January 13, 2016

Congress Takes Important Step in Preventing Asbestos Fraud

On January 8th, the U.S. House of Representatives passed the Furthering Asbestos Claim Transparency (FACT) Act. It’s an important step toward stopping pervasive fraud in the secretive asbestos trust system, which currently holds about $30 billion in assets.

More than 60 asbestos bankruptcy trusts have been created to compensate victims of asbestos exposure in the wake of asbestos litigation that has driven more than 100 companies into bankruptcy. These trusts are controlled by plaintiffs’ lawyers with lax rules that allow for the payment of bogus claims and big pay-offs for the plaintiffs’ lawyers who file them.

The collective damage from this activity is the likely payment of hundreds of millions of dollars by the trusts on bogus claims, drawing down the trusts’ assets faster than anticipated and raising the question of whether there will be enough money left to pay future claimants. According to a recent report, 23 trusts are already paying less to claimants today than they did in 2008

The current rules allow asbestos trusts to operate under strict, self-imposed confidentiality rules that keep them from sharing claims information with one another and with the courts.

The damage from this secrecy is also forcing asbestos defendants to pay much more than their fair share in the court system. Two years ago, a federal bankruptcy judge ruled that there had been so much withholding of evidence about trust claims in cases involving a gasket-manufacturer called Garlock, that he reduced the company’s future liability by about $1 billion.

One of the 15 examples cited by the court was a case called White, in which the plaintiff testified that all of his exposure to asbestos had been from Garlock’s products and that he had never worked at the Norfolk Naval Shipyard, never went aboard naval ships and never had been exposed to insulation in the Coast Guard. Meanwhile the plaintiff had filed claims with various trusts saying he had worked at worked at the Norfolk Naval Shipyard, went aboard naval ships and was exposed to insulation in the Coast Guard.

The FACT Act would very simply require asbestos trusts to disclose and file reports with bankruptcy courts on a quarterly basis listing asbestos plaintiffs who have filed claims with the trusts.

The plaintiffs’ bar fears this reform because it would shine a line on this broken system and affect their livelihood. They are resorting to scare tactics to try to defeat the bill.

Their principle argument was that new transparency would reveal personal patient information, risking identity theft.

This is completely false.

The FACT Act specifically states that trust reports should not include any confidential medical records or the claimant’s full social security number. Furthermore, trust reports will be subject to existing privacy protections already in the bankruptcy code, which allows courts to redact any additional information they believe would impose an undue risk of identity theft or unlawful injury.

What plaintiffs’ lawyers refuse to acknowledge—perhaps deliberately because it turns their privacy argument on its head—is that the disclosure requirements in the FACT Act are LESS than those currently required by asbestos plaintiffs who file lawsuits in federal court. In fact, in the Garlock case, the country’s top asbestos plaintiffs’ law firms never objected to disclosing this information.

It’s not hard to see through the opponents’ weak arguments.

They say the FACT Act harms victims and doesn’t have victims’ best interests in mind. And they are representing themselves as the “real” advocates for asbestos victims. The only harm that will come out of the FACT Act is to some plaintiffs’ lawyers’ bank accounts.

It’s time for plaintiffs’ lawyers to be held accountable. And it’s time for the Senate to follow the House’s lead and take up this vital piece of legislation.

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