IV. Consumer Rights
Bankruptcy Rules: Leave the Children Behind

For seven years now, the banking and credit card industries have been trying to pass legislation that would make it much more difficult for those suffering from massive credit card debts and other crushing financial situations to declare bankruptcy.

Though various versions of the bankruptcy bill have passed in both the House and Senate, so far no bill has managed to make it to George Bush's desk for signing. Most recently, in 2002 Senator Charles Schumer, D-New York, managed to defeat the measure by tacking on an amendment that would have restricted the ability of anti-abortion activists to write off their court fines in bankruptcy courts. This convinced enough anti-abortion conservatives to change their vote, eventually sinking the bill.

But though the bankruptcy bill didn't come up last year because the financial services industry had other priorities (namely, limiting states' rights on credit reporting laws), a version of the bill passed in the House earlier this year as part of a family farm bill. Senate Majority Leader Bill Frist, R-Tennessee, has indicated that he may bring the bill to the Senate floor soon.

And while President Clinton vetoed the only version of the bankruptcy bill that came across his desk, President George W. Bush has expressed his eagerness to sign a bill to make it harder to declare bankruptcy.

This should come as no surprise to anybody who has paid attention to Bush's campaign contributions. After all, the leading donor to Bush's presidential campaign in 2000 was MBNA Bank, a major distributor of credit cards. And five of Bush's top 10 campaign donors in 2000 and 31 of Bush's Pioneers and Rangers (those rounding up more than $100,000 or $200,000 in contributions, respectively) were also from the financial industry (second only to lawyers and lobbyists). This time around, the financial services industry is the leading source of Pioneers and Rangers in the Bush campaign, with at least 100 of Bush's 2004 Pioneers and Rangers coming from the financial services industry, according to Texans for Public Justice.

"The financial industry has given a lot of money to him and they're saying support the bankruptcy bill," says U.S. Public Interest Research Group's (U.S. PIRG's) Ed Mierzwinski, who tracks consumer and financial issues in Congress.

"This administration does favors for corporations. That's what they came to Washington to do."

If the current version of the bankruptcy bill were to become law, it would become much harder for consumers to qualify for Chapter 7 "fresh start" bankruptcy. This would mean that most people would instead be forced into some kind of debt retainment plan, regardless of their ability to pay. The bill would strip away the flexibility of judges to adjust debt management for emergencies such as sickness. It would also change the definition of what debts can be written off and in what order. One result: credit card debts would be on equal footing with child-support payments.

What the legislation does not do, say consumer group opponents, is address the reasons why there is now more than $750 billion worth of revolving-door debt in the first place (most of which is held by the 20 biggest credit card companies). For example, they note, it does nothing to challenge the ability of credit card companies to charge usurious interest rates that often run as high as 25 percent annually. Nor does it place any responsibility on credit card companies for educating customers about the consequences of only making the minimum payments on credit card bills or about the long-term costs of debt.

"In a nutshell, the primary goal of the bill is so credit card companies can strip you twice," says Mierzwinski. "First they take your money with overpriced interest rates. Then, if you get in trouble, they can take your money again by preventing you from getting a fresh start."

Supporters of the legislation generally argue that bankruptcy reform is necessary because too many people are abusing the bankruptcy system and sticking credit card companies with the bill. "We believe our current system allows people to game the bankruptcy system," says Peter Lawson, director of Congressional and public affairs at the U.S. Chamber of Commerce. "People that can afford to pay back some of their debt are instead just walking away from it, and it costs all consumers thousands of dollars."

But according to research by Harvard Law School professor Elizabeth Warren, author of The Two-Income Trap, more than 90 percent of bankruptcies are the result of three typically uncontrollable triggers -- illness, getting laid off or divorce. Only an estimated 3 percent of all bankruptcies may be the result of abuse. In 2002, personal bankruptcies hit a record 1.6 million, a number that has been steadily growing for two decades (in 1980, there were approximately 300,000 personal bankruptcies).

Personal debt is widespread among most working-class people in the United States, meaning that millions are one catastrophe away from bankruptcy. The average U.S. household now owes an average of $8,940 on its credit cards.

"Over half of Americans have excessive credit card debt averaging $8,000 to $10,000," notes Mierzwinski. "These are basically working-class Americans, and the credit card industry is getting a lot of money from these people in terms of their interest in fees, and now they are running this bogus �people should be responsible for their debts' campaign to try to extract more money from them."

Those hit hardest by the bankruptcy bill would be those who are most prone to bankruptcies -- typically the young and the old, as well as minorities. The bill is especially harsh on women, both because women often are forced to declare bankruptcy as a result of divorce and because the bill puts child support payments on the same footing as credit card payments in bankruptcy court.

Bill supporters say that the goal is not to go after poor people, but rather deadbeat millionaires. As Lawson puts it, "it is only attempting to rein in the egregious cases of people who are trying to get out of paying bills they can afford to do so."

But what the Chamber describes as even-handed may not appear that way to the general public. While the legislation would give credit card companies equal standing with child support payments, it contains a provision that protects the mansions of the rich in bankruptcy.

-- Lee Drutman

Victimizing the Victims

With Republicans in control of both houses of Congress and the presidency since 2002, corporate interests have had their best opportunity to advance legislation to limit access to U.S. courts to redress unsafe products and negligent doctors. Curtailing lawsuits against businesses and limiting the size of judgments against them -- what proponents call "tort reform" and consumer groups denigrate as "tort deform" -- has long been a key legislative goal of the business community.

According to tort reform proponents, business is beleaguered by a wave of plaintiff lawsuits with huge damage awards. The only hope for relief, claim the business lobbyists, is to limit the number and scope of these lawsuits.

"Lawsuit abuse raises consumer prices, cripples companies, drives down shareholder value and clogs our courts with frivolous lawsuits that do little more than enrich unscrupulous lawyers," says Lisa Rickard, president of the Institute for Legal Reform, an affiliate of the U.S. Chamber of Commerce.

But the numbers don't support the corporate claims. The frequency of tort suits has been declining for a decade. According to an April 2004 Department of Justice study, the number of tort cases in state courts declined by nearly a third (32 percent) between 1992 and 2001. Only 3 percent of cases ever go to trial and the median jury trial award fell by more than half, from $64,000 in 1992 to $28,000 in 2001.

To date, special interests and Republican lawmakers have been unable to capitalize on their political gains to achieve tort reform at the federal level -- though state limits on the ability of victims to sue makers of defective products, negligent doctors and other perpetrators are spreading like wildfire.

Over the past two years, the GOP has moved the tort reform efforts to the top of its agenda. Three Bush administration-supported measures have passed the House of Representatives but died narrowly in the Senate. Medical malpractice reform, significant changes to class action lawsuits, and limitations to asbestos liability claims have all been flagship measures in the broader tort reform effort of the big business-Republican alliance.

Medical Malpractice: Approximately 80,000 people die annually in the United States as a result of medical error and negligence in hospitals alone, according to the Harvard School of Public Health, and hundreds of thousands more suffer from lesser injury or disease due to malpractice. A relatively small fraction of these injured patients or their families sues for compensation -- many remain unaware that their ailments are due to malpractice and were preventable.

Doctors have contended the real problem is not bad care, but excessive lawsuits. They contend that frivolous lawsuits have driven up the cost of malpractice insurance, thereby driving up the overall costs of health care.

"The civil litigation system in the United States has evolved into a �lawsuit lottery' where a few patients and their lawyers receive astronomical awards, and the rest of society pays the price," wrote the president of the American Medical Association (AMA) in endorsing a medical malpractice reform proposal introduced by Representative Jim Greenwood, R-Pennsylvania. Greenwood's legislation would cap pain and suffering awards for medical malpractice suits at $250,000. Consumer groups say the plan would disregard the extent of injuries patients suffer and unfairly disadvantage children and seniors with little income to justify economic damages (primarily income lost due to injuries).

A tiny number of doctors commit the majority of malpractice cases. About half of recent malpractice premium increases are related to losses insurers faced on Wall Street, not increases in lawsuits, according to the General Accounting Office, the Congressional research arm. Moreover, it is not easy to win a malpractice claim -- in part, consumer groups charge, because jurors have been poisoned by anti-patient propaganda from the insurance industry and doctors' groups. Only about a quarter (27 percent) of plaintiffs win malpractice cases, according to the 2004 Department of Justice study.

The broad medical malpractice legislation supported by the AMA failed in the Senate in July 2003, but efforts to tailor it to certain specialists continue.

Class Action: Class action lawsuits allow individuals who may have small individual claims to pool their interests with others. Together, they can bring a single economically viable suit. Class actions have been a vital tool when many consumers are slightly damaged by a corporation's actions -- like small overcharges on phone bills or credit cards -- which in total could cost many consumers a great deal.

Proposed class action "reform" legislation, introduced under the name of the Class Action Fairness Act, would fundamentally change the way class action lawsuits could be brought, handing corporate defendants important procedural advantages, primarily by moving class action lawsuits from state to federal courts. Federal courts often interpret state laws narrowly and conservatively. Moreover, certifying a class of plaintiffs in federal court is more difficult than in many state courts, reducing the number of approved class action suits.

"Jurisdictional changes mandated by [the legislation] are designed to impede class action, not to make them fairer or more efficient," argued the U.S. Public Interest Research Group and the Consumer Federation of America in an April 2003 letter. "The Class Action Fairness Act will substantially reduce the effectiveness of one of the most important legal tools consumers now have."

Despite the hype from business interests, few class action suits are filed. Regardless, industry and trade associations hired 475 lobbyists during 2000-2002 to promote the class action legislation. The Chamber of Commerce spent $22 million lobbying Congress in 2000-2002 to advance its overall tort reform agenda, of which class action changes were the key element.

Despite the pressure from business interests, in October 2003 the class action measure failed to garner enough support to pass the Senate. Democrats, who receive strong financing from trial lawyers and are lobbied heavily by consumer groups, refused to support the proposal. After failure of the deal, a handful of Democratic Senators -- enough to get a bill passed -- agreed to a compromise only mildly different than the legislation that had been rejected. At press time, it remains unclear whether the Republican leadership will be able to maneuver to get the revised class action bill debated and passed.

Asbestos: Asbestos-related diseases cause 10,000 deaths a year in the United States, a figure projected to remain steady over coming decades, based on old exposures and even though most uses of asbestos are now banned. Evidence uncovered in lawsuits show the companies that produced and used asbestos concealed the risks of asbestos for decades. The Environmental Working Group recently publicized the asbestos industry's secret memos detailing efforts to hide the effects of asbestos on workers.

A 1958 memo by National Gypsum noted "just as certain as death and taxes is the fact that if you inhale asbestos dust you get asbestosis."

Nearly 20 years later, an internal Exxon memo stated "not only are we violating the existing regulations concerning clothing by not providing such clothing and laundering it, but we are also failing to protect our employees and the families of our employees from asbestos exposure."

The gross disregard for the health of workers is one of the reasons the asbestos industry fares so poorly in the courtroom. Many of the original asbestos manufacturers have gone bankrupt, so exposed workers are suing the companies that used asbestos in their equipment and thereby exposed them. The enormous number of victimized workers, and the widespread use of asbestos despite dangers known to corporations, means that lots of companies -- including Owens Corning, Halliburton, WR Grace and U.S. Gypsum -- have major outstanding asbestos liabilities.

A bill to consolidate and protect asbestos companies and companies that used asbestos products has struggled through the Congress for several years. The companies have tried to limit their financial exposure by setting medical limits on who can receive damages from companies that made or used asbestos that are so stringent that many victims would be ineligible.

Senator Orrin Hatch, R-Utah, provided the rationale for such measures in a statement on the Senate floor this April: "The fact is that unscrupulous personal injury lawyers are abusing the system and getting a windfall. They know that companies, even ones with the most remote connection to asbestos, are fearful of runaway verdicts."

Supporters of the bill contend that the asbestos liability suits are driving these companies into bankruptcy. But consumer and labor groups say the bankruptcy provisions are relatively attractive for corporations facing asbestos liability, so it is no surprise that companies are seeking bankruptcy protection. Nearly 80 companies are already enjoying the asbestos bankruptcy provisions, and most are prospering.

Republicans and the Bush administration have not been able to force through their asbestos bill. Organized labor has been receptive to a compromise arrangement that would provide for arbitration of asbestos claims and impose limits on what exposed workers could recover, but not on the terms offered by Republicans. In April, asbestos bill negotiations stalled in the Senate.

Victims' rights to sue makers of dangerous products and bad doctors exist more precariously now than ever before, and may even face a major setback through class action revisions this year. Whether the narrow Senate minority blocking the full range of such business-backed changes continues, and whether there is a White House that eagerly supports such proposals, will depend largely on the November elections.

-- Patrick Woodall

Mad Cow, Mad Policy

When Great Britain suffered a wave of brain wasting disease deaths attributed to eating beef infected with Bovine Spongiform Encephalopathy (BSE), or mad cow disease in the 1990s, the U.S. Department of Agriculture (USDA) assured the U.S. public that it had sufficient measures in place to prevent BSE from entering the United States. Consumer groups, animal welfare organizations and environmentalists all urged USDA to enact stronger protections to protect U.S. food stocks and the cattle industry.

USDA and the cattle industry viewed the critics as alarmists, but in December 2003 USDA announced that a cow in Washington state had BSE, confirming the worst fears of administration critics.

The UK discovered the BSE outbreak in 1986. It was linked to feeding cattle feed that included meat and bone meal from infected animals. In 1996, scientists associated eating BSE-infected beef with a human neurological disorder, a form of Creutzfeldt-Jakob disease (CJD) known as vCJD, an incurable and fatal brain wasting disease. Countries began to ban British beef, but live cattle and feed from the UK had already been exported. Nearly 150 people have already died of vCJD, mostly in the UK.

Although the United States imposed its import ban in 1989, expanded the ban to the rest of Europe a few years later and enacted new regulations on feeding cattle bone meal and cattle meat, consumer groups insisted that the regulatory approach was too weak to ensure BSE did not enter the U.S. livestock population. Loopholes for potentially risky materials in U.S. cattle feed, enforcement of the feed regulations and testing for BSE were weak.

The U.S. rules prohibited using bone meal and meat in cattle feed, but allowed it for pig and chicken feed. In turn, meat from pigs and chickens raised on feed with cattle meat could be used in feed for cattle. Even these rules were inadequately enforced. A 2002 U.S. General Accounting Office report found that the USDA measures failed to sufficiently ensure BSE-infected animals or products were eliminated or even kept out of the human food supply. In 2003, a Food and Drug Administration database listed 300 companies that were in violation of the feed regulations, double the number listed in 2002.

"As long as the U.S. federal oversight is weaker than in other nations and loopholes in mad cow prevention exist," says John Kinsman, president of Family Farm Defenders, "the safest way for individuals to avoid the disease is to eat organic, grass-fed beef."

The testing regime was similarly weak. USDA tested less than 2 percent of downer cows -- cows that collapse and die for no apparent reason, a potential indicator of BSE -- for BSE. Between 1990 and 2003, 57,000 total cows were tested, 0.01 percent of the 390 million cattle slaughtered over the period. In comparison, Europe tests 100 percent of its downer cows and 25 percent of all cattle. Japan tests every cow.

USDA relied on a risk analysis prepared by the Harvard Center for Risk Analysis that the regulations were sufficiently rigorous. Consumer and environmental groups have vociferously criticized the Harvard center for being overly sympathetic to business concerns about regulatory costs. It is partially funded by a bevy of big businesses and trade associations including the American Farm Bureau Federation, Kraft Foods and the Grocery Manufacturers of America.

Multinational Monitor has learned that the center's BSE risk analysis credited a scientist from Taylor Byproducts, a subsidiary of beef packing powerhouse Cargill, as one of four key advisers. The acknowledgements list Conagra, the American Cattlemen's Association, the National Renderers Association, the National Cattlemen's Beef Association, American Feed Association, and the National Grain and Feed Association. Food safety or consumer groups apparently were not consulted.

Despite the inadequate enforcement and lax testing, USDA continued to assure the public that its measures were sufficient. In May 2003, USDA issued a radio press statement that said the USDA has "made every effort to look for the disease. If it was here we have been doing surveillance at a level that we should find it."

After the mad cow was found last December, USDA was forced to defend the policy but also expand its regulatory oversight. USDA Secretary Ann Veneman viewed the BSE case as a regulatory success, telling CNN, "We have had a number of measures in place in this country for several years to mitigate the possibility of mad cow spreading in this country. We have found a single case."

The Department's new rules proposed to close some of the loopholes in the regulations, eliminate downer cows from the human food supply and screen more cattle. But more than three months after the new feed regulations were promised, there had been no federal register notice of proposed changes, the first step in enacting new regulations.

The new screening plan, if it ever moves forward, would screen half the downer cows, which are believed to have a greater chance of having BSE than ambulatory cows, and 20,000 additional healthy, older cows (because of BSE's long incubation time, older cows are more likely to test positive for BSE). Screening higher risk cows makes sense, but there are now doubts about whether the mad cow was actually a downer. Three witnesses have come forward saying the cow was walking and not a downer cow. If true, increased screening of downer cattle would not have caught the cow found to be infected with BSE. Screening 20,000 ambulatory cattle would only examine 0.05 percent of the annual slaughter.

By April 2004, 58 countries had banned the imports of some or all U.S. beef and cattle products. Japan, which buys nearly one third of U.S. beef exports, has stated that it will not import U.S. beef until 100 percent of the cattle are tested for BSE.

In April, USDA prohibited a Kansas meatpacker from voluntarily testing 100 percent of its cattle in order to export to Japan. The meatpacker is losing $40,000 a day and has already laid off 50 employees.

USDA prohibited the testing because it "would have implied a consumer safety aspect that is not scientifically warranted." The Center for Science in the Public Interest responded, "USDA's action is a disincentive to companies that want to do more to meet their food safety obligations."

Regardless of the new regulatory regime, BSE may have already entered the U.S. food supply and started to infect people with vCJD. A March New York Times Magazine story reported an unusual cluster of unexplained CJD cases around Cherry Hill, New Jersey. Eight people known to eat at the same race-track in nearby towns died of CJD, a rate of 4 people every three years. But natural spontaneous CJD unrelated to mad cow occurs in only one in a million people. The towns near the racetrack have a population of less than 125,000; natural CVD cases should only occur once every eight years. The New Jersey of Department of Health, relying on assistance from the Centers for Disease Control determined the cluster was not mad cow in April, but critics remained unconvinced.

"The industry and agency line that consumers have nothing to worry about is not supported by the facts," says Wenonah Hauter, director of Public Citizen's Energy and Environment Project. "At its core, the BSE issue is one of priorities -- fast production versus wholesomeness and animal health."

-- Patrick Woodall

They Call This Patriotism?

Since essential parts of the controversial USA Patriot Act are slated to expire next year, President Bush has chosen to highlight the legislation as a major campaign issue. "The Patriot Act defends our liberty," said the President during a recent stump speech in Pennsylvania.

This strikes civil liberties groups as Orwellian. As with many other incursions against civil liberties, though, advocates of anti-privacy legislation say the laws are justified because of terrorist threats to the country.

The Patriot Act, says Ari Schwartz of the Washington, D.C.-based Center for Democracy and Technology, "is clearly number one" on the list of the Bush Administration's sins against privacy, while its utility against terror is much less clear.

And while the Patriot Act is the most high-profile example of the Bush administration's disregard for privacy, it is far from the only one, say privacy advocates.

Much of the Patriot Act -- such as increased funding for border security -- is innocuous. But hidden within it are numerous provisions that make the policy, in Schwartz's words, "the biggest threat to privacy since the 1970s."

Why the alarm bells? Powers to spy have been expanded while due process protections have been contracted. Consider the case of so-called "roving wiretaps," where law enforcement agencies like the Federal Bureau of Investigation can record telephone or Internet activity at multiple sites. Before the Patriot Act, the FBI already had the ability to issue these wiretaps, but had to meet certain standards. First, the agency had to specify a suspect under surveillance and the phones or computers intended for monitoring. Second, it had to prove that the intended target of the investigation was actually using the particular phone or computer being tapped. Now, neither is the case, increasing fears that innocent people not under suspicion could have their conversations monitored without notification, without reasonable suspicion and without court approval.

Attorney General John Ashcroft defended the Patriot Act as an example of "ordered liberty" during a speech to the Federalist Society, saying also that "there have been no abuses" of the law. His Department of Justice has also launched a website to answer critics. But potential for abuse, civil libertarians say, remains high.

Privacy groups are also quick to remind that these rights aren't limited to being free of government surveillance. And besides sins of commission like increased spying authority, there have been sins of omission by the administration as well. The focus on surveillance issues sometimes obscures that Bush has done virtually nothing to protect people from commercial incursions on privacy interests, says Schwartz. "Because of this lack of focus, we still lack privacy laws that the rest of the world has," he says, including health privacy laws.

Data mining --- the monitoring of patterns of individual use within vast commercial databases, to build detailed profiles of identified individuals -- has continued unabated, with little if any action taken against it by the administration. And because technology continues to advance, Schwartz notes, these threats against the right to be let alone come quicker than ever.

Health privacy offers a point of comparison between the last two presidents. Under the rubric of the 1996 Health Insurance Portability and Accountability Act (HIPAA), the Clinton administration launched protections for health privacy in the pipeline that were subverted after Bush took office.

This April was the first anniversary of the regulations coming into effect, the first truly comprehensive federal rules on health information privacy. But according to Janlori Goldman, director of the Health Privacy Project, "the Bush administration has shown a lack of commitment to protecting the privacy of Americans' medical information" in the law's inaugural year. The project gave the administration a failing grade during its first annual HIPAA Privacy Check-Up. "Bush made major changes [to health privacy rules] that weakened protections quite a bit," Schwartz says.

"The Bush administration's insistence on relying solely on consumer complaints to enforce the Privacy Rule is inadequate," asserts the Health Privacy Project's Privacy Check-Up. "Despite over 5,000 consumer complaints filed, not one civil penalty has been imposed by the Department of Health and Human Services. And, dozens of criminal complaints have been referred to the Department of Justice, with no known penalties imposed." The project also highlights administration maneuvers that make it easier for drug companies to use sensitive personal information to market to consumers.

It is the domestic surveillance powers conferred upon law enforcement agencies that continue to dominate public debate. But many surveillance-related threats to privacy rights fly below radar. The administration, especially Attorney General John Ashcroft, has a wish list of expanded spying powers that critics have dubbed Patriot Act II, and many say that the administration has begun to surreptitiously implement that slate of policies step-by-step. A prime example is the routine appropriations bill that passed Congress in December 2003 almost without comment. Contained within H.R. 2417, the Intelligence Appropriations Act for 2004, are new rules permitting the FBI to survey once-private financial records from a wide array of businesses without a court order. Representative Ron Paul, R-Texas, dubbed this "a stealth enactment of the enormously unpopular �Patriot II' legislation."

Privacy rights backers are concerned because this change, like parts of the first Patriot Act, allows expanded investigative powers without any oversight from the legislature or the judiciary.

-- Jeff Shaw

AUTHORS OF BUSH DISSECTION ARTICLES
Charlie Cray, a contributing writer to Multinational Monitor, is director of the Center for Corporate Policy and co-author of the forthcoming The People’s Business: Controlling Corporations and Restoring Democracy (Berrett-Kohler).

Lee Drutman is communications director for Citizen Works and co-author of the forthcoming The People’s Business: Controlling Corporations and Restoring Democracy (Berrett-Kohler).

David Helvarg is president of the Blue Frontier Campaign and author of The War Against the Greens, (Johnson Books, 2004).

Jason Mark is the co-author, with Kevin Danaher, of Insurrection: Citizen Challenges to Corporate Power (Routledge, 2004). He works for Global Exchange.

Jeff Shaw is a freelance writer based in Oregon.

Patrick Woodall is a writer in Washington, D.C. and co-author of Whose Trade Organization? (New Press, 2004).