Lilly decries $450M award in Brazil as based on bad science, fuzzy math

Lilly general counsel Michael J. Harrington

Eli Lilly ($LLY) has hotly denied and intends to fight the findings of a court in Brazil that could cost it nearly half a billion dollars to cover medical costs for former employees. The employees claimed hazardous materials used at a Lilly plant caused them health issues. The ruling from a labor court in São Paulo also falls on Italy's ACS Dobfar, which bought the antibiotics plant from Lilly in 2003.

"In this case, there is absolutely no basis for the court's decision that employees were harmed based on extensive scientific and medical assessments conducted by third party health experts, as well as by Lilly," Michael J. Harrington, senior VP and Lilly general counsel, said in a statement. "For that reason, we strongly disagree with the court's ruling and will appeal this decision."

Penalties levied by Judge Antonia Rita Bonardo of the Labor Court in São Paulo against Lilly and Dobfar could run approximately $450 million, Lilly said. The judge also ordered the plant closed for a year because of the contamination, Reuters reports. The news service said that 77 of 80 former workers who were tested when the Brazilian case was first filed in 2008 showed evidence of exposure. But Lilly counters that the alleged contaminants--benzene and heavy metals--were never used in the manufacturing operations at the facility. "In addition, the published ruling is based on inaccurate scientific claims, as well as mathematical errors," Harrington said.

Lilly manufactured human and animal antibiotics as well as agricultural chemicals at the plant in Cosmopolis, which it owned from 1977 to 2003, Lilly spokeswoman Amy Sousa said in an email. When Lilly identified groundwater contamination of tebuthiuron, an agricultural chemical, and cumene, an organic solvent used in manufacturing, within the property line, Sousa said the company voluntarily reported the contamination to the environmental agency of Brazil, CETESB. In fact, the company is near to completing a "multi-million dollar remediation plan for underground contamination on the site" which CETESB approved.

Lilly contends workers at the facility were never exposed to the contaminated groundwater. "The groundwater was never used for drinking or industrial purposes," Sousa said.

A similar case was filed in Lilly's home base of Indianapolis in 2009 on behalf of about 40 workers. That case, which was dismissed the next year, accused Lilly, Dow Agrosciences, Dow Chemical, Shell, American Cyanamid and BASF of incinerating and dumping hazardous materials in the area.

The ruling is certainly not good PR in a country that Lilly considers among its most important for growth. Next to China, Brazil is among Lilly's top emerging markets. It is one of what Lilly calls its "Five Focus" markets that also include South Korea, Turkey, Russia and Mexico.

- here's the Lilly announcement
- read the Reuters story

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