Names in the News

LP's Timber Troubles

TIMBER INDUSTRY INSIDERS, in a series of memos, have accused Louisiana-Pacifica Corp (LP), the largest U.S. forest-cutting company, of engaging in massive over-cutting that will significantly damage the long-term economic prospects of the company. The memos were written by Robert Morris, a former LP Western Division resources manager who was fired a week after writing one of the memos last August, and Jerry Partain, a private consultant and former director of the California Department of Forestry.

In a December 1990 memo, Partain offered this assessment to LP's Western Division Manager Joe Wheeler: "It is now clear to me that the environmental activists, the Department of Forestry, your contract loggers and your foresters are all correct when they say your present harvest rate cannot be continued for long and that the company must either reduce that rate significantly now or make deep and drastic cuts just a few years from now."

 Morris, a 16-year employee, blamed the decimation of LP's Western Division on a "failure to understand and apply basic business principles." The Morris memos assert that LP has been over-cutting its forests, in some cases before the trees have begun their most economically productive period of growth.

 "Their intent is to cut the resources and leave, rather than sustain," says Gary Ball of the Mendocino Environmental Center. The memos surfaced as California state legislators are considering timber reform proposals.


Uniroyal Workers Bounced

UNIROYAL AND THE MICHELIN GROUP encouraged the United Rubber Workers to accept concessions and Michelin's buyout in 1990 by fraudulent means, charges a suit by members of the United Rubber Workers Local 19 of Eau Claire, Wisconsin. The workers allege that, since 1975, the union has agreed to more than $95 million in givebacks and payroll deductions to help Uniroyal modernize the Eau Claire plant, which Michelin now plans to close. The suit seeks $145 million in damages, plus triple the amount in punitive damages, as allowed under federal racketeering law.

 To secure Justice Department approval of the 1990 sale of Uniroyal, Michelin and Uniroyal attempted to convince the public that the acquisition would be beneficial for Uniroyal employees and the communities surrounding the plant. But within a year, on January 8, 1991, Uniroyal, at the direction of Michelin, announced it would close its Eau Claire plant in mid-1992.

At the time the closing was announced, the Eau Claire plant employed more than 1,300 people. The plant is the principal heavy industrial employer in that region of Wisconsin, according to the Rubber Workers.

Michael S. Shaw, the lawyer for Local 19, says, "The people out here in Eau Claire are mad and are fighting back for what they've invested." While the union concessions had as a "primary objective the modernization of the Eau Claire plant in order to rank equally or better with other tire manufacturing plants," the suit charges, the plant's equipment "has been removed and continues to be removed from the plant and shipped overseas, to Michelin plants, non-union plants, and plants in weak union states, and other locations."

 Uniroyal officials did not return phone calls seeking comment on the lawsuit.


Drug Profiteers

A LAW DESIGNED TO ENCOURAGE the pharmaceutical industry to research and develop drugs to treat rare diseases has resulted in huge profits for drug companies and exorbitant prices that have prevented many of those in need from gaining access to drugs, Senator Howard Metzenbaum, D-Ohio, charged last week.

 Approved in 1983, the Orphan Drug Act was designed to encourage the development of medical drugs to treat illnesses afflicting fewer than 200,000 people. The Act allows drug companies exclusive marketing rights for the first seven years after Food and Drug Administration (FDA) approval and tax breaks on research costs. Since the law was enacted, 60 drugs have been accorded orphan drug status for 73 different rare diseases.

 Metzenbaum chastised a number of companies for profiting excessively from the sale of orphan drugs. Genentech, for example, had total sales of $580 million through 1991 from Human Growth Hormone, on which it spent only $45 million on research and development. Genzyme's total sales for Ceradase, a drug treatment for Gaucher's disease, were $120 million in the10 months following FDA approval, compared to research and development costs of $54 million.

To address the problem of overpricing, Metzenbaum and Senator Nancy Kassebaum, R-Kansas, co-sponsored a bill which would allow competition if a company made $200 million on an orphan drug before the seven-year protected period was over. Tax incentives would remain in place.

Drug companies, such as Genentech and Genzyme, argue that a $200 million sales cap would eliminate the financial incentive to develop orphan drugs. However, the antitrust subcommittee found that the average cost of research and development for most orphan drugs is below $50 million.

 - Ben Lilliston