees the Institute's role as a neutral one. "We are not working on behalf of Mitsubishi or RAN," she explains.
Despite the Institute's efforts and the private meetings between RAN and Mitsubishi, RAN continues to call for a total boycott of all products or services from Mitsubishi companies, including Mitsubishi automobiles, trucks, bicycles, televisions, VCRs, fax machines, microchips, Nikon cameras, Kirin beer, Value-Rent-A-Car and the Bank of California. RAN claims that Mitsubishi logs or imports timber from the Philippines, Malaysia, Papau New Guinea, Bolivia, Indonesia, Brazil, Chile, Canada, Siberia and the United States.
Steve Wechselblatt, vice president of Mitsubishi International Corporation, says RAN's claims about the company "are not valid." He explains, "We have rainforest operations only in one place -- in Brazil. And it's not a rainforest logging operation. The one in Brazil is the only one we have in the world."
Wechselblatt admits that the company is also a trading company. "But it handles less than 0.03 percent of tropical timber used around the world," he says. "Our trade is not really great. We are not the largest company that trades tropical timber. ... We are not even in the top five."
-- Russell Mokhiber