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AHP’s RECEIPT OF $217,000 IN FEDERAL FUNDS FOR HIRING DISADVANTAGED

Executive Summary

AHP's RECEIPT OF $217,000 IN FEDERAL FUNDS FOR HIRING DISADVANTAGED workers for its Guayama, Puerto Rico facility was criticized by Rep. Lantos (D-Calif.) at an Aug. 5 hearing before his House Government Operations/Employment Subcommittee. Lantos said Congress intended the Job Training Partnership Act to provide an incentive for hiring youth and unskilled labor. However, he maintained, American Home Products used the JTPA funds to hire Guayama-area residents whom the firm would have hired even without the funds. Although they were poor, those offered contracts by AHP had high school diplomas, and a number were bilingual chemists with bachelors degrees. Consequently, he contended, AHP's receipt of the $217,000 constituted the taking of "a gift from the American taxpayer." Lantos' comments were made during the second of a July 29-Aug. 5 pair of hearings that were scheduled before AHP settled litigation with the Oil, Chemical & Atomic Workers Union involving the firm's shutdown of a plant in Elkhart, Indiana. Unlike the union, the chairman did not accuse AHP of violating the JTPA's prohibition against using the federal funds for training new employees following a relocation. AHP Chairman John Stafford testified that AHP did not "relocate" its Whitehall plant from Elkhart, Ind. to Guayama. The $50 mil. Puerto Rican plant largely produces AHP's OTC ibuprofen product Advil; the defunct Elkhart facility never did, Stafford said. AHP decided to build the Guayama plant in 1986, when the corporation had too little production capacity. However, he continued, AHP decided to shut down the aging Elkhart plant in 1990 because the company by then had too much capacity and was operating inefficiently. In the interim AHP's OTC sales had dropped and, in 1989, it had acquired A. H. Robins, which "substantially increased" production capacity. Although Stafford also insisted that his firm did not engage in "abuse," "fraud" or "creaming" the most qualified job candidates, he acknowledged that AHP's use of the funds "was not the intent" of Congress, judging "from everything that you [Lantos] have said." Stafford noted that the local Puerto Rico agency responsible for administering the JTPA program "came to us" in 1989 and "asked if we would be willing to hire some of their applicants -- whose families were living on incomes under the poverty level -- as part of a JTPA program." The agency provided a list of 166 applicants, representing $413,000 in potential funding. AHP hired 78 of the top applicants, all of whom had high school diplomas, and received $217,000 in funding -- roughly equivalent to half of the hires' first six months of wages. The firm's total payroll at the Guayama plant is $28 mil. Lantos said the local agency shared blame with AHP in the misuse of federal funds. Rep. Martinez (D-Calif.) commented that Schering-Plough has hired for its Puerto Rican plant employees, "who would have ranked below this pool that you've selected." Stafford replied that "Schering-Plough is a very fine company," and he pledged that AHP "will certainly look into" selecting employees from "lower categories of either education or economic circumstances" if it uses the JTPA program in the future. The AHP chairman noted that his firm reached a tentative settlement with the Oil, Chemical & Atomic Workers Union in litigation over the shutdown of the Elkhart plant. The July 29 agreement calls for AHP to pay $24 mil. to a trust for outstanding employee claims. The settlement provides $9.5 mil. to be divided by an independent trustee among eligble claimants, up to $8 mil. for employees' legal fees, $3.5 mil. for court costs and related expenses, $2 mil. for the union and $1 mil. for an emergency "hardship" fund for former employees. At a July 30 hearing before Lantos' subcommittee, union member Connie Malloy, formerly employed at the Elkhart plant, testified that the company rebuffed efforts to help retrain employees laid off when AHP shut down the Indiana facility. Stafford on Aug. 5 testified that AHP opened a job placement and training facility, "but the union [representing about 500 of the 800 displaced workers] declined to participate" because AHP would not cede control of the facility to the union. AHP also has posted more than 800 jobs through a placement program to find new employment for laid-off workers in Elkhart and other parts of the country, Stafford said. He added that former employees received severance pay and extended health care benefits.
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