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 “We unequivocally believe that our talc and our baby powder does not
contain asbestos,” Gorsky testified in an Oct. 3 deposition in a
case involving a retired Indiana college professor who alleges his
cancer was caused by the Baby Powder he used for decades. The
deposition has not been previously reported.
Gorsky, citing “thousands of tests and studies” to support his
testimony, said: “I’m not aware of our baby powder or talc
containing asbestos.”
That’s harder for him to say now. Last Wednesday, just 13 days after
his deposition, the U.S. Food and Drug Administration told the
healthcare giant it had discovered asbestos, a known carcinogen, in
a bottle of Johnson’s Baby Powder.
On Friday, a day after getting the full FDA test results, J&J
recalled 33,000 bottles of Baby Powder in the United States. It
marked the first time the company has recalled Baby Powder for
possible asbestos contamination and the first time U.S. regulators
have announced finding asbestos in the product.
The recall is the latest blow to a healthcare conglomerate that has
for many years tried to project an image as a caring company. It is
now facing thousands of lawsuits over a variety of products,
including legal action by more than 15,000 consumers claiming its
talc powders caused their cancers.
Shares in J&J, which in February said it had received subpoenas from
the U.S. Justice Department and U.S. Securities and Exchange
Commission for documents related to the asbestos contamination
allegations, dropped almost 6% on Friday after the recall was
announced. The inquiries include a criminal grand jury investigation
into how forthright J&J has been about the safety of its powders,
according to people familiar with the matter.
In the deposition, Gorsky was pressed again and again to say -
without qualification - that the company’s powders were asbestos
free. But in answering questions under oath for the first time in
the talc litigation, he stuck to his statement that he “believed”
J&J’s powders were clean.
The FDA finding will make it much more difficult for Gorsky and the
company to continue saying that they "believe" the talc powders are
free from asbestos, said Elizabeth Burch, a product liability expert
at the University of Georgia School of Law. She said the test result
and recall lend credibility to what plaintiffs have been arguing in
court for months.
J&J stands behind the safety of its talc and said it’s investigating
the FDA test result. The company said it proceeded with the recall
“out of an abundance of caution.”
In a statement on Sunday J&J said: “Thousands of tests over the past
40 years repeatedly confirm that our consumer talc products do not
contain asbestos, including prior tests by the FDA as recently as
last month.”
In a written response to questions from Reuters on Monday, J&J added
that Gorsky had no knowledge of the FDA finding of asbestos at the
time of his deposition.
The company also said the FDA notified it on Sept. 20 that a test of
its Baby Powder did not find any asbestos. Neither had the regulator
detected asbestos during testing in 2010 using the “most
sophisticated testing techniques available.”
COULD BE DEPOSED AGAIN
Gorsky’s testimony echoed statements he made after Reuters on Dec.
14 last year published an investigation that found J&J knew for
decades asbestos lurked in its talc.
Internal company records, trial testimony and other evidence show
that from at least 1971 to the early 2000s, the company’s raw talc
and finished powders sometimes tested positive for small amounts of
asbestos, the Reuters investigation found. Company executives, mine
managers, scientists, doctors and lawyers fretted over the problem
and how to address it, while failing to disclose it to regulators or
the public.
Jim Kramer, the lawyer who deposed Gorsky this month, said he plans
to ask the New York state judge in the case to allow him to question
the CEO a second time in light of the FDA’s findings and the recall.
J&J declined to comment on the possibility of a second round with
Kramer or about its legal strategy following the FDA test result.
Gorsky faces at least one more deposition, this one ordered by a
Missouri judge for Baby Powder cancer cases pending in that state.
That has yet to be scheduled.
DISCUSSED DROPPING TALC POWDERS
In his daylong videotaped deposition, Gorsky, a former Army Ranger,
recounted his efforts to stem the growing controversy over one of
the company’s signature products.
Sitting at the head of a conference table with the blinds drawn in
the midtown Manhattan offices of a mediation firm, he testified that
J&J considered dropping talc powders.
“We had discussions internally along the way regarding should we
leave … talc on the market or not,” Gorsky said at the deposition.
In the end, however, Gorsky said the company, which also sells Baby
Powder made from cornstarch, stuck with talc because it was
confident about its safety and because many consumers liked its
feel.
“We had the right testing procedures in place and so there was … no
medical reason or safety reason to withdraw it,” he testified.
“There were in fact differences between cornstarch and talc-based
baby powder in its feel, in its absorbency,” said Gorsky, who has
been J&J’s CEO since 2012. The company “felt it was important to
have different options on the market based upon different consumer
needs.”
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The plaintiff’s lawyer pressed the 59-year-old Gorsky on his use of
the word “believe” when asked about asbestos in J&J’s talc. “My
follow up is,” Kramer said, “can you not answer the question as I've
presented it with a yes or a no?”
Gorsky, who said in the deposition he uses Johnson’s Baby Powder and
had also used it on his son, didn’t budge. “I did not personally
conduct every single test. I can only … gauge it based upon the data
and totality that’s been presented to me.”
In its answers to Reuters questions on Monday, the company
reiterated that “Mr. Gorsky is not a scientist and did not conduct
the tests. He therefore relies on others to advise him.”
Before the FDA test result, Gorsky’s focus on what he "believed" to
be true was helpful to J&J's legal position, said Andrew Bradt, a
Berkeley Law professor at the University of California. Many state
laws require plaintiffs to prove companies knew a product was
defective, and if Gorsky had unequivocally said talc does not
contain asbestos then opposing lawyers could seek to undermine his
declaration by contrasting it with the results of tests J&J knew
about over the years suggesting otherwise.
However, in light of the FDA asbestos discovery, plaintiff lawyers
could now make it sound like he was being hesitant in his
deposition, Bradt said.
'MAD MONEY’
Much of the testimony centered on Gorsky’s efforts to quell public
and investor concerns raised by the Dec. 14 Reuters investigation
and a story published hours later in the New York Times. The Reuters
report had prompted a stock selloff that erased about $40 billion
from the company’s market value in one day.
In the subsequent days, J&J tweeted, posted on Facebook, ran a
series of full-page newspaper ads, published a lengthy rebuttal to
the Reuters investigation on its website and announced a $5 billion
stock buyback.
In video posted in December and still featured on J&J’s website,
Gorsky emphasized that regulators "have always found our talc to be
asbestos free.”
Jim Cramer, the host of the CNBC investing show “Mad Money,” gave
Gorsky the chance to present his side of the story last December,
according to copies of emails shown at the deposition.
Hours after the Reuters and New York Times articles were published,
Cramer sent a message to Gorsky’s work email, saying: “Dear Alex, if
you feel these talc stories are not truthful, I would love to know
how to refute them! – all the best, Jim.”
And that evening, Cramer sent a followup: “Thank you, Alex. Do not
be afraid to overwhelm me. I will work all weekend to tell the truth
about your great company!!! -Jim.”
Gorsky appeared in person in the “Mad Money” studio the following
Monday, Dec. 17.
“We want to make sure that our trust and integrity that we’ve earned
over the last 130 years is maintained for the next 130 years,” he
told viewers.
“We unequivocally believe that our talc, our Baby Powder, does not
contain asbestos,” Gorsky said on the broadcast.
In an email to Reuters, Cramer said his goal “was to get Alex Gorsky
on CNBC first and to ask all the toughest questions … There were no
ground rules and nothing was off the table.” At the end of the Dec.
17 broadcast, there was a disclosure that Cramer's charitable trust
owned J&J shares.
It still has a stake today, Cramer said.
TESTING ACCURACY
When the question of previous test results came up in the
deposition, Gorsky said occasional findings of asbestos in talc
haven’t held up under scrutiny. Such tests were subsequently found
to be “incomplete or inaccurate,” he said.
A New Jersey judge overseeing thousands of talc lawsuits
consolidated in a federal court is expected to rule soon on a J&J
request to disqualify expert witnesses hired by plaintiffs,
including the head of an asbestos testing lab who testified in
earlier trials that he found the contaminant in the company’s
powders.
In a filing Friday, plaintiffs’ lawyers drew the judge’s attention
to the FDA finding of asbestos in the bottle of Baby Powder and said
they have asked J&J to turn over documents related to the FDA test
results and any communications with regulators.
In a brief conference call Friday with analysts and journalists, J&J
officials called the FDA test results “extremely unusual,” and
suggested the sample may have been contaminated by an outside source
or come from a counterfeit bottle.
A few hours later, the FDA shot back with a defense of its
laboratory analysis, saying it wasn’t aware of “any records pointing
to counterfeit Johnson’s Baby Powder in the U.S. market.”
The FDA declined to provide further comment for this article.
(Reporting by Lisa Girion and Chad Terhune in Los Angeles, and Mike
Spector in New York; Additional reporting by Dan Levine in San
Francisco; Editing by Martin Howell)
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