Current Events in June 2004

California Attorney General Bill Lockyer said that under the settlement, Wal-Mart will pay $5 million in fines, submit to court-enforced compliance with all gun laws, and provide more than $4 million to fund state compliance checks, prevent the sale of ammunition to minors and educate the public on gun laws.

Wal-Marts failure to comply with gun safety laws put the lives of all Californians at risk by placing guns in the hands of criminals and other prohibited persons, Lockyer said.

Although Wal-Mart has suspended gun sales in California, this settlement will ensure that it follows state law if it renews sales and will also provide valuable public education about the importance of gun safety. I will continue to vigorously regulate all gun dealers in California to ensure compliance with the law - the health and safety of all Californians depends on it.

Lockyers lawsuit alleged that Wal-Mart engaged in unfair competition by committing thousands of violations at five separate stores. Among the laws Wal-Mart allegedly violated are:

• Selling and delivering firearms to 23 individuals the Attorney Generals Office had informed the store were prohibited from possessing firearms,
• Delivering firearms to 36 persons prohibited from possessing a firearm by means of a straw purchase to a relative or friend,
• Delivering firearms to persons prior to the completion of a criminal background check,
• Failing to verify the identity of purchasers through thumbprints and by scanning drivers licenses, and
• Failing to document that a firearm safety device, such as a trigger lock, was delivered with each firearm.

Lockyers lawsuit stems from a series of inspections, investigations and audits conducted between 1999 and 2004 that uncovered thousands of firearms law violations at numerous Wal-Mart stores.

Routine inspections by Firearms Division agents of Wal-Mart stores in 1999 and 2000 revealed numerous technical violations of state gun laws. In response, a special training program was provided by the Attorney General to Wal-Mart officials to ensure knowledge and compliance with state laws.

In September 2001, state agents inspected the Wal-Mart store in Pleasanton and again discovered numerous violations - including allowing buyers to claim firearms before background checks were completed and failing to conduct background checks on employees allowed to sell guns. Special training on gun law compliance was provided to Bay Area Wal-Mart stores.

Subsequent inspections in 2002 and 2003 revealed continued violations of law. As a result, the Firearms Division conducted an investigation of six Wal-Mart stores and identified hundreds of state gun law violations. The stores were located in Turlock, Merced, Los Banos, Madera and two in Sacramento.

After notifying Wal-Mart of the findings, in April 2003 the company voluntarily agreed to shut down firearms sales at all of its 114 store locations that sold guns in California.

Later in 2003, the Firearms Division completed a comprehensive audit of five randomly selected Wal-Mart stores in Folsom, Turlock, Fresno, Ukiah and Simi Valley. The audit uncovered 2,891 violations that occurred between 2000 and 2003; these violations served as part of the basis of the Attorney Generals lawsuit.

Among the most serious of the violations discovered by the Attorney General were 23 confirmed cases where Wal-Mart released a firearm to a prohibited person and 36 straw purchases (where an individual purchases a gun on behalf of a prohibited person).

Follow-up investigations by Firearms Division agents led to the successful recovery of 20 weapons sold to prohibited persons. With respect to the straw purchases, criminal charges have been filed against 20 different individuals and most of the firearms have either been recovered or confirmed to have been transferred to a non-prohibited person. Investigations regarding the outstanding prohibited person and straw-purchase cases remain ongoing.

The Federal Trade Commission has finalized the rule under which the three consumer credit agencies will provide consumers with a free yearly copy of their credit report upon request.

Equifax, Experian, and Trans Union will be required to establish a centralized source for accepting consumer requests for free credit reports. This centralized source must include a dedicated Internet Web site, a toll-free telephone number, and a postal address.

The rule provides for a gradual, structured roll-out of the centralized source. The centralized source will become available in cumulative stages, over a period of nine months, rolling-out from west to east beginning December 1, 2004. The entire transition will be complete by September 1, 2005.

Consumers will become eligible on the following schedule:

• Western states (Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming) will become eligible on December 1, 2004;
• Midwestern states (Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin) will become eligible on March 1, 2005;
• Southern states (Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, and Texas ) will become eligible on June 1, 2005; and
• Eastern states (Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont, Virginia, and West Virginia), Puerto Rico, and all U.S. territories will become eligible on September 1, 2005.

The rule also requires that the centralized source:

• Must have adequate capacity to accept requests from the reasonably anticipated volume of consumers making requests;
• May collect only as much personally identifiable information as necessary to process requests;
• Must provide clear and easily understandable information and instructions on how to make requests; and
• May not include any advertising or marketing that interferes with, detracts from, or undermines the purpose of the centralized source.

In addition, the final rule provides the credit reporting agencies with relief from the capacity requirements during times of unusually heavy request volume. In those circumstances, the agencies are permitted to place consumer requests in a queue for processing, or request that consumers return to the centralized source at a reasonable later time.

The rule also limits the use and disclosure of personally identifiable information collected through the centralized source. It provides that personally identifiable information can only be used to process the consumers request.

In addition, the final rule requires nationwide specialty credit agencies - those that maintain specific types of files on consumers, such as employment history, tenant history, medical records, and insurance claims - to maintain a toll-free telephone number through which consumers may request a free copy of their credit report once every 12 months.

The new procedure was mandated by Congress when it passed the Fair and Accurate Credit Transactions Act (FACTA) and by amendments to the Fair Credit Reporting Act (FCRA).

The Federal Trade Commission has charged marketers of Supreme Greens with MSM and Coral Calcium Daily with falsely claiming that their products can prevent and cure cancer and other diseases. The supplements have been sold through two widely-aired infomercials.

The Supreme Greens infomercial promotes the supplement as a means to treat, cure, and prevent cancer and other diseases, and to cause significant weight loss, as well as being a safe for consumption by all, including pregnant women and persons on medication, the FTC charged. The Coral Calcium Daily infomercial touts the supplement as a means to treat and cure cancer and other diseases and as a superior form of calcium based on its purported bioavailability.

In its complaint, the FTC also charges that the infomercial presents itself as an independent television program rather than a paid program-length commercial. Also, the promoters are accused of charging consumers credit cards for automatic product shipments without authorization.

The FTC is seeking a temporary restraining order against the marketers of Supreme Greens, and is seeking permanent injunctive relief, including redress to consumers who purchased the products, against the marketers of both products.

Supreme Greens

According to the FTC, the promoters began marketing Supreme Greens in August 2003 through a nationally disseminated infomercial featuring Donald Barrett and Alejandro Guerrero. The infomercial promoted Supreme Greens as an effective treatment to cure or prevent cancer, heart disease, diabetes, and arthritis.

The FTC also alleges that the defendants claimed Supreme Greens will cause significant weight loss of up to four pounds a week and up to 80 pounds in eight months, and that the product is safe for everyone, including pregnant women, children, and persons on medication.

The FTC has asked the court to enter a temporary restraining order against the Supreme Greens defendants to prohibit them from making the challenged claims. The Commission also has asked the court to freeze the assets of the promoters and to appoint a temporary receiver.

Coral Calcium Daily

The FTCs complaint also alleges that the promoters marketed Coral Calcium Daily to consumers throughout the United States beginning in 2002. Coral Calcium Daily is a dietary supplement that purportedly contains a form of calcium derived from marine coral.

According to the FTC, the defendants promoted the product through a nationally televised infomercial featuring Kevin Trudeau and Robert Barefoot, whom the FTC sued in June 2003 in connection with an infomercial promoting another coral calcium product.

The Coral Calcium Daily infomercial aired on national cable networks such as PAX Television, Womens Entertainment, and the Food Network. The defendants also advertised in free-standing newspaper inserts, and sold the product through retail outlets such as CVS, Rite Aid, and Walgreens.

According to the FTC, the defendants promoted Coral Calcium Daily as an effective means to prevent, treat, and cure cancer, heart disease, and various degenerative and autoimmune diseases including multiple sclerosis, lupus, and Parkinsons disease.

In addition, the FTC alleges that the defendants had no basis for their claims that Coral Calcium Daily was superior to other calcium supplements in terms of the amount of calcium absorbed by the body and the speed of that absorption, and that the defendants had no basis for claiming that scientific research published in the Journal of the American Medical Association and the New England Journal of Medicine proves that calcium supplements are able to prevent, reverse, or cure cancer in humans.

The FTC alleges that the defendants health benefit and superior bioavailability claims for Coral Calcium Daily are false and/or unsubstantiated.

In a related action, on April 19, 2004, the Food and Drug Administration (FDA) sent a warning letter to the promoters, stating that labeling for the firms dietary supplement product Supreme Greens with MSM, including a brochure and customer letter included when the product was ordered caused the product to be out of compliance with the provisions of the Federal Food, Drug, and Cosmetic Act.

The brochure and letter contained unsubstantiated claims about the products benefits such as [n]atural weight loss, balance the bodys pH, and neutralize acidity...heartburn, acid-reflux.

In addition, disease claims were made on the firms website. For example, the product claimed it helped thousands of people with cancer, diabetes, arthritis, lupus, fibromyalgia, chronic fatigue syndrome.... The claims cause the product to be an unapproved new drug. Subsequently, a response from the firms attorneys stated that they intend to remove all the violative claims.

Defendants include Boston-area marketers Direct Marketing Concepts, Inc., ITV Direct, Inc. and Donald Barrett, along with their business partners, California corporations Healthy Solutions, LLC and Health Solutions, Inc., and their principals Alejandro Guerrero (a.k.a. Alex Guerrero), Michael Howell, and Greg Geremesz; and Wayne, Pennsylvania-based Triad ML Marketing, Inc., King Media, Inc., and Allen Stern.

June 3, 2004
Fried chicken a low-fat food? The Federal Trade Commission thinks not. It charged KFC Corporation, owner of the Kentucky Fried Chicken chain, with making false claims about the nutritional value and healthiness of its chicken in a national television ad campaign.

The Commission also charged the company with making false claims that its fried chicken is compatible with certain popular weight-loss programs.

In a proposed settlement, which does not include a fine, the company will stop making these or similar claims about the nutritional value, weight-loss benefits, or other health benefits of its chicken products and meals unless it substantiate the claims.

Todays action signals food advertisers that the FTC will not tolerate misleading advertisements to consumers who are trying to eat healthier and watch their weight, warned FTC Chairman Timothy J. Muris. More than ever before, todays consumers need truthful information about diet and health in food marketing. Consumers want healthier menu options, and many of the national fast food chains are responding. For consumers to obtain healthier choices, we must make sure that companies promote their products honestly, added Chairman Muris.

The FTCs complaint charged KFC with making false claims that eating KFC fried chicken, specifically two Original Recipe fried chicken breasts, is better for a consumers health than eating a Burger King Whopper.

One ad featured a woman putting a bucket of KFC fried chicken down in front of her husband and announcing, Remember how we talked about eating better? Well, it starts today! The ad then states that Two KFC breasts have less fat than a BK Whopper.

Although it is true that the two fried chicken breasts have slightly less total fat and saturated fat than a Whopper, they have more than three times the trans fat and cholesterol, more than twice the sodium, and more calories.

A second ad, the complaint charges, falsely claims that eating KFC fried chicken is compatible with low carbohydrate weight-loss programs. The ad depicts a man surprised when he recognizes a friend who is sitting on the tailgate of a truck eating KFC fried chicken.

Jack? the first asks, Is that you? Man, you look fantastic! What the heck you been doing!? Eatin chicken, Jack replies.

The announcer states, One Original Recipe chicken breast has just 11 grams of carbohydrates and packs 40 grams of protein. So if youre watching carbs and going high-protein, go KFC. The claim is false, the FTC says, because low carbohydrate weight-loss programs such as the Atkins Diet and the South Beach Diet specifically advise against eating breaded, fried foods.

The FTC is not endorsing any particular diet program. Consumers should choose an approach to managing their weight that works for them. But they cannot succeed if they make choices based on bad information, said Muris.

The settlement prohibits KFC from claiming that eating its fried chicken is better for a consumers health than eating a Burger King Whopper, or that its fried chicken is compatible with low-carbohydrate weight-loss programs, unless it substantiates the claim with competent and reliable evidence, including scientific evidence when appropriate.

The settlement also prohibits KFC from making any other claim about the amount of fat or other nutrients in its chicken products; the compatibility of its chicken products with any weight-loss program; or any other health benefit, unless the company substantiates the claim with competent and reliable evidence, including scientific evidence when appropriate.

The FTC has been engaged on several fronts to improve access to information about the calorie content and other health consequences of the foods consumers eat. For example, the FTC has provided its support to FDAs food labeling initiative on qualified health claims, which affords food companies more flexibility to discuss emerging areas of nutrition research.

And, as part of a government-wide effort to combat the nations rising obesity rates, the FTC also has joined forces with the Food and Drug Administration to create regulatory policies that will ensure that food labels offer accurate and more complete information about the calorie content of foods.

As food companies create lower-calorie, healthier options for consumers, they should be able to communicate these improvements to the consumer. At the same time, we will police the marketplace to ensure the information is truthful, accurate, and not misleading, Muris said.

June 3, 2004
A San Diego jury has awarded a woman paralyzed in a Ford Explorer rollover $246 million in punitive damages, in addition to $122 million in compensatory damages. It is the first of about a dozen Explorer rollover cases that Ford has lost.

Plaintiff Benetta Buell-Wilson, 49, had asked for up to $27 million in compensatory damages. Instead the jury awarded her a total of $369 million. She has offered to waive $100 million of the punitive damages if Ford agrees to recall Explorers made between 1990 and 2001 to fix roof defects in those models.

Ford is likely to file motions to have the jury awards set aside. It could also try to negotiate a lower settlement with the plaintiff.

Buell-Wilson's lawyers argued that Ford had ignored the advice of its own engineers and designed the Explorer with safety flaws that made it prone to roll over.

Jurors hugged Buell-Wilson as they left the courtroom after the trial, press reports said. One juror said the evidence proved that Ford went out of its way to deceive the public on the safety of the Explorer.

Buell-Wilson was injured in January 2002. She was driving her 1997 Explorer on Interstate 8 when she swerved to avoid an object in the roadway. The Explorer tipped up on two wheels and rolled over. The roof caved in, breaking her back and leaving her paralyzed from the waist down. Her attorney said she is in constant pain.

Explorers made between 1990 and 2001 have a high center of gravity and a narrow wheel base, making them susceptible to rollovers during sharp maneuvers, said her attorney, Lou Arnell.

Buell-Wilson said that when she bought her Explorer she told the dealer that safety was her No. 1 concern.

"They said it was a very safe car," she testified.

Consumers should watch out for a scam in which swindlers buy items on the Internet with counterfeit cashier's checks greater than the purchase price and then ask sellers to return the difference. The bogus check bounces, leaving the seller owing the bank the entire amount.

The scam artists, usually from overseas, typically target online sellers of expensive items, such as cars. In a variation of the scam, consumers receive calls telling them they have won a large prize and telling them to remit part of a cashier's check to pay expenses.

"Consumers selling items on line should immediately reject offers to pay with cashier's checks greater than the agreed-upon price," said Connecticut Attorney General Richard Blumenthal, whose office uncovered the scam.

"These seemingly simple transactions are scams intended to relieve sellers of their cash. A buyer or business has no legal or legitimate reason to send a check larger than the sale price," Blumenthal said. "Alarm bells should go off the moment someone from overseas offers to pay with a cashier's check. Wiring cash from a cashier's check will line the scam artist's pocket while picking yours."

Phony buyers sometimes offer explanations for the cashier's check being greater than the purchase price. The purchaser may claim the check was mistakenly made out for a greater amount, is a refund from an unrelated transaction, or includes transportation or import/export fees that need to be refunded. The scam artists typically ask the seller to wire money to a foreign country via Western Union.

In another scenario, the swindler claims that he has to pull out of the deal because of a tragic accident or other unforeseen circumstance and asks for a refund of the cashier's check. He may even offer to let the consumer keep a small amount of the payment as compensation for the inconvenience.

Steps consumers can take to avoid such scams include:

• Read all alerts related to Internet sales.
• Be wary of prospective buyers who send e-mails from overseas, want to pay more than the purchase price and ask pay by cashier's check but then cancel the transaction and ask for a refund.
• Do not assume that the cashier's check has cleared and is not counterfeit even if your bank says that funds are avialable.
• Do not withdraw cash or write checks on any cashier's check until the check has cleared, and there is no risk that you will have to reimburse the bank.
• Check with the bank which issued the cashier's check. Aask if it has had problems with counterfeit cashier's checks.

If you are the victim of a counterfeit check cashing scam, submit your complaint to FDIC's Special Activities Section, 550 17th St., NW, Room F-4040, Washington, D.C. 20429, or send your information electronically to alert@fdic.gov.

New York State Attorney General Eliot Spitzer has filed a lawsuit against one of the world's leading pharmaceutical companies for concealing important information about the safety and efficacy of an anti-depressant drug.

The lawsuit, filed today in New York State Supreme Court in Manhattan, alleges that GlaxoSmithKline (GSK) engaged in repeated and persistent fraud by concealing and failing to disclose to physicians information about Paxil, a drug used to treat depression. Paxil has been approved by the FDA for the treatment of depression in adults, but not in children.

Prozac is the only antidepressant that has been approved to treat depression in children. Physicians, however, have professional discretion to prescribe Paxil for treatment in children, a so-called "off-label" use.

"Doctors should have access to all scientifically sound information so that they can prescribe appropriate medication for their patients," Spitzer said. "By concealing critically important scientific studies on Paxil, GSK impaired doctors' ability to make the appropriate prescribing decision for their patients and may have jeopardized their health and safety."

The lawsuit alleges that, starting in 1998, GSK engaged in a concerted effort to withhold negative information concerning Paxil and misrepresented data concerning Paxil's safety and efficacy when prescribed for depression in children and adolescents.

Specifically, GSK conducted at least five studies on the use of Paxil in children and adolescents. However, GSK only published and disseminated one of these studies, which showed mixed results on efficacy. The lawsuit alleges that the company suppressed the negative results of the other studies, which failed to demonstrate that Paxil is effective and which suggested a possible increased risk of suicidal thinking and acts. GSK is also alleged to have failed to disclose this information in "Medical Information Letters" that it sent to physicians.

An internal GSK document from 1998 shows that GSK intended to "manage the dissemination of (the) data in order to minimize any potential negative commercial impact."

The lawsuit also alleges that GSK misrepresented the results of its research on Paxil as a treatment for children and adolescents to its sales representatives who promote Paxil to physicians. The company portrayed the drug as having "remarkable efficacy and safety in the treatment of adolescent depression."

In fact, GSK's studies did not demonstrate that Paxil is effective in treating children and adolescents with major depressive disorder and showed the possibility of increased risk of suicidal thoughts and acts in adolescents. In documents submitted to the FDA and similar agencies in the United Kingdom and Europe, GSK admitted that its studies "all failed to separate [Paxil] from placebo overall and so do not provide strong evidence of efficacy in this indication."

Through these and other acts, GSK deprived physicians of the information they needed to evaluate the risks and benefits of prescribing Paxil for children and adolescents and deprived these youngsters of the benefit of their physicians' professional judgment.

The lawsuit seeks disgorgement of all profits obtained by GSK as a result of the conduct alleged in the suit.

Barry Perlman, M.D., President of the New York State Psychiatric Association, said: "The relationship between a doctor and a patient must be based on a sense of trust. In order to hold true to that principle, physicians must have access to all relevant medical information regarding treatment. Any obstacle placed in the way of full and complete communication with our patients undermines the trust upon which the doctor-patient relationship is based and prevents us from providing the best care we can to our patients."

Arthur Levin, Executive Director, Center for Medical Consumers, said: "The fact is that published drug studies are hugely biased towards good news - the drug works and is safe - and that studies reaching the opposite conclusion are likely never to see the light of day. The ability of drug companies to pick and choose the research they provide doctors in support of their product is an outrageous conflict of interest and puts us all in harm's way."

More than two million prescriptions for Paxil were written for children and adolescents in the United States in 2002. Nearly 900,000 of these prescriptions were for youngsters whose primary diagnosis was a mood disorder, the most common of which is depression. Prescriptions for Paxil to treat mood disorders in children and adolescents translated into US sales for GSK of approximately $55 million in 2002 alone.

In the last year, the use of Paxil for children and adolescents for the treatment of major depressive disorder has come under scrutiny by the FDA and regulatory agencies in the UK, Ireland, Europe and Canada. The FDA has advised caution in prescribing Paxil in children and adolescents for the treatment of major depressive disorder and is currently conducting an analysis of the data related to the use of Paxil and the possibility of increased suicidal thoughts. Regulatory agencies in the UK, Europe, Ireland and Canada have recommended that Paxil not be prescribed for adolescents and children with depression.

GSK is based in the United Kingdom with subsidiaries in the United States and several other nations.