Thursday, October 4, 2012

Final Paper: Up in Smoke: Ethical Issues





Up in Smoke: Ethical Issues
University of Hawaii at West Oahu
Thanh Nguyen
04/23/2012







The percentage of death related to smoke issues increases as more and more people begins smoking. Tobacco is one of the leading factors of premature and preventable deaths. Each day in the United States, there are over 3800 young people under the age of 18 began to light up their first cigarettes, and about 1000 teens under 18 years of age begins daily smoking habits. Every year, there are an estimate of 443000 deaths caused by smoking cigarettes equivalent to one every five deaths in the United States. There are approximately about 90% of deaths in men and 80% of deaths in women are caused by lung cancers from smoking. Smoking also has negative effects on the America’s economy. It cost about 96 billion of dollars in direct medical cost, and about 97 billions of dollars in lost productivity annually. Additionally, cigarette also imposes a heavy toll on the smokers. It cost roughly over 3000 of dollars for the smokers who smoke 1 pack per day. Well, the number is just an overall estimation on an average. For people who smoke more regularly, the cost is much higher. Because tobacco imposes a huge threat to public health and financial cost to the U.S., the government tries to prevent these preventable threats to the minimal by passing laws and acts. It is not the act of big brother by the government, but rather an act to secure the future of the U.S. The battle of politics against Tobacco Company involves a lot of social and personal benefits. Therefore, these are many ethical issues during this political battle. These ethical issues are described in the book: Up in Smoke written by Martha A. Derthick, a former professor of government at the University of Virginia.
Up in Smoke describe the process of US policy making against the use of tobacco.  Most of the writing in this book analyzes and describes the events of 1998 tobacco settlement with the U.S. states. It describes the litigation of the tobacco company and its policymaking coming in waves. The wave of “against the big tobacco” fight is the part of the latest wave that analyze against the tobacco companies and this industry. Most of the story focuses on lawsuits brought by the state attorney general in the 1990s. In that litigation, the keys players tried to negotiate a “global settlement” with the tobacco company that would eventually require the adoption of the congress. However, the settlement was not a success. In addition to the lawsuits, the FDA tried to get some benefit from the tobacco company, stating some regulation that is similar to the “global settlement”. However, the FDA’s effort was announced illegal by the US Supreme Court. In the end, the tobacco industry entered into a settlement called Master Settlement Agreement (MSA) for all US states to resolve the case.
In the beginning of the book, Derthick describes the dangerous effect and the pattern of cigarette use in the twenty century. It all began with the Surgeon General’s Advisory Committee’s report on smoking and health that confirmed the smoking hazards to one’s health. After this report was published, the U.S. policy process began its evolution. The government began to educate people about the health dangers to control and prevent people from the use of tobacco. Derthick described this policy evolution as “ordinary politics”. The evolution continued to develop over the years. Eventually, the government began to impose banning signs on radio and TV commercials. Most of the tobacco products were required to have some type of warning on the label. In addition, smoking was banned in most of the domestic airlines flights. In the same year, more strict regulations were enacted in regard of smoking in some state and local governments. Legal cases against cigarette companies had no results. The cases filed against tobacco companies usually got delayed for all sort of reasons. It also cost a lot of money for individual to suit against the tobacco industry. Thus, the policy evolution from 1964 to 1993 was not meant to stop the tobacco industry, rather the progress it made was meant to reduce the number of smokers.
Ordinary politics began to take back seat in adversarial legalism toward the end of this period. This approach was aided by the federal bureaucracy. C. Everett Koop was appointed as a surgeon general. With this new appointment, the president Ronal Reagan began to take smoking matter to the national level. The new surgeon general was calling for a smoke-free society by the year of 2000 in 1984. Early in the 1990’s, David A. Kessler was appointed as commissioner of food and drugs. Kessler made his argument on the hazardous risk of smoking. He argued that cigarettes contain addictive nicotine and it should be regulated by the FDA (Food and Drug Administration).
In the mid of 1990’s, there was a huge development for the tobacco companies. It was the increasing cooperation of state attorneys general. The idea was for tobacco companies to get back their cost on Medicaid cost associated with smoking. Mike Moore, an attorney general of Mississippi was the first one to take a step on this ominous development. He chose the most skilled tort lawyers from his judicial force to acquire a settlement from the tobacco companies. From the state attorney general’s perspective, this approach took the basic of the litigation to the next level. It avoided the need of the legislative approval and utilized the tort lawyers on a contingency-fee basic.
Derthick examined the concept of adversarial legalism that changed the context of the politics. There was an increase in smoking cause advocacy which was promoted by the major law school activists. Derthick described this political development as nationalization and mediaization of politics. It made the policy process became more amendable for those who promoting causes. These activists were aided by the tort lawyers who were successfully obtained huge fees from the tobacco companies. All those factors had finally forced tobacco companies to make agreement on the MSA (Master Settlement Agreement) with the states in 1997.
In Derthick’s book, the intended contribution comes to the reader in the final chapter. She argues that it is better to make tobacco policy by legislative process than litigation process. Derthick stated that the previous settlements and the MSA were deeply flawed. These settlements were made upon the interest of the private party involved. Those policies are not made public before they are passed. Therefore, there were no public comments on these settlements in advanced of the adoption. They are only available on the internet. However the documents cannot be retrieved by anyone except for the lawyers. In addition, there is no official record on the debate of the contents, or justification, and legislative history as a guide to the authority’s intentions.
There are two major complaints about this issue. First, it is true that MSA certainly can impose tax on cigarettes without any legislature votes for such tax. But the Industry settlements of these cases have much of the same effects of as the defendants are concerned. The policies made via litigation could be viewed as vigorous enforcement of the government’s laws. Second, the complaint can be made upon the tobacco legislation. In 1987, a statue of California Legislature was adopted and gave the tobacco companies certain immunity to the laws. Some deals were made to the private parties to pass that statute.
Derthick’s major concern is on the Tobacco Settlement. It may be a harbinger of the movement of adversarial legalism into the government policy. Our government policy relies heavily on legislative policy process that reflects or represents the population. This development could become a serious threat to our formulation of normal policy. On the other hand, the MSA was trying to negotiate with the tobacco industry without any public input. Every agreement should require the approval of the congress. However, state attorneys generals settled into the MSA without any congress approval which later on ratified by consent agreement by the state courts.  The tobacco industry paid more than 200 billion of dollars to the states for a period of over 25 years. Additional payment was paid by the tobacco companies to grant perpetuity to protect the tobacco companies and the industry against all the further lawsuits against the tobacco industry by the state. The tobacco industry promised not to challenge the tobacco research and the constitutionality of the settlement in return. It was considered a sweet deal for the tobacco industry in which both tobacco companies and the private parties benefit from the deal. This tobacco policy was entirely made by circumventing the legislative process. This deal provided billions of dollars in legal fees for the private parties.
Following this issue, Derthick concerns about the consequences of adversarial legalism. It pushes the legislative policymaking to the margins. In addition, it potentially politicizes the judicial branch thoroughly. The vivid example for this concern is the billions of dollars in legal fees were reaped by tort lawyers. Another salient example would be the Florida state legislatures sometimes intervenes the litigation directly by making laws which makes it easier in making judgments on the tobacco industry. Now the question is on the government system. Most people in the neutral position would probably agree that the state government legal theories were very uncertain in this case against the tobacco industry. That could be the reason why that case was solved merely by the litigation that based on the contingency fee basic.
In the opinion of the public, there is a possibility that the combination of the tort attorneys and states will eventually seeking other targets as how they did with the tobacco industry. There is always money and power involve. The MSA is the vivid example. The purpose of this agreement was to weaken the tobacco industry. However, in the eye of the public, the MSA approach changed the formulation of the American policies and pushed the laws to its margin. Tobacco companies ironically benefited from the MSA which supposed to disadvance the tobacco industry. Obviously, there was something wrong with our legal system. Questions on our government and legal system rose. Was the government really doing its job to protect the benefit of its citizens? Or did it act solely on some individuals’ benefit? Ever since the MSA was passed, the tobacco industry obtained some legal immunity to protect its benefits. Tobacco companies got some certain perpetuity of protection from the state lawsuits. The price the Tobacco industry had to pay was just a small fraction compared to the advantages and benefits tobacco companies gained from the MSA.
Up in smoke was a mixed bag of all the factors and elements in regarding of smoking issue. It focuses on the public health and the flaws of the government’s legal system. In general, smoking rate was decreased in America society. However, in my opinion, I think the states prefer not to see the decrease in the tobacco sales. This way, the local governments can get substantial payment from the tobacco industry. They can impose heavy tax on tobacco sales. As the matter of facts, many states have increased the tax on cigarette drastically. Public health will never be the main concern for the government. What they interest in is the actual benefits they can get out of the industry. There are signs, banners, and TV and radio commercials that warn people about the danger of smoking. If the government really concern about the health of the public, it would have banned smoking entirely. Unfortunately, it has been proven so far that benefit of the public is not comparable to the government interests and benefits. Although the idea of smoke-free society is promoted by the government, smokers are still everywhere. Local governments may act upon on the restricting of smoking, but the possibility of the national litigation that may result in heavy penalty is very slim. Lawsuits against smoking may be possible, but the option is very limited. Chances that private plaintiffs will win against the industry are very small if not nearly impossible. The benefits that the tobacco industry offers to the government are potential. It may even affect how the government system runs at a certain point. Therefore, in my opinion, smoking will never be eradicated entirely. 







Bibliography:
Derthick, Martha A. (2012). Up in Smoke: From Legislation to Litigation in Politics. Washington, DC: CQ Press.
U.S. Department of Health and Human Services. Preventing Tobacco Use Among Youth and Young Adults: A Report of the Surgeon General. Atlanta, GA: U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and Health, 2012.

Bernard Madoff Case Analysis








University of Hawaii at West Oahu
Phil 481
Bernard Madoff Case Analysis
3/16/2012
















Being an investor and investment adviser, Bernard Madoff started off with a legitimate and successful businessman in his early career. He also served as chairman of NASDAQ in 1990, 1991, 1993 and served on charitable board. Being a man of respect and trustworthiness, Bernard Madoff founded his own company called Bernard L. Madoff Investment Securities LLC in 1960 which consisted of only his family members. His company was one of the top market maker businesses in Wall Street. Bernard Madoff was arrested on December 11th, 2008 for using Ponzi scheme to defraud his clients. Basically, in this scheme, He promised investors a large return of 10 to 12 percents of profit for their investment. Tricky part was Bernard Madoff never invested any of his money in his investor funds. All he did was transferring money from one bank to another. However for this scheme to work, Bernard Madoff always needed to attract new investors and use their investment money to pay the earnings for old investors. Typically, this type of scheme would likely to be self-destruct because of the ability to attract new investors would diminish gradually. Ironically, Bernard was able to continue his scheme for so many years. Clients of Bernard Madoff included successful business people and entrepreneurs, profit and non-profit organizations. All of these investors lost significant amount of money to Bernard Madoff’s scheme. Some of investors lost their entire life saving fund led to their suicides. He was arrested for his $65 billion Ponzi scheme, charged with criminal securities fraud, and sentenced 150 years in prison.
This is a 30-years Ponzi scheme that destroyed $65 billion in investment. How come a scheme with such a staggering scale had been going on for so long without any suspicion? The question goes straight to the business gate keeper such as accountants, regulators, and auditors in the SEC who supposed to protect investors’ interest. Their jobs are to protect the investors from swindlers like Bernard Madoff. Obviously, the SEC did not do a very good job in this case. Bernard’s scheme had been going on for years and the SEC was not able to stop his scheme until it’s too late. Many investors were hurt financially, emotionally, and physically. Considering the scale of this scheme how could the SEC not notice? The SEC should have placed investor like Bernard Madoff under a tighter government scrutiny
What about the people and institutions who contributed millions of dollars to his scheme? Why did those investors blindly invest a huge amount of money without any careful research on where the money going to? The investors also took faults in Bernard’s scheme. The scheme was very fishy from the start. The return of investment was a lot higher than usual. Because of high profit in return, those investors chose to trust their money with Bernard Madoff without any hesitation.
What are the ethical issues involved in Madoff’s case?
The case of Madoff was a very complicated case. From an ethical perspective, this is a white-collar crime. Bernard Madoff sacrifice the public interest to pursuit his own financial goals. From the beginning, there were several ethical issues to begin with. First of all, Madoff manipulated the stream of cash flow to make it look like his company is more valuable than it actually was. Second, his company’s financial reports were never made public during the time of the scheme. For some reason, no one ever question on that. And how his company passed the tax audition imposed question on the SEC internal system. There were maybe bribery involves for the one who audit his company. Those facts make us question the US government system.
Do you believe that Bernard Madoff worked alone, or do you think he had help in creating and sustaining his Ponzi scheme? Would this represent a conflict of interest?
            It doesn’t matter how intelligent Bernard Madoff is, he cannot possibly pull this scheme all by himself. The fact is who know and complicit Madoff on this scheme is questionable. How did people in his company’s internal system such as accountant, and auditors not know about the suspicion on the financial report? It would make more sense if these people not become suspicious if the scheme end in couple months. However, this scheme had been carried out for 30 years. And there is no one to report the suspicions on the company’s financial documentation. Another explanation would be that those people get some kind of benefit so they can keep their mouth shut. Besides, his whole family is involved with the company. Judgment had not been made whether or not his family members were involved. It’s still under investigation. However, I am positive that they are involved in his scheme in at least a certain degree. Assumption that Madoff carried out this entire scheme by himself would be out of the question.
            What should be done to help ensure that Ponzi schemes like this one do not happen in the future?
            The SEC exists to protect the investors. We rely on SEC system to uncover frauds from the start to protect the public interest. The failure of SEC, in my opinion, is due to the understaffing problem. SEC does not get enough funds from the government to investigate cases before the damage have been made. One way is to get more funds from the government so that they get more power to do what they are supposed to do.
            For investors, they should be more careful about overly consistent profit return. Stocks tend to go up and down unexpectedly. If someone guarantees a high profit return regardless of the changes of the stock market, do some careful research before investing. It usually is too good to be true.