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Furthering Asbestos Claim Transparency (FACT) Act of 2013

Floor Speech

By:
Date:
Location: Washington, DC

BREAK IN TRANSCRIPT

Mr. Chairman, I yield myself such time as I may consume.

I rise today in support of a bill that will help those asbestos victims that must look to the bankruptcy process to seek redress for their or their loved ones' injuries. Unfortunately, on too frequent an occasion, by the time asbestos victims assert their claims for compensation, the bankruptcy trusts formed for their benefit have been diluted by fraudulent claims, leaving these victims without their entitled recovery.

The reason that fraud is allowed to exist within the asbestos trust system is the excessive lack of transparency created by plaintiffs' firms. Due to a provision in the Bankruptcy Code, plaintiffs' firms are essentially granted a statutory veto right over a debtor's chapter 11 plan that seeks to restructure asbestos liabilities. Plaintiffs' firms have exploited this leverage to prevent information contained within the asbestos trusts from seeing the light of day.

The predictable result from this reduced transparency has been a growing wave of claims and reports of fraud. The increase in claims has caused many asbestos trusts to reduce the recoveries paid to asbestos victims who emerge following the formation of the trusts. For example, the T.H. Agriculture and Nutrition asbestos trust cut its recovery rate from 100 percent to 70 percent, and the Owens Corning trust sliced its recovery rate from 40 percent to 10 percent.

In addition, instances of fraud within the asbestos trust system have been documented in news reports, State court cases, and testimony before the Judiciary Committee. The Wall Street Journal conducted an investigation into asbestos trusts where it found, among other things, that hundreds of plaintiffs filed claims against asbestos trusts asserting one injury while simultaneously asserting a completely different injury before the State courts.

Reports directly from many State courts are uncovering similar conduct. For example, in Ohio, one judge described a plaintiff's case as ``lies upon lies upon lies'' after discovering that the plaintiff received hundreds of thousands of dollars from various asbestos bankruptcy trusts while alleging in court that a single product caused his illness. In Virginia, a judge stated that a similar case over which he presided was the ``worst deception'' he had seen in his 22-year career.

The FACT Act, introduced by Congressman Farenthold, will combat this fraud by introducing long-needed transparency into the asbestos bankruptcy trust system. The FACT Act increases transparency through two simple measures. First, it requires the asbestos trusts to file quarterly reports on their public bankruptcy dockets. These reports will contain very basic information about demands to the trusts and payments made by the trusts to claimants. Second, the FACT Act requires asbestos trusts to respond to information requests about claims asserted against and payments made by the asbestos trusts.

These measures were carefully designed to increase transparency while providing claimants with sufficient privacy protection. To accomplish this goal, the bill leverages the privacy protections contained in the Bankruptcy Code and includes additional safeguards to preserve claimants' privacy.

A State court judge with 29 years of bench experience described the privacy protections within the FACT Act as far stronger than those afforded in State court, where asbestos plaintiffs often pursue parallel claims. The FACT Act also was deliberately structured to minimize the administrative impact on asbestos trusts. Indeed, according to testimony before the Judiciary Committee from an expert on asbestos litigation and the asbestos trusts, preparing the quarterly disclosure requirements would be ``very simple'' and would ``take minutes.''

The FACT Act strikes the appropriate balance between achieving the transparency necessary to reduce fraud in an efficient manner and providing claimants with sufficient privacy protections. We cannot allow fraud to continue reducing recoveries for future asbestos victims. The FACT Act is a simple, narrow measure that will shed much-needed sunshine on a shadowy system.

I thank Mr. Farenthold for introducing this legislation and urge all of my colleagues to vote for the FACT Act.

I reserve the balance of my time.

BREAK IN TRANSCRIPT

Mr. Chairman, I yield myself such time as I may consume to respond to the mischaracterization of this legislation as it is somehow imposing burdens on the victims of asbestos. In fact, it is quite the opposite.

First of all, the information disclosed under the FACT Act is very basic and is less information than would be disclosed during the normal course of a State court lawsuit, in which many asbestos bankruptcy claimants pursue simultaneous claims, but they don't tell the bankruptcy courts about that, so these trusts need to tell them that.

Secondly, the FACT Act includes strong privacy protections, including prohibiting the disclosure of confidential medical records and full Social Security numbers. To be clear, the FACT Act does not require asbestos trusts to require or to disclose asbestos victims' Social Security numbers.

The FACT Act also leverages existing privacy protections in the Bankruptcy Code to give the presiding bankruptcy judge broad discretion to prevent the disclosure of information that would result in identity theft or in any other unlawful activity. Indeed, a judge with 29 years of bench experience testified before the Judiciary Committee that the FACT Act provides more protection in terms of the confidentiality of asbestos claimants' records than the legal system is able to do.

By requiring the disclosure of basic information regarding claims submitted to the asbestos trusts, the FACT Act will facilitate a reduction in fraud that will allow future asbestos victims to maximize their recovery, but they will not be able to do that if we continue to have money taken from these trusts for duplicative claims, fraudulent claims, and claims without merit.

I reserve the balance of my time.

BREAK IN TRANSCRIPT

Mr. Chairman, I yield myself such time as I may consume to respond to the mischaracterization of the process followed in the Judiciary Committee.

The FACT Act and the problems it addresses have been the subject of three separate hearings: one before the Judiciary Subcommittee on the Constitution on September 9, 2011, on the issue generally, and two legislative hearings before the Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law--one during the 112th Congress and another this year on March 13.

The minority used these opportunities to call witnesses who were representatives from the asbestos plaintiffs' trial bar to voice their concerns with the bill. In fact, the minority called the same witness for two out of the three hearings. Now they claim that asbestos victims were never provided an opportunity to testify. The Judiciary Committee provided ample opportunities to include asbestos victims' views on the legislation on the record, and there are many letters and statements from asbestos victims in the record as a result. Additionally, the committee offered a special procedure to asbestos victims in order to provide an occasion for the victims to personally inform Members and staff of their views, which they refused.

It has become necessary to act with expediency and move this important legislation forward. Each day that passes is a day on which fraudulent claims can be prosecuted against the asbestos trusts, thereby reducing the recovery to legitimate asbestos victims. This legislation will benefit victims by reducing fraudulent claims and by ensuring that asbestos trusts provide the maximum recovery to future asbestos claimants.

Mr. COHEN. Will the gentleman yield?

Mr. GOODLATTE. I yield to the gentleman from Tennessee.

Mr. COHEN. Would you explain to me then why the victims were never allowed to testify on the record in this Congress and were never given an opportunity even though the subcommittee chairman valiantly and heroically tried to rectify that?

Mr. GOODLATTE. In reclaiming my time, that is not accurate. The claimants were offered a process by which they could come and speak to the members of the committee.

Mr. COHEN. In private.

Mr. GOODLATTE. Mr. Chairman, I have the time.

The CHAIR. The gentleman from Virginia controls the time.

Mr. GOODLATTE. The minority had the opportunity to have an asbestos victim testify if they wished to do so and chose instead to have a plaintiff's attorney who had already testified in a previous hearing do so.

I reserve the balance of my time.

BREAK IN TRANSCRIPT

Mr. Chairman, I yield 1 minute to myself to respond to the allegation that fraud has not been documented.

Fraud has been documented in news reports, State court cases, and testimony before the Judiciary Committee. The Wall Street Journal conducted an investigation that found thousands of disparately filed claims. Court documents in many States, including Delaware, Louisiana, Maryland, New York, Ohio, Oklahoma, and Virginia, attest to widespread fraud.

Additionally, the Judiciary Committee heard testimony over the course of three hearings during which witnesses repeatedly testified that fraud existed within the asbestos trust bankruptcy system. Keep in mind that the fraud reported to date has been in spite of the lack of disclosure that currently pervades this system. The increased transparency the FACT Act introduces will go a long way in uncovering previously undetected fraud and preserving assets for future asbestos victims.

Mr. Chairman, it is my pleasure to yield 2 minutes to the gentleman from Illinois (Mr. Davis).

BREAK IN TRANSCRIPT

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, a lot of assertions have been made by the other side of the aisle with regard to the FACT Act. Let's make clear what we are talking about here.

This is a bill that in its totality doesn't cover two full pages of double-spaced type in legislative language. It simply requires that trusts that have been established to preserve the assets of companies that have gone bankrupt and have paid funds into these trusts, that future claims, future real, legitimate claims, will have resources available to them when it is a known fact and established by testimony before the Judiciary Committee and by investigations in a number of publications, including The Wall Street Journal, and by reports from various State courts in more than a half-dozen States, of fraud, duplicative claims.

These are what we are concerned about, and this is simply good legislative reform for protection of these assets for future availability. Otherwise, these trusts, which are already reducing the amount that they can pay to legitimate asbestos victims, will run out of money altogether before all of the legitimate claims have been addressed.

That's what the purpose of this legislation is. The opponents of the FACT Act have offered creative and far-ranging allegations against a measure that only seeks to introduce a modest amount of transparency into an opaque system. We know these allegations to be unfounded. The allegation that it hurts asbestos victims is unfounded. We know this because by increasing transparency and deterring fraud, the FACT Act helps asbestos victims by protecting trust funds for future claimants.

The allegation there is no widespread fraud is unfounded. We know this because there has been fraud documented in news reports, State court cases, and before the Judiciary Committee.

I urge my colleagues to reject the unfounded allegations offered today by critics of the FACT Act, and vote in support of this simple transparency measure.

I might add, this does not in any way delay the claim of anyone with a legitimate claim, either in State courts or in the bankruptcy courts. What it will do is it will root out those who are making duplicative claims, who are trying to double dip at the same time there are people with legitimate claims that will not have any money available to them because, as we know, and as was mentioned by many of the speakers here today, asbestos is a problem that has affected many, many Americans, and it is something that can be latent for a long period of time. We want to make sure that those victims who come along at the end of this process, who discover late in their lives that they also suffer from mesothelioma and related cancers, and other diseases caused by asbestos, have the opportunity to recover, not just those who want to abuse this system by hiding their claims and not allowing proper discovery of duplicative claims and fraudulent claims.

I urge my colleagues to support this well founded, good legal reform.

I yield back the balance of my time.

BREAK IN TRANSCRIPT

Mr. Chairman, I claim the time in opposition to the amendment.

The CHAIR. The gentleman from Virginia is recognized for 5 minutes.

Mr. GOODLATTE. Mr. Chairman, this amendment would exclude asbestos trusts that have in place internal audit systems from the requirements of the FACT Act.

There has not been any evidence presented to establish that trusts with internal reporting systems are free from fraud. On the contrary, a GAO report found that trust audit processes are designed to ensure compliance with internal trust procedures, not to remedy the fraud that the bill seeks to address. Simply put, internal audits will not be able to detect whether disparate claims are filed among several asbestos trusts or in the State courts.

Excluding certain asbestos trusts from the FACT Act would eliminate critical sources of information that can facilitate the reduction of fraud. Furthermore, the amendment would not address the problem presented by plaintiffs who assert inconsistent allegations between the State court tort system and the asbestos trusts. I urge my colleagues to oppose the amendment.

I reserve the balance of my time.

BREAK IN TRANSCRIPT

Mr. Chairman, I simply would reiterate that the fact of the matter is that when you don't know who future victims are going to be and you make a claim that somehow this is going to enrich businesses when, in fact, the businesses are bankrupt and they paid their money into a fund, that this is in the interest of determining what people who have not yet made claims have and in the interest of justice in making sure that people who have false claims or duplicative claims and are making claims to more than one trust for different claims about the same illness or claims in State court, as well as in the bankruptcy court, need to be uncovered. That is what this seeks to do. If some victims are doing that, that is not a defense to this legislation, to say we shouldn't have transparency in the providing of benefits to people who have truly been harmed.

I urge my colleagues to oppose this amendment and support the underlying bill.

I yield back the balance of my time.

BREAK IN TRANSCRIPT

Mr. Chairman, I claim the time in opposition to the amendment.

The CHAIR. The gentleman from Virginia is recognized for 5 minutes.

Mr. GOODLATTE. Mr. Chairman, one of the principal issues discussed over the course of three separate hearings before the Judiciary Committee was the existing impediments to information contained in the asbestos trusts.

In particular, these impediments include obstacles that asbestos trusts institute against the prosecution of valid State court subpoenas for trust information.

The FACT Act addresses these issues by requiring affirmative, minimal disclosures from asbestos trusts and allowing for access to additional information at the cost of the requesting party. The amendment does not address these underlying problems and instead places broad additional burdens on defendants seeking to prosecute discovery requests in State courts. Specifically, it requires defendants potentially to comply with a host of unrelated requests from unknown parties. These defendants include small businesses that played a very minor role, if any, in asbestos manufacturing, but are the last wave of companies in the plaintiffs' firms never-ending search for a solvent defendant.

The burden this amendment imposes on a defendant is highly atypical, unnecessary, and would unduly impair a party's ability to assert a defense. The FACT Act, by contrast, provides transparency where previously it did not and provides defendants with the same access to information as plaintiffs. The legislation merely levels the playing field so all parties, including other asbestos trusts and State court judges, have access to the same information.

I urge my colleagues to oppose the amendment, and I reserve the balance of my time.

BREAK IN TRANSCRIPT

Mr. Chairman, I yield myself the balance of my time.

The FACT Act does not impose burdens on the victims of asbestos. It imposes a minimal disclosure requirement upon the trust, a disclosure requirement that will benefit both plaintiffs and defendants in various courts litigating asbestos claims.

Therefore, these new burdens that would be imposed by the defendant, which are substantial and onerous burdens, not the minimal informational disclosure that would help to identify duplicative claims in various courts, is a massive additional burden added to this legislation.

For that reason, I oppose the legislation, oppose the amendment, and urge my colleagues to join me opposing the amendment and supporting the underlying legislation.

I yield back the balance of my time.

BREAK IN TRANSCRIPT

Mr. Chairman, I claim the time in opposition to the amendment.

The CHAIR. The gentleman from Virginia is recognized for 5 minutes

Mr. GOODLATTE. Mr. Chairman, the FACT Act addresses a number of issues, including State court litigants' inability to obtain information from federally-supervised asbestos trusts and the general lack of disclosure that is allowing fraud to be committed against these trusts. The FACT Act addresses these problems by introducing transparency into the asbestos bankruptcy trust system.

The amendment dramatically undercuts the transparency provided under the bill by completely eliminating the quarterly reporting requirements. This removes an important and efficient disclosure component provided by the FACT Act and would eliminate sister asbestos trusts' access to information that is critical for the defense against fraudulent claims. Additionally, the amendment would place disclosure requirements on the State court party requesting information from the asbestos trusts. These disclosure requirements are unnecessary, unusual, and would severely constrain a party's availability to defend itself in State court litigation.

Plaintiffs and plaintiffs' firms already have the ability to gain access to the defendant's information through the traditional discovery process; however, it is the defendant's inability to gain access to information submitted to the asbestos trusts that has created an environment that is conducive to fraud. The FACT Act merely levels the playing field so all parties, including other asbestos trusts, State court litigants, and State court judges have access to this information and the same information.

I would point out that, when one brings a lawsuit seeking damages from another entity that they make a party to that lawsuit, they are not entitled to anonymity in doing so. The purpose of the complaint, the initial pleading filed in the lawsuit, is to disclose who it is that is seeking the damages and what damages they are seeking.

All we are asking for in this legislation is that trusts that have been entrusted with funds that are to be made available for the exclusive purpose of helping the victims of asbestos problems have the opportunity to have information that they would have if it were a normal plaintiff's filing in a lawsuit. That is what we seek to have disclosed.

I urge my colleagues to oppose this amendment and to support the underlying bill.

Mr. Chairman, I reserve the balance of my time.

BREAK IN TRANSCRIPT

Mr. Chairman, I yield myself the balance of the time in opposition to the amendment.

I just have to say that this amendment goes well beyond the scope of this legislation in terms of what it would do in terms of discovery in State courts and gathering various types of information that is already readily and easily discoverable in those proceedings, including, if necessary, in the bankruptcy court.

What it doesn't get at, and the FACT Act does, is information that is not otherwise available to all of the parties to all of those proceedings to determine whether there are duplicative claims, whether there are fraudulent claims, whether there are claims where one party is claiming to have the same disease caused by two different places of employment or having claimed the same disease caused by two different instrumentalities in two different places. That is what we need to know. That is why the FACT Act is necessary.

I oppose the amendment, urge my colleagues to oppose the amendment.

Mr. Chairman, I yield back the balance of my time.

BREAK IN TRANSCRIPT


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