Re: The World According to Monsanto: Pollution, Corruption,
Posted: Sun Feb 07, 2016 6:52 am
Conclusion: A Colossus with Feet of Clay
The scene took place at the headquarters of TIAA-CREF (Teachers Insurance and Annuity Association, College Retirement Equities Fund) in an upscale neighborhood of Manhattan in July 2006. Established ninety years earlier, this prestigious pension fund is one of the most important financial institutions in the United States, holding $437 billion in assets. Ranked eightieth on Fortune’s list of the five hundred largest companies in the country, TIAA-CREF has a special characteristic figuring prominently on all its official documents: the company provides “financial services for the greater good.” The only people eligible to join the pension fund are those who serve the “greater good,” including “professors, nurses, deans, hospital and university administrators, doctors,” and the like, amounting to 3.2 million members. Since 1990, TIAA-CREF has had a department specializing in “responsible investment,” which 430,000 clients have joined. The reason I had asked to meet representatives of the venerable company was that I had discovered it was one of the twenty largest shareholders in Monsanto, 1.5 percent of whose shares it held at the time. [i]
Reputation Is a Risk Factor for Companies
I met that day with John Wilcox, head of the company’s corporate governance practice, and Amy O’Brien, director of the Socially Responsible Investing group. “Considering the special nature of your clientele, are there companies in which you refuse to invest?” I asked, under a little stress because the public relations director was also there, sitting behind me and taking notes.
“Of course,” O’Brien said. “For instance, our investors don’t want us to invest their money in tobacco companies, because of the burdens they impose on society. And, generally speaking, they are sensitive to the conduct of companies in social and environmental matters.”
“That means you take into account a company’s reputation?”
“Absolutely,” Wilcox answered without hesitation. “Reputation is increasingly considered a risk factor. Until recently, non-financial criteria for a company’s performance, such as its reputation or its environmental practices, were of no interest to Wall Street analysts, probably because they are hard to quantify and they involve the long term. But this is very clearly changing. There are increasing numbers of citizens who demand that the companies they invest their savings in share their values.”
“I have read that TIAA-CREF holds 1.5 percent of Monsanto’s shares.”
“It’s possible,” Wilcox said. “I really don’t know.”
“That company’s reputation is very controversial. How do you explain that investment?”
“I don’t think we offered it in our portfolio of shares for responsible investing,” O’Brien said hesitantly, visibly embarrassed. “I’m not sure, but in any case the company is especially controversial in Europe because of genetically modified organisms, but not in the United States.”
“But Agent Orange, PCBs, bovine growth hormone, aren’t they American stories? Did you inform your clients about the litigation Monsanto has had to deal with in the last several years?”
“No,” Wilcox answered. “I’m going to examine Monsanto’s risk factors and ask for advice from the people managing our stock portfolios.”
A Risky Company for Investors
Still in Manhattan, not far from the offices of TIAA-CREF, I went to see Marc Brammer, who works for Innovest Strategic Value Advisors, the leader in what is known as “extrafinancial analysis,” which consists of evaluating the social and environmental performances of companies on a scale ranging from AAA for the best to CCC for dunces. The grades are used to advise investors so that they may reduce their financial risks and increase the yield of their investments. With offices in New York, London, Tokyo, and Paris, Innovest has taken on the task of developing a clientele with portfolios focused on sustainable development. In January 2005, Brammer published a report titled “Monsanto and Genetic Engineering: Risks for Investors,” in which he presented a summary of the company’s activities and noted its “management and strategy” in the area of biotechnology.1 The result was a grade of CCC. “It’s the worst environmental grade,” he told me. “We have observed that in almost every industrial sector the companies with above-average environmental grades generally do better in the stock market than those with below-average grades, by a range of three hundred to three thousand points annually. This means that Monsanto is a risky business for shareholders in the medium and long term.”
“Who are Monsanto’s shareholders?”
“They are very dispersed, but the principal investors are pension funds and banks, which represent tens of thousands of small shareholders.”
“How do you explain the fact that a fund like TIAA-CREF has invested in Monsanto?”
“It’s surprising, because it’s an institution that really encourages responsible investing. On the other hand, it’s rather typical of the way pension funds operate: they make short-term calculations and are very sensitive to market rumors. In the case of Monsanto, it’s clear that it is overvalued because of unconditional support on Wall Street.”
“What are the principal risk factors for investors?”
“The primary one is market rejection, which is a real time bomb for Monsanto. GMOs are some of the most strongly rejected products that have ever existed. More than thirty-five countries have adopted or proposed legislation limiting the imports of GMOs or requiring the labeling of food containing biotech ingredients. Most European food distributors have established measures to guarantee that no biotech ingredients are used in their products. This is true for Nestlé, Unilever, Heinz, ASDA [British subsidiary of Wal- Mart], Carrefour, Tesco, and many others. Outside of Europe, there is also strong consumer opposition to GMOs in Asia and Africa.
“Even in the United States, Monsanto was forced, for example, to withdraw its Bt potatoes from the market after companies such as McDonald’s, Burger King, McCain, and Pringles refused to buy them. I’m sure that if the FDA decided to label GMOs, Monsanto would lose 25 percent of its market overnight. In fact, twenty surveys conducted between 1997 and 2004 clearly indicate that more than 80 percent of Americans want biotech products to be labeled.* So much so that one of the consequences of the lack of labeling of GMOs is the absolutely exponential development of the market for organic products in the United States.”
Monsanto has fully understood the danger labeling represents for its biotech business. When a citizen initiative in 2002 succeeded in getting a referendum on the ballot in Oregon on the labeling of GMOs, Monsanto quickly organized a campaign under the name of the Coalition Against the Costly Labeling Law, with its “allies from biotechnology and the food industry,” which cost the tidy sum of $6 million. “The general feeling,” argued Monsanto spokesman Shannon Troughton, “is that the measure, if passed, would create a new set of bureaucratic rules and regulations and provide meaningless information at a considerable cost to consumers.”2 The initiative, the first of its kind in the United States, was finally rejected by 73 percent of the voters, on the grounds that the labeling would be too costly.
“The other risk factor that threatens Monsanto’s performance are the flaws in the regulatory system, perfectly illustrated by the StarLink disaster,” Brammer went on. “We have calculated that if it were faced with a similar case, the company would lose $3.83 a share. The fundamental problem with GMOs is that only Monsanto benefits from them; risks are for the others, and regulatory agencies have abdicated their role of assessment and supervision. The opacity of the regulatory process feeds rejection by consumers in the United States because they don’t have the right to choose what they eat, but also in Europe, as the example of MON 863 corn shows.”
The Flaws of the Regulatory System: The Example of MON 863 Corn
While the French government announced in January 2008 that it was implementing the “safeguard clause” for MON 810 corn, suspending the cultivation of this Monsanto Bt variety until the European Union has reconsidered its authorization, I would like to recall the history of MON 863, a close cousin of MON 810. MON 863 contains a toxin (Cry3Bb1) intended to protect it against the corn root worm, while MON 810 has been engineered (Cry1Ab) to resist infestation by the corn borer. [iii] The MON 863 affair is a perfect illustration of the worrisome way, to put it mildly, in which GMOs are regulated in Europe.
In August 2002, Monsanto filed a request for marketing approval of MON 863 with the German authorities, submitting a technical file including a toxicological study conducted on rats for twenty-nine days. In conformity with European regulations, the authorities examined the data supplied by Monsanto and transmitted a negative opinion to the Brussels Commission, on the grounds that the GMO contained a marker for resistance to an antibiotic, which infringed directive 2001/18 strongly advising against its use. The commission was then required to distribute the file to the member states to solicit their opinions, which would be examined by the European Food Safety Authority (EFSA), the European scientific committee charged with evaluating the food safety of GMOs.
In France, the Commission du Génie Biomoléculaire (CGB) received the file in June 2003. Five months later, on October 28, 2003, the CGB issued an unfavorable opinion, not because of the presence of the antibiotic resistance marker, but because, as Hervé Kempf explained in Le Monde, it was “very troubled by the deformities observed in a sample of rats fed with 863 corn.”3 “What struck me in this case was the number of anomalies,” explained Gérard Pascal, director of research at INRA and member of the CGB since its creation in 1986. “There are too many areas here where one observes significant variations. I’ve never seen that in another case. It has to be reconsidered.”4
The “variations” included a “significant increase in white blood cells and lymphocytes in males in the sample fed with MON 863; a reduction in reticulocytes (immature red blood cells) in females; and a higher frequency of anomalies (inflammation, regeneration) of kidneys in males,” as well as a reduction in weight in the test animals.5 As Kempf points out, “no one would have known anything about it” if the lawyer Corinne Lepage, former environment minister in the government of Alain Juppé and president of CRIIGEN, [iv] “had not forced entry into the CGB” to obtain, after a legal battle lasting a year, the transcripts of discussions leading to the CGB’s negative opinion, which was “unusual for a commission that had always tended to support the authorization of GMOs.” The deliberations of the scientific committees of member states of the European Union, like those of EFSA, are indeed confidential, which gives one an idea of the transparency of the process for the evaluation of GMOs.
There was a new development in the affair on April 19, 2004, when EFSA issued an opinion in favor of marketing MON 863. According to the authority, the anomalies observed by the CGB “are part of the normal variation of control populations”; as for the kidney deformities, they were “of minimal importance.”6
How could two scientific committees express such different opinions on the same case? The answer to this question was provided by the European branch of Friends of the Earth, which in 2004 published a very detailed (and very troubling) report on the operations of EFSA.7 Established in 2002 under the authority of European directive 178/2002 on the safety of food products, this institution includes eight scientific committees, one of which is charged exclusively with the evaluation of GMOs. It is precisely this committee, known as the GMO panel, that the report considers.
Friends of the Earth begins by observing: “In just over a year [the GMO panel] has published twelve scientific opinions, virtually all favourable to the biotechnology industry. These opinions have been used by the European Commission, which is under increasing pressure from the biotechnology industry and the United States, to force new GM products onto the market. . . . They are being used to create a false impression of scientific agreement when the real situation is one of intense and continuing debate and uncertainty. Concerns about the political use of their opinions have been expressed by members of the EFSA themselves.”
According to the report, this situation is due to the close ties between “certain members” of the GMO panel and the giants of biotechnology, led by the panel’s chairman, Harry Kuiper. Kuiper is the coordinator of Entransfood, a project funded by the European Union to “facilitate market introduction of GMOs in Europe, and therefore bring the European industry in[to] a competitive position.” In that capacity, he is a participant in a working group that includes Monsanto and Syngenta. Similarly, Mike Gasson works for Danisco, a partner of Monsanto; Pere Puigdomenech was co-chair of the Seventh International Plant Molecular Biotechnology Congress, sponsored by Monsanto, Bayer, and DuPont; Hans-Yorg Buhk and Detlef Bartsch are “well-known for their pro-GM views and have even appeared in promotional videos produced by the biotechnology industry.” One of the few outside experts consulted by the panel is Dr. Richard Phipps, who had signed a petition in favor of biotechnology circulated by AgBio World8 and turned up on Monsanto’s Web site to support bovine growth hormone.9
Friends of the Earth then considered several cases, including MON 863. It appears that the reservations expressed by the German government about the presence of an antibiotic resistance marker were dismissed out of hand by the GMO panel, which relied on an opinion it had issued in a press release on April 19, 2004: “The Panel has confirmed that ARMs [antibiotic resistance markers] are in the majority of cases still required in order to ensure the efficient selection of transgenic events in plants,” Kuiper stated. Friends of the Earth commented: “The Directive does not ask for confirmation of whether ARMs are an efficient tool for the biotech industry; the assessment required is whether they could have adverse effects on the environment and human health.”
The end of the story was equally exemplary. After EFSA’s favorable opinion was issued, Greenpeace asked the German Agriculture Ministry to have the technical file supplied by Monsanto (1,139 pages) made public, so that it could be independently analyzed. The ministry replied that this was impossible; Monsanto refused to make the data public because they were covered by the “trade secret” privilege. After a legal battle that lasted several months, Monsanto was finally compelled to make the data public by a decision of the court of appeals in Munich on June 9, 2005.
“It’s really unbelievable, when it’s a question of verifying the safety of a pesticidal plant designed to enter into the food chain, that Monsanto could first claim ‘trade secret,’ then file two lawsuits to deny access to the raw data in its study,” according to Gilles-Éric Séralini, who had followed the case very closely. At the request of Greenpeace, and simultaneously with Arpad Pusztai, the University of Caen scientist first did an assessment of the toxicological file that had been dragged out of Monsanto, which confirmed the anomalies observed by the French CGB.10 Then, under the auspices of CRII-GEN, he conducted an independent analysis of the raw data, in which he applied a more refined statistical method, considering in particular organs, dosage, and exposure time to GMOs. This analysis revealed that the effects of 863 corn on rats were much more significant than those observed initially, “which indicates the need to conduct further tests.”11
“Indeed,” Séralini commented, “the story of MON 863 corn shows the inadequacy of the process for the approval of GMOs, which ought to be assessed in the same way as any pesticide or medicine is, by testing them on three mammalian species over two years, which would permit an assessment of their long-term toxicity, not only of their possible acute toxic effects.” In the meantime, faced with these disturbing revelations, the European Commission discreetly swept MON 863 corn under the rug by banning its cultivation but not its importation and therefore not its consumption.
What If GMOs Were Tomorrow’s Agent Orange?
“Contrary to what Monsanto claims, it is not an agricultural company, but a chemical company,” argues Marc Brammer. “The proof is that the only GMOs it has succeeded in getting on the market are plants resistant to its star herbicide, Roundup, which still accounts for 30 percent of its revenue, or insecticidal plants. [v] Those plants are of no interest to consumers who are still waiting for the miracle GMOs that the company has constantly promised them, such as the golden rice that it announced with great public fanfare.”
To be precise, Monsanto did not invent golden rice, which was cobbled together, with the best intentions in the world, by two European researchers, Ingo Potrykus from Zurich and Peter Beyer from Freiburg. This GM rice was supposed to produce beta-carotene, the precursor to vitamin A, deficiency of which leads to the death of a million children annually in the Third World and causes blindness in 300,000 others. Published in Science in 2000, the laboratory results seemed so promising that golden rice made headlines in many newspapers as the embodiment of the great promise of biotechnology.12 Funded by the Rockefeller Foundation, the two researchers decided to launch their creation on the market, but they were confronted by an inextricable problem of patents: to make their golden rice, they had used genes and procedures covered by no fewer than seventy patents belonging to thirty-two companies or research centers. That meant that unless they sold the precious grains at astronomical prices, the business was doomed to failure. At that point a philanthropic association by the name of Monsanto intervened. At an agricultural conference in India in 2000, the company announced that it would “give away certain patent rights to speed [the] use of a genetically modified rice that could save millions of malnourished children.”13 The development of the rice, said Hendrik Verfaillie, who would soon succeed Robert Shapiro, “clearly demonstrates that biotechnology can help not only countries in the West, but in the developing world as well.”14
However, as soon as golden rice was grown in real conditions, it produced such a pathetic amount of beta-carotene that it did absolutely no good. “We never found out why,” said Brammer, “but this story is a good illustration of the unknowns surrounding the process of genetic engineering. They represent a medium- and long-term risk for Monsanto; we have no guarantee that GMOs will not be tomorrow’s Agent Orange.”
I will not enumerate all the surprises held in store over the years by products derived from genetic tinkering, such as, for example, the discovery by a Belgian scientist of an “unknown DNA fragment” in Monsanto Roundup Ready soybeans.15 I merely advise the reader to consult a European Commission Web site listing the scientific studies it sponsors on the safety of GMOs. One example is a research study with the title “The Mechanisms and Control of Genetic Recombination in Plants.”16 In their presentation of the project, the authors note: “A major problem with present day technology is the non-predictability of the integration of . . . transgenes,” which “may induce unpredictable and undesirable mutations in the host genome.” The researchers proposed to ascertain the facts of the situation, proof that GMOs have entered the food chain before this important question was resolved.
Another example is “Effects and Mechanisms of Bt Transgenes on Biodiversity of Non-Target Insects: Pollinators, Herbivores, and Their Natural Enemies.”17 I think the monarch butterfly would have appreciated it if this study had been conducted before Bt corn was put on the market. A final example is “Safety Evaluation of Horizontal Gene Transfer from Genetically Modified Organisms to the Microflora of the Food Chain and Human Gut.”18 The findings of this British study have since been published, and the least that can be said is that they are not reassuring. The researchers gave seven volunteers each a hamburger and a milk shake containing RR soy, then analyzed the bacteria in their intestines. In three cases out of seven, they “detected very low levels of the gene for resistance to the herbicide.”19 It would certainly be useful, in the name of the principle of precaution, if the experiment were repeated over a period of two years with a daily intake of Monsanto soy products (a normal diet in the United States).
Genetic Contamination Is a Major Risk Factor
When one dissects Monsanto’s activity reports (contained in 10-K forms) since 1997, one is struck by the place taken up by litigation. First there are suits filed by victims of the company’s chemical activities, such as the residents of Anniston or the Vietnam War veterans.
“If the veterans’ second class action were successful, it could lead to bankruptcy for Monsanto,” Marc Brammer told me when I met him in the summer of 2006. “Not forgetting PCBs, bovine growth hormone, and Roundup, which may lead to more suits. In addition to the risks incurred by its past and present chemical activities, there are those associated with genetic contamination, which is an inexhaustible source of potential litigation. So far the StarLink disaster has cost Aventis $1 billion. But contamination is continuing, and so it is impossible to estimate the final cost to the company.” The reader may recall the uproar provoked in 2006 by the discovery of traces of unauthorized GMOs in American rice.20 Produced by Bayer Crop- Science, one of Monsanto’s competitors, the GM rice had never been approved for consumption or planting; the contamination, which came from field tests conducted on a Louisiana farm between 1998 and 2001, affected thirty countries, led to a collapse in American rice exports, and resulted in “losses of up to $253 million from food-product recalls in Europe.”21
“We are involved in various intellectual property, biotechnology, tort, contract, antitrust, employee benefit, environmental, and other litigation, claims, and legal proceedings and government investigations.”22 This is according to Monsanto’s 2005 10-K form, under the heading “Litigation and Other Contingencies.” Under the heading of “Legal Proceedings,” the firm enumerates, in a catalogue worthy of Prévert or perhaps Kafka, all the lawsuits in which it is a party, either as plaintiff or defendant.23 Some proceedings pit it against its competitors, the Swiss Syngenta, the German Bayer, or the American Dow Chemical Company, over “who is the first to have discovered one or another gene or active principle.” Similarly, the University of California filed a complaint against Monsanto for violation of a patent covering bovine growth hormone. One also finds that Syngenta has filed an antitrust claim asserting that Monsanto holds a monopoly on glyphosate-tolerant corn seeds. Reuters has wondered: “Monsanto Co.’s domination of the biotech crop market is indisputable, but is it illegal?”24
Says Marc Brammer: “The danger hanging over Monsanto is the same that once threatened Microsoft. It’s not impossible that the company will one day be found guilty of violating American antitrust and antiracketeering laws. If that were to happen, it would be very costly.” In 1999, a class action had been brought by farmers in federal court in St. Louis, claiming that the company had conspired with Pioneer Hi-Bred to fix the prices of seeds at a very high level. But the claim was dismissed in 2003 by Judge Rodney Sippel, the same judge who was so severe against farmers accused of violating Monsanto patents.25
One year later, the New York Times published a very detailed investigation in which, after interviewing dozens of executives of seed companies, the paper confirmed the suspicions of conspiracy hanging over the world leader in GMOs. Among other things, Monsanto had asked Mycogen, a California seed company, “not to compete with Monsanto and its partners on the price of biotech seeds in exchange for access to some of Monsanto’s patented technologies, according to former executives” of the company (since acquired by Dow Chemical).26 These allegations were later repeated in fourteen class action suits filed in fourteen different U.S. courts, as the company acknowledged in its 2005 10-K form.
“We are attacking the monopoly on seeds that Monsanto has acquired by what we consider to be illegal means,” Adam Levitt, one of the plaintiffs’ attorneys, who works for a well-known Chicago firm, told me in October 2006, “namely, the abuse of patent rights, such as the prohibition on farmers keeping their seeds or the requirement to buy only Roundup and not a generic glyphosate; also the obligation imposed on licensed dealers to sell a high percentage of Monsanto products. We also accuse the company of having stifled competition with unfair trade practices and having conspired to fix seed prices at an exorbitant level. All of that seems to us to amount to a violation of U.S. laws.”
“Do you think you’ll win?”
The question made Levitt smile, and he reminded me that he was paid on contingency. He concluded with obvious pleasure: “The fact that Monsanto has hired the largest law firms in the country for its defense makes us think that the company takes the matter seriously.”
I will add that for us too, the citizens of the Earth, the matter is serious. After tracking the company for four years, I think I am in a position to state that we can no longer say we didn’t know, and that it would be irresponsible to allow the food of humanity to fall into Monsanto’s hands. For if there is one thing I’m certain I do not want, for myself and even less for my three daughters and my future grandchildren, it is the world according to Monsanto.
_______________
Notes:
i. According to the SEC, in June 2006 Monsanto’s principal shareholders were: Fidelity Investment (9.1 percent), Axa (6.1 percent), Deutsche Bank (3.6 percent), Primecap Management (3.6 percent), State Street Corp (3 percent), Barclays (3 percent), Morgan Stanley (2.9 percent), Goldman Sachs Group (2.7 percent), Vanguard Group Inc. (2.5 percent), Lord Abbett & Co (2.4 percent), American Century Investment Management Inc. (2.4 percent), and General Electric (2.3 percent).
ii. The surveys referred to in the Innovest report were done by ABC News (in which 93 percent of those surveyed wanted GMOs labeled as such), Rutgers University (90 percent), Harris Poll (86 percent), USA Today (79 percent), MSNBC (81 percent), Gallup Poll (68 percent), Grocery Manufacturers of America (92 percent), Time magazine (81 percent), Novartis (93 percent), and Oxygen/Market-Pulse (85 percent).
iii. According to Greenpeace, the corn root worm, a very harmful insect, was introduced into Europe during the Balkan War; it is said to have come in American air force planes.
iv. CRII-GEN is the Committee for Independent Research and Information on Genetic Engineering, of which Professor Gilles- Éric Séralini is a member.
v. *According to its 10-K form, Monsanto had revenues of $7.3 billion in 2006, $2.2 billion of which were from Roundup.
The people of this company are poison: like the god of death, they take away life.
—A member of the Community Media Trust in Pastapur, Andhra Pradesh
The scene took place at the headquarters of TIAA-CREF (Teachers Insurance and Annuity Association, College Retirement Equities Fund) in an upscale neighborhood of Manhattan in July 2006. Established ninety years earlier, this prestigious pension fund is one of the most important financial institutions in the United States, holding $437 billion in assets. Ranked eightieth on Fortune’s list of the five hundred largest companies in the country, TIAA-CREF has a special characteristic figuring prominently on all its official documents: the company provides “financial services for the greater good.” The only people eligible to join the pension fund are those who serve the “greater good,” including “professors, nurses, deans, hospital and university administrators, doctors,” and the like, amounting to 3.2 million members. Since 1990, TIAA-CREF has had a department specializing in “responsible investment,” which 430,000 clients have joined. The reason I had asked to meet representatives of the venerable company was that I had discovered it was one of the twenty largest shareholders in Monsanto, 1.5 percent of whose shares it held at the time. [i]
Reputation Is a Risk Factor for Companies
I met that day with John Wilcox, head of the company’s corporate governance practice, and Amy O’Brien, director of the Socially Responsible Investing group. “Considering the special nature of your clientele, are there companies in which you refuse to invest?” I asked, under a little stress because the public relations director was also there, sitting behind me and taking notes.
“Of course,” O’Brien said. “For instance, our investors don’t want us to invest their money in tobacco companies, because of the burdens they impose on society. And, generally speaking, they are sensitive to the conduct of companies in social and environmental matters.”
“That means you take into account a company’s reputation?”
“Absolutely,” Wilcox answered without hesitation. “Reputation is increasingly considered a risk factor. Until recently, non-financial criteria for a company’s performance, such as its reputation or its environmental practices, were of no interest to Wall Street analysts, probably because they are hard to quantify and they involve the long term. But this is very clearly changing. There are increasing numbers of citizens who demand that the companies they invest their savings in share their values.”
“I have read that TIAA-CREF holds 1.5 percent of Monsanto’s shares.”
“It’s possible,” Wilcox said. “I really don’t know.”
“That company’s reputation is very controversial. How do you explain that investment?”
“I don’t think we offered it in our portfolio of shares for responsible investing,” O’Brien said hesitantly, visibly embarrassed. “I’m not sure, but in any case the company is especially controversial in Europe because of genetically modified organisms, but not in the United States.”
“But Agent Orange, PCBs, bovine growth hormone, aren’t they American stories? Did you inform your clients about the litigation Monsanto has had to deal with in the last several years?”
“No,” Wilcox answered. “I’m going to examine Monsanto’s risk factors and ask for advice from the people managing our stock portfolios.”
A Risky Company for Investors
Still in Manhattan, not far from the offices of TIAA-CREF, I went to see Marc Brammer, who works for Innovest Strategic Value Advisors, the leader in what is known as “extrafinancial analysis,” which consists of evaluating the social and environmental performances of companies on a scale ranging from AAA for the best to CCC for dunces. The grades are used to advise investors so that they may reduce their financial risks and increase the yield of their investments. With offices in New York, London, Tokyo, and Paris, Innovest has taken on the task of developing a clientele with portfolios focused on sustainable development. In January 2005, Brammer published a report titled “Monsanto and Genetic Engineering: Risks for Investors,” in which he presented a summary of the company’s activities and noted its “management and strategy” in the area of biotechnology.1 The result was a grade of CCC. “It’s the worst environmental grade,” he told me. “We have observed that in almost every industrial sector the companies with above-average environmental grades generally do better in the stock market than those with below-average grades, by a range of three hundred to three thousand points annually. This means that Monsanto is a risky business for shareholders in the medium and long term.”
“Who are Monsanto’s shareholders?”
“They are very dispersed, but the principal investors are pension funds and banks, which represent tens of thousands of small shareholders.”
“How do you explain the fact that a fund like TIAA-CREF has invested in Monsanto?”
“It’s surprising, because it’s an institution that really encourages responsible investing. On the other hand, it’s rather typical of the way pension funds operate: they make short-term calculations and are very sensitive to market rumors. In the case of Monsanto, it’s clear that it is overvalued because of unconditional support on Wall Street.”
“What are the principal risk factors for investors?”
“The primary one is market rejection, which is a real time bomb for Monsanto. GMOs are some of the most strongly rejected products that have ever existed. More than thirty-five countries have adopted or proposed legislation limiting the imports of GMOs or requiring the labeling of food containing biotech ingredients. Most European food distributors have established measures to guarantee that no biotech ingredients are used in their products. This is true for Nestlé, Unilever, Heinz, ASDA [British subsidiary of Wal- Mart], Carrefour, Tesco, and many others. Outside of Europe, there is also strong consumer opposition to GMOs in Asia and Africa.
“Even in the United States, Monsanto was forced, for example, to withdraw its Bt potatoes from the market after companies such as McDonald’s, Burger King, McCain, and Pringles refused to buy them. I’m sure that if the FDA decided to label GMOs, Monsanto would lose 25 percent of its market overnight. In fact, twenty surveys conducted between 1997 and 2004 clearly indicate that more than 80 percent of Americans want biotech products to be labeled.* So much so that one of the consequences of the lack of labeling of GMOs is the absolutely exponential development of the market for organic products in the United States.”
Monsanto has fully understood the danger labeling represents for its biotech business. When a citizen initiative in 2002 succeeded in getting a referendum on the ballot in Oregon on the labeling of GMOs, Monsanto quickly organized a campaign under the name of the Coalition Against the Costly Labeling Law, with its “allies from biotechnology and the food industry,” which cost the tidy sum of $6 million. “The general feeling,” argued Monsanto spokesman Shannon Troughton, “is that the measure, if passed, would create a new set of bureaucratic rules and regulations and provide meaningless information at a considerable cost to consumers.”2 The initiative, the first of its kind in the United States, was finally rejected by 73 percent of the voters, on the grounds that the labeling would be too costly.
“The other risk factor that threatens Monsanto’s performance are the flaws in the regulatory system, perfectly illustrated by the StarLink disaster,” Brammer went on. “We have calculated that if it were faced with a similar case, the company would lose $3.83 a share. The fundamental problem with GMOs is that only Monsanto benefits from them; risks are for the others, and regulatory agencies have abdicated their role of assessment and supervision. The opacity of the regulatory process feeds rejection by consumers in the United States because they don’t have the right to choose what they eat, but also in Europe, as the example of MON 863 corn shows.”
The Flaws of the Regulatory System: The Example of MON 863 Corn
While the French government announced in January 2008 that it was implementing the “safeguard clause” for MON 810 corn, suspending the cultivation of this Monsanto Bt variety until the European Union has reconsidered its authorization, I would like to recall the history of MON 863, a close cousin of MON 810. MON 863 contains a toxin (Cry3Bb1) intended to protect it against the corn root worm, while MON 810 has been engineered (Cry1Ab) to resist infestation by the corn borer. [iii] The MON 863 affair is a perfect illustration of the worrisome way, to put it mildly, in which GMOs are regulated in Europe.
In August 2002, Monsanto filed a request for marketing approval of MON 863 with the German authorities, submitting a technical file including a toxicological study conducted on rats for twenty-nine days. In conformity with European regulations, the authorities examined the data supplied by Monsanto and transmitted a negative opinion to the Brussels Commission, on the grounds that the GMO contained a marker for resistance to an antibiotic, which infringed directive 2001/18 strongly advising against its use. The commission was then required to distribute the file to the member states to solicit their opinions, which would be examined by the European Food Safety Authority (EFSA), the European scientific committee charged with evaluating the food safety of GMOs.
In France, the Commission du Génie Biomoléculaire (CGB) received the file in June 2003. Five months later, on October 28, 2003, the CGB issued an unfavorable opinion, not because of the presence of the antibiotic resistance marker, but because, as Hervé Kempf explained in Le Monde, it was “very troubled by the deformities observed in a sample of rats fed with 863 corn.”3 “What struck me in this case was the number of anomalies,” explained Gérard Pascal, director of research at INRA and member of the CGB since its creation in 1986. “There are too many areas here where one observes significant variations. I’ve never seen that in another case. It has to be reconsidered.”4
The “variations” included a “significant increase in white blood cells and lymphocytes in males in the sample fed with MON 863; a reduction in reticulocytes (immature red blood cells) in females; and a higher frequency of anomalies (inflammation, regeneration) of kidneys in males,” as well as a reduction in weight in the test animals.5 As Kempf points out, “no one would have known anything about it” if the lawyer Corinne Lepage, former environment minister in the government of Alain Juppé and president of CRIIGEN, [iv] “had not forced entry into the CGB” to obtain, after a legal battle lasting a year, the transcripts of discussions leading to the CGB’s negative opinion, which was “unusual for a commission that had always tended to support the authorization of GMOs.” The deliberations of the scientific committees of member states of the European Union, like those of EFSA, are indeed confidential, which gives one an idea of the transparency of the process for the evaluation of GMOs.
There was a new development in the affair on April 19, 2004, when EFSA issued an opinion in favor of marketing MON 863. According to the authority, the anomalies observed by the CGB “are part of the normal variation of control populations”; as for the kidney deformities, they were “of minimal importance.”6
How could two scientific committees express such different opinions on the same case? The answer to this question was provided by the European branch of Friends of the Earth, which in 2004 published a very detailed (and very troubling) report on the operations of EFSA.7 Established in 2002 under the authority of European directive 178/2002 on the safety of food products, this institution includes eight scientific committees, one of which is charged exclusively with the evaluation of GMOs. It is precisely this committee, known as the GMO panel, that the report considers.
Friends of the Earth begins by observing: “In just over a year [the GMO panel] has published twelve scientific opinions, virtually all favourable to the biotechnology industry. These opinions have been used by the European Commission, which is under increasing pressure from the biotechnology industry and the United States, to force new GM products onto the market. . . . They are being used to create a false impression of scientific agreement when the real situation is one of intense and continuing debate and uncertainty. Concerns about the political use of their opinions have been expressed by members of the EFSA themselves.”
According to the report, this situation is due to the close ties between “certain members” of the GMO panel and the giants of biotechnology, led by the panel’s chairman, Harry Kuiper. Kuiper is the coordinator of Entransfood, a project funded by the European Union to “facilitate market introduction of GMOs in Europe, and therefore bring the European industry in[to] a competitive position.” In that capacity, he is a participant in a working group that includes Monsanto and Syngenta. Similarly, Mike Gasson works for Danisco, a partner of Monsanto; Pere Puigdomenech was co-chair of the Seventh International Plant Molecular Biotechnology Congress, sponsored by Monsanto, Bayer, and DuPont; Hans-Yorg Buhk and Detlef Bartsch are “well-known for their pro-GM views and have even appeared in promotional videos produced by the biotechnology industry.” One of the few outside experts consulted by the panel is Dr. Richard Phipps, who had signed a petition in favor of biotechnology circulated by AgBio World8 and turned up on Monsanto’s Web site to support bovine growth hormone.9
Friends of the Earth then considered several cases, including MON 863. It appears that the reservations expressed by the German government about the presence of an antibiotic resistance marker were dismissed out of hand by the GMO panel, which relied on an opinion it had issued in a press release on April 19, 2004: “The Panel has confirmed that ARMs [antibiotic resistance markers] are in the majority of cases still required in order to ensure the efficient selection of transgenic events in plants,” Kuiper stated. Friends of the Earth commented: “The Directive does not ask for confirmation of whether ARMs are an efficient tool for the biotech industry; the assessment required is whether they could have adverse effects on the environment and human health.”
The end of the story was equally exemplary. After EFSA’s favorable opinion was issued, Greenpeace asked the German Agriculture Ministry to have the technical file supplied by Monsanto (1,139 pages) made public, so that it could be independently analyzed. The ministry replied that this was impossible; Monsanto refused to make the data public because they were covered by the “trade secret” privilege. After a legal battle that lasted several months, Monsanto was finally compelled to make the data public by a decision of the court of appeals in Munich on June 9, 2005.
“It’s really unbelievable, when it’s a question of verifying the safety of a pesticidal plant designed to enter into the food chain, that Monsanto could first claim ‘trade secret,’ then file two lawsuits to deny access to the raw data in its study,” according to Gilles-Éric Séralini, who had followed the case very closely. At the request of Greenpeace, and simultaneously with Arpad Pusztai, the University of Caen scientist first did an assessment of the toxicological file that had been dragged out of Monsanto, which confirmed the anomalies observed by the French CGB.10 Then, under the auspices of CRII-GEN, he conducted an independent analysis of the raw data, in which he applied a more refined statistical method, considering in particular organs, dosage, and exposure time to GMOs. This analysis revealed that the effects of 863 corn on rats were much more significant than those observed initially, “which indicates the need to conduct further tests.”11
“Indeed,” Séralini commented, “the story of MON 863 corn shows the inadequacy of the process for the approval of GMOs, which ought to be assessed in the same way as any pesticide or medicine is, by testing them on three mammalian species over two years, which would permit an assessment of their long-term toxicity, not only of their possible acute toxic effects.” In the meantime, faced with these disturbing revelations, the European Commission discreetly swept MON 863 corn under the rug by banning its cultivation but not its importation and therefore not its consumption.
What If GMOs Were Tomorrow’s Agent Orange?
“Contrary to what Monsanto claims, it is not an agricultural company, but a chemical company,” argues Marc Brammer. “The proof is that the only GMOs it has succeeded in getting on the market are plants resistant to its star herbicide, Roundup, which still accounts for 30 percent of its revenue, or insecticidal plants. [v] Those plants are of no interest to consumers who are still waiting for the miracle GMOs that the company has constantly promised them, such as the golden rice that it announced with great public fanfare.”
To be precise, Monsanto did not invent golden rice, which was cobbled together, with the best intentions in the world, by two European researchers, Ingo Potrykus from Zurich and Peter Beyer from Freiburg. This GM rice was supposed to produce beta-carotene, the precursor to vitamin A, deficiency of which leads to the death of a million children annually in the Third World and causes blindness in 300,000 others. Published in Science in 2000, the laboratory results seemed so promising that golden rice made headlines in many newspapers as the embodiment of the great promise of biotechnology.12 Funded by the Rockefeller Foundation, the two researchers decided to launch their creation on the market, but they were confronted by an inextricable problem of patents: to make their golden rice, they had used genes and procedures covered by no fewer than seventy patents belonging to thirty-two companies or research centers. That meant that unless they sold the precious grains at astronomical prices, the business was doomed to failure. At that point a philanthropic association by the name of Monsanto intervened. At an agricultural conference in India in 2000, the company announced that it would “give away certain patent rights to speed [the] use of a genetically modified rice that could save millions of malnourished children.”13 The development of the rice, said Hendrik Verfaillie, who would soon succeed Robert Shapiro, “clearly demonstrates that biotechnology can help not only countries in the West, but in the developing world as well.”14
However, as soon as golden rice was grown in real conditions, it produced such a pathetic amount of beta-carotene that it did absolutely no good. “We never found out why,” said Brammer, “but this story is a good illustration of the unknowns surrounding the process of genetic engineering. They represent a medium- and long-term risk for Monsanto; we have no guarantee that GMOs will not be tomorrow’s Agent Orange.”
I will not enumerate all the surprises held in store over the years by products derived from genetic tinkering, such as, for example, the discovery by a Belgian scientist of an “unknown DNA fragment” in Monsanto Roundup Ready soybeans.15 I merely advise the reader to consult a European Commission Web site listing the scientific studies it sponsors on the safety of GMOs. One example is a research study with the title “The Mechanisms and Control of Genetic Recombination in Plants.”16 In their presentation of the project, the authors note: “A major problem with present day technology is the non-predictability of the integration of . . . transgenes,” which “may induce unpredictable and undesirable mutations in the host genome.” The researchers proposed to ascertain the facts of the situation, proof that GMOs have entered the food chain before this important question was resolved.
Another example is “Effects and Mechanisms of Bt Transgenes on Biodiversity of Non-Target Insects: Pollinators, Herbivores, and Their Natural Enemies.”17 I think the monarch butterfly would have appreciated it if this study had been conducted before Bt corn was put on the market. A final example is “Safety Evaluation of Horizontal Gene Transfer from Genetically Modified Organisms to the Microflora of the Food Chain and Human Gut.”18 The findings of this British study have since been published, and the least that can be said is that they are not reassuring. The researchers gave seven volunteers each a hamburger and a milk shake containing RR soy, then analyzed the bacteria in their intestines. In three cases out of seven, they “detected very low levels of the gene for resistance to the herbicide.”19 It would certainly be useful, in the name of the principle of precaution, if the experiment were repeated over a period of two years with a daily intake of Monsanto soy products (a normal diet in the United States).
Genetic Contamination Is a Major Risk Factor
When one dissects Monsanto’s activity reports (contained in 10-K forms) since 1997, one is struck by the place taken up by litigation. First there are suits filed by victims of the company’s chemical activities, such as the residents of Anniston or the Vietnam War veterans.
“If the veterans’ second class action were successful, it could lead to bankruptcy for Monsanto,” Marc Brammer told me when I met him in the summer of 2006. “Not forgetting PCBs, bovine growth hormone, and Roundup, which may lead to more suits. In addition to the risks incurred by its past and present chemical activities, there are those associated with genetic contamination, which is an inexhaustible source of potential litigation. So far the StarLink disaster has cost Aventis $1 billion. But contamination is continuing, and so it is impossible to estimate the final cost to the company.” The reader may recall the uproar provoked in 2006 by the discovery of traces of unauthorized GMOs in American rice.20 Produced by Bayer Crop- Science, one of Monsanto’s competitors, the GM rice had never been approved for consumption or planting; the contamination, which came from field tests conducted on a Louisiana farm between 1998 and 2001, affected thirty countries, led to a collapse in American rice exports, and resulted in “losses of up to $253 million from food-product recalls in Europe.”21
“We are involved in various intellectual property, biotechnology, tort, contract, antitrust, employee benefit, environmental, and other litigation, claims, and legal proceedings and government investigations.”22 This is according to Monsanto’s 2005 10-K form, under the heading “Litigation and Other Contingencies.” Under the heading of “Legal Proceedings,” the firm enumerates, in a catalogue worthy of Prévert or perhaps Kafka, all the lawsuits in which it is a party, either as plaintiff or defendant.23 Some proceedings pit it against its competitors, the Swiss Syngenta, the German Bayer, or the American Dow Chemical Company, over “who is the first to have discovered one or another gene or active principle.” Similarly, the University of California filed a complaint against Monsanto for violation of a patent covering bovine growth hormone. One also finds that Syngenta has filed an antitrust claim asserting that Monsanto holds a monopoly on glyphosate-tolerant corn seeds. Reuters has wondered: “Monsanto Co.’s domination of the biotech crop market is indisputable, but is it illegal?”24
Says Marc Brammer: “The danger hanging over Monsanto is the same that once threatened Microsoft. It’s not impossible that the company will one day be found guilty of violating American antitrust and antiracketeering laws. If that were to happen, it would be very costly.” In 1999, a class action had been brought by farmers in federal court in St. Louis, claiming that the company had conspired with Pioneer Hi-Bred to fix the prices of seeds at a very high level. But the claim was dismissed in 2003 by Judge Rodney Sippel, the same judge who was so severe against farmers accused of violating Monsanto patents.25
One year later, the New York Times published a very detailed investigation in which, after interviewing dozens of executives of seed companies, the paper confirmed the suspicions of conspiracy hanging over the world leader in GMOs. Among other things, Monsanto had asked Mycogen, a California seed company, “not to compete with Monsanto and its partners on the price of biotech seeds in exchange for access to some of Monsanto’s patented technologies, according to former executives” of the company (since acquired by Dow Chemical).26 These allegations were later repeated in fourteen class action suits filed in fourteen different U.S. courts, as the company acknowledged in its 2005 10-K form.
“We are attacking the monopoly on seeds that Monsanto has acquired by what we consider to be illegal means,” Adam Levitt, one of the plaintiffs’ attorneys, who works for a well-known Chicago firm, told me in October 2006, “namely, the abuse of patent rights, such as the prohibition on farmers keeping their seeds or the requirement to buy only Roundup and not a generic glyphosate; also the obligation imposed on licensed dealers to sell a high percentage of Monsanto products. We also accuse the company of having stifled competition with unfair trade practices and having conspired to fix seed prices at an exorbitant level. All of that seems to us to amount to a violation of U.S. laws.”
“Do you think you’ll win?”
The question made Levitt smile, and he reminded me that he was paid on contingency. He concluded with obvious pleasure: “The fact that Monsanto has hired the largest law firms in the country for its defense makes us think that the company takes the matter seriously.”
I will add that for us too, the citizens of the Earth, the matter is serious. After tracking the company for four years, I think I am in a position to state that we can no longer say we didn’t know, and that it would be irresponsible to allow the food of humanity to fall into Monsanto’s hands. For if there is one thing I’m certain I do not want, for myself and even less for my three daughters and my future grandchildren, it is the world according to Monsanto.
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Notes:
i. According to the SEC, in June 2006 Monsanto’s principal shareholders were: Fidelity Investment (9.1 percent), Axa (6.1 percent), Deutsche Bank (3.6 percent), Primecap Management (3.6 percent), State Street Corp (3 percent), Barclays (3 percent), Morgan Stanley (2.9 percent), Goldman Sachs Group (2.7 percent), Vanguard Group Inc. (2.5 percent), Lord Abbett & Co (2.4 percent), American Century Investment Management Inc. (2.4 percent), and General Electric (2.3 percent).
ii. The surveys referred to in the Innovest report were done by ABC News (in which 93 percent of those surveyed wanted GMOs labeled as such), Rutgers University (90 percent), Harris Poll (86 percent), USA Today (79 percent), MSNBC (81 percent), Gallup Poll (68 percent), Grocery Manufacturers of America (92 percent), Time magazine (81 percent), Novartis (93 percent), and Oxygen/Market-Pulse (85 percent).
iii. According to Greenpeace, the corn root worm, a very harmful insect, was introduced into Europe during the Balkan War; it is said to have come in American air force planes.
iv. CRII-GEN is the Committee for Independent Research and Information on Genetic Engineering, of which Professor Gilles- Éric Séralini is a member.
v. *According to its 10-K form, Monsanto had revenues of $7.3 billion in 2006, $2.2 billion of which were from Roundup.