U. S. Economic News
Wall Street Police Blotter: WorldCom on the Hot Seat
This week's installment in our Wall Street crime report finds some of the nation's biggest corporate crooks about to face the music. Swept up by the lunatic policies of Alan Greenspan's Federal Reserve, and the worship of "shareholder value" by members of Congress who pushed deregulation, privatization, etc., these are the high-flying execs taking the fall this weekbut there are plenty more to follow.
*WorldCom Inc.'s former chief financial officer Scott Sullivan was indicted on fraud charges Aug. 28 in connection with the $7.68-billion accounting scandal that forced the telecommunications giant into the world's largest bankruptcy. Sullivan now faces a trial in Manhattan Federal court. The grand jury also indicted WorldCom's former director of general accounting, Buford Yates, for his role in the alleged scheme aimed at artificially inflating WorldCom's earnings by hiding expenses.
*AOL is under investigation by the Securities and Exchange Commission, for pumping up its share prices with optimistic forecasts, while its executives were selling stocks. Fifteen senior executives and directors of AOL made almost $500 million in profits, by selling shares between February and June 2001, while the company insisted it would meet earnings targets set after the AOL-Time Warner merger was announced in January 2000.
*Citigroup's lucrative financing deal with AT&T: New York State Attorney General Eliot Spitzer has widened his probe of Salomon Smith Barney to see whether Citigroup CEO Sandy Weill pressured Jack Grubman, then a Salomon telecom analyst, to raise his rating on AT&T in order to win a spot in underwriting a large stock offering of AT&T's wireless business. Citigroup's brokerage unit joined Merrill Lynch and Goldman Sachs in pocketing $45 million each in fees for the $10.62-billion stock offering in April 2000.
*The Justice Department got its first Enron scalp Aug. 21 when former executive Michael Kopper pleaded guilty to fraud and money-laundering, agreeing to pay $12 million in restitution and cooperate with authorities. Kopper worked for Chief Financial Officer Andy Fastow and was heavily involved in the off-balance-sheet partnerships that have been the subject of the various Enron investigations. Under Federal sentencing guidelines, according to Bloomberg news wire, Kopper faces up to 10 years in jail, but no doubt has been promised a significantly reduced sentence if he helps the Feds nail Fastow. He also faces civil suits.
With Kopper turning state's evidence, the next target is clearly Andy Fastow. If Fastow is indicted, he in turn will likely be provided the opportunity to rat out former chief executive Jeffrey Skilling.
* And now, for a laugh: Richard Grassowho, in his capacity as chairman of the New York Stock Exchange, helps make rules for U.S. companiesfailed to meet disclosure requirements for five years straight, in his capacity as board member of Computer Associates International.
According to the Aug. 27 Washington Post, Grasso (also known for his embraces with FARC narcoterrorists in the Colombian jungles, and for his Nazi-chic shaved head), apparently did not include information on stock compensation in year-end reports required by the SEC. Neither did his fellow board member, former New York Senator Alfonse D'Amato.
Then Computer Associates identified Grasso, D'Amato et al. as delinquent filers in a proxy filing to shareholders. Grasso's spokesman declined to comment on the proxy disclosure.
Fortune 500 Company Pension Funds Come Up Short
The pension funds of the majority of Fortune 500 companies in the United States are underfunded, as a result of stock-market and other losses during the course of 2001, warned John Crudele in his column in the New York Post Aug. 22. Crudele cited a memo by Merrill Lynch analysts, which reported that the pension funds of 346 of the Fortune 500 companies suffered severe losses during 2001, and are now in deep trouble. At the end of 2000, these pension funds had $215 billion in overfunding. A year later, at the end of 2001, the overfunds had shrunk to a total of just $1.1 billion! The report added that, if the costs of health-care benefits for the retirees are factored in, the 346 firms' pension funds were actually underfunded by $245 billion by the end of 2001!
And if the losses of pension funds were factored into the companies' overall profits, real earnings would have been reduced by 6.1%! Among the companies with the biggest pension fund holes: GM, Ford, ExxonMobil, Delphi, DuPont, SBC, Boeing, IBM, Philip Morris, and AMR (holding company of American Airlines).
FDA Inspections Trimmed To Fit Budget Cuts
For the first time in 25 years, the U.S. Food and Drug Administration, the Federal agency charged with oversight and safety of pharmaceutical and human biological drug products distributed in the United States, has revamped its rules for inspecting drug manufacturing plants for lack of adequate funding.
Congress has repeatedly failed to provide sufficient funds to the FDA, and the number of inspections of drug-manufacturing plants fell from 4,300 in 1980, to 1,600 in 2001, according to FDA's Janet Woodcockeven as the number of new drug products vastly increased annually.
Magellan Health Needs Financial Transfusion
Magellan Health Services, the largest U.S. manager of mental-health care, is in deep trouble, with $1 billion in debtmore than five times its earningsand expects to fall out of compliance with its bank agreements by the end of September, amid rising costs and declining membership. The company, if unable to restructure its debt, may not survive. "We would have a liquidity issue. It would be difficult to meet our obligations," said Melissa Rose, Magellan's vice president of investor relations.
Magellan's costs are rising 6-8% per year, but it cannot raise prices fast enough to keep up, since only a third of its contracts are renewed annually. And it risks losing future business as health plans, such as Aetna and TennCare, which make up 32% of its revenue, are struggling. Since January 2002, Magellan has lost about 1.75 million members from Aetnaand expects to lose an additional 300,000 by the end of the year.
Medicare Elderly, Disabled: More Are Going Without Medications, Doctors
According to the National Conference of State Legislatures, between 500 and 600 bills have been proposed in the states to address the high cost of prescription drugs, and access on the part of America's poor to medications. Because states are mistakenlyand murderouslytrying to balance their budgets by cutting critical services, some 200 of these bills deal with restricting prescription drug coverage or increasing costs for medications for those in the Medicaid program, the Federal-state health-care plan for the poor, including the elderly and disabled.
Proposals such as the new requirement in some states that forces the poor to pay deductibles and co-payments for their medication (as much as $10 for each prescription), create life-and-death situations for those with low incomes, putting medications out of reach of many. The crisis is vastly worse for older and disabled Americans in Medicare, the Federal health insurance program that does not cover prescription drugs.
According to a recent Kaiser Family Foundation and Commonwealth Fund eight-state survey, 22%, or nearly one in four seniors with drug coverage, skipped doses of needed medications or did not buy medications they needed in 2001 because of high costs.
For seniors without prescription drug coverage, the situation was worsethe percentage who skipped doses or did not purchase medication was higher, about 35%. Seniors with severe and chronic conditions, like heart disease or diabetes, also skipped medications or did not fill their prescriptions due to costs. This survey took place before most state actions increased the costs of medications to those with low incomes. - Most Vulnerable Go Without -
A December 2001 study of a large, nationally representative sample of older Americans found that among Americans 70 or older, even one of the risk factorsethnicity, income, or out-of-pocket drug costs of more than $100 a monthmade it significantly more likely that people without drug coverage would be forced to restrict their use of medication due to costs. The authors noted that "policies designed to limit medication use may have serious consequences for patients' health."
A November 2001 Harris poll found that because of high costs, 39-40% of low-income people took medication in smaller doses than prescribed by their doctor; 21-30% took medication less frequently than prescribed. Some 35% of people with disabilities did not fill prescription for needed medicines; 27% of them took medications in smaller dose than prescribed; and 28% took medication less frequently than prescribed.
The high costs of medication also hit the elderly in managed-care plans, like HMOs (health maintenance organizations) that either drop Medicare patients or cut payments for prescription drugs from what they promised.
The elderly, poor, and disabled face another crisis: access to pharmacies that will take Medicaid prescriptions, after states cut Medicaid reimbursments to pharmacies to below the stores' costs of filling the prescriptions. Large chain pharmacies, such as Walgreens, CVS Corp., Brooks Pharmacy, which together filled 60% of Massachusetts' Medicaid prescriptions, now refuse to take them, after the state cut payment rates by 11%. Pharmacies in Washington State are doing likewise.
The states have started down a road that murders the most vulnerable. It's now up to Americans to give their legislators the political gumption to deprioritize Federal and state debt issues, and prioritize a plan to build this country's critical infrastructure, as Lyndon LaRouche has urged, taking usand other nationsout of the present global depression.
Lack of Nurses Equals Tens of Thousands of Deaths
The critical shortage of registered nurses in the United States (a subject EIR and New Federalist have reported on many times in the past) contributes to "tens of thousands of preventable patient deaths due to hospital errors, such as patient falls and hospital-acquired infections, according to a study by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO).
JACHO, a not-for-profit body that inspects and accredits hospitals and nursing homes, said the report may actually "understate the impact of the shortage.
The study found that there are currently 126,000 vacant nursing positions in hospitals nationwide. This will grow to 400,000 by 2020. They studied 1,609 adverse events that hospital officials voluntarily reported between January 1996 and March 2002, and found that 24% were related to an "insufficient number of registered nurses on the job. Clearly, this number would be much, much higher if all adverse incidents were reportedespecially those seen by nurses themselves. This study is just the latest of many that should prove, even to those with the thickest of blinders on, the magnitude of the crisis. - Study After Study -
In April 2001, the U.S. Health Resources and Services Administration found that having too few registered hospital nurses available, proved dangerous to patients. A higher number of registered nurses, and a higher ratio of nurses to patients, are strongly linked to lower mortality rates from pneumonia, sepsis (infection), shock, upper gastrointestinal bleeding, and urinary tract infections among medical and major surgery patients. The study analyzed 1997 data from more than 5 million patient discharges from 799 hospitals in 11 states.
A December 1998 study by the U.S. Agency for Health Care Policy and Research also found that patients who had surgery in hospitals with fewer RNs per patient than the norm, ran a higher risk of developing avoidable complications like those listed above, plus formation of blood clots and pulmonary congestion, following surgery.
The report, like many before it, is a glaring demonstration that the post-industrial policy of "managed health care (like HMOs); the murderous Balanced Budget Act of 1997, which slashed billions of Federal dollars to hospitals; and the international economic collapse, are taking down the nation's capability to deliver health care. Like so many groups studying the problem, this committee's proposals to reduce the shortage are useful but limitedthey fail to address the driving forces behind the problem.
Thus, the present study calls for more magnet hospitals to attract and retain nurses with improved training, decent staffing levels, a policy of no abuse against nurses, and increased government funding for nurses' education (the Bush Administration just passed a nurse loan repayment program, but didn't allocate funding for it).
The recommendations of this study are like trying to fix a leak in a pipe that's spewing out tons of water hourly! Their fix won't work without a major national economic changeand a major paradigm shift to policies that support the general welfare, as detailed by Presidential candidate Lyndon LaRouche.
This means that every community must have the hospitals, physicians, nurses, and public health infrastructure essential to support the high standard of living necessary for advancing a productive society in this generation and the next. Within that context, nursing would be a desirable vocationnot a field people are leaving in droves, due to double shifts, dangerous overwork, and insufficient hospital staff.
A primary problem is that the youth of today see society as dying. Hospitals like the University of California-Irvine Medical Center are ending treatment for some indigent patients. A major Denver hospital recently did the same. Public hospitals are in financial jeopardy; clinics and mental health programs are closing. Without LaRouche's program to reverse the crisis, why would youth choose to serve in hospitals, when state and Federal governments, balancing their budgets through bloodletting, are closing them down?
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