U.S. Sen. Jeff Flake (R-AZ)
The fate of legislation sponsored by U.S. Senator Jeff Flake (R-AZ) that would provide more transparency in the asbestos bankruptcy trust system could be bolstered by a new study that shows “inconsistencies” and “red flags” in that system.
Flake said the bill, the Furthering Asbestos Claim Transparency (FACT) Act, "will discourage fraud and abuse in the asbestos compensation system while protecting the sensitive information of claimants by shielding their medical records and their full Social Security numbers from disclosure."
A study released last week by the U.S. Chamber Institute for Legal Reform found “widespread inconsistencies” in the information provided by individual asbestos plaintiffs to the various bankruptcy trusts.
The trusts were set up by Congress to compensate future victims of asbestos exposure after asbestos litigation sent an estimated one hundred companies into bankruptcy.
According to ILR, the trusts currently control more than $30 billion in assets but have a “strong financial incentive for abuse.”
The Institute’s new study, Insights & Inconsistencies: Lessons from the Garlock Trust Claims, analyzed data from one hundred randomly selected personal information questionnaires submitted by asbestos plaintiffs in the bankruptcy proceedings of Garlock Sealing Technologies, Inc.
According to ILR, these questionnaires contained several “inconsistencies”, including: 69 percent of claimants not listing every place of employment; fifteen percent not listing specific products to which they were exposed; 55 percent having date discrepancies; and, 21 percent of claims having a variety of other inconsistencies, such as “differing medical diagnoses, conflicting job descriptions, and implausible exposure allegations.”
The study was conducted for the ILR by James L. Stengel and C. Anne Malik of Orrick, Herrington and Sutcliffe LLP.
Stengel and Malik claim the fact that the trusts are overseen by Trust Advisory Committees that are “made up of plaintiffs’ lawyers or those appointed by plaintiffs’ lawyers” show a need more greater accountability.
“This study shows a system without accountability and demonstrates the urgent need for external oversight and reform of the asbestos bankruptcy trusts,” said ILR President Lisa A. Rickard in a statement. “Twenty-three bankruptcy trusts have already had to reduce payments to asbestos claimants – with some trusts paying pennies on the dollar – and if we do nothing to rein in these abuses there is a very likely possibility some trusts will not have enough money to compensate future asbestos claimants.”
In an interview with Arizona Business Daily published last week, Senator Flake’s spokesperson, Jason Samuels, said the senator is sponsoring the FACT Act because the lack of transparency and oversight has resulted in a system where claimants can file inconsistent claims among the numerous trusts or against trusts and solvent companies in the tort system.
“Unfortunately, soon after its creation, fraud and misrepresentation began to surround the asbestos trust system,” Samuels said. “This lack of transparency allows for fraud and misrepresentation, which threatens the ability of future claimants to receive full compensation for their injuries.”
The FACT Act. S. 357, has passed the House and is currently pending in the U.S. Senate Committee on the Judiciary, which is chaired by U.S. Senator Charles Grassley (R-IA).
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