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Sensient Flavors: Fed's actions in inquiry leave bad taste

January 5, 2009
An Indianapolis flavor-maker's lawsuit to keep out federal health inspectors has escalated into a legal melee, with attorneys for the company seeking sanctions against the feds for failing to cooperate during the discovery phase of the case.

Both sides in the case say their positions are cloaked in principle.

Sensient Flavors of Indianapolis says allowing the National Institute for Occupational Safety and Health to return to conduct another inspection of its 200-employee Raymond Street plant—in addition to one it completed May 29-30—would violate its due process protection under the Fifth Amendment of the U.S. Constitution.

For its part, NIOSH, part of the Atlanta-based Centers for Disease Control and Prevention, says it's to fulfill its mission of protecting workers from workplace-related health risks.

The legal standoff surrounds the company's production of diacetyl, a compound used in microwave popcorn, margarine and other products to create a buttery taste.

The product has created a firestorm of controversy in recent years. Some U.S. factory workers with prolonged exposure to diacetyl have developed a rare, life-threatening lung condition—dubbed popcorn lung—for which there is no cure or treatment. Health regulators are in the process of assessing the dangers.

The Indianapolis dispute began after the International Brotherhood of Teamsters Local 135, which represents plant workers, asked NIOSH last March to conduct a formal health hazard evaluation at the plant.

NIOSH wasn't satisfied with the first inspection. During the visit, "we were informed by employees that NIOSH was not viewing a normal production day," the agency wrote in a July letter to Sensient, a unit of Milwaukee-based Sensient Technologies Corp. "We did not feel we had a chance to see many processes and conveyed our disappointment with the level of production activity to Sensient management during our closing conference."

The letter goes on to cite concerns about pulmonary abnormalities found in the medial records of some Sensient employees. The letter says NIOSH is investigating the possibility of "chronic disease."

It then laid out a plan to conduct an extensive second inspection in late July.

Sensient and NIOSH have been at loggerheads since. The company acknowledges federal law gave NIOSH authority to conduct the first inspection. But it says no new information had emerged that would give NIOSH the right to go through the highly invasive process again.

"NIOSH is attempting to use Sensient's facility as its own personal laboratory," the company complained in a federal lawsuit filed July 14. The suit asks Judge Richard L. Young to block the second inspection.

Since then, a mountain of legal briefs have piled up, but the case has barely inched forward. NIOSH has asked the court to dismiss the suit—arguing that it had made no final determinations, and thus there are no matters subject to judicial review.

At the same time, NIOSH is fighting Sensient's efforts to unearth as much information as possible about the agency's inquiry through broad discovery requests. The two sides spent more than an hour battling over discovery during a court hearing in September. In an order the next month, Magistrate Judge Tim Baker came down in the middle, concluding Sensient's definition of appropriate fodder for discovery was too sweeping while NIOSH's was too narrow.

But NIOSH continues to rebuff its requests, Sensient said in a December filing seeking sanctions against the agency. "Merely copying and pasting the same responses that the court had already found inadequate and labeling those responses 'supplemental' cannot, under any rationale reading of the order, be considered providing the answers Judge Baker required."

NIOSH says any sanctions against it would be unwarranted. It says it has complied with the judge's order and is acting in good faith.

Lilly board keeps faith

Investors are nervous about the future of Eli Lilly and Co., which over the next five years faces patent expirations on drugs currently generating more than $9 billion in annual sales.

But Lilly's board isn't ready to blink. In a show of confidence, the board recently announced it was hiking Lilly's quarterly dividend by 4.3 percent, from 47 cents to 49 cents.

This marks the 42nd consecutive year Lilly has increased its dividend. The additional 2 cents will cost Lilly more than $90 million a year.

The hike pushes Lilly's dividend yield (the annual dividend divided by the stock price) to 5.1 percent. "Mad Money' host Jim Cramer recently recommended Lilly shares because of the dividend, which he called "juicy." 
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