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May 04, 2005
Report Asserts Shareholders Have The Right To Know More About DuPont PFOA Liabilities
    by William Baue

The report documents information on perfluorooctanoic acid, a Teflon ingredient associated with human health hazards, which DuPont withheld from federal regulators and investors alike.

In July 2004, the US Environmental Protection Agency (EPA) accused DuPont (ticker: DD) of failing for two decades (1981-2001) to disclose information on perfluorooctanoic acid (PFOA) and its salts (also known as C8), key ingredients in the company's non-stick Teflon product. Might the company also be holding out on shareholders, omitting from US Securities and Exchange Commission (SEC) filings information known by the company about the potential human hazards of exposure to PFOA? So asks a report by environmental attorney Sanford Lewis for DuPont Shareholders for Fair Value (DSFV), which includes the Paper, Allied-Industrial, Chemical, and Energy Workers Union (PACE) and socially responsible investing (SRI) firm Green Century Capital Management.

"Internally, the company discussed the potential liability and reputational impact associated with [PFOA] at least as early as 1984," states the report, entitled The Shareholder's Right to Know More. "However, it did not commence SEC disclosure until it was actually sued over alleged public exposures to PFOA."

In September 2004, DuPont agreed to pay more than $100 million to settle this class-action lawsuit on behalf of 80,000 people living in the vicinity of its Washington Works plant in Parkersburg, West Virginia. It was during the discovery phase of this suit that many of the internal documents suggesting DuPont's foreknowledge of potential human health risks and financial liabilities surfaced.

For example, the report reprints a 1981 DuPont document revealing that three of seven women who were pregnant while working in areas exposed to C8 had babies with facial birth defects like those found in animal studies of C8, or C8 was detected in the baby's or umbilical cord blood. The report also reprints a November 2000 email from John Bowman to Thomas Sager and Martha Rees, all DuPont attorneys.

"We are going to spend millions to defend these lawsuits and have the additional threat of punitive damages hanging over our head," Mr. Bowman wrote. "Our story is not a good one, we continued to increase our emissions into the community and then environment because of our concern about the biopersistence of this chemical."

This degree of concern did not inspire the company to disclose these potential liabilities to the EPA or to DuPont shareholders, despite the fact that SEC regulations require the filing of "material" information. The report cites a 1976 US Supreme Court decision stating that a "disclosure is material is there is a substantial likelihood that the disclosure of the omitted fact would have been viewed by a reasonable investor as having significantly altered the total mix of information available."

"It seems to me that some of this internal information would have changed the mix of information available to investors in ways that they would want to know," Mr. Lewis told "At some point, didn't management owe investors much more information on the mounting evidence and the emerging trends showing increasing scrutiny of this substance, before there were lawsuits and EPA claims against the company?"

"You can argue about whether, when and how any individual item on PFOA should have been disclosed, but the aggregate effect of withholding this whole cluster of issues was to blindside investors in a way that Securities law is supposed to prevent," stated Mr. Lewis.

The historical precedent set by DuPont on disclosure lapses regarding PFOA raises concern about problems elsewhere in the company's operations.

"Information that's been disclosed so far comes out of the lawsuit involving one DuPont facility, but there are several other DuPont facilities where they use or produce PFOA," said Mr. Lewis. "We don't know, and DuPont has not disclosed, what kind of liability exposures are associated with those facilities."

DuPont spokesperson R. Clifton Webb did not respond to questions on whether the four other plants that handle PFOA are exposed to any of the same liabilities as the Washington Works plant, nor on why the company did not disclose PFOA-related risks and liabilities earlier.

"As noted in the proxy statement, the company has published in its Securities and Exchange Commission (SEC) reports detailed descriptions of current developments related to PFOA. In addition, there is also a substantial body of information about PFOA available on our website," Mr. Webb told

A shareholder resolution (item number nine in the proxy statement) asked the company to report on PFOA-related expenses incurred between 1981 and 2004, and the proxy statement also includes DuPont's response to the resolution.

"Given the breadth of information that is publicly available, we are not going to comment beyond the proxy statement and other SEC reports," Mr. Webb added.


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