Justice Department Files Statement of Interest Urging Transparency in the Compensation of Asbestos Claims

The Department of Justice today filed a Statement of Interest in In re Bestwall LLC in the U.S. Bankruptcy Court for the Western District of North Carolina.  In this bankruptcy case, the debtor Bestwall LLC seeks to establish a trust to resolve its asbestos liabilities pursuant to 11 U.S.C. § 524(g), a provision in the Bankruptcy Code that provides the framework for responding to the unique issues associated with asbestos liability. 

As part of the bankruptcy, the court will evaluate the submitted asbestos claims and estimate the amount of the debtor’s asbestos liabilities.  In order to ensure the accuracy of the estimation, the debtor has asked the court to require asbestos claimants to fill out a questionnaire providing basic information about their claims and to authorize discovery from other asbestos trusts to which claimants have submitted claims.  The department’s Statement of Interest supports these proposed procedures on the ground that they will further transparency in the evaluation of the submitted asbestos claims and ensure the reliability of the estimation of the debtor’s asbestos liabilities.  

“It has become increasingly common for claimants’ counsel to seek duplicative recoveries from multiple sources by misrepresenting the asbestos products to which claimants were exposed,” said Deputy Assistant Attorney General Douglas Smith of the Justice Department’s Civil Division.  “Such duplicative claiming depletes resources that would otherwise be available to compensate deserving claimants filing claims in the future.  Today’s Statement of Interest is one of many actions the department has taken over the last several years to encourage greater transparency in asbestos bankruptcy proceedings and prevent fraud.”

“In recent years, numerous courts and commentators have recognized that many asbestos claims are based on inaccurate or even fraudulent information,” said U.S. Attorney R. Andrew Murray for the Western District of North Carolina.  “That lack of transparency in the compensation of asbestos claims has been a significant problem,”

Congress enacted 11 U.S.C. § 524(g) to create a comprehensive mechanism for addressing injuries caused by asbestos.  Under section 524(g), asbestos-related claims may be channeled to a special trust created under the bankruptcy plan of reorganization, which then assumes responsibility for both the defense and payment of those claims.  The trusts are managed by trustees, who often must secure support for major decisions from a “trust advisory committee,” whose members are often the same attorneys who represented asbestos claimants during the bankruptcy.  Since 1994, more than 60 such trusts have been established by chapter 11 debtors with asbestos-related liabilities.  According to the Government Accountability Office, asbestos bankruptcy trusts paid $17.5 billion from 1988 through 2011, and more recent studies estimate higher amounts.

Both courts and commentators have expressed growing concerns that claims submitted in these bankruptcies may be fraudulent.  In 2014, the same bankruptcy court in which the United States today filed its Statement of Interest found a substantial pattern of misrepresentation in another case, In re Garlock Sealing Technologies LLC, 504 B.R. 71 (Bankr. W.D.N.C. 2014).  The court found that, in a sample of asbestos claims submitted before the bankruptcy, in each and every case key evidence about asbestos exposure had been misrepresented or withheld.  In several instances, plaintiffs made claims against defendants to whose products they had previously represented they had never been exposed.  Similarly, several studies have demonstrated problems with claims submitted to asbestos trusts.  One study found that, in the study period, people without malignant asbestos injury accounted for 86 percent of all claims made to the trusts and 37 percent of all trust payments.  Another found that many of the claim forms submitted by the same claimants and law firms to different trusts contradicted each other.  The secrecy with which asbestos claims are processed by asbestos trusts has facilitated the payment of claims that do not deserve compensation and has made it difficult to detect when plaintiffs are seeking a recovery based on inaccurate or fraudulent representations.  Recognizing this problem, 16 states have already passed legislation requiring disclosure of basic information regarding other sources of asbestos compensation as well as the asbestos products to which claimants were exposed. 

The United States’ Statement of Interest argues that there should be transparency in the estimation of asbestos claims in bankruptcy proceedings in order to prevent fraud and abuse.  As the statement explains, courts presiding over asbestos bankruptcy cases increasingly are putting in place procedures requiring claimants to provide basic information documenting their allegations regarding product identification (and other elements of their claims) as well as any prior claims they have filed in the courts or with other asbestos trusts.  Courts increasingly recognize that such transparency is critical to the fair and efficient resolution of asbestos claims.

Today’s filing is part of broader efforts by the department to look for opportunities to increase the transparency of asbestos bankruptcy proceedings and asbestos trusts in order to protect the interests of legitimate claimants and the United States.  This includes objecting to bankruptcy plans that lack critical provisions to ensure transparency and accountability and to prevent fraudulent claims and mismanagement of asbestos trust funds, including provisions: that require compliance with the Medicare Secondary Payer Statute that notify claimants of their potential obligation to reimburse Medicare; that prevent excessive administrative costs and attorney contingency fees; that avoid conflicts of interest among members of the trust advisory committee; and that prevent payments to those who cannot demonstrate exposure to the defendants’ products or who have made inconsistent claims in other asbestos proceedings.

This matter is being handled by the Justice Department’s Civil Division with assistance from the U.S. Trustee Program and the U.S. Attorney’s Office for the Western District of North Carolina.

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    A Houston-area physician and anesthesiologist at two registered pain clinics, Texas Pain Solutions and Integra Medical Clinic, was sentenced today to seven years in prison for his role in fraudulently billing health care programs for at least $5 million dollars in medical tests and procedures, and for the role his fraud played in multiple patient deaths.
    [Read More…]
  • Vitol Inc. Agrees to Pay over $135 Million to Resolve Foreign Bribery Case
    In Crime News
    Vitol Inc. (Vitol), the U.S. affiliate of the Vitol group of companies, which together form one of the largest energy trading firms in the world, has agreed to pay a combined $135 million to resolve the Justice Department’s investigation into violations of the Foreign Corrupt Practices Act (FCPA) and to resolve a parallel investigation in Brazil.
    [Read More…]
  • Texas Rapper Charged in Narcotics and Prescription Opioid Conspiracy
    In Crime News
    Authorities have taken nine people into custody on charges involving the distribution of meth, cocaine and/or oxycodone and hydrocodone, announced Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division and U.S. Attorney Ryan K. Patrick for the Southern District of Texas.
    [Read More…]
  • Helicopter Crash in Egypt
    In Crime Control and Security News
    Michael R. Pompeo, [Read More…]
  • Attacks by the Terrorist PKK Organization in the IKR
    In Crime Control and Security News
    Cale Brown, Deputy [Read More…]
  • The United States and the Holy See: Promoting Religious Freedom and Defending Human Dignity
    In Crime Control and Security News
    Office of the [Read More…]
  • U.S. Trustee Program Reaches Agreements with Three Mortgage Servicers Providing More than $74 Million in Remediation to Homeowners in Bankruptcy
    In Crime News
    The Department of Justice’s U.S. Trustee Program (USTP announced today that it has entered into national agreements with three mortgage servicers to address past mortgage servicing deficiencies impacting homeowners in bankruptcy.
    [Read More…]
  • Assistant Attorney General Delrahim Delivers Remarks at the Antitrust Division’s Seventh Annual Diversity Celebration
    In Crime News
    Thank you, Matthew, for that kind introduction. And good afternoon everyone. It is great to be joined by so many colleagues from across the Antitrust Division and beyond.
    [Read More…]
  • William M. Kelly, M.D., Inc And Omega Imaging, Inc. Agree To Pay $5 Million To Resolve Alleged False Claims For Unsupervised And Unaccredited Radiology Services
    In Crime News
    William M. Kelly Inc. and Omega Imaging Inc., together, operate 11 radiology facilities in Southern California, have agreed to pay the United States $5 million to resolve allegations that they violated the False Claims Act (FCA) by knowingly submitting claims to Medicare and the military healthcare program, TRICARE, for unsupervised radiology services and services provided at unaccredited facilities, the Department of Justice announced today.
    [Read More…]
  • Principal Deputy Assistant Attorney General Katharine T. Sullivan and Office for Victims of Crime Director Jessica E. Hart Recognize Domestic Violence Month at a Law Enforcement and Domestic Violence Roundtable
    In Crime News
    Yesterday, Office of [Read More…]
  • North Carolina Return Preparer Indicted for Tax Fraud Scheme
    In Crime News
    A federal grand jury sitting in Greenville, North Carolina, returned an indictment charging a North Carolina tax preparer with conspiracy to defraud the United States and with preparing false returns for clients, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney Robert J. Higdon, Jr. for the Eastern District of North Carolina.
    [Read More…]
  • America Stands for Freedom
    In Crime Control and Security News
    Michael R. Pompeo, [Read More…]
  • Title X Family Planning Program Turns 50
    In Human Health, Resources and Services
    Title X of the Public [Read More…]
  • Public Designation of Current and Former Members of the Guatemalan Congress Due to Involvement in Significant Corruption
    In Crime Control and Security News
    Michael R. Pompeo, [Read More…]
  • Biogen Agrees To Pay $22 Million To Resolve Alleged False Claims Act Liability For Paying Kickbacks
    In Crime News
    Pharmaceutical company Biogen, Inc. (Biogen), based in Cambridge, Massachusetts, has agreed to pay $22 million to resolve claims that it violated the False Claims Act by illegally using  foundations as a conduit to pay the copays of Medicare patients taking Biogen’s multiple sclerosis drugs, Avonex and Tysabri, the Justice Department announced today. 
    [Read More…]
  • Pain Clinic Owner Sentenced for Role in Operating Pill Mills in Tennessee and Florida
    In Crime News
    A pain clinic owner was sentenced today to over 33 years in prison for her role in operating several pill mills in Knoxville, Tennessee, and Hollywood, Florida.
    [Read More…]