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Jury finding upends Bayer’s Roundup defense strategy: experts

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NEW YORK (Reuters) – Bayer AG had hoped a new trial strategy focusing jurors on scientific evidence could stem a burgeoning tide of U.S. lawsuits over its glyphosate-based weed killer Roundup, but a second jury finding on Tuesday that the product caused cancer has narrowed the company’s options, some legal experts said.

FILE PHOTO: Werner Baumann, CEO of Bayer AG poses for a picture during the annual results news conference of the German drugmaker in Leverkusen, Germany February 27, 2019. REUTERS/Wolfgang Rattay/File Photo

Bayer shares tumbled more than 12 percent on Wednesday after a unanimous jury in San Francisco federal court found Roundup to be a “substantial factor” in causing California resident Edwin Hardeman’s non-Hodgkin’s lymphoma.

The jury decision was a blow to Bayer after the judge in the Hardeman case, at the company’s request, had split the trial, severely limiting evidence plaintiffs could present in the first phase. Tuesday’s defeat on terms considered advantageous to Bayer sets up the second phase to be even tougher and limits the grounds on which the company could appeal any final verdict, the experts said.

“The fact that Bayer lost this trial despite it being set up in the most favorable way for them is a huge setback,” said Thomas Rohback, a Connecticut-based defense lawyer.

Bayer in a statement on Tuesday said it stood behind the safety of Roundup and was confident the evidence in the second trial phase would show that Monsanto’s conduct was appropriate and the company not liable for Hardeman’s cancer.

The company, which bought Monsanto last year, on Wednesday declined to comment beyond that statement.

Tuesday’s finding did not address liability, which will be determined following the second trial phase that began on Wednesday.

Bayer denies glyphosate or Roundup cause cancer. The German company faces more than 11,200 lawsuits over the popular weed killer. Last August, following the first Roundup trial, a California state court jury issued a $289 million verdict against the company.

Two weeks after that verdict, which was later reduced to $78 million and is being appealed, Bayer Chief Executive Werner Baumann reassured analysts that the company had a new legal strategy based on focusing jurors on the scientific evidence.

“Bayer and the joint litigation team are working to ensure that, going forward, this overwhelming science will get the full consideration it deserves,” Baumann said in an Aug. 23 conference call.

A LOT AT STAKE

There is a lot at stake for Bayer, which acquired Roundup maker Monsanto last year for $63 billion. Though Bayer does not break out sales figures for Roundup, glyphosate is the world’s most widely used weed killer, and Roundup is the leading brand.

Bayer’s new strategy was focused on keeping out plaintiffs’ allegations that the company improperly influenced scientists, regulators and the public about the safety of Roundup. Bayer has denied it acted inappropriately and said in public statements following the August verdict that it thought the jury was inflamed by the claims of corporate misconduct.

Vince Chhabria, the San Francisco federal judge overseeing the Hardeman case, agreed with the company’s argument that such evidence was a “distraction” from the scientific question of whether glyphosate causes cancer. He agreed to split the trial in a January order.

Had Bayer had won the first phase, there would have been no second phase looking at company liability. Now that it has lost, almost all of the previously excluded evidence can be presented to the jury.

Plaintiffs’ lawyers hit Bayer with those allegations in their opening statements for the second phase on Wednesday. Aimee Wagstaff, one of Hardeman’s lawyers, said Monsanto influenced the science around Roundup through its “cozy” relationship with regulators.

Bayer could convince the jury in the second phase that, despite their finding that Roundup played a substantial role in Hardeman’s cancer, the company was not liable. Experts said that was unlikely.

“They could present evidence of how careful they were in developing Roundup, but that’s an uphill battle given that the scientific evidence was their strongest argument,” said Alexandra Lahav, a law professor at the University of Connecticut.

A lawyer for Bayer on Wednesday argued that Bayer could not be held liable because the U.S. Environmental Protection Agency, as well as other regulators worldwide, approved Roundup without a cancer warning.

If the Hardeman trial had not been split and a final verdict went against Bayer, the company might have been able to appeal any damages award to the U.S. 9th Circuit Court of Appeals by claiming the jury had been improperly swayed by inflammatory evidence, said Lori Jarvis, a Virginia-based mass tort defense lawyer. That argument will now be difficult to make.

“It would not be surprising at all for the 9th Circuit to uphold what the jury did in this case, particularly given the great effort Chhabria put into creating a level playing field for Monsanto,” Jarvis said.

Some lawyers said Bayer could still argue on appeal that plaintiffs’ experts and their scientific evidence were insufficient and statistically invalid and should not have been admitted at trial. But they noted the 9th Circuit, which oversees the San Francisco federal court, has generally been permissive in allowing expert testimony.

However, experts said it was probably too soon to write off Bayer’s legal strategy, noting future Roundup cases could result in different outcomes.

“It’s a relatively early phase in this litigation as a whole and we just need to see more trials to understand Bayer’s liability,” said Adam Zimmerman, a law professor at Los Angeles-based Loyola Law School.

Reporting by Tina Bellon; Editing by Anthony Lin and Bill Berkrot

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KISERO: What KCB-NBK merger means

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Columnists

What KCB-NBK merger means

A National Bank of Kenya branch. FILE PHOTO | NMG 

The Press statement by the Kenya Commercial Bank (KCB)announcing its move to acquire the National Bank of Kenya(NBK) through a share swap did not give much detail.

The statement only said that the deal would involve 10 ordinary shares of NBK for every one ordinary share of KCB. If it works, we will have seen the end of one of the most troublesome chapters in the country’s banking sector. Even though NBK has a weak balance sheet, it will bring to the table strong customer-facing assets for the combined entity. It has retained branches in exclusive locations at airports, ports of exit and entry into the country, giving it advantage when it comes to inter-trade business.

Secondly, it has over the years retained exclusive viable public sector clients. In the past, NBK was the designated bank for receiving landing fees for all aircraft landing and taking off from Kenya. It retains a substantial part of the business.

NBK used to be the banker for the largest employer in the country — the Teachers Service Commission. It still retains a substantial portion of the business. It used to be the designated banker for receiving payments to Kenya Revenue Authority and still retains a big chunk of this business.

So, what are the likely outcomes of the proposed merger? First, the government’s stake — now at 17 percent — is bound to increase with consequences for the corporate governance of the largest bank in the country.

The public float, a broad and impressive spectrum currently holding in excess of 80 per cent, may also suffer dilution.

When the details of the transaction are finally put out, it will be interesting to see how the vexing issue of the mainly government-owned preference shares in the books of the bank — which have always been the deal breaker for investors interested in buying the bank — will be treated.

NBK has a peculiar capital structure of having normal ordinary shares and at the same time preference shares with equity-like features that, unlike normal preference shares, allow these securities to share in the profit of the bank.

Indeed, transaction advisers hired in the past to sell the bank have advised that no sale transaction of the NBK is possible unless the preference shares are converted into ordinary shares first, and on a 1:1 basis.

Predictably, the National Social Security Fund (NSSF) has been opposed to the 1:1 conversion formula, arguing that such a move would dilute its current near majority 48 percent stake of ordinary shares of the bank.

This is because, when the 1:1 conversion formula is applied, the Treasury’s stake rises to 70 percent of ordinary shares from the current 23 percent, giving it power to make unilateral decisions on the future of the bank.

It will be interesting to see how the National Treasury and KCB will navigate through this shareholding quagmire.

With the shares of the NBK currently trading at its lowest multiples and at a steep discount on the book value, this transaction could put the government and the NSSF in a position where they can start realising a return on their investments in the bank.

The two investors have not been able to earn a return either by way of capital appreciation or dividends from the billions they invested in the company in nearly two decades. But more significantly, a takeover of NBK will serve as a strong signal that distressed State-owned banks will no longer be artificially kept alive even after they have long outlived their usefulness.

Indeed, many of the State-owned banks have been in poor financial health, only managing to limp along because of support and regulatory forbearance from the Central Bank of Kenya (CBK) .

A good number are currently suffering crippling liquidity problems, forcing them to resort to complete dependence on the CBK discount window for liquidity. In the interbank market, they are unable to access liquidity easily because the large banks are not willing to lend to them, choosing to deal only with their large peers.

How I hope that the proposed merger of NBK and KCB will just be but the beginning of structured changes that will eventually give us a long-lasting solution to widespread distress within the State-owned segment of the banking sector.



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Keter defies GDC board on chief executive new term

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Keter defies GDC board on chief executive new term

Energy Secretary Charles Keter. FILE PHOTO | NMG 

Energy Secretary Charles Keter has defied the board of Geothermal Development Company (GDC) in extending the term of the firm’s CE0.

Mr Keter has offered GDC boss Johnson ole Nchoe a one-year contract despite the board’s verdict to seek a new managing director.

Mr Nchoe, whose three-year term ended on Wednesday, sought a contract renewal. This triggered a board review that gave him a score of poor.

The board gave him a score of 39.6 percent for the six months to December and 39.8 per cent for the year ended June last year with both scores categorised as poor.

“He sought a contract renewal and we said no based on his appraisal,” said a GDC director who sought anonymity fearing reprisals from Mr Keter.

“The board spoke, but the CS had a final word that was contrary to the resolution of the directors.

“This is out of step with good corporate governance.”

Mr Nchoe, who was picked to head GDC in April 2016 on a three-year contract, previously worked at Kenya Power as IT and telecoms chief manager until 2013 when he joined a group of consultants in Liberia on a donor-funded plan tasked with helping the West Africa nation rebuild its electricity network.

He protested the poor review from the board, arguing it was designed to embarrass him.

“He felt strongly that the evaluation was designed to embarrass the person of the CEO and was inconsistent with the good board evaluation results,” said board minutes capturing Mr Nchoe’s protest.

The one-year contract extension is tied to the fact that Mr Nchoe will next April attain the mandatory retirement age of 60.

His predecessor, Dr Silas Simiyu, also fell out with the board, prompting his resignation in March 2015 after he was adversely mentioned in tender irregularities.

Eight months after Dr Simiyu’s exit, the board suspended six GDC managers including acting CEO Godwin Mwawongo, company secretary Praxidis Saisi and tender committee members Mr Abraham Saat, Mr Peter Ayodo, Mr Caleb Mbayi and Mr Nicholas Karume.



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Tea rebounds to Sh203 at weekly auction amid shrinking supply

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By GERALD ANDAE
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The amount of tea withdrawn from sale at the auction fell 24 percent this week as price increase at the Mombasa auction saw buyers sell most of the commodity.

Data by East African Tea Traders Association indicates only tea worth Sh228.8 million was offloaded from the auction against that valued at Sh302.3 million last week. In trading held on Tuesday, a kilogramme of tea on average went up to Sh203, up from Sh193 realised last week.

Tea prices have been falling in the last two months but have rebounded in the last two sales as volumes offered started coming down because of the ongoing drought.

The volumes offered for sale this week dropped from 7.275 million kilos to 7.2 million as adverse effects of droughts hit tea farmers and factories.

Over 40,000 tea factory workers have been forced to go on advance leave as production went down by half.

Kenya Tea Growers Association (KTGA) chief executive officer Apollo Kiarii says the harsh climatic conditions have forced factories to operate three to four days a week, significantly cutting down operations.

He said it will take another six to eight weeks for the crop to recover if the rains come, and additional cost of replanting and infilling the fields for the dried-up bushes means the industry performance for the year 2019 will be poor than any other time. The Tea Directorate had forecast the volumes will this year drop to 416 million kilos from a high of 474 million kilos last year.



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