Just What's In That Plastic Container? And Why?

Here's another "what if" scenario to think about:

What if ... you had been manufacturing a product, successfully, profitably, for a while, and then ... studies start to indicate that your product is toxic in the long term. (We'll assume that if it were toxic in the short term, you would have noticed and stopped manufacture.)

It's not that unusual a story. Everyone knows how long it took to figure out that cigarettes were deeply toxic. In this 1930 ad reproduced in a 2008 New York Times article, the headline reads: "20,679 Physicians Say 'Luckies are less irritating' [because] 'it's toasted'". I mean, Yikes.

What's more disturbing is how viciously Big Tobacco fought the scientific evidence that pointed out smoking's dangers. As early as the 1940s, evidence was accumulating that smoking was a significant cause of cancer. And that evidence was well-known and acknowledged within the tobacco companies, even as they resisted all efforts to limit their advertising and marketing claims. (Click here for a long, but fascinating / depressing, 2002 article from the BMJ, "Failed promises of the cigarette industry and its effect on consumer misperceptions about the health risks of smoking")

It's easy for us, from this distance, to say what the tobacco companies should have done.

What about plastics companies today? Not to mention pesticide companies, toy companies, cosmetics companies, and others.

New York Times columnist Nicholas Kristof has a question today: "What are the lessons from years of lead poisoning?" (Full column, here) The lead industry, like the tobacco industry, fought long and hard the efforts to regulate and limit consumer exposure to lead (in paint, in gasoline, etc.). And Kristof considers the chemical industry to be today's lead industry.

His concerns are focused on "endocrine disruptors", chemicals that mimic the body's own hormones. They're found in everything. While there is still debate about how much damage these chemicals cause, there's little debate that they cause some. Kristof quotes from a 2012 World Health Organization / United Nations report:

Exposure to EDC's [Endocrine Disrupting Chemicals] during fetal development and puberty plays a role in the increased incidences of reproductive diseases, endocrine-related cancers, behavioral and learning problems, including ADHD, infections, asthma, and perhaps obesity and diabetes in humans.

The WHO is concerned that

Close to 800 chemicals are known or suspected to be capable of interfering with hormone receptors, hormone synthesis or hormone conversion. However, only a small fraction of these chemicals have been investigated in tests capable of identifying overt endocrine effects in intact organisms. 

Really? In fact, "The vast majority of chemicals in current commercial use have not been tested at all."

Kristof notes that the chemical industry "spent $55 million lobbying last year, twice the figure a decade earlier". So don't expect these chemicals to be more heavily regulated any time soon.

The battle is a sneaky one, too, in part because no one knows exactly how dangerous these chemicals are. Kristof notes,

This summer 18 scientists wrote a scathing letter railing against European Union regulations of endocrine disruptors. That underscored the genuine scientific uncertainty about risks -- until Environmental Health News showed that 17 of the 18  have conflicts of interests, such as receiving money from the chemical industry. Meanwhile, more than 140 other scientists followed up with their own open letters denouncing the original 18 and warning that endocrine disruptors do indeed constitute a risk.

Me, I'd rather that chemicals were regulated first, until we were sure that they're safe (within whatever reasonable boundaries you want to use as the definition of "safe", since of course nothing is 100% safe under all circumstances). But that's not going to happen here.

But what to do when scientists are themselves uncertain? Kristof wonders, too, and writes:

But I'm struck that many experts in endocrinology, toxicology or pediatrics aren't waiting for regulatory changes. They don't heat food in plastic containers, they reduce their use of plastic water bottles, and they try to give their kids organic foods to reduce exposure to pesticides. 

So I, too, am tossing the plastic containers, drinking my water from the tap, and continuing to spend a little more for organic.

But I'm especially struck by Kristof's closing question to the big chemical companies: "Are you really going to follow the model of tobacco and lead and fight regulation every step of the way, once more risking our children's futures?"

Well, are you?

"See No Evil, Face No Liability"

Today's headline is lifted from New York Times finance columnist Floyd Norris' piece about Ponzi schemes. While a single individual may be behind a particular scheme, the money raised has to pass through a bank. As Norris writes,

In such a scheme, money that is supposed to be invested is really used to line the pockets of the Ponzi promoter or to pay previous investors. A lot of money has to flow through bank accounts, and it flows in ways that differ from what the promoter tells investors is happening. Banks are in a unique position to notice what is going on before the money is all gone. 

But do the banks notice? And even if they do notice, do they have to take action, or do they have plausible deniability?

Generally speaking, the courts have sided with the banks. Hence, "See no evil, face no liability." So there's actually an incentive to turn away and not look too carefully. Sigh.

If regulators do not go after banks, the banks are usually home free. Some bankruptcy trustees for collapsed Ponzi schemes have tried to sue banks to recover money for defrauded investors only to have judges rule that because the trustee is standing in the shoes of the fraudster, such suits are not permitted. But when investors try to sue the banks, they can run up against rules limiting class-action suits and a Supreme Court decision saying that only the government — not victims — can bring suits contending that a bank, or anyone else, aided and abetted a fraud.  

So Norris is interested -- and so am I -- in a joint regulatory action filed by the Securities and Exchange Commission, the Office of the Comptroller of the Currency, and the Financial Crimes Enforcement Network (part of Treasury), in which a total of $52.5 million in fines was levied against TD Bank for "failure to file suspicious activity reports related to the massive Ponzi scheme orchestrated by Florida attorney Scott Rothstein." A .pdf of the 23 Sept press release can be found here.

The press release quotes Financial Crimes Enforcement Network director Jennifer Shasky Calvery: "In the face of repeated alerts on Mr. Rothstein's accounts by the Bank's anti-money laundering surveillance software over an 18 month period, the Bank did not do enough to prevent the pain and financial suffering of innocent investors."

Mr. Rothstein's $1.2 billion Ponzi scheme (he has pleaded guilty to most charges and is currently serving a 50-year sentence) was more than usually egregious. And so was TD Bank's involvement.

TD Bank initially disclaimed any responsibility, and it bitterly fought a suit filed by Coquina Investments, which lost more than $30 million in the scheme. The bank is appealing a jury verdict that ordered it to pay Coquina $67 million in damages, including $35 million in punitive damages.... It later turned out that lawyers for TD had withheld evidence in the case and misled the judge in a number of instances. As punishment, the judge ordered the bank to pay Coquina’s legal fees. 

The bank has since settled other cases filed by victims. Altogether, the mess has cost it $500 million, according to a report in The South Florida Business Journal, although the bank declined to confirm the figure.

Now Norris is concerned -- and so am I -- that the joint SEC and FinCEN action does not represent "a new attitude on the part of regulators to try to force banks to pay attention to possible Ponzi schemes" but only a response to a particularly over-the-top "mess".