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Misty

 

http://www..com

 

 

U.S. Will Subsidize Cleanup of Altered Corn

By Justin Gillis

Washington Post Staff Writer

Wednesday, March 26, 2003; Page E01

 

http://www.washingtonpost.com/wp-dyn/articles/A29223-2003Mar25.html

 

The Agriculture Department's settlement with a Texas company that

mishandled gene-altered corn, portrayed three months ago as a

stringent crackdown designed to send a message to other potential

violators, actually involved a no-interest $3.5 million government

loan that means American taxpayers will effectively subsidize cleanup

efforts.

 

The payment terms, worth as much as $500,000 in interest and other

savings to the company over the next three years, are contained in a

document newly uncovered in government files by a Washington advocacy

group. The Agriculture Department did not release the information at

the time it announced the settlement with ProdiGene Inc. of College

Station, Tex.

 

Alisa Harrison, spokeswoman for the Agriculture Department, said

there was no intent to deceive the public. " It wasn't that we made a

conscious decision not to release it, " she said. " It didn't occur to

us. "

 

But Gregory Jaffe, director of biotechnology issues at the Center for

Science in the Public Interest, the Washington-based consumer group

that recently discovered the payment terms, said he thought the

government misled the public. His group, which supports the use of

genetic engineering in principle but has long complained that federal

oversight is lax, and others initially asked for copies of all

relevant documents related to the case and did not receive the one

detailing terms.

 

" I think there was a conscious decision to create an illusion that

this was a more severe penalty than it really is, " Jaffe said. " This

situation strongly suggests to me that the government is going to say

one thing in public and do something different to help this industry

as best it can behind closed doors. "

 

When it outlined the settlement last fall, the government said it was

fining ProdiGene $250,000 and requiring it to reimburse the cost of

destroying a warehouse full of potentially adulterated soybeans in

Aurora, Neb. " It's a significant demonstration, I think, of the rigor

of our regulatory system, " Bobby R. Acord, administrator of the

animal and plant health inspection service at the Agriculture

Department, said at the time.

 

Buying, transporting and burning the beans ultimately cost $3.5

million. Under the arrangement Jaffe discovered recently, the

government paid for the cleanup. The company is not required to begin

making payments for a year, and it will have two years to pay the

money in quarterly installments, owing the government no interest on

either the fine or the cleanup -- totaling $3.75 million.

 

Harrison said the Agriculture Department had little choice but to

accept extended payment terms. The government " took a look at their

financial situation, and it was very clear that the company could not

pay the fine immediately, " she said. " If the company had gone

bankrupt, we wouldn't have gotten anything. We would have had to foot

the entire bill. "

 

ProdiGene has replaced its chief executive, Anthony G. Laos, with

Russell K. Burbank, who specializes in corporate turnarounds. He said

he was studying all aspects of ProdiGene's operations with an eye

toward preventing any recurrence of last year's violations.

 

The privately held company, which is not required to disclose

financial information, has acknowledged that it is low on cash and

will seek new financing as part of its turnaround plan. " I can just

tell you that as an early-stage company, that is an enormous amount

of money, " Burbank said of the $3.75 million.

 

In two incidents last year, in Iowa and Nebraska, ProdiGene failed to

follow government regulations for growing experimental, genetically

altered crops. The corn in question was designed to produce a pig

vaccine, part of a new trend among biotechnology companies of

attempting to use food plants as factories for pharmaceutical

production.

 

Environmental and consumer groups, joined recently by the food

industry, have warned that the biotech industry is putting the food

supply at risk with practices they describe as sloppy.

 

In the Iowa case, pollen from the gene-altered corn may have spread

to nearby food corn in Pocahontas County, and the government ordered

about 155 acres burned.

 

Far more difficult was a situation in Nebraska, where a small amount

of leaf or stalk from gene-altered corn may have adulterated a huge

warehouse full of fidyl soybeans. Under a Food and Drug

Administration

policy that forbids such adulteration in food, the government ordered

the beans destroyed and the warehouse specially cleaned.

 

The Agriculture Department has little experience with large cleanup

projects like the one in the ProdiGene case, which more closely

resembles the cleanups often ordered by the Environmental Protection

Agency. The EPA sometimes accepts extended payments from financially

struggling companies, but it routinely charges interest in such

cases.

 

The value of the interest-free loan and the extended payment schedule

to ProdiGene can be derived from a standard type of financial

calculation called a net-present-value analysis.

 

At the request of The Washington Post, Joseph C. Hartman, an

assistant professor at Lehigh University in Bethlehem, Pa., who

specializes in economic-decision analysis and has no involvement in

the ProdiGene matter, estimated that the company will save about

$500,000 in interest and other costs over the term of the deal.

 

It won't necessarily cost taxpayers that much, because the government

can borrow money on better terms than a small company such as

ProdiGene can. Using a calculation that factors in the government's

short-term cost of funds, Hartman's analysis shows a cost to

taxpayers from the ProdiGene arrangement of about $264,000, mostly in

forgone interest charges.

 

This assumes, however, that ProdiGene is ultimately able to repay

everything it owes. If the company goes under, taxpayers could still

pay the entire $3.75 million.

 

=====

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