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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.
SocialFunds.com --
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 SocialFunds.com. "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 SocialFunds.com.
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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