AMA to pay Sunbeam $9.9 million in settlement - Quad-Cities Online: Employment

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AMA to pay Sunbeam $9.9 million in settlement

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Posted: Sunday, August 2, 1998 1:00 am | Updated: 2:36 pm, Mon Apr 21, 2014.

CHICAGO (AP) -- Hoping to ``once and for all'' put the troubling episode in its past, the American Medical Association will pay Sunbeam Corp. $9.9 million for pulling out of an endorsement deal that critics regarded as unethical.

AMA board chairman Randolph Smoak Jr. said Friday the settlement -- $7.9 million in damages and $2 million for expenses including legal fees -- closed a chapter in the group's history.

``The AMA is now fully focused on its historic mission to serve America's patients and the quality of American medicine,'' Smoak said.

The settlement averts a costly trial, which had been scheduled for Nov. 2 in federal court in Chicago. After the AMA pulled out of the deal, Sunbeam, based in Delray Beach, Fla., hit it with a $20 million breach of contract lawsuit.

The AMA was to receive millions of dollars in royalties under a five-year agreement in which it would give a ``seal of approval'' to Sunbeam humidifiers, blood-pressure monitors and other products without testing them or comparing them to competing products.

The Chicago-based organization changed its mind after a storm of criticism.

An AMA committee that investigated the deal blamed the group's staff and said the board of directors had no prior knowledge. The controversy led to the dismissal of five AMA staff members, including former executive vice president Dr. P. John Seward.

The Sunbeam controversy had already cost the AMA $3.5 million in legal fees and an undisclosed amount in severance packages to the dismissed employees. Morale at the AMA, with about 290,000 members, or close to 40 percent of U.S. doctors, suffered as well.

At the time of the Sunbeam deal, the AMA had been seeking similar arrangements with other large corporations.

``This has made the AMA look very carefully at relationships with corporations so situations like this should never happen again,'' said Dr. Robert Tenery, an AMA ethicist.

Dr. Arnold Relman, an AMA member and former editor of the New England Journal of Medicine, said the settlement was a defeat for the group's rank and file. He is concerned not all the facts came out in the internal investigation.

``I think if we'd gone to trial, probably a lot more relevant information would have been uncovered and made available to the membership,'' Relman said. ``As a result of this settlement, we will never know the truth of what happened. It does not let the sun shine in.''

Sunbeam, meanwhile, has had to deal with financial problems of its own, including a sharp drop in its stock price. Al Dunlap, viewed as the primary force behind the breach-of-contract suit, has been fired as Sunbeam's top executive.

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