November 15, 2018

Justice Dept. Bringing Much-Needed Transparency, Accountability to Asbestos Bankruptcy Trusts

Statement for the Senate Record by Senator Chuck Grassley of Iowa
Chairman, Senate Judiciary Committee
Justice Dept. Bringing Much-Needed Transparency, Accountability to Asbestos Bankruptcy Trusts
Thursday, November 15, 2018
 
Mr. President, I come to the floor today to highlight the excellent work being done by the Justice Department under this administration in ensuring an accountable asbestos bankruptcy trust system.
 
In 1994, in response to widespread asbestos litigation in our Nation’s courts, Congress created a system of asbestos bankruptcy trusts. The purpose of these trusts is two-fold.  First, they provide an effective means for victims of asbestos exposure to obtain compensation from the companies they worked for years earlier or whose products caused their injuries. This helps provide some measure of justice for those whose lives have been dramatically impacted by asbestos exposure.
 
At the same time, the companies—who otherwise face crippling liability—obtain a degree of certainty as they emerge from bankruptcy and re-enter the stream of commerce.
 
Most importantly, these trusts are designed to ensure that all victims—current and future—have access to compensation for their injuries. 
 
But if the available funds are depleted unfairly through fraudulent claims, abuse, or mismanagement, it’s the future victims—or those whose injuries have yet to manifest—who will feel the impact. 
 
Unfortunately, the asbestos bankruptcy trust system has largely lacked any meaningful, independent oversight to ensure that trusts are not deceived into—or willingly engage in—paying erroneous claims to unscrupulous lawyers. For years, I’ve called out this problem and the need for more sunshine to deter potential abuse.
 
That’s why I applaud the Justice Department’s recent actions to stand up for victims of asbestos exposure by ensuring an accountable trust system.
 
In a recent letter to 20 state attorneys general who had called for action, the Department forcefully criticized the “problematic lack of transparency in the operation and oversight of asbestos trusts” and acknowledged “alarming evidence” of “fraud and mismanagement inside trusts.”
 
On September 13, 2018, the Justice Department filed a Statement of Interest in a case concerning a proposed asbestos bankruptcy trust in North Carolina. The Department objected to the trust’s formation, arguing that the plans failed to include sufficient safeguards to prevent fraud and abuse of the trust funds.
 
The Department further stated that the United States will object to any plan that “lacks critical provisions to ensure transparency and accountability and to prevent fraudulent claims and mismanagement of the trust funds[.]” This includes ensuring that trusts comply with any obligations under the Medicare Secondary Payer Statute, avoid conflicts of interest, and prevent excessive administrative costs and attorney’s fees.
 
Shortly thereafter, on September 26, 2018, the Justice Department’s U.S. Trustee Program—for the first time ever—objected to the appointment of a proposed Future Claimants’ Representative in a separate asbestos bankruptcy case based on the candidate’s apparent conflicts of interest and close ties to lawyers representing current claimants.
 
According to Principal Deputy Associate Attorney General Jesse Panuccio, “[t]o best protect all victims, those appointed in asbestos cases should be held to the same conflicts prohibitions and standards of independence that are required of other fiduciaries under the Bankruptcy Code.”
 
I couldn’t agree more.
 
Asbestos bankruptcy trusts are created to compensate victims—not to line the pockets of lawyers who file claims or administer the trusts. Fraudsters and poor management cannot be allowed to cheat victims of asbestos-related diseases out of the assistance Congress established for them.
 
So I’m pleased to see the Justice Department stepping up and using its existing authority to push back against trust plans that fail to put the victims’ interests first. I applaud its commitment to investigate conduct related to asbestos trusts that is illegal under federal law.
 
It’s time the asbestos trust system protects the interests of the victims, as Congress intended.
 
To be sure, however, Congress’s job isn’t finished. There are commonsense steps we can take to better ensure that the Department has the tools and authority it needs to police against fraud and mismanagement.
 
Earlier this year, I co-sponsored S.2564, the PROTECT Asbestos Victims Act, which would codify needed accountability measures for asbestos trust oversight. This bill, introduced by Senator Tillis, deserves strong bipartisan support. Among other reforms, it strengthens the U.S. Trustee’s statutory authority to investigate the administration and operation of trusts. If the U.S. Trustee believes a false claim or demand was paid by the trust, he or she may refer the matter to the U.S. Attorney’s Office. It criminalizes a knowingly and fraudulently false claim or representation to a trust. And it better ensures that the right people are appointed as Future Claims Representatives—in other words, those who understand that their duty is to future victims, not to their trial lawyer friends.
 
These are commonsense reforms, and I invite all of my colleagues to join in support.
 
In the meantime, I fully expect the Justice Department to keep up its great work in protecting asbestos victims—and the American taxpayer—by policing against waste, fraud, and mismanagement in the asbestos bankruptcy trust system.
 
I yield the floor.
 

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