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Risky business.

Risky Business

Mustang Ranch, Inc., a legalized brothel near Reno, Nevada, is going public. According to a preliminary prospectus dated January 25, 1989, 1,165,000 shares of common stock are to be offered at $20 per share. The prospectus indicates share ownership can "involve a high degree of risk," including a long term disagreement with the IRS over whether the prostitutes are employees of the brothels or independent contractors. The IRS claims they are employees who owe over $1 million in payroll taxes and interest. Of greater interest in regard to medical ethics and law are concerns relating to sexually transmittable diseases.

The substantial risks to the company relative to STDs are acknowledged in some detail. These are said to include adverse publicity, loss of operating license, and liability for personal injury damage claims by both the independent contractors and their customers. AIDS is considered a particularly dangerous threat.

With unintended irony the prospectus also discusses under risk factors how the "Company will be required to rely upon medical experts to conduct and interpret the results of testing designed to detect the infection or exposure of any Independent Contractor to a sexually transmittable disease." The company has, however, noted that medical research may not yet have developed standard and satisfactory approaches to problems with herpes and the AIDS virus.

The current method of addressing the threat of STDs is described and discounted as follows:

While the "house" rules of the Brothels will prohibit an Independent Contractor from performing any sexual act with a male customer without the Independent Contractor first having performed a visual physical examination of the customer, particularly the customer's genitalia, to detect any indications of a sexually transmittable disease and require that no sexual act be performed by an Independent Contractor without the customer's use of a condom satisfactory to the Independent Contractor, the Company will have no means of assuring that an Independent Contractor will comply with such rules with every customer. Neither can the Company be assured that each Independent Contractor will have the ability to perform the physical examination of a customer effectively to detect the presence of a sexually transmittable disease. Because many sexually transmittable diseases, particularly AIDS, are not always capable of being detected by a physical examination, no assurance can be given that, even if each Independent Contractor never fails to perform the appropriate physical examination, such a disease will not be transmitted in the course of a sexual act between the Independent Contractor and her customer.

The risks to shareowners are further compounded by the recognition that adequate insurance against problems with STDs is not likely to be available.

Mustang Ranch has, nevertheless, decided to proceed despite the risks. Their strategy for dealing with the risks from STDs will be to consult continuously with independent medical experts with experience in the detection, prevention and treatment of sexually transmittable diseases to develop and overses the Company's procedures for testing prospective Independent Contractors seeking to do business at the Brothels, monitoring and testing Independent Contractors who are engaged in business at the Brothels and for establishing and maintaining the "house" rules of the Company for the conduct of the Independent Contractors relating to sexually transmittable diseases.

The "independent medical experts" would seem to be assuming some complicated ethical and legal obligations. The company wants to minimize risk and so, presumably, do the prostitutes and their customers. How is this best done in this context?

The preliminary prospectus betrays either ignorance about HIV and AIDS or a careful understating of the problems. One wonders who fashioned the wonderfully misleading comment that AIDS is "not always capable of being detected by a [visual] physical examination." "Medical experts" will no doubt fill the company in on the complicated problems involved with HIV and AIDS. Prospective independent contractors must be screened for HIV; will a mandatory waiting period be imposed to assure accurate test results?

More generally, the ethical and legal issues concerning informed consent to the risks require attention. Will customers be provided information about the health status of the prostitutes? Will they be provided a brief education concerning the risks of HIV and other infections? Will customers be asked to provide a brief medical and lifestyle history to supplement the physical examination? Will any provision be made that would enable informing customers or prostitutes who are subsequently found to be at higher risk because of involvement with someone who does test positive for an STD? Then of course, confidentiality will also need careful attention. And how will the right of refusal to provide services be drawn up?

Perhaps the company should sponsor someone for a month at The Hastings Center.
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Title Annotation:sex oriented business
Author:Bachman, James
Publication:The Hastings Center Report
Date:May 1, 1989
Previous Article:Starve them or shoot them.
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