Current Events in August 2002

August 28, 2002
An Orlando company has been charged by the Federal Trade Commission with making false and unsubstantiated claims in advertisements for its electronic mosquito and pest repellers and its air cleaning products.

• its MosquitoContro devices repel mosquitoes from the user and provide an effective alternative to using chemical pesticides in the prevention of the West Nile Virus;
• its pest-control products drive away mice, rats, bats, cockroaches, and other household pests by means of ultrasound and electromagnetic technology; and
• its air cleaning products remove various pollutants from indoor air through ozone and ionization.

The FTC alleges in an administrative complaint that the respondents do not have competent and reliable evidence to support the claims made for these products, and that the claims for the MosquitoContro device are false.

Lentek International is a manufacturer and distributor of such items as air cleaners, pest-control devices, housewares, pet products, personal care products, and flashlights. These products are sold on the Internet, www.lentek.com, in retail stores and catalogs, and by individual home distributors.

MosquitoContro

The respondents have claimed that their battery-operated MosquitoContro products, designed to be worn or placed near the body, create sounds that mimic male mosquitoes and dragonflies, thereby supposedly frightening away the biting female mosquitoes. The MosquitoContro devices, which cost between $10 and $20, include a bracelet, a key chain, and a tabletop model.

• use insect repellent containing DEET, according to the manufacturer's instructions;
• wear long-sleeved shirts and long pants;
• spread mosquito netting over infant carriers; and
• stay indoors at dawn and dusk.

PestContro

Lentek also markets, under the brand name "PestContro," a variety of pest- control products that are claimed to drive away household pests such as rats, mice and cockroaches. Most of the devices are plug-in or battery operated, and some are sold for outdoor use. The PestContro products purportedly work by emitting ultrasound waves, thereby creating an annoying noise that is audible to certain pests but not to people. The uncomfortable noise supposedly drives pests out of the house or away from an outdoor area. Some PestContro devices also purport to alter the electromagnetic field of household wiring so that pests are driven out of the walls.

According to the FTC's complaint, the respondents do not have a reasonable basis for claims that ultrasound will eliminate or repel pests, including rodents and many insects, from a user's home. The complaint charges as false the respondents' claims that some PestContro devices drive away pests by altering the electromagnetic field of home wiring. In addition, the FTC alleges that the respondents have no basis for their claims that particular devices repel or eliminate pests in a space of a certain size (e.g., 2500 square feet) or that other products repel deer, racoons, skunks, or similar animals from a yard.

Sila Air Cleaners

According to the FTC, the respondents sell several small air cleaning products under the brand name "Sila." These units, ranging in price from $20 to $70, include room air cleaners, devices to be plugged into automobile cigarette lighters, and personal devices to be worn around the neck. The Sila products purportedly clean indoor air through ozone and ion generation.

The FTC's complaint alleges that the respondents do not have a reasonable basis to support their claims for the product.

August 21, 2002
The Food and Drug Administration FDA is warning that two Chinese diet pills pose a serious public health risk. Several people in Japan have become ill and some have died after using the products, Chaso (Jianfei) Diet Capsules and Chaso Genpi.

"FDA is taking this action as a precautionary measure to help assure that people are not exposed to this potentially dangerous product," said Dr. Lester M. Crawford, FDA Deputy Commissioner.

Products of this type are often sold in small urban markets as alternatives to Western medicine. In 2001, FDA issued a nationwide alert on the recall of thirteen "Treasure of the East" herbal products because of a dangerous ingredient, aristolochic acid, which is toxic to the kidney.

The deaths in Japan linked to these Chinese weight-loss products may have resulted from the presence of such active drug ingredients as fenfluramine in the capsules.

Fenfluramine and another diet drug, phentermine, were used in combination for weight loss until it was determined that the combination of drugs was linked to valvulopathy, a serious and sometimes fatal heart disease. Fenfluramine and a chemically similar drug, dexfenfluramine, were removed from the market in 1997. Phentermine, when used alone, has not been associated with valvulopathy and remains on the market.

The agency is urging consumers not to take these diet pills and to notify their local FDA if the products are found in their area.

August 19, 2002 Continental AG is recalling more than half a million tires used on Ford Expeditions and Lincoln Navigators. The company said the tires are "not performing up to standard."

Continental says that Ford is supporting the recall. Ford broke off a longterm relationship with Firestone last year after a disastrous round of rollovers on its Explorer SUVs. Ford blamed the problem on Firestone while Firestone said the Expedition design was faulty (story).

The latest recall involves 600,000 size 275/60R17 tires used on 2000 and 2001 Ford Expedition and Lincoln Navigator sport UTEs. Customers will be asked to take their vehicles to Ford dealerships, which will replace the tires with Continental P265/70R17 tires at no cost.

"In-depth investigations indicated that these tires were not performing up to our standards after two years in service," Continental said in a statement. The company said the tires were displaying uneven tread wear.

Continental estimated the cost of the recall at about $20 million. The company is based in Frankfurt, Germany. Its U.S. operations are based in Charlotte, NC.

August 16, 2002
Vacationers out for a good time at sea don't usually spend much time considering the potential risks of an ocean cruise but, in fact, for the duration of the cruise passengers are beyond the protections they take for granted.

Cruise ships sailing from U.S. ports are almost without exception registered under the flags of Panama, Liberia and the Bahames. They are exempt from most U.S. labor standards, environmental regulations, security requirements and medical safeguards.

The $12 billion cruise industry pays no U.S. corporate taxes and in most matters is beyond the reach of U.S. courts. Passengers are truly on their own.

The issue of medical care is especially worrisome, especially for passengers who may have underlying medical conditions that can become life-threatening if not quickly and properly treated.

Consider these factors:

• Once on the high seas, it is seldom practical for cruise ships to turn back in a medical emergency; helicopter evacuation is extremely expensive and useful only if the patient is adequately stabilized by the shipboard staff.
• Most shipboard infirmaries are set up to handle sunburn and seasickness and may or may not be able to deal with a serious illness or injury, even though heart attacks are the most frequent cause of death at sea.
• Infirmaries are usually staffed by doctors who are not licensed in the United States. Regulation of shipboard medical care is largely non-existent. Most cruise lines have no formal procedure for reviewing doctors' work.
• Doctors and nurses are independent contractors, not employees. Thus, the cruise lines are generally not legally liable for their actions.
• There is no international oversight of medical care because martime law does not require cruise ships to provide medical care for passengers, only for the crew.

With more than five million tourists taking cruises from U.S. ports each year, it's inevitable that the number of medical emergencies is increasing, raising concern among American physicians. A few years ago, the American Medical Association conducted a study that found glaring inadequacies in shipboard care.

For example, the study found that 27 percent of shipboard doctors and nurses lacked advanced training in treating heart attacks, the leading cause of death on ships. More than half the doctors and 72 percent of the nurses lacked advanced training in dealing with trauma.

The AMA called on Congress to take action but the cruise industry's lobbying organization, the International Council of Cruise Lines, has so far kept the issue off the Congressional agenda.

Partly to deflect Congressional action, the industry has adopted voluntary guidelines written by the American College of Emergency Physicians. The guidelines do not require certification in emergency or critical care.

While most passengers recover from shipboard illness, about 20 die each year. Heart attacks are the most common cause of death.

In their defense, the cruise lines compare their ships to small towns and say the level of care onboard is comparable to most small towns. Perhaps, but small-town doctors must be licensed and are overseen by state licensing boards and the hospitals where they practice.

Perhaps more significantly, if someone becomes ill in a small town, it is a simple matter to transport them by ambulance to a sophisticated medical center in the nearest big city. On the high seas, it's not nearly that simple, fast or inexpensive. And the nearest hospital will often be in a foreign country with medical standards that may be significantly less stringent than Americans take for granted.

What can travelers do? The first step is to check with your physician before sailing. Be certain you have an ample supply of prescription medications and a copy of your medical history. Check with the cruise line to see if it complies with the ACEP recommendations.

It's also a good idea to check you medical insurance and credit card plans. Some may provide emergency evacuation if you become sick in foreign lands or on the high seas. Most, however, do not.

There are numerous other dangers that can befall cruise passengers, everything from onboard fires and epidemics to bad weather and mechanical failure. For an eye-opening look at what is and isn't regulated by U.S. authorities, see the Coast Guard's cruise fact sheet.

August 14, 2002
Counting on your air bag to save you in an accident? Not a good idea, especially if you bought your car used or if it's ever been in an accident that caused the air bags to deploy.

An industry group today issued a warning that many air bags are being refurbished with false or faulty replacements, putting unsuspecting customers at risk. In some cases, rags, towels, cans and other debris have been found stuffed in air bags. In other cases, examiners have found the air bags were rebuilt with inferior parts.

The warning comes from a group called the Automotive Occupant Restraints Council, a trade association representing manufacturers of -- what else? -- air bags and seat belts.

"Consumers should be aware that some disreputable repair facilities around the nation are installing false air bags in vehicles after original air bags have been deployed and need to be replaced," the council said. The council said it knows of two deaths that were attributed to remanufactured air bags last year.

Consumers may be surprised to learn that most states don't require air bags to be replaced once they have deployed. It could, however, be a violation of consumer fraud laws to sell used vehicles without notifying consumers that the air bags are missing or defective.

Fourteen states have laws that prohibit remanufactured or false air bags.

The vehicles most likely to have defective air bags and other problems are those that have "salvage" titles. This means they have been declared a total loss by an insurance company following an accident or natural disaster, such as a flood.

Conseco, the big finance company, admits its turnaround strategy has failed and it's expected to file for bankruptcy protection soon. The company is a major insurer and the largest lender to mobile home buyers. Its financial shipwreck may cause turbulence for many retirees who rely on payments from Conseco annuities.

Federal and state regulators say they are watching the Indiana-based company carefully but noted that the state insurance subsidiaries are required to be self-sufficient and should not be affected by the parent company's troubles.

However, some financial analysts said they feared a "run on the bank," with retirees and others rushing to cash in their annuities and insurance policies. Nearly $5 billion worth of policies could be redeemed with no financial penalties, observers said.

Conseco is the nation's 26th-largest life insurance company. It collected $5.6 billion in premiums last year and has 5.7 million policyholders. Its portfolio includes traditional life insurance, annuities and supplemental health coverage.

Conseco's troubles began two years ago, in what some say was a foreshadowing of Enron and other celebrated collapses. The company went on an acquisition binge, taking on a huge debt load that is now the basis of its plight.

Most observers see Conseco's purchase of Green Tree Financial as its downfall. Green Tree was the nation's largest lender in the mobile home market, which turned out to be much riskier than Conseco had realized.

Conseco hasn't been tight with a buck.

Shortly after the Green Tree deal, the company recruited General Electric wizard Gary C. Wendt as CEO, awarding him one of the lushest contracts in history, worth at least $75 million and gauranteeing him a retirement annuity of $1.5 million yearly. The company also made loans of nearly $550 million to its executives and directors. No one seriously expects any of those to be repaid.

Wendt is throwing ballast overboard as fast as possible. The company said Friday it would halt interest payments on about half of its $2.6 billion in bonds for at least the next 30 days.

Wendt is celebrated for his business acumen and for his bitter and very public divorce from his first wife, Lorna, several years ago. She sought to be compensated for her alleged role in Wendt's success at GE Capital.

The Federal Trade Commission has settled two cases against companies that failed to live up to rebate promises made to consumers of computer peripheral products. It's the first time the FTC has challenged such conduct as both deceptive and unfair in violation of the FTC Act.

The cases were against Philips Electronics North America Corp. and Tim Wofford, president and sole shareholder of the recently bankrupt OKie, Inc., a company that did business as "Prime Peripherals."

"Rebates that begin as a big draw for consumers often end up as a big drag," said J. Howard Beales III, Director of the FTC's Bureau of Consumer Protection. "Some companies are quick to offer attractive rebates, but are slow to send them out, and often make them so difficult to redeem that consumers simply give up."

Further, he stated that, "In both of the cases announced today, the Commission alleged that the sellers changed the rules of the game while it was being played. The FTC will use all of its powers - including its power to allege unfair business practices - to challenge such conduct."

According to the FTC, both Philips and Wofford misrepresented the time in which they would deliver rebates, in addition to unilaterally modifying the terms of their rebate programs after they had already begun.

Under the consent orders reached with the Commission, Philips and Wofford would be required to comply with the FTC Act and the Commission's Mail or Telephone Order Rule (Mail Order Rule) in the future. Philips also would be required to provide redress to consumers whose pending rebate requests are either due or past due.

The FTC's complaint against Philips states that, between January 2001 and January 2002, its division, Philips Consumer Electronics North America, promised a rebate delivery time of eight weeks, and, in many instances, extended this delivery time without seeking agreement from consumers. Over 50,000 consumers waited up to six months or more beyond the promised eight weeks before receiving their rebates.

The complaint against Wofford alleges a similar failure to live up to rebate delivery promises made for OKie, Inc.'s "Prime Peripherals" brand products - noting that in many instances, Wofford's customers either experienced delays ranging from one to six months, or never even received their rebates. The Wofford complaint also alleges facts indicating that the respondent made it difficult for consumers to redeem their rebates by modifying or failing to disclose material terms and conditions of rebate offers. Specifically, Wofford rejected rebate coupons that did not include a phone number, fax number, or email address on the rebate coupon - without informing customers that they would be required to have and disclose all of this information to be eligible to receive a rebate.