The Kelo Case Redux Once More: Pfizer Pulls Out and the "Carefully Formulated" Development Plan Collapses

Four years ago we posted (here, here and here) about the controversial US Supreme Court decision in the Kelo case. Most discussion of the case at the time focused on individual property rights vs the power of the government to promote economic development, but the case had an important health care angle.

Briefly, the case centered on the taking of private property, including a house owned by Susette Kelo, by a not-for-profit organization, the New London (Connecticut) Development Corporation (NLDC) given the power of eminent domain by the New London city government. While the ostensible rationale for the taking was economic development, the action appeared to have been at the behest of Pfizer Inc, the world's largest pharmaceutical company, which had built a research and development facility in the city, and wanted a suitably upscale and sanitized environment for its workers.

As we previously posted, the NLDC's leadership had multiple conflicts of interest that involved ties to Pfizer. One board member was a Pfizer vice-president. The board president was married to another Pfizer vice-president. Pfizer wanted the part of New London that included Kelo's house made more attractive to complement its new research facility. The husband of the NLDC president had said, "Pfizer wants a nice place to operate. We don't want to be surrounded by tenements."

Kelo's and other property owners' protest of the taking went all the way to the US Supreme Court. As we posted here, the Court decided against the property owners 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 rejuvenation 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 upscale waterfront developments.

Two months ago, we posted on how the supposedly "carefully formulated" development plan had fallen apart.  The land on which the Kelo house stood had never been developed, and remained a weedy lot.
 
This week, the (New London) Day reported:

Eight years after opening its state-of-the-art global research-and-development headquarters in New London, Pfizer Inc. announced Monday it will close the nearly $300 million complex within the next two years and consolidate local operations into its Groton campus.

Why did Pfizer decide to close the facility?

Pfizer earlier this year said nearly 20,000 jobs would be cut as a result of its merger with the New Jersey-based Wyeth. The company said Monday that about 15 percent of its overall R&D work force would be cut as part of that downsizing.

The result apparently will be the complete dissolution of the "carefully formulated" development plan.

The announced closing of the New London site came as a blow to a city that had counted on Pfizer to help revive its fortunes.

The loss of Pfizer as a keystone business in New London could put in further jeopardy the Fort Trumbull development that started in conjunction with Pfizer's move into the city but has left little but flattened buildings and eminent-domain angst in its wake.

So, the unfortunate Kelo case has become a vivid demonstration how badly government does when it partners with businesses and tries to pick corporate winners and losers.  Unfortunately, it seems that much of what passes for US health care policy is such "corporate socialism."  As we said before, instead of trying to pick corporate winners and losers, government would do better to act like a combination of an honest policeman on the beat, deterring and punishing dishonest behavior, and in impartial referee, trying to make sure everyone is playing the game honestly. But no doubt government officials used to mingling with the corporate superclass would not be comfortable in the roles of honest cop or impartial referee.

See also comments on the Volokh Conspiracy blog.  Hat tip to the PharmaLot blog.

Post Title → The Kelo Case Redux Once More: Pfizer Pulls Out and the "Carefully Formulated" Development Plan Collapses

The Kelo Case Redux: Pfizer's "Nice Place" Ends Up Covered with Weeds

Four years ago we posted (here, here and here) about the controversial US Supreme Court decision in the Kelo case. Most discussion of the case at the time focused on individual property rights vs the power of the government to promote economic development, but the case had an important health care angle.

Briefly, the case centered on the taking of private property, including a house owned by Susette Kelo, by a not-for-profit organization, the New London (Connecticut) Development Corporation (NLDC) given the power of eminent domain by the New London city government. While the ostensible rationale for the taking was economic development, the action appeared to have been at the behest of Pfizer Inc, the world's largest pharmaceutical company, which had built a research and development facility in the city, and wanted a suitably upscale and sanitized environment for its workers.

As we previously posted, the NLDC's leadership had multiple conflicts of interest that involved ties to Pfizer. One board member was a Pfizer vice-president. The board president was married to another Pfizer vice-president. Pfizer wanted the part of New London that included Kelo's house made more attractive to complement its new research facility. The husband of the NLDC president had said, "Pfizer wants a nice place to operate. We don't want to be surrounded by tenements."

Kelo's and other property owners' protest of the taking went all the way to the US Supreme Court. As we posted here, the Court decided against the property owners 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 rejuvenation 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 upscale waterfront developments.

The Associated Press just published an ironic follow-up.

Weeds, glass, bricks, pieces of pipe and shingle splinters have replaced the knot of aging homes at the site of the nation's most notorious eminent domain project.

There are a few signs of life: Feral cats glare at visitors from a miniature jungle of Queen Anne's lace, thistle and goldenrod. Gulls swoop between the lot's towering trees and the adjacent sewage treatment plant.

But what of the promised building boom that was supposed to come wrapped and ribboned with up to 3,169 new jobs and $1.2 million a year in tax revenues? They are noticeably missing.

What happened?

New London the city's prized economic development plan has fallen apart as the economy crumbled.

The Corcoran Jennison Cos., a Boston-based developer, had originally locked in exclusive rights to develop nearly the entire northern half of the Fort Trumbull peninsula.

But those rights expired in June 2008, despite multiple extensions, because the firm was unable to secure financing, according to President Marty Jones.

So that was the result of the economic development plan the Supreme Court majority termed "carefully formulated." The lesson seems to be that when government makes policy to favor individual corporations, the results are bad policy and little public benefit. Government leaders often seem willing to favor specific health care organizations, rationalizing their actions in terms of economic development or promoting health and health care. Doing so may benefit the corporations involved, but rarely individual or public health.

Although US local and national government officials have have increasingly practiced such corporate socialism, they have neglected their regulatory roles. Instead of picking winners and losers, government would do better to act like a combination of an honest policeman on the beat, deterring and punishing dishonest behavior, and in impartial referee, trying to make sure everyone is playing the game honestly. But no doubt government officials used to mingling with the corporate superclass would not be comfortable in the roles of honest cop or impartial referee.

Post Title → The Kelo Case Redux: Pfizer's "Nice Place" Ends Up Covered with Weeds

"Pfizer's Fingerprints" on the Kelo Case

We previously posted on the Supreme Court's decision on the Kelo case, which would seem to be off-topic for this blog.

The Kelo case was widely perceived to be about a city (New London, Connecticut) trying to take houses and land by eminent domain to hand the property over to a developer to build an upscale complex. However, we noted that the seizure of land was proposed by the New London Development Corporation, a not-for-profit organization whose leaders had conflicts of interest involving the pharmaceutical company Pfizer. Furthermore, Pfizer favored the upscale development to make the environment around its new research facility in New London more attractive for its workers.

The New London Day just published an article re-affirming Pfizer's involvement in the project. It first noted that a July, 2005 Pfizer press release denied the company's involvement the Kelo case,

Eminent domain has played no part in the development by Pfizer of its Global Research and Development Headquarters in New London CT.
We at Pfizer have been dismayed to see false and misleading claims appear in the media that suggest Pfizer is somehow involved in this [Kelo] matter.

However, the Day responded

But in a recent, months-long review of state records and correspondence from 1997 to 1998 - when officials from the administration of then-Gov. John G. Rowland were helping convince the pharmaceutical giant to build in New Londong - shows taht statement is misleading, at best.

Facts the paper uncovered included:

• That a preliminary plan that included Pfizer's facility and adjacent "high end residential district," offices, businesses, and a marina was drawn up by the firm that designed Pfizer's facility.
• Former state officials confirmed that "the state's agreement to replace the existing neighborhood was a condition of Pfizer's move...." One said, "they would not have done the deal without the commitment to make the surrounding area more livable."
• Former state officials said "it was clear from the beginning of the negotiations with Pfizer that it would be necessary to use eminent domain to clear some of the houses in the Fort Trumbull neighborhood...."

However, Pfizer officials have kept implying that the company was not involved. For example, Nancy Hutson, listed as a "senior vice president" in charge of the Groton and New London laboratories, wrote a letter to the Day about an op-ed piece written by Froma Harrop (mentioned in our previous post), stating,

Ms. Harrop claims that homes in Fort Trumbull were razed because Pfizer wanted the area 'spiffed up.' This charge was examined at length by the Superior Court and dismissed as groundless. Repeating the fib is unfair and hurtful.

Note that Ms. Hutson did not directly refute the charges, but fell back on how the Superior Court found, and managed to claim offense in the currently politically correct manner, by referring to the op-ed piece as "hurtful."

No wonder that the public no longer finds most drug companies worthy of their trust. Although Pfizer's conduct in New London did not directly involve doctors and patients, it should certainly give us pause.

Thanks to Pharma Watch for the tip.

Post Title → "Pfizer's Fingerprints" on the Kelo Case

Kelo Revisited: Conflicts of Interest, Pharmaceutical Companies, and Civil Liberties

In a Washington Times op-ed piece, Susette Kelo, of Kelo vs. City of New London, wrote to remind us that with the blessings of a recent Supreme Court decision, the nominally not-for-profit New London Development Corporation (NLDC) has served "eviction notices" to three of her neighbors who own their own homes. She emphasized that the NLDC "wants my land to market to a developer for projects to 'complement' our area's new Pfizer facility."
Kelo continued,

What is happening to me should not happen to anyone else. Congress and state legislatures need to send a message to local governments that this kind of abuse of power not only won't be funded, it won't be tolerated.
Special interests - developers and governments that benefit from this use of power - are working to convice the public there is no problem, but I am living proof there is.

A reminder: as we previously posted, the NLDC's leadership had multiple conflicts of interest that involved ties to Pfizer. One board member was a Pfizer vice-president. The board president was married to another Pfizer vice-president. Pfizer wanted the part of New London that included Kelo's house made more attractive to complement its new research facility. The husband of the NLDC president had said, "Pfizer wants a nice place to operate. We don't want to be surrounded by tenements."
Although we have frequently discussed conflicts of interest affecting the leaders of health care organizations, this is one case in which the downside of such conflicts is not worse health care outcomes, but loss of civil liberties.

Post Title → Kelo Revisited: Conflicts of Interest, Pharmaceutical Companies, and Civil Liberties

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.

Post Title → The Kelo Case, Pfizer, and Conflicts of Interest