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JOHN
CONYERS, JR.,
Michigan
CHAIRMANHOWARD
L.
BERMAN,
California
RICK BOUCHER,
Virginia
JERROLD NADLER,
New York
ROBERT
C.
"BOBBY"
SCOTT,
Virginia
MELVIN
L.
WATT,
North
CarolinaZOE LOFGREN,
California
SHEILA JACKSON LEE, Texas
MAXINE
WATERS,
CaliforniaWILLIAM
D. DELAHUNT, MassachusettsROBERT WEXLER, FloridaSTEVE COHEN, TennesseeHENRY
C.
"HANK"
JOHNSON,
JR.,
Georgia
PEDRO, PIERLUISI, Puerto RicoLUIS
V.
GUTIERREZ.
Illinois
BRAD SHERMAN,
California
TAMMY
BALDWIN, Wisconsin
CHARLES
A.
GONZALEZ, Texas
ANTHONY
D.
WEINER,
NewYork
ADAM
B.
SCHIFF,
California
DANIEL
B.
MAFFEI,
NewYork
LINDA
T. SANCHEZ,
California
DEBBIE
WASSERMAN
SCHULTZ, Florida
"VACANT"
ONE HUNDRED ELEVENTH CONGRESS
(iongrtss
of
tht
tinittd
~tattS
iltoust
of
Rtpfrsrntatiurs
COMMITTEE ON THE JUDICIARY
2138
RAYBURN HOUSE
OFFICE
BUILDINGWASHINGTON,
DC
20515-6216(202) 225-3951
http://www.house.gov/judiciary
April 29, 2010The Honorable Gene
L.
DodaroActing Comptroller
of
the United StatesGovernment Accountability Office
441
G St.,
NW
Washington, DC 20548Dear Mr. Dodaro,
LAMAR
S. SMITH, TexasRANKING MINORITY MEMBER
F.
JAMES
SEN SEN BRENNER, JR.,
Wisconsin
HOWARD COBLE,
North
Carolina
ELTON
GAlLEGLY,
California
BOBGOODLATTE,
Virginia
DANIEL
E.
LUNGREN,
California
DARRELL
E.
ISSA,
California
J.
RANDY FORBES,
Virginia
STEVE
KING,lowa
TRENT FRANKS, ArizonaLOUIE GOHMERT, Texas
JIM
JORDAN,
Ohio
TED
POE,
Texas
JASON
CHAFFETZ,
Utah
THOMAS
ROONEY, FloridaGREGG HARPER,
Mississippi
This is to request that the Government Accountability Office perform a review
of
thetransparency
of
so-called asbestos bankruptcy trusts created under
11
U.S.C.
§
524(g) to payasbestos-related claims against bankrupt companies. The Bankruptcy Code generally establishesa presumption in favor
of
public access to information filed in a bankruptcy case.
1
I believe thatthis principle
of
openness is no longer being fully implemented for 524(g) trusts, underminingboth the tort system and the asbestos trust system.The legislative history
of
section 524(g) unambiguously demonstrates that Congressintended the asbestos trust system created
by
the section to ensure that all present and futureasbestos claimants have equal access to payments for asbestos-related injuries. In the CommitteeReport on the Bankruptcy Reform Act
of
1994, which created the asbestos trust system, theHouse Judiciary Committee specifically stated that asbestos trusts must "operate in a structureand manner necessary to give reasonable assurance that the trust will value, and
be
able to pay,similar present and future claims in substantially the same manner.,,2 However, recentlitigation, legal scholarship and media accounts call into question whether a lack
of
transparencyis undermining the asbestos trust system as designed
by
Congress.In fact, it appears that many 524(g) trusts are specifically structured and operated tothwart attempts to obtain information regarding trust claimants who are also making claims
of
other 524(g) trusts or who are suing solvent defendants in the tort system. This lack
of
transparency appears to foster dishonest claims practices and encourage claimants and theirattorneys to seek duplicative payments
by
concealing trust recoveries. Falsified claims andduplicative recoveries increase the financial burden on solvent tort defendants and other asbestos
1
See
11
u.S.C.
§
107.
2
H. Rpt. 103-835 (1994);
see also
140
Congo
Rec. H 10765, 10766 (Oct. 4, 1994).
Mr. Gene
L.
DodaroApril 29, 2010Page 2trusts and thereby unfairly reduce the compensation available to deserving present and futureclaimants.There is a record from the courts that demonstrates that that the lack
of
transparency hasthe potential to allow claimants to provide asbestos trusts with inaccurate information and to seekpayment
of
duplicative claims. For example, in 2007, an Ohio trial court uncovered one
of
themore egregious examples
of
abuse
of
the opaque nature
of
asbestos trusts.
3
In
that case, theplaintiff claimed in the tort system that he had developed mesothelioma solely from smokingLorillard asbestos-filtered cigarettes while simultaneously obtaining hundreds
of
thousands
of
dollars in compensation
by
filing contradictory claims with multiple asbestos trusts alleging thattheir products caused his disease. Had these contradictory claims not been detected, severalmore trusts and tort defendants could have made duplicate payments to the same asbestosclaimants for the same injury. Similar efforts have been discovered in other cases, but theseinstances in which abusive claims practices have been discovered indicate that greatertransparency likely is needed throughout the entire asbestos trust system.Recent legal scholarship and media reports also highlight the threat the lack
of
transparency in asbestos trusts poses. A recent article in the
Norton Journal
of
Bankruptcy
Law
describes how the interrelationship between 524(g) trusts and tort litigation results in inaccurateoverpayments
by
the trusts that could
be
avoided through greater transparency.4 In addition,articles in the
Wall Street Journal
and
Forbes
report that independent experts, who studyasbestos trusts, believe the lack
of
transparency endangers the ability to pay future claimantsfairly.s
In
order to aid Congress
in
better understanding whether increased transparency couldhelp ward
off
the potential for abuse related to 524(g) asbestos trusts, I request that the GAOconduct a study to determine:
1.
What actions and
via
what mechanisms,
if
any, 524(g) asbestos trusts are takingto avoid duplicative payments to claimants or payments to claimants with inadequate
proof
of
entitlement to compensation
by
the trusts;
2.
whether 524(g) asbestos trusts adequately and timely disclose information aboutdemands made
by
asbestos claimants where relevant between and among S24(g) trusts;
3.
whether 524(g) asbestos trusts adequately and timely disclose information aboutdemands made
by
asbestos claimants where relevant to tort litigation;4. whether, and to what extent, S24(g) asbestos trusts are making demand andpayment information available to courts and other participants in the tort system in order
3
Kananian
v.
Lorillard Tobacco Company,
No. CV 442750 (Ohio Cuyahoga County Comn. PI. Jan. 18,2007).
4
William P. Shelley, et
aI.
"The Need for Transparency Between the Tort System at Section 524(g) AsbestosTrusts,"
17
Norton Journal
of
Bankruptcy
Law and
Practice
257 (2008).
5
Nonnan Koppel, ''New Fight Erupts Over Pursuit
of
Asbestos Claims,"
Wall
St.
J.,
Dec. 3, 2009; Daniel Fisher,"Double-Dippers,"
Forbes,
September 4, 2006.
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