Friday, July 01, 2005

The Kelo Case, Pfizer, and Conflicts of Interest

There has been quite a lot published both in main-stream media and on blogs about the Kelo case, so I have hesitated about precipitously commenting on it. However, it turns out that aspects of the case are relevant to Health Care Renewal.
The basics of the case are as follows, as per the Boston Globe. Pfizer built a large research facility in New London, CT. A not-for-profit organization, New London Development Corporation (NLDC), planned to build a "sprawling waterfront complex of private housing, stores, restaurants, and businesses" nearby in the Fort Trumbull area. Some land-owners in the area refused to sell to the NLDC, and so the city claimed their land by eminent domain. The land-owners sued the city, and the action wound up in the US Supreme Court, which decided in favor of the city, by a 5-4 vote.
Justice John Paul Stevens wrote for the majority that the city's "determination that the area was sufficiently distressed to justify a program of economic rejuventation is entitled to our deference. The city has carefully formulated an economic development plan that it believes will provide appreciable benefits to the community, including - but by no means limited to - jobs and increased revenues." This majority opinion is important, because the Fifth Amendment to the US Constitution provides "nor shall private property be taken for public use without just compensation." Many had interpreted this provision to mean that eminent domain could only be used to take property for public use, e.g., to build a road or a public school, but not for private purposes, like building up-scale waterfront developments.
In a vigorous dissenting opinion. Justice Sandra Day O'Connor wrote, "any property may now be taken for the benefit of another private party, but the fallout from this decision will not be random. The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms.... The government now has the license to transfer property from those with fewer resources to those with more." Finally, "the specter of condemnation hangs over all property. Nothing is to prevent the state from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, any farm with a factory." Justice Clarence Thomas added, "allowing the government to take property solely for public purposes is bad enough, but extending the concept of public purpose to encompass any economically beneficial goal guarantees that these losses will fall disproportionately on poor communities."
For additional, important aspects of the case, see the report first published in the Wall Street Journal, September 10, 2002, and available on the web here, which details the history of what became the Kelo case. Some important points made in the article:
  • The interaction between Pfizer, the New London Development Corporation, and the city of New London was more complex than more recent reports suggest. The NLDC, which dated back to the 1970's, was taken over by new leaders in 1997. One new board member was George Milne Jr, who also was a Pfizer vice-president. The new board president was Claire Gaudiani, President of Connecticut College, the wife of David Burnett, also a Pfizer vice-president. Milne visited the Fort Trumbull site several times, but claims he recused himself from NLDC board decisions about Fort Trumbull.
  • The plan for Pfizer to build a new research facility adjacent to Fort Trumbull included contributions of $19 million by the state of Connecticut to clean up contamination on the property and a nearby scapyard, and $7 million by the city of New London and the state to lesson odors from a nearby sewage treatment plant.
  • Pfizer bought the land for the research center for only $10, and the city agreed to an 80 year real-estate and property-tax abatement.
  • Pfizer wanted the adjacent Fort Trumbull property made more attractive. In 1999, Milne wrote to the NLDC that improvement of that property "is integral to our corporate facility and to the plan for revitalization of New London to a world-class standard." Clare Gaudiani's husband, David Burnett, stated "Pfizer wants a nice place to operate. We don't want to be surrounded by tenements." (See this op-ed in the Providence Journal.)
  • The plan to re-develop Fort Trumbull came from the NLDC, not the city of New London, per se. Not only did the city council agree to the NLDC development plan for Fort Trumbull, it delegated its power of eminent domain to the NLDC, allowing this supposed private not-for-profit organization to take land from private holders.
  • Attempts by the NLDC to condemn specific properties lead to the lawsuit.
Thus, the organization which attempted to take private property by eminent domain in the Kelo case was not the city of New London, but the NLDC, an ostensibly private not-for-profit organization. This private, not-for-profit used its adopted governmental powers to apparently further the interests of a private, for-profit pharmaceutical company, Pfizer. Furthermore, the NLDC's leadership had severe conflicts of interest, specifically close ties to Pfizer, which could have affected how it used this power. None of these issues have been addressed in recent discussion of the Kelo case.
Presumably, the relationships between a large, for-profit pharmaceutical corporation and not-for-profit and government entities found in the Kelo case lead to what the Supreme Court's dissenting members felt will be a major usurpation of the rights of individuals to favor corporate interests. This case may predict similar relationships that will affect individual's rights in other circumstances, including those more specifically related to health care.


Jim Hu said...

Are the numbers above all in millions, or was the $10 a token payment like when transfers are made for $1?

Roy M. Poses MD said...

According to the Wall Street Journal article (follow the link in the original post above), it was ten dollars, a token payment, not $10 million.

Anonymous said...

Yes, but the State of Connecticut offered $19 million for cleanup of the site, not $19.

Roy M. Poses MD said...

Boy, this is a tough crowd. You're right. I fixed the error in the main post above: now it reads "19 million." Thanks.

Anonymous said...

It is amazing how often the "cahoots" theory works.You follow the money and you find out a lot about how the world works.

K.R.C. O'Brien said...

How embarrassing that I owned Pfizer stock during this debacle. I feel personally responsible for some of this corruption, personally attainted by the greed of the Pfizer managers.

What despicable people.

One thing worth mentioning -- many assume that "non-profit" is the same thing as "charitable". It's not even close. Most non-profits seem to exist to further someone's personal hobby horse or line someone's personal pockets -- as appears to be the case here.

Once again, these people are despicable. They may have done everything within the letter of the law, but the law, like the lawyers and judges who manipulate it, is for sale.