SANFORD J. LEWIS, ATTORNEY
May 24, 2005
Ms. Linda
Thompson, Director
Division of Enforcement
Securities and Exchange Commission
100 F St. NE
Washington, D.C. 20002
Mr. Alan L. Beller,
Director
Division of Corporation Finance
Securities and Exchange Commission
100 F St. NE
Washington, D.C. 20002
RE: EI DuPont de Nemours and PFOA
Dear Ms. Thompson and Mr. Beller:
Enclosed find a review of disclosures by E.I. DuPont de Nemours regarding the financial risks and challenges posed by its utilization of the chemical perfluorooctanoic acid (PFOA).
We conducted this review on behalf of a group of shareholders known as DuPont Shareholders for Fair Value (DFSV), after the EPA filed repeated charges against DuPont alleging failure to disclose certain information to EPA. The context for the enclosed report is that DSFV asked me to evaluate whether, if the company has allegedly failed to meet its disclosure obligations to EPA, has it also failed to meet its shareholder disclosure obligations?
On Thursday May 19, DuPont announced that a federal grand jury subpoena was issued to DuPont regarding PFOA related issues. From prior to the announcement on Thursday until the close of the market on Friday, Dupont’s share price fell about 2.2 percent. The subpoena followed on the heels of DuPont’s announcement of a settlement in principle of the EPA’s administrative claims in this matter.
Our review looks at a range of issues regarding DuPont’s disclosures. In light of our review, we would like to call some specific questions to your attention:
1. The company has never disclosed in its shareholder reports the array of data gathered, including blood and water testing, that it conducted beginning in the 1980’s that forewarned of eventual liability at its Parkersburg, WV facility. The management recently settled a class action suit associated with that site which has so far cost it $108 million, but which may by the terms of the settlement yield hundreds of millions of dollars in additional liabilities. We believe the SEC should ask Dupont management to disclose whether it has comparable data which may forewarn of similar liabilities at other DuPont facilities that utilize or produce PFOA.
2. DuPont has not disclosed in its shareholder reports certain emerging trends that may restrict markets for its products. These include a recent ban in Canada of three perfluorinated compounds, and government reviews of PFOA in Europe and Australia with an eye toward regulatory restrictions. In addition, DuPont has not disclosed or analyzed the impact of current consumer education campaigns geared toward curtailing the use of products involving PFOA.
3. We seek clarification as to when a company’s assertion that it believes its products do not harm human health despite mounting evidence to the contrary is misleading within the meaning of rule 10(b)(5). As you know, rule 10(b)(5) prohibits materially misleading communications, and omissions, to shareholders. With PFOA, DuPont’s own studies have found that exposure to PFOA is correlated with increases in workers’ cholesterol levels, a risk factor for heart attack and stroke. Company data also show that at the company’s Washington Works plant in Parkersburg, W.Va., workers had higher than normal levels of leukemia, rheumatic heart disease, atherosclerosis and aneurysm -- yet DuPont reportedly did not gather the data needed to assess the relationship to PFOA exposure. Historically, the management also denied in its SEC filings that the fungicide Benlate® caused any harm, even after being hit with numerous property and business damage lawsuits. The Benlate issue has so far cost the company over $1.9 billion to fight or settle the lawsuits, including the torts and the securities fraud case alleging improper disclosure.
We believe the aggregate effect of withholding the cluster of issues known to management has had the effect of blindsiding investors to liability and market risks associated with PFOA, in a manner that securities law is intended to prevent. We urge your examination of the above issues in the enclosed report.
Sincerely,
Sanford Lewis
Attorney
DuPont Shareholders for Fair Value