Hatch Backed Bill Benefiting Own Stock Holdings

Sen. Orrin G. Hatch, an influential Republican from Utah, was the author and primary backer last year of legislation that benefited a drug company in which he owns stock worth as much as $50,000, according to documents and interviews.

The Hatch-sponsored provision, attached as an amendment to a major drug bill last fall and signed into law by then-President George Bush, prohibits the Food and Drug Administration from monitoring and evaluating the health claims for vitamins, mineral pills, herbs and similar supplements until the end of 1993.

Senate financial records show that Hatch owns 71,843 shares in Pharmics Inc. The small Utah company sells prenatal vitamins and Vitamin C additives that would be affected by government regulation of the industry. Hatch’s financial disclosure forms value the stock at $15,000 to $50,000.

While it would appear that Hatch’s actions do not violate any Senate standards of conduct, such conflict-of-interest rules are narrowly drawn. They prohibit senators from promoting legislation only when they or family members would be the principal financial beneficiaries. Hatch’s actions could, however, attract criticism from increasingly vocal advocates of tougher ethics restrictions for members of Congress.

The president of Pharmics is Walter J. Plumb, a Salt Lake City attorney and Hatch’s former law partner. Hatch and Plumb are partners in several investments, and Plumb owes the senator $63,000 from the purchase of Hatch’s share of their former law practice, according to records.

Hatch maintained there was no conflict of interest in championing legislation with an impact on Pharmics. Through a spokesman, he said he was unaware of the products sold by the company.

“Plumb took care of everything,” said the spokesman, J. Paul Smith. “The senator is a limited partner and he had no knowledge of anything going on at Pharmics.” Smith said Hatch pushed the exemption in response to concerns of Utah’s $700-million-a-year vitamin and dietary supplement industry.

Hatch, an articulate conservative, has emerged as an increasingly visible and influential figure in the Republican Party. He is the senior Republican on the Senate Judiciary Committee and a senior member of the Labor and Human Resources Committee, which oversees drug regulations.

His activities on behalf of the Bank of Credit & Commerce International--the defunct international bank tied to money laundering and corrupt dictators--came under scrutiny last year after it was discovered that a 1990 speech he gave in the Senate defending the bank was drafted by BCCI lawyers.

The Senate Ethics Committee is investigating ties between a former Hatch aide and BCCI, which was shut down by regulators around the world in 1991.

Hatch has long been a strong supporter of the drug industry. He has consistently taken the industry’s side in the Senate, arguing against tougher regulation and attempts to impose price restraints.

In 1989, he filed a brief with the U.S. Supreme Court siding with two big drug manufacturers whose executives had contributed thousands of dollars to his campaigns. He acknowledged later that the brief had been prepared with help from lawyers for the drug companies, but said he saw no conflict of interest.

Last year, Hatch introduced a bill to exempt the vitamin and dietary supplement industry from new regulations that require the FDA to evaluate health claims made on food product labels, such as the assertion that fiber reduces the risk of getting cancer.

While consumers hailed the regulations, the supplement industry and health stores that sell the products were afraid FDA regulations would severely restrict sales of vitamins, mineral pills, herbs and other supplements.

Hatch’s bill was not passed, but near the end of the congressional session he wrote an amendment to a major drug bill, which had passed the House unanimously and had strong support in the Senate. Hatch’s amendment prohibited the FDA from monitoring and evaluating health claims for vitamins and other diet supplements for one year.

A congressional staff member familiar with the negotiations over the amendment said Hatch threatened to stop passage of the larger drug measure unless his amendment was adopted. A similar amendment was proposed in the House.

The drug bill was passed and signed into law and the moratorium on FDA regulation was imposed until the end of 1993.

“The moratorium makes it practically impossible for the FDA to ban potentially dangerous dietary supplements and allows the manufacturers to make practically any disease-prevention claim they want,” said Bruce Silverglade, director of legal affairs for the Center for Science in the Public Interest, a Washington-based consumer group that opposed the ban.

According to Smith, Hatch’s spokesman, the senator wrote the amendment and worked for its passage because of the large supplement industry in Utah and his personal belief in the value of diet supplements.

Smith and another Hatch aide said that the senator was unaware when he backed the legislation that Pharmics sells vitamins and other supplements.

“Until recently, he was not aware that Pharmics even dealt with vitamins or over-the-counter pharmaceuticals that might have been affected by the legislation,” a Hatch aide said. “It certainly was not a factor in his decision to back the legislation.”

Plumb, the company’s president, said he never told Hatch that Pharmics sold vitamins and supplements. He said the two products constitute only a small part of the company’s business.

Hatch and Plumb are partners in a number of investments. Hatch’s Senate financial disclosure forms, which require assets to be reported only in a wide range, value the total investments with his former law partner at between $100,000 and $250,000.