    [Senate Hearing 109-350]
    [From the U.S. Government Publishing Office]

                                                         S. HRG. 109-350

    S. 852: A FAIR AND EFFICIENT SYSTEM TO RESOLVE CLAIMS OF VICTIMS
    FOR BODILY INJURY CAUSED BY ASBESTOS EXPOSURE, AND FOR OTHER PURPOSES

                                  HEARING

                                 BEFORE THE
                      COMMITTEE ON THE JUDICIARY
                        UNITED STATES SENATE

               ONE HUNDRED NINTH CONGRESS FIRST SESSION

                           ____________

                          APRIL 26, 2005
                        Serial No. J-109-2C
                           ____________

           Printed for the use of the Committee on the Judiciary

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                   COMMITTEE ON THE JUDICIARY
              ARLEN SPECTER, Pennsylvania, Chairman

    ORRIN G. HATCH, Utah               PATRICK J. LEAHY, Vermont
    CHARLES E. GRASSLEY, Iowa          EDWARD M. KENNEDY, Massachusetts
    JON KYL, Arizona                   JOSEPH R. BIDEN, JR., Delaware
    MIKE DEWINE, Ohio                  HERBERT KOHL, Wisconsin
    JEFF SESSIONS, Alabama             DIANNE FEINSTEIN, California
    LINDSEY O. GRAHAM, South Carolina  RUSSELL D. FEINGOLD, Wisconsin
    JOHN CORNYN, Texas                 CHARLES E. SCHUMER, New York
    SAM BROWNBACK, Kansas              RICHARD J. DURBIN, Illinois
    TOM COBURN, Oklahoma

                       DAVID BROG, Staff Director
    MICHAEL O�NEILL, Chief Counsel
    BRUCE A. COHEN, Democratic Chief Counsel and Staff Director

                      TUESDAY, APRIL 26, 2005

                  STATEMENTS OF COMMITTEE MEMBERS
                                                                                     Page
    Coburn, Hon. Tom, a U.S. Senator from the State of Oklahoma ..................... 29
    Cornyn, Hon. John, a U.S. Senator from the State of Texas ....................... 26
    Durbin, Hon. Richard J., a U.S. Senator from the State of Illinois .............. 31
    Feingold, Hon. Russell D., a U.S. Senator from the State of Wisconsin ........... 34
    Feinstein, Hon. Dianne, a U.S. Senator from the State of California ............. 27
    Kennedy, Hon. Edward M., a U.S. Senator from the State of Massachusetts ......... 23
    Leahy, Hon. Patrick, a U.S. Senator from the State of Vermont .................... 2
    prepared statement ............................................................. 175
    Sessions, Hon. Jeff, a U.S. Senator from the State of Alabama ................... 21
    Specter, Hon. Arlen, a U.S. Senator from the State of Pennsylvania ............... 1

                           WITNESSES
    Becker, Edward R., Judge, U.S. Court of Appeals for the Third Circuit,
    Philadelphia, Pennsylvania ........................................................4

    Berrington, Craig A., Senior Vice President and General Counsel, American
    Insurance Association, Washington, D.C........................................... 15

    Crapo, James D., M.D., Professor of Medicine, National Jewish Medical and
    Research Center, University of Colorado Health Sciences Center, Denver,
       Colorado ......................................................................40

    Engler, John M., President and Chief Executive Officer, National Association
       of Manufacturers, Washington, D.C............................................. 11

    Gober, Hershel W., National Legislative Director, Military Order of the Pur-
       ple Heart, McLean, Virginia .................................................. 43

    Green, Eric D., Professor of Law, Boston University Law School, Boston,
       Massachusetts ................................................................ 42

    Landrigan, Philip J., M.D., Professor of Occupational and Environmental
       Medicine, and Chairman, Department of Community and Preventive Medi-
       cine, and Professor of Pediatrics, Mount Sinai School of Medicine, New
       York, New York ............................................................... 45

    Morgan, Carol, President and General Counsel, National Service Industries,
       Inc., Doraville, Georgia ..................................................... 47

    Peterson, Mark A., President, Legal Analysis Systems, Inc., Thousand Oaks,
       California ................................................................... 48

    Rabinovitz, Francine, Hamilton, Rabinovitz & Alschuler, Carmel, California ...... 50

    Reuther, Alan, Legislative Director, International Union, United Automobile,
    Aerospace & Agricultural Implement Workers of America (UAW), Wash-
       ington, D.C................................................................... 52

    Seminario, Margaret, Director, Safety and Health Department, American
       Federation of Labor and Congress of Industrial Organizations (AFL-CIO),
       Washington, D.C............................................................... 13

                     QUESTIONS AND ANSWERS
    Responses of Edward Becker to questions submitted by Senator Durbin ............. 73
    Response of Craig A. Berrington to a question submitted by Senator Cornyn ....... 79
    Responses of James D. Crapo to questions submitted by Senator Kyl ............... 80
    Responses of Eric D. Green to questions submitted by Senator Cornyn ............. 86
    Responses of Carol Ellis Morgan to questions submitted by Senator Specter ....... 92
    Responses of Mark A. Peterson to questions submitted by Senators Coburn,
       Cornyn, Specter and Kyl ...................................................... 97
    Responses of Francine Rabinovitz to questions submitted by Senators Cornyn
       and Kyl ..................................................................... 114

    IV Page SUBMISSIONS FOR THE RECORD

    Admiral Zumwalt & Consultants, Inc., James G. Zumwalt, Vice President,
       Reston, Virginia, statement ................................................. 118
    Asbestos Disease Awareness Organization, Linda Reinstein, Executive Direc-
      tor, and Co-Founder, prepared statement ...................................... 120
    Asbestos Study, Group, Barry B. Direnfeld, Counsel, letter...................... 123
    Berrington, Craig A., Senior Vice President and General Counsel, American
       Insurance Association, Washington, D.C., prepared statement.................. 124
    Blinded Veterans Association, Thomas H. Miller, Executive Director, Wash-
       ington, D.C., letter......................................................... 128
    Center for Justice & Democracy, United Church of Christ Justice & Witness
       Ministries, USAction, and U.S. PIRG, joint letter and attachment............. 130
    Chemerinsky, Erwin, Alston & Bird Professor of Law, Duke University School
       of Law,  Durham, North Carolina, letter........................ ..............134
    Crapo, James D., M.D., Professor of Medicine, National Jewish Medical and
       Research Center, University of Colorado Health Sciences Center, Denver,
       Colorado, prepared statement ................................................ 136
    Engler, John M., President and Chief Executive Officer, National Association
       of Manufacturers, Washington, D.C., prepared statement....................... 142
    Gober, Hershel W., National Legislative Director, Military Order of the Pur-
       ple Heart, McLean, Virginia, prepared statement.............................. 147
    Green, Eric D., Professor of Law, Boston University Law School, Boston,
      Massachusetts, prepared statement ............................................ 151
    International Association of Heat and Frost Insulators and Asbestos Workers,
      James A. Grogan, General President, Lanham, Maryland, press release .......... 164
    International Association of Machinists and Aerospace Workers, R. Thomas
       Buffenbarger, President, Upper Marlboro, Maryland, prepared statement ....... 166
    Landrigan, Philip J., M.D., Professor of Occupational and Environmental
       Medicine, and Chairman, Department of Community and Preventive Medi-
       cine, and Professor of Pediatrics, Mount Sinai School of Medicine, New
       York, New York, prepared statement........................................... 168
    Leaders of major asbestos victims� and advocacy groups, joint letter ........... 173
    Morgan, Carol, President and General Counsel, National Service Industries,
       Inc., Doraville, Georgia, prepared statement................................. 179
    Olson, Theodore B., Gibson, Dunn & Crutcher LLP, Washington, D.C., letter
       and attachments ............................................................. 184
    Peterson, Mark A., President, Legal Analysis Systems, Inc., Thousand Oaks,
       California, prepared statement............................................... 192
    Phillips, Carter G., Sidley Austin Brown & Wood LLP, Washington, D.C.,
       letter....................................................................... 202
    Reuther, Alan, Legislative Director, International Union, United Automobile,
       Aerospace & Agricultural Implement Workers of America (UAW), Wash-
       ington, D.C., letter and prepared statement.................................. 212
    Seminario, Margaret, Director, Safety and Health Department, American
       Federation of Labor and Congress of Industrial Organizations (AFL-CIO),
       Washington, D.C., prepared statement and attachment.......................... 219
    Strauss, David A., University of Chicago Law School, Chicago, Illinois, letters .235
    Veterans of Foreign Wars of the United States, Robert E. Wallace, Executive
       Director, Washington, D.C., letter........................................... 248

                         A FAIR AND EFFICIENT SYSTEM TO RESOLVE
                          CLAIMS OF VICTIMS FOR BODILY INJURY
                            CAUSED BY ASBESTOS EXPOSURE, AND
                                 FOR OTHER PURPOSES
                                     ________

                                                     TUESDAY, APRIL 26, 2005
                                                        UNITED STATES SENATE,
                                                     COMMITTEE ON THE JUDICIARY,
                                                           Washington, D.C.
       The Committee met, pursuant to notice, at 9:00 a.m., in room SR-325,
    Russell Senate Office Building, Hon. Arlen Specter, Chairman of the
    Committee, presiding.
       Present: Senators Specter, Hatch, Kyl, Sessions, Cornyn, Coburn,
    Leahy, Kennedy, Feinstein, Feingold, and Durbin.

                        OPENING STATEMENT OF HON. ARLEN SPECTER,
                     A U.S. SENATOR FROM THE STATE OF PENNSYLVANIA

       Chairman SPECTER. Good morning, ladies and gentlemen. It is precisely
    9 o�clock, the time scheduled for this hearing by the Senate Judiciary
    Committee. We meet in one of the most historic rooms on Capitol Hill,
    the Senate Caucus Room, where hearings were held on Teapot Dome,
    Army-MacArthur, Kefauver Crime Commission, McClelland Committee.
    President John F. Kennedy announced for the Presidency in this room.
    During fairly recent tenure, highly celebrated hearings with Judge
    Bork and Justice Thomas. And today we approach a subject of, I think,
    great importance to the United States for tens of thousands of asbestos
    victims who are suffering without compensation because their companies
    have gone into bankruptcy, and some 74 companies in bankruptcy are a
    tremendous drag on the economy.
       Senator Leahy and I, on April 19th, introduced Senate bill 852,
    joined by a group of Democrats with Senator Leahy and a group of
    Republicans with me, after working on a very, very carefully crafted
    bill to achieve certain core principles, and as previously stated,
    those principles will be maintained on the agreement that Senator
    Leahy and I have. They are subject to modifications on improvements
    which we can agree to.
       The discussion draft on this bill was circulated on February 7th,
    and an updated draft on April the 12th incorporating a great many
    changes, and the discussion draft was formulated after very, very
    extensive proceedings on legislation which was reported out of Committee
    by Chairman Hatch, who deserves an enormous amount of credit for
    moving forward on the trust fund concept. And that bill was reported
    out largely along party lines. Senator Feinstein joined Republicans at
    that time. And the bill had a great many problems, and I voted for it
    but said it was necessary to move the bill along. And I then enlisted
    the aid of the former Chief Judge of the Court of Appeals for the
    Third Circuit, Judge Edward Becker, who had taken senior status a
    couple of months before. Judge Becker convened a meeting of all the
    so-called stakeholders--the manufacturers, the AFL-CIO, the insurance
    industry, and the trial lawyers--in his chambers for 2 days in August.
    And that has been followed by a series of meetings totaling some 39,
    all counted, in my conference room where we have worked through many
    of the issues. Those meetings have been attended by some 27 Senators�
    representatives, and discussions have been ongoing.
       I called Senators yesterday to see if there were any additional
    witnesses which they would like to have heard today. Yesterday we
    worked through many of the issues with representatives of AFL- CIO in
    the morning and sat down with a group of my Republican colleagues in
    the afternoon. And we have worked through many, many of the issues,
    and we are prepared to consider other modifications which will
    supplement and be consistent with the core provisions.
       Our Judiciary calendar is very, very heavy, and it is well known
    generally we anticipate a Supreme Court nomination in the course of
    the next several months. This bill is a longstanding product, and it
    is not possible to satisfy everybody on everything. And on the four
    interested stakeholders, we have interested parties who have great
    strength and great courage in the political world of the United States
    Congress. If we are not successful, I do not see any time in the
    reasonably near future when we will again revisit this issue.
       I am going to yield back the one second and turn to my very
    distinguished colleague, Senator Leahy, who I want to compliment
    specially. He has taken on a very, very difficult job and a courageous
    job in dealing with many people on his side of the aisle. I have had
    a few on my side who do not like everything he has done. A lot of
    people do not like everything I have done. We are having a hard time
    finding people who like anything we have done.
       [Laughter.]
       Chairman SPECTER. Senator Leahy?

          STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR
                    FROM THE STATE OF VERMONT
       Senator LEAHY. Mr. Chairman, I like what you have done, if that is
    any help. But this is a bipartisan bill. It is the result of years of
    conscientious work, and the Chairman, who has worked so hard on this,
    called this one of the most complex issues he has ever tackled. I
    agree. I think in that regard we have been very fortunate to have Judge
    Becker join with us on this, and, Judge, I salute you for all the work
    you have done. But, Mr. Chairman, I salute you because I do not think
    we would be this far if you had not persevered as hard as you have.
       Among the other hearings held in this room which the Chairman did
    not mention was the hearing on the sinking of the Titanic. Now, in this
    case, we are bringing the ship back up. We are not putting it down.
    And we are bringing up a ship well worth saving.
       It is not the bill that I would have written if I was the only one
    to write it. It is not the bill that Senator Specter would have if he
    were the only one writing it. But you have to get consensus. Nobody
    should be surprised here that the interested groups--the labor
    organizations, industrial participants in the trust fund, the insurers,
    the trial bars--are each less than pleased with some portion or another
    of the bill. But that is the essence of legislative compromise. We
    either compromise or we have no bill. It is as simple as that.
       And this is a good compromise. We have tried to protect the ultimate
    goal of fair compensation to the victims. That is the lodestar of our
    efforts. We have all had to make sacrifices on a group of subsidiary
    issues as we moved forward. But what we have achieved is a significant
    step toward a better, more efficient way to compensate asbestos victims.
       This is the most lethal substance ever to be widely used in the
    workplace. Between 1940 and 1980, more than 27.5 million workers were
    exposed to asbestos on the job. Nearly 19 million of them had high
    exposure over long periods of time. We even know of family members
    who have suffered asbestos-related diseases just because they lived
    with the person, because they washed the clothes of loved ones.
       The economic harm caused by asbestos is real. The bankruptcies that
    resulted are a different kind of tragedy for everyone, for workers and
    retirees, for the shareholders, and for families who built these
    companies. In my own State of Vermont, the Rutland Fire Clay Company
    is among more than 70 companies nationwide to have declared bankruptcy.
       Now, I am encouraged by the favorable reaction this bill has generated
    among many. In the past week, we have received letters of support from
    United Automobile Workers, the UAW; the Asbestos Workers Union,
    certainly a union that has a great deal of interest in what happens;
    the Veterans of Foreign Wars of the United States, the VFW; the Asbestos
    Study Group; the Blinded Veterans Associations; and others, and I ask
    consent that all these letters be put in the record.
       Chairman SPECTER. Without objection, they will be made a part of the
    record.
       Senator LEAHY. The UAW notes in its April 13th letter to us, ��This
    will provide more equitable, timely, and certain compensation to victims
    of asbestos-related disease, and I am pleased that Alan Reuther, their
    legislative director, will be here today.��
       The VFW letter of April 14th says, ��The national trust fund you
    are proposing offers our members who are sick and dying the opportunity
    to secure timely and fair compensation for the injury they suffered in
    the course of serving their country.��
       The National Association of Manufacturers also released a statement
    expressing their hope that the legislation will engender broad support.
    And I thank Governor Engler for NAM�s support, and I look forward to
    his testimony today.
       All unimpaired asbestos victims are eligible for medical monitoring,
    and unlike last year�s bill, the bill provides for medical screening
    for high-risk workers, a relatively low-cost way to help
    make sure that those most likely to be harmed as properly diagnosed
    and treated, and I thank the AFL-CIO for their help in this.
       Organized labor strongly supported the provision ensuring that
    victims� awards under the new trust fund would not be subject to
    subrogation by insurance companies. The initial funding of the trust
    is more realistic and more substantial than the bipartisan bill that
    passed last Congress.
       And unlike the earlier bill, this bill ensures that all contributors
    in the fund will be a matter of public record, as are their obligations
    to the fund. And we guarantee that court cases that have reached
    judgment or attained verdicts will not be upset by the new trust fund,
    unlike last year�s.
       I want to thank the senior Senator from California, Senator Feinstein,
    for her tireless efforts. Under her approach we adopted, exigent cases
    may receive an immediate lump sum payment. The history of asbestos use
    in this country must come to an end. Senator Murray�s provision does
    that.
       So these are very complex things. I will close with this, and I will
    put my whole statement in the record. But Chairman Specter and I know
    that what we are attempting here rates off the charts in legislative
    degrees of difficulty. Neither of us were born yesterday. We have
    served a long time in the Senate. We have worked on compromises,
    Republican legislation, Democratic legislation, legislation that
    passes--not legislation that is put in to score points for one interest
    group or another, one party or another. But we have worked on
    legislation that passes because it benefits Americans, first and
    foremost. This is one of those pieces of legislation.
       [The prepared statement of Senator Leahy appears as a submission
    for the record.]
       Chairman SPECTER. Thank you very much, Senator Leahy.
       We turn now to Judge Edward R. Becker, former Chief Judge of the
    Court of Appeals for the Third Circuit, who wrote the opinion on the
    asbestos class action case, which was affirmed by the Supreme Court
    of the United States. He has had a very extraordinary judicial record,
    served on the United States District Court for the Eastern District
    of Pennsylvania for 12 years and for 23 years after that has been on
    the Court of Appeals for the Third Circuit. He last year received the
    Devitt Award as the Outstanding Federal Jurist in America. His academic
    background is extraordinary: Phi Beta Kappa of the University of
    Pennsylvania, where I first met him; Yale Law School graduate, where
    we attended at the same time. And he has undertaken a labor of love
    here in tackling this issue in addition to his regular judicial duties.
       The only major point where he and I have a substantial disagreement
    on what has happened is that he will not take reimbursement for travel
    or hotel lodging.
       Judge Becker, the floor is yours.

               STATEMENT OF EDWARD BECKER, JUDGE, U.S. COURT OF AP
               PEALS FOR THE THIRD CIRCUIT, PHILADELPHIA, PENNSYL
                                    VANIA
       Judge BECKER. Thank you, Mr. Chairman, for the privilege of appearing
    again before the Committee, and I thank you and Senator Leahy for your
    kind words about me and about my stewardship.
       S. 852 is different in many important respects from the discus-sion
    bill about which I previously testified. As a result of many, many hours
    of negotiation in recent months, most of the loose ends that I identified
    in my previous testimony have been tied down. I do not represent that
    they have been tied down to the satisfaction of all the stakeholders any
    more than that the bill as a whole is satisfactory to all stakeholders.
    As you and Senator Leahy have said, a bill completely satisfactory to
    any one stakeholder or any on Senator could probably never pass. S. 852
    represents a compromise.
       In my testimony, I will focus on the changes from the previous draft,
    the areas that have provoked the greatest controversy in recent months,
    and the issues that we are still working on. I will, however recapitulate
    the salient features of the bill, which, as we know, is a trust fund
    bill providing for a $140 billion trust fund.
       When I appeared previously, I represented that the financial experts
    had demonstrated that trust fund was more than adequate to pay the
    projected claims. New figures from Goldman Sachs represent that by
    reason of elimination of the Level VIIs, even with the increase in the
    claim values, the fund is at least $5 billion more secure than before,
    which I hope will give assurance to those Senators who have expressed
    concerns about the solvency of the fund. The total program cost in
    this current bill is estimated to be $120 billion, and the fund is
    $140 billion. The first 5-year outflow is within the up-front money.
       Now, the $140 billion is based upon the Goldman Sachs translation
    of the projections of future asbestos disease of Dr. Fran Rabinovitz,
    which, when I examined them in our marathon sessions last May, impressed
    me as correct. I know that there will be testimony today that those
    figures are off. That is the testimony of Mr. Peterson, which will be
    countered, as I understand, by that of Dr. Rabinovitz. I note for the
    benefit of the panel that the recent, very recent figures show a
    significant decline in claims. Sangabam, one of the major companies with
    asbestos liability claims, are down 70 percent in the last 2 years.
       The Peterson and Rabinovitz estimates have been examined in a judicial
    proceeding by one of the most experienced judges in the Federal system,
    Judge John P. Fullam, of the District Court for the Eastern District of
    Pennsylvania, a bankruptcy expert who reorganized the Penn Central. And
    with respect to the Owens-Corning estimation, Dr. Peterson�s estimate
    of $11 billion in future OCF liability was rejected by Judge Fullam as
    not sound, and he accepted Dr. Rabinovitz�s figures, which came up with
    a figure of $4 billion less.
       So it seems to me that there is at least credible evidence based upon
    Judge Fullam�s findings that the Goldman Sachs figures, which are based
    upon Dr. Rabinovitz�s projections, are sound and that we should have
    some confidence that the fund will be able to meet the claims.
       The huge projected numbers of 300,000, according to David Austern,
    who is the most experienced man in this field, who has administered
    the Manville Trust for decades now, tells me that the bulk of those
    figures are either unimpaireds who will not be filing early claims
    against the fund because, as you know, they are only entitled to medical
    monitoring, or they are people who are maxed out, that is, people who
    have already in other lawsuits achieved or secured the maximum amount
    that they could get under the fund.
       So it seems to me that based on the Manville figures and what I have
    talked about, the Peterson projections, which start above the actual
    experience, are questionable. The funding seems sound. It is guaranteed
    by business as a whole, Section 204(l) at page 162 of the bill, the
    guaranteed payment surcharge. I stress, too, that contrary to recent
    press reports, the Government and the taxpayers have no obligation to
    contribute to the fund. That is made very clear in Section 406 of the
    bill at page 287. And the up-front funding appears, as I said in my
    previous testimony, to be realistic.
       Now, what about getting the money up front first? Business and
    insurance will be putting up the lion�s share. The big guys can quickly
    determine the amount that they must contribute, and I anticipate that
    the bulk of the up-front money will be available within months of
    enactment. Section 204(i)(L), pages 148 and 149 of the bill, requires
    that Tier II to Tier VI defendant companies must provide the
    administrator within 120 days of enactment a good-faith estimate of
    past asbestos expenditures, their 2002 revenues, which is the CalPERS,
    and an initial payment specified in the bill of very substantial
    amounts, for example, in Tier II it must be at least $22 million for
    each participant. Besides, the participants want the fund to work and
    not to sunset; hence, they have every motive to pay quickly.
       Professor Green will testify, has expressed concern about the
    companies paying up. For the reasons that I have stated, I think this
    concern is misplaced. The companies have every motive to pay up. In
    all events, contrary to Mr. Green�s testimony, there are very strong
    enforcement remedies in this bill. Section 225 of the bill at page 210
    gives the Government liens, and it seems to me that with the availability
    of liens and action by the Justice Department, the companies will pay
    up, and will pay up when they are supposed to. That will cure the fund.
       The great advantage of the trust fund, of course, is that it removes
    asbestos litigation from the tort system, where it can languish for
    years and years, often with disastrous results for the victim because
    the defendants have gone into bankruptcy or the victim cannot identify
    the product to which he was exposed 30 years previous. And I know of
    cases where there was a mesothelioma case where the meso victim could
    not recover simply because the exposure having been 30 years previous,
    nobody could identify the product, and they simply could not pin it on
    any given defendant. Whereas, under this fund, which is no-fault, you
    do not have to get into the product identification.
       It also provides an administratively streamlined no-fault system,
    telescopes the process into the here and now with the money in place,
    and in my judgment this is far superior to the medical criteria approach
    under which litigation will continue for decades in the State tort
    system, mostly in State courts, attended by endless legal challenges
    in the State courts, which the Congress had in mind, would be imposing
    tort reforms.
       Now, under the bill, priority in payment goes to the exigents, the
    very sick people first, which means that they will get promptly paid.
    Will this, in fact, happen? I say yes.
       Now, I know that concerns have been expressed as to the ability of
    the Department of Labor to handle the anticipated volume of claims. The
    revised bill addresses those concerns. Senator Fein-stein has offered
    a proposal which is in the bill for an offer for judgment,
    Section 106(f)(a) at page 38 of the bill. Additionally, to the extent
    that someone does not pursue the offer of judgment, the Labor Department
    is required to contract out--Section 106(c)(4) at page 33. Contract
    out to whom? Contract out to claims facilities. There are claims
    facilities, the Manville Fund, the Western MacArthur Trust, the
    Fuller-Austin Trust. This asbestos claims process has been in effect
    for years, and there are entities, claims facilities like Manville,
    which have hardware/software experience, experienced workers who can
    be used in connection with processing these claims, who can process
    them with great facility. The Manville Trust processed as many as
    150,000 claims per year. Based upon my conversation with Mr. Austern
    in the early--in the first 9 months, which is the start-up period for
    the exigents, there will be nowhere near that number of claims.
       So the expertise is out there. The Labor Department can contract
    those who want to pursue the offer of judgment and may do so. As I
    have said, the fund is solvent. The money will be in place, and I think
    that things will work.
       A proposal was made as an alternative for a private corporation to
    administer it in lieu of the Department of Labor. Careful research has
    suggested that there are serious constitutional, non-del-egation problems
    with that, which would doubtless lead to litigation. The mandatory
    contracting is only for evaluation or settlement of the claims. It would
    then come back to the Labor Department for processing. The Labor
    Department would sign off on them so you don�t have a non-delegation
    problem there.
       Now, let me quickly turn to a number of areas where there has been
    controversy or disagreement among the stakeholders. One area is medical
    criteria. Senator Hatch and Senator Leahy I thought did a magnificent
    job of crafting medical criteria. We have not spent a great deal of
    time in our deliberations over medical criteria, which we had thought
    were untouchable; but, however, a number of points have been raised.
       As you know, under the medical criteria, which started with 1125,
    those who were unimpaired do not get paid under the bill, as they do
    get paid large sums in the tort system. They get only medical monitoring.
    The most significant change in this new bill, S. 852, is the elimination
    of the Level VIIs.
       Insofar as the Level VIs are concerned, there is certainly significant
    medical evidence, as Senator Coburn and Dr. Crapo have pointed out, that
    there are a number of cancers. This is the Level VIs that are not
    caused by asbestos exposure: pharyngeal, laryngeal, esophageal, stomach,
    and colon cancer. There has been a proposal that level VI should be
    eliminated.
       Senator Specter�s proposal was and is, as in this bill, Section 121(e)
    at page 87, for the Institute of Medicine of NIH to make a study which
    must be completed by April 1, 2006. That study is mandatory. If that
    study demonstrates that esophageal, laryngeal, stomach, colon, these
    other cancers are not caused by asbestos exposure, then Level VI is
    out of the bill.
       There was some concern that a lot of money would be paid out between
    now and then. The fact of the business is that under Section 121(e),
    the proof requirements are very rigorous. My guess is that very few,
    if any, people are going to be paid out under Level VI because they
    need tremendous medical backup and an opinion from a physician, which
    would be against the medical literature, or much of it, that these
    particular cancers were caused by asbestos exposure. So I don�t think
    that Level VI is a problem.
    The claims values have been increased, Section 131, page 92. The
    start-up has been modified, Section 106 at page 232. If the fund is
    not up and running and paying the exigents within 270 days, they can
    go back to the tort system. But as I have suggested, the offer of
    judgment and the contracting should solve that problem.
       Insofar as subrogation is concerned, Senator Leahy pointed out
    Section 134(b) at page 105, there is no subrogation in this bill. A
    lot of people are very unhappy about that, but it is a trade-off. As
    I said and Senator Specter and Senator Leahy said, this is not a bill
    that--no stakeholder or no Senator would write this bill. A bill that
    any particular stakeholder or Senator would write could probably not
    pass. There has to be a compromise. There has to be a trade-off.
       A lot of people are very unhappy about the Level VIIs being out of
    the bill, but the Level VIIs are out of the bill, and subrogation is
    in. It is a trade-off and, obviously, the Senators will have to decide,
    politics being the art of the possible, as to whether this is a fair
    compromise.
       In my last testimony, the last time I appeared, you will recall
    that there was also subsequent to that a hearing on the so-called mixed
    dust or silica. Section 403(i) at page 243 seems to have solved the
    so-called silica or mixed dust claims, which says that someone who
    honestly has a bona fide claim from silica exposure, so long as they
    can demonstrate it was not due to asbestos exposure and, therefore,
    they are not compensated under this bill, but they can demonstrate
    that it was due to exposure to silica, they can proceed in the tort
    system. But as a result of the hearing and interim developments, it
    seems to me--the situation which appeared in Texas and I believe in
    Mississippi seems to have evaporated or been mooted.
       An example of the process that we have engaged in here is the issue
    with respect to the rail workers. One of the problems that we thought
    intractable was dealing with the rail workers. As a result of, I think,
    about 12 or 13 negotiating sessions, we have worked out a solution to
    that, Section 131(b)(4), page 94, to the satisfaction of the Association
    of American Railroads and Rail Labor. I submit that this is probably
    the longest-running markup in the history of the United States Senate.
    It has been going on for at least a year and a half, and the 13 or 14
    sessions which resulted in the special adjustment for rail workers,
    which will be a surrogate for the payments they would otherwise get
    under the Federal Employers Liability Act, is an example of that.
       Screening is another example of a controversial issue. Some want it
    in; some want it out. It is, in effect, a compromise, but we have,
    however, been able to limit the cost of medical screening, and I do
    credit a very wise suggestion of Dr. Coburn, who pointed out that the
    way we can control costs--and this is in Section 225(c)(6) at page
    221--is to make payments limited by the CPT code, which is what Medicare
    pays and which is what private doctors pay for the kinds of procedures
    that they do and that would be involved in medical screening.
       Insofar as the counsel fee issues, according to the figures, the
    plaintiffs� lawyers have gotten $3 billion in fees already over the
    history of asbestos in the tort system. Again a compromise. People on
    one side or the other will not be completely happy with it. The previous
    amounts have been reduced to 5 percent. Is that too much? Well, it can
    be a lot in a simple meso case; it can be too little in other cases
    where there may be causation issues.
       My concern, frankly, on the counsel fee issue is administrative
    convenience. I do not want to see the Secretary of Labor, the
    administrator, I don�t want to have to see the administrator get
    involved in complicated counsel fee determinations. I know how much
    time I spent--I just wrote a 107-page--it ended up a 95-page opinion
    on counsel fees. Now, it was in class action cases. I have another
    case I am working on right now.
       Obviously, these are not as complicated, but determination of
    individualized counsel fees can take a lot of time. And we have a
    streamlined administrative system, and there are enough burdens on
    the administrator that I think that it is preferable to have a fixed
    sum, maybe too much in some cases, too little in other cases. But it
    seems to me that administrative convenience is important. And, of
    course, the client can negotiate. We do have time record requirements.
    There are penalties for infractions by lawyers. Indeed, if you look
    at Section 401 at page 30, very severe sanctions for misconduct, for
    anyone who abused the system by false claims.
       There also is an extensive pro bono provision with a notice that
    has to be given to the putative client as to the availability of pro
    bono representation, and the administrator has to retain a pro bono
    roster.
       I know Senator Kohl, who is not here, was concerned about the
    mesothelioma research and treatment center. Section 222(c) at page
    203 provides $1 million for each of the year 2005 to 2008 for each of
    up to ten mesothelioma research and treatment centers.
       Insofar as the sunset provision, we have a compromise, again, that
    was proposed by Senator Feinstein that in the event of sunset, which
    we think will not happen, but if it does, after extensive program
    review, the reversion goes either to the Federal court or the State
    court where the individual was exposed or where the individual lives
    so that it cannot go to the bete noire of Madison County, Illinois.
    And we are looking at a proposal by Senator Kyl that would tighten
    up program review.
       There are a number of open issues that we are still working on,
    and I am nearing the end of my testimony, Mr. Chairman. Senator Levin
    I know, among others, and Senator Feinstein expressed concern about
    the little guys. When I say the little guys, I don�t mean the small
    business folks, because they are exempt, but the whole sales and others
    who are not the real big guys who have been doing the negotiation at
    the table, and there is a proposal which is very close that will give
    some relief, and this is satisfactory to business, have in mind that
    business guarantees the fund. You say, well, what good is the guarantee?
    Well, General Electric and Viacom and Dow Chemical, you know, all these
    big companies, if they go down the tube, the American economy is down
    the tube, and we are all in big trouble. But as long as the American
    economy stays healthy, these businesses have guaranteed--and I gave
    you the section be-fore--the solvency of the fund and have in mind
    that the little guys--the littler guys also have the availability of
    an inequity adjustment, Section 204(d) at page 138 of the bill, if
    the payments that would be imposed upon them would be inequitable. So
    that is still being looked at. We think we are close insofar as the
    issues posed.
       A number of you are familiar with the issues raised by Equitas,
    the Lloyd�s of London runoff, and the problems that some of the insurers
    had, or the orphan share issue. That is being worked on. We may be close
    to an agreement about that.
       There has also been some issue about what happens to the bankruptcy
    trust in the event of sunset. There is a proposal for a master trust
    that would address that issue, and as I said before, Senator Kyl has
    some proposals for more searching program review and a possible revision
    of the medical criteria if the fund runs into trouble.
       Let me conclude by saying that this is not only one of the most
    contentious--one of the most complicated bills, I think, in the history
    of the Senate, but one of the most contentious because the stakeholder
    groups are not monolithic; rather, individual insurers, businesses, and
    unions are affected differently by the bill. Most of the insurers, I
    believe, support it. Many insurers oppose. Most businesses, as reflected
    by the statistics you have, are for it, but there are some businesses
    who think they are adversely affected who are not for it. And the same
    is true with respect to the unions. And to the extent that each of them
    is motivated and looks to their own pocketbook, any coalition is fragile.
    We cannot avoid that.
       My hope is that the Senate will rise above the temptation to protect
    particular constituents and look instead to the good of the Nation, the
    economy, and the victims. The fact remains that asbestos litigation has
    wrought more havoc on the American court system, State and Federal,
    including the Federal bankruptcy courts, and on American business and
    on the economy and on victims than any other species of litigation in
    American legal history. The Supreme Court has stated in three opinions
    that a legislative solution is needed. As a toiler in the vineyards of
    the court system, I have witnessed with my own eyes the grapes turning
    sour. I hope that the Senate will summon the political will and courage
    to act.
       S. 852 is not perfect, but it is the product of years of toil and I
    believe a fair compromise, as good as we are likely ever to get, and I
    commend it to you.
       That concludes my statement. I would be pleased to answer any
    questions that any members of the Committee may have.
       [The prepared statement of Judge Becker appears as a submission for
    the record.]
       Chairman SPECTER. Thank you very much, Judge Becker, for that summary,
    and thank you for the thousands of hours you have put into this matter.
       The bill is a complicated one, and it is our conclusion that we ought
    to have an explanation that is not really as detailed as it might have
    been, but he has covered all the points and has given you some feel for
    the trade-offs, for the complex issues that we have had to wrestle with.
       I would like now to call the balance of the first panel. Governor
    Engler, Ms. Seminario, and Mr. Berrington, if you would step forward.
    We have a custom of having opening statements, as a generalization,
    of 5 minutes and 5-minute rounds for Senators, and we will have multiple
    rounds to the extent it is practical. We labor under time constraints
    in the Senate. The Majority Leader has scheduled a vote for 11:45. I do
    not think it is possible to conclude before that time, so Senators will
    go and vote, or this Senator will go and vote and come right back. And
    it is my hope to avoid an afternoon session because we have briefings
    on transparency on this issue. But this is a very, very important
    hearing, and we will take whatever time is required to hear the witnesses
    and to have Senators with a full opportunity to question.
       Our first witness is John Engler, who is the President of the National
    Association of Manufacturers. Governor Engler comes to that position
    after a three-term status as Governor of the State of Michigan, served
    20 years in the Michigan Assembly, 7 years as the Senate Majority
    Leader, the youngest man ever elected to the Michigan House of
    Representatives.
       Thank you for joining us, Governor Engler, and we look forward to
       your testimony, which will be at 5 minutes. Thank you.

         STATEMENT OF JOHN M. ENGLER, PRESIDENT AND CHIEF EXECUTIVE
         OFFICER, NATIONAL ASSOCIATION OF MANUFACTURERS, WASHINGTON,
                D.C., ON BEHALF OF THE ASBESTOS ALLIANCE
       Governor ENGLER. Thank you, Mr. Chairman.
       Chairman Specter, Senator Leahy, members of the Committee, thank
    you for the opportunity to testify. Today I am speaking on behalf of
    the National Association of Manufacturers� Asbestos Alliance, a
    broad-based coalition of companies and associations committed to
    seeking a fair resolution of the asbestos litigation crisis. Last
    week�s introduction of the bipartisan S. 852 represents a major step
    forward in the decades-long push for asbestos legislation, almost
    coinciding with my arrival in the legislature many years ago. It has
    been a long time. But I commend you, Mr. Chairman and Senator Leahy,
    along with Majority Leader Frist, Senator Hatch, and so many others
    who worked so hard on this legislation, for your strong leadership
    and incredible persistence in dedicating yourselves to crafting a bill
    that compensates victims, provides fairness and certainty to companies,
    and delivers a major boost to our Nation�s economy. Today I would like
    to focus on why passage of the trust fund legislation is so vital to
    our economy.
       In the last few years, we have seen numerous studies documenting
    the negative economic impact of asbestos litigation. This morning a new
    study, being released by NERA Consulting, quantifies for the first time
    the tremendous benefits of a legislative solution like S. 852. Here are
    some of the key findings:
       Enactment of trust fund legislation will reduce administrative costs,
    such as legal fees, and bankruptcy costs, including serious impacts on
    workers, by $85 billion. According to NERA, these costs and the cost to
    the economy of lost productivity have reached a staggering $343 billion.
       To date, productivity losses due to litigation represent $303 billion.
    This means that companies involved in asbestos litigation pay more to
    borrow to expand and create jobs. Companies also have expended
    significant resources on the lawsuits themselves, and they have lost
    countless opportunities perhaps for acquisitions or mergers, certainly
    less attractive to investors. A trust fund bill will eliminate these
    drags on productivity and substantially reduce productivity losses that
    in the past have been as high as $50 billion a year in these industries
    affected.
       Another plus cited by NERA is the near elimination of the transaction
    costs, such as legal fees, which have eaten up almost 60 percent of the
    billions spent on litigation. RAND previously reported that claimants
    are only getting 43 cents of every dollar today. NERA reports that the
    reduction in transaction costs means that with a $140 billion trust
    fund, claimants will receive up to $65 billion more in compensation
    than they would if we allowed the status quo to continue.
       Finally, NERA quantified the expected value of asbestos reform on
    Wall Street using stock market valuation of defendant companies. They
    note that Wall Street would value enactment of an asbestos trust fund
    bill at as much as $137 billion. By removing the cloud of uncertainty
    with the passage of asbestos legislation, stock market gains would
    benefit the pensions of millions of workers and retirees as well as
    other investors in the market.
       These new findings from NERA clearly demonstrate that the passage
    of asbestos trust fund legislation will provide an immediate and
    long-lasting boost to the economy. And, Mr. Chairman, I brought a copy
    of the full study to be made part of the record this morning.
       Chairman SPECTER. Without objection, it will be made a part of the
    record.
       Governor ENGLER. As I said earlier, other studies, Mr. Chairman
    and members of the Committee, have also detailed the significant
    economic effects of asbestos litigation. The impact on workers and
    jobs is particularly worth noting. According to a 2002 study by Nobel
    laureate Joseph Stiglitz, about 60,000 jobs, many in the manufacturing
    sector, have been lost due to asbestos bankruptcies. Many of those lost
    jobs were union jobs, and I note, as you did in your statement, that
    the UAW, which represents so many workers across this Nation, strongly
    endorsed the draft that formed the basis before the Committee.
       Now, the direct losses in the Stiglitz study are only part of the
    story. Communities are also affected as laid-off workers tighten up
    their spending or move away in search of new jobs and bankrupt companies
    cut operations, slash purchases, and, of course, reduce charitable and
    community giving. In fact, another NERA study showed that for every
    ten jobs lost due to an asbestos bankruptcy, a community loses as many
    as eight other jobs.
       The scope of the asbestos litigation scourge is quite clear. More
    than 8,000 companies have been dragged into this litigation. These are
    from the largest to small, family-owned businesses. For 30 years, these
    companies have been paying an asbestos tort tax. That is estimated now
    to be about $70 billion. That is through 2002. Nearly 60 percent of
    that money went to the trial bar, defense lawyers, and court costs.
    And, unfortunately, this asbestos tax has been levied quite randomly.
    While defendants will certainly pay into a trust fund, these companies
    and their Wall Street analysts will at least get a clear picture of
    their liability, now and in the future. That certainly, Mr. Chairman,
    is a compelling reason for this legislation.
       Chairman SPECTER. Governor Engler, your time has expired. Your full
    statement will be made a part of the record. If you could summarize,
    we would appreciate it.
       Governor ENGLER. In summary, a major advantage of the trust fund
    solution ends the scandal of asbestos litigation by getting the problem
    out of the courts and into a no-fault system; complies at long last
    with the Supreme Court--and these are repeated exhortations, I think
    on four or five occasions--that Congress step in and solve the problem.
    It gets the asbestos issue to a point where the flow of the funds goes
    now to the people who are ill, not to the lawyers. It ends this random
    assessment of the asbestos tort taxes on certain companies. And, most
    importantly--well, let me say it restarts the growth of these individual
    companies, but most importantly, it provides for the people who are
    sick--and manufacturers acknowledge there are people who are sick--sure,
    fair, timely compensation to medical victims.
       And, Mr. Chairman, I thank you for the time and for the opportunity
    to summarize.
       [The prepared statement of Governor Engler appears as a submission
    for the record.]
       Chairman SPECTER. Thank you very much, Governor Engler.
       We turn now to Ms. Margaret ��Peg�� Seminario, who is the Director
    of Occupational Safety and Health for the AFL-CIO, where she has been
    a key employee since 1977. She has a master of science in industrial
    hygiene from Harvard School of Public Health and a B.A. from Wesley
    College. Thank you for being here today, Ms. Seminario, and for
    attending so many, many, many long sessions of the so-called
    stakeholders. We look forward to your testimony.

              STATEMENT OF MARGARET SEMINARIO, DIRECTOR, SAFETY
               AND HEALTH DEPARTMENT, AMERICAN FEDERATION OF
              LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS,
                              WASHINGTON, D.C.

       Ms. SEMINARIO. Thank you very much, Senator Specter. We do appreciate
    the opportunity to testify on S. 852. I would first like to acknowledge
    the work that you and Senator Leahy have put forward, your tireless
    efforts and the efforts of many others, including Senator Feinstein,
    Senator Hatch, and, of course, judge Becker, to attempt to develop a
    fair and effective asbestos compensation bill.
       As you are well aware, the AFL-CIO has a long involvement in the
    asbestos issue, and for the last 3 years we have been deeply engaged
    in the discussions and process that have led to the current proposal.
    We have done so because we believe that many victims are not being
    well served by the current system and that hundreds of thousands of
    victims who will develop asbestos disease in the future could be better
    served by an alternative system that provides compensation to sick
    individuals in a more efficient and equitable manner.
       The AFL-CIO has consistently supported the establishment of a Federal
    asbestos trust fund to fairly compensate asbestos victims for their
    injuries, and we continue to support the establishment of such a trust
    fund. At the same time, we have made clear that we cannot accept a
    substitute to the current civil litigation system unless it would
    provide a means by which victims could obtain fair compensation on
    a timely basis.
       The legislation introduced last week includes a number of important
    improvements over past proposals. These include higher award values,
    no subrogation of awards, a medical screening program. And, again, we
    want to acknowledge the work of you, Senator Specter and Senator Leahy
    and your staffs, in securing these important changes.
       Unfortunately, in the AFL-CIO�s view, the bill still fails to ensure
    victims just and timely compensation and would leave tens of thousands
    of individuals with no remedy at all, and that is why we opposed the
    legislation as introduced.
       Over the past 3 years, as we have worked on this legislation, we
    have listened to the concerns and the proposals put forward by business
    and insurers, and we have attempted to be responsive. In the interest
    of reaching agreement on legislation, we have compromised on numerous
    aspects of the legislation, including accepting the $140 billion in
    overall funding, a much lower level of funding for the program than
    we think may be actually required to meet anticipated claims.
       But on the fundamental issue of insuring that the legislation will
    create a system that will, in fact, deal fairly with victims and pay
    timely compensation to those who are sick from asbestos disease, we
    cannot accept a compromise that does not achieve this basic objective.
    It is not in victims� interest to trade one flawed system for another
    that has serious, identifiable problems and deficiencies and threatens
    to leave many individuals worse off.
       These serious problems include the exclusion of thousands of asbestos-
    related lung cancer claims, leaving most victims with no remedy during
    the start-up period; the inclusion of restrictions preventing individuals
    with both asbestos and silica disease from obtaining access to the courts
    or fair compensation from the fund; unworkable statute of limitations
    provisions that could bar tens of thousands of worthy claims; and
    program sunset provisions that could leave claimants in limbo should
    the fund run out of money.
       We continue to believe that the major problems with the bill can
    still be corrected, and we have put forward proposals to do so. Moreover,
    we believe that a primary reason they have not been address is due to
    objections by some business and insurer groups who want to limit claims
    and costs or make it difficult or impossible for individuals who are
    sick to receive compensation.
       If the goal is to truly enact a bill that provides prompt and fair
    compensation to victims who meet the eligibility requirements, then
    there is no valid reason not to fix the problems we identified. We
    have prepared detailed comments on the legislation, which we have
    included in an attachment to our testimony. For now I would just like
    to spend the remaining time that I have just to highlight a couple of
    the major problems in the bill.
       One of the first major problems is that the compensation for
    thousands of asbestos lung cancer victims is eliminated; that with
    the elimination of the Level VII lung cancer categories, based on CBO
    estimates, 40,000 individuals with lung cancer related to asbestos
    are no longer covered specifically by the bill. Provisions have been
    added that allow some of these lung cancer victims to use CT scans to
    show that they have asbestosis, but that does not apply to victims
    with pleural disease. The net result is about 25,000 asbestos lung
    cancer victims previously covered may not be eligible for compensation.
       The start-up provisions leave claimants in limbo for as much as 2
    years. An estimated 60,000 to 80,000 claimants currently pending who
    are sick will have nowhere to go for 2 years under the provisions of
    this fund, the bill. This is not fair.
       As I said, there are also problems with some of the other provisions
    related to silica, statute of limitations, and we have provided comments
    and proposals on those matters.
       Let me conclude by saying that we have spent years working on this
    legislation, and we believe that we have played a constructive and
    responsible role in the process. We intend to keep working to address
    the major problems with the bill, with the hope that changes will be
    made that will enable the AFL-CIO to support the bill.
       However, in its present form, the AFL-CIO must oppose S. 852 since
    it fails to ensure asbestos disease victims the just and timely
    compensation they deserve.
       Thank you.
       [The prepared statement of Ms. Seminario appears as a submission
       for the record.]
       Chairman SPECTER. Thank you very much, Ms. Seminario.
       We now turn to Mr. Craig Berrington, Senior Vice President and
    General Counsel of the American Insurance Association, extensive
    experience from the Department of Labor, including Deputy Assistant
    Secretary for Employment Standards, a law degree from Northwestern,
    and a graduate of the School of International Service at American
    University.
       Thank you, Mr. Berrington, for being a regular attendee at the
    numerous, lengthy sessions of the stakeholders and your contributions
    there, and the floor is yours for 5 minutes.

            STATEMENT OF CRAIG A. BERRINGTON, SENIOR VICE PRESIDENT
            AND GENERAL COUNSEL, AMERICAN INSURANCE ASSOCIATION,
                                WASHINGTON, D.C.

       Mr. BERRINGTON. Thank you, Mr. Chairman. I am testifying today on
    behalf of the AIA and the Reinsurance Association of America and have
    a written statement that I would appreciate having entered into the record.
       Chairman SPECTER. Without objection, your statement and all
    statements will be made a part of the formal record.
       Mr. BERRINGTON. Thank you so much.
       As always, we greatly value the opportunity to be here and to work
    with you and the Committee on this important legislation and, of course,
    to salute Judge Becker for his heroic efforts in this regard, not to
    mention his patience.
       Mr. Chairman, your bill as introduced makes some very important
    improvements in the medical criteria aspects of the legislation, in
    removing the Level VII cases, and, in addition, requiring that claimants
    establish their asbestos exposure was a substantial contributing factor
    to their disease.
       Unfortunately, other important problems remain that are critical
    to our evaluation of the legislation. I would like to touch on six of
    them quickly.
       First, litigation leakage from the trust fund. Captured in a phrase,
    a national trust fund must provide an exclusive remedy for resolution
    of all asbestos claims. Without that certainty, we will find ourselves
    paying both substantial sums into the fund and into the tort system for
    claims permitted to leak outside of the fund. In S. 852, leakage would
    occur before the fund gets operational certifi-cation, while the fund
    is fully up and running, and in the event of fund sunset.
       We are particularly concerned about leakage during the fund start-up.
    If the new law does not have a fast and effective startup, it will
    fail. Sure as shooting, it will fail. And with that failure will come
    recriminations all around. So this is no small matter. In our judgment,
    to make the start-up happen, all of the bill�s incentives must be aimed
    toward obtaining that fast, efficient implementation.
       S. 2290, introduced last year, met this test by having a legislative
    red light/green light approach, with the President�s signature resulting
    in an immediate red light for the old litigation system and an equally
    immediate green light for the new trust fund. Embedded in this approach
    was language giving the Labor Secretary all the authority she would
    need to enable the program to review and decide claims quickly,
    including the use of outside contractors and a priority for exigent
    claims.
       Moreover, S. 2290�s red light/green light approach made it crystal
    clear to everyone, including the trial bar, that once the bill was
    enacted, it was time to quit fighting over it and to get to work
    implementing it.
       S. 852 adopts a very different approach, therefore jeopardizing
    the ability of the new law to quickly and efficiently be implemented.
    Indeed, S. 852 actually provides incentives to those who believe that
    the loss of the legislative battle on the bill need only be a skirmish
    in the longer-term war over keeping the litigation system going. The
    result would be stress on this new law of enormous proportions, which
    should be avoided at all costs.
       This problem did not exist in the trust fund as laid out in S. 2290.
    We believe the policy choice in S. 2290 which would have applied the
    exclusive remedy provisions to any litigation outstanding upon the
    date of enactment was much the better approach. It would have
    established an understandable, bright-line test, making it clear
    that the moment the President signed the new law, the old litigation
    system ended and the new trust fund system began, cutting off the
    opportunity for litigation game-playing.
       Second, the bill�s handling of exigent claims. Although part of
    the broader litigation leakage problem, the new exigent claims
    provision raises its own unique questions. Exigent claims are those,
    as we know, from individuals who have mesothelioma or whose asbestos
    illness is at a critical stage where they are likely with less than a
    year to live. We believe the trust fund, not continuing the litigation
    system, would work best for these cases. However, S. 852 does not
    follow this approach. Instead, it uses an offer of judgment provision
    to keep current exigent cases going in the litigation system after
    the bill is enacted and even allows new exigent cases to be filed in
    court.
       While the new offer of judgment provision was obviously done in
    good faith to speed review and payment of exigent claims, I don�t
    think the provision works. Not only does it provide an opportunity
    for new litigation, but with its 200-day litigation process for getting
    from beginning to end, it not only is unlikely to speed reviews for
    people with critical illnesses, but is also likely to be slower than
    the Labor Department�s processing of these very same claims.
       While it is unlikely to speed up the process for individuals getting
    their money, it does nothing to control attorneys� fees. So if one
    assumes the normal attorney fee of perhaps a third of recover, it will
    reduce the amount of money that a claimant will get for himself and
    his family.
       Other issues that are of concern to us relate to the operational
    certification provisions in the bill. The bill�s prohibition on workers�
    compensation subrogation, that issue has been well vetted, but we still
    do not understand why it is a problem, having the same system here that
    exists in the State workers� compensation systems to prevent double
    recoveries. And, of course, the fifth issue is program sunset. We would
    prefer that all cases go to Federal court. We think that is what ought
    to happen.
       Mr. Chairman, we do applaud the improvements made in this version
    of the bill, but we have substantial concerns still that prevent us
    from being able to support it as currently drafted.
       Thank you very much.
       [The prepared statement of Mr. Berrington appears as a submission
    for the record.]
       Chairman SPECTER. Thank you very much, Mr. Berrington.
       We will now proceed with 5-minute rounds for members� questioning.
       Ms. Seminario, with respect to the CT scans, which is an issue on
    the minds of a number of Senators, Senator Leahy and I worked through
    this after our first draft and came to the combination on CT scans for
    Category IX and not for Category VIII. And we are going to be hearing
    a good bit of medical testimony. We have added some extra witnesses
    today after you and I and others sat down in the afternoon and after
    consulting with Senator Coburn.
       The question that I have for you, on a bill which cannot put its
    arms around everything and we do find a major concession, which Senator
    Leahy and I worked on a long time on the number VIIs, on the smokers,
    and we were able to find a trade-off on some very key items like
    subrogation, whether it would not be sufficient under the exceptional
    medical claims section, where there can be CT scans submitted in
    addition to X-rays, wouldn�t that be a safety valve for the kind of
    injured party whom you have referred to?
       Ms. SEMINARIO. Well, we are looking for more than a safety valve.
    We are looking for a system that actually does, in fact, have criteria
    to compensate people that have asbestos-related disease. I will not
    go into our views at length on the Level VIIs, but we still believe
    that with the 15-year substantial occupational exposure that those
    lung cancers are attributable to asbestos. So we start from believing
    very firmly that the science supported the Level VIIs.
       Chairman SPECTER. We agree with you on moving in to get the lung
    cancers caused by asbestos. We really agree with you totally. I think
    there is no disagreement. But the question is--I did not mean to use
    safety valve in derogation. Coverage--let�s call it that instead of
    safety valve.
       Ms. SEMINARIO. What we tried to do with the medical criteria, if
    you remember, is to set up categories where if an individual had the
    diagnosis, they had the exposure, that they were covered. And it was
    not the exception, it was he rule. And I think if you do indeed look
    at both the epidemiology but also the latest American Thoracic Society
    guidelines on diagnostic techniques, you find that indeed the use of
    CT scans has become a routine diagnostic method for the non-malignant
    diseases. And if they are permitted as a presumptive diagnostic tool
    for asbestosis, we do not see why it should not be the same for the
    other categories. But I would leave it to the medical experts to have
    that more informed and knowledgeable discussion with you about the
    use of those--
       Chairman SPECTER. Governor Engler--
       Ms. SEMINARIO. --techniques.
       Chairman SPECTER. I do not mean to cut you off, Ms. Seminario.
       Ms. SEMINARIO. That is fine.
       Chairman SPECTER. But I want to cover a couple more issues here in
    the 5 minutes I have.
       The Committee thanks you for the very material assistance which
    Pat Hanlon has rendered in the Asbestos Study Group on Gary Slaiman
    and thank you for your letter. We are still working through some of
    the issues which you have reserved.
       Let me turn to Judge Becker at this point on an issue which is
    raised by the Chamber of Commerce, Thomas Donahue, a letter dated
    April 25th, which is generally laudatory and supportive and we want
    a bill and keep working, all of which we intend to do. And the one
    issue which is raised is the issue of leakage. Would you address the
    Herculean efforts which the stakeholders worked to try to find an
    accommodation on that issue?
       Judge BECKER. We spent many, many, many sessions, and I think the
    leakage is virtually gone. And, frankly, I do not understand the drama
    with which Mr. Berrington describes the leakage problem. Anything that
    has gone to judgment already, final judgment, well, obviously that is
    preserved. If a case is actually on trial before a judge or a jury,
    the case may continue. I mean, it just seems to me unfair, you are in
    the middle of a case, it has gone to the jury or the testimony has
    been going on, and all of a sudden the bill is signed, to say, okay,
    jury and lawyers, go home, we are not going to conclude the case. I
    mean, it is a very limited number of cases, and it is limited to
    individual cases, not consolidations. I mean, there are some instances
    where you have hundreds or thousands of cases consolidated. The bill
    very precisely says it is a one-on-one case and it is actually on trial.
       It seems to me reasonable to let it continue, and with respect to
    settlements, if a settlement has been negotiated--not an inventory
    settlement, the plaintiff�s asbestos lawyer has a deal that covers
    500 or 1,000 cases, the bill says a one-on-one settlement. And if it
    has got to be signed by the plaintiff and signed by the defendant or
    someone on behalf of a defendant, and there is 30 days after the Act,
    there are certain data that has to be supplied, so long as the
    settlement has already been signed, well, then there is 30 more days.
    And, frankly, I don�t see what the problem is. With respect to
    virtually everything else, the tort system is closed down and everything
    else goes into the fund. And it seems to me that these minimal examples
    with respect to cases actually on trial and settlements and, indeed,
    the insurance company can even protect itself or the defendant by
    putting in some requirement in the settlement agreement that the
    paperwork be submitted sooner.
       I just don�t see what the problem is. It seems to me the leakage
    issue is virtually gone. We had many, many, many sessions, and we have
    come up with provisions which are in the Act.
       Chairman SPECTER. Thank you, Judge Becker. The red light went on
    during the middle of your answer, so I will now turn to-- my red light
    went on. Yours did not go on, Judge Becker. Mine went on.
       I turn now to Senator Leahy.
       Senator LEAHY. Thank you, Mr. Chairman.
       Governor Engler, welcome, and I appreciate all the time you have
    spent on this. We did not want you to completely have to forget all
    the hours you had to spend with the Michigan Legislature. So we have
    tried to make up for that in your life. But I want to thank you for
    NAM�s support of this bipartisan legislation. And I agree with your
    assessment about the tremendous economic impact of the legislation to
    create jobs and get a more efficient compensation system.
       A major component of the bill is to ensure that the fund is
    operational through higher front-end funding, something you have looked
    at closely. In your testimony to the Committee in January and in some
    of the follow-up letters to me, you stated that you expect to have
    written commitments or letters from financial institutions regarding
    the availability of $20 billion in front-end funding once the
    legislation was introducing, including estimates of the interest costs
    on such potential borrowing.
       Now that we have introduced it, when do you expect to receive such
    written assurances from financial institutions?
       Governor ENGLER. The specificity of the draft makes this easier as
    it gets obviously closer, but we think by Thursday that from Goldman
    Sachs we may have a letter that gives us assurances. We have been
    talking to a lot of the different financial houses about how this gets
    done. We think this is clearly bankable, but we are anticipating that
    Thursday we would have something, you know, in time for markup, that
    you would have a commitment on, you know--
       Senator LEAHY. And you have--
       Governor ENGLER. It can still be couched, I suppose, as financial
    folks do, based on what exactly the mechanisms are, but we think that
    the Committee has done a nice job in the draft of trying to put a
    framework together that somebody like Goldman Sachs can kind of come
    in and say this is what we think it would be.
       Senator LEAHY. And, Governor, will you be able to share that with
    Senator Specter and me?
      Governor ENGLER. Yes.
       Senator LEAHY. And the Committee. Thank you.
       Ms. Seminario, you have probably felt that you have taken up
    residence up here on the Hill, but I appreciate all the work you and
    your staff have done with Senator Specter�s staff and with mine as we
    tried to craft this bill. So many of the victims of asbestos exposure,
    of course, are under the AFL-CIO umbrella. I might want to note, you
    have represented them tirelessly in this regard.
       I have been pleased we have been able to make many of the
    constructive changes that the AFL-CIO has promoted: higher awards
    values for victims, no subrogation, proof of exposure, medical screening
    program, new criminal penalties for willful OSHA violations and so on.
    I appreciate your comments, which have been constructive, on the statute
    of limitations and the need for ongoing oversight and planning and
    mechanisms hopefully to avoid termination of the fund. I know Senators
    Kyl and Cornyn have similar concerns about the drastic nature of the
    sunset provisions. I hope we can work out a refinement.
       Would you send me and Senator Specter any proposed language,
    legislative language you might have on this issue?
       Ms. SEMINARIO. We would be happy to, and we would also be happy to
    continue the discussions over the next couple days and weeks.
       Senator LEAHY. Thank you. If we have time, I am going to come back
    to you.
       Mr. Berrington, the last time you appeared before the Committee,
    in January, your testimony was in support of a medical criteria bill.
    I am pleased that you and the American Insurance Association have now
    joined the asbestos trust fund bandwagon. I want to welcome you aboard.
    I can see by the expression on your face how happy you are to be
    onboard.
       [Laughter.]
       Mr. BERRINGTON. I am just trying to recall my testimony.
       Senator LEAHY. I recall it very, very well. I strongly disagreed
    with your position of allowing insurers to reduce the awards to victims
    through subrogation. We have been very direct with each other on that.
    I do want to work with you and the insurance industry to find common
    ground on refinements for our bipartisan trust fund legislation. We
    need that as it moves forward in the legislative process, and I would
    ask you to continue to work with us.
       Mr. BERRINGTON. Mr. Leahy, if I might, just for a moment.
       Senator LEAHY. Sure.
       Mr. BERRINGTON. I believe my testimony in January said that if we
    could work out a good trust fund, we are all in favor of doing that,
    but if it were not possible to do that, that we would recommend
    alternatives to that. And we have been at the table. We plan to stay
    at the table, and we are certainly hopeful that we can work out a
    good bill. But it has to be a good bill from our perspective.
       Senator LEAHY. I understand.
       Now, I will include for the record, Ms. Seminario, some questions
    on chest X-rays, and that will sort of follow up on what you and the
    Chairman have talked about. But, again, I appreciate it. You and I
    want to help the Chairman keep to the time, too.
       Chairman SPECTER. Thank you very much, Senator Leahy.
       Senator Sessions?

                  STATEMENT OF HON. JEFF SESSIONS, A U.S. SENATOR
                            FROM THE STATE OF ALABAMA

       Senator SESSIONS. Thank you, Mr. Chairman, and thank you for your
    leadership on this important issue. Asbestos litigation has been a
    colossal disaster for the litigation system in America. I cannot think
    of anything that is more embarrassing to me as someone who believes
    in a good, efficient legal system than a system that has paid out tens
    of billions of dollars, put companies in bankruptcy, but only 40 percent
    of the money being paid out going to the people who are sick, and many
    of those under this system today receiving money are not sick. Hundreds
    of thousands of lawsuits are pending in Federal courts today, and they
    have been pending. They are handled in huge groups. Individual
    plaintiffs are not often having their day in court. There is just no
    way physically to do that, as, Judge Becker, I think you have indicated
    now before us.
       So I am very concerned about this system. There is no doubt in my
    mind that we can create a trust fund that will allow people who are
    sick to receive compensation promptly, to receive it fairly, to get
    more than they would get under the current system, to relieve the
    stress on the courts, to end this aberrational thing where some
    plaintiff gets $50 million and some plaintiff gets $500,000 for the
    very same illness just because of a different jury and a different
    situation. I believe we can make improvements in the way we do that,
    and we should do that.
       This is not a perfect piece of legislation. It is not even a pretty
    piece of legislation. I don�t know how to make it pretty or better.
       I know we can get more money to the victims and we can get more
    money to the victims promptly. From my experience in the system, victims
    receive a check from some defendant, one of maybe 300 they have sued
    for $250. The lawyer takes that 30, 40 percent of it, and they get
    this little check. Six months goes by, another one, another company
    sends in their check. Some fund sends in their check. The idea that
    today under the current system victims are getting substantial
    compensation promptly is just not so. I know, Ms. Seminario, you know
    that, and that is one reason you are interested in having a fund that
    would work better for the victims.
       Is it a tax? We need to talk about who is paying and how they are
    being paid? Is it an allocation of liability or a tax? I don�t know.
    Maybe it is a little bit of both, Judge Becker. What do you think? To
    assess the companies that are being held liable today in a trust fund,
    would you construe that as a tax?
       Judge BECKER. Well, to me, a tax is what is paid by the taxpayers,
    and under Section 406, nothing can be imposed on a taxpayer or on the
    Government. Loosely, you could call it a tax, but basically it is a
    contribution in lieu of what they would be paying in the tort system.
    It is a kind of fair approximation, and it seems to me within the power
    of Congress within the Commerce Clause to make these rough
    approximations, rough justice. Rough approximations based on policy
    judgments is what you folks do, and I think when you do it, it is not
    really right to call it a tax.
       Senator SESSIONS. Well, whatever, it is an assessment of some kind.
    We need to be careful how we do that and make it as fair as we possibly
    can.
       Under the attorneys� fees provision, 5 percent of $140 billion is
    $7 billion. At one point this bill was up to 20 percent; that is $28
    billion of the fund going to attorneys. And I just do not believe that
    is necessary. These are going to be much more akin to workmen�s comp
    or Social Security claims where the attorneys follow the processes,
    and if they have medical proof that the person is sick, they are going
    to be paid.
       Mr. Berrington, would you agree with that?
    Mr. BERRINGTON. Absolutely. It is absolutely analogous to a workers�
    compensation system.
       Senator SESSIONS. And they do not get big fees and do not need big
       fees.
       Mr. BERRINGTON. And, ideally, in the system, which I think is well
    laid out in the legislation, most people should not need an attorney at
    all. The Labor Department is obligated to provide assistance to help
    people work through their claims if they need that. And so attorneys�
    fees, if they are necessary at all, should be not very high.
       Senator SESSIONS. Well, attorneys have made enough money in these
    cases. These attorneys, many of them, have just become incredibly rich
    over it. I don�t think even they are proud of the current system, and
    I think most trial lawyers know it needs to be fixed.
       With regard to exigent cases, such as mesothelioma, Judge Becker,
    just briefly how much does the fund contemplate today?
       Judge BECKER. $1.1 million.
       Senator SESSIONS. $1.1 million. What about the concern that--
    normally, would they not be paid promptly, once this fund is up and
    running, how soon would it take before a claimant came in with a medical
    report that they had meso, they had exposure significantly to asbestos,
    and made their claim before they got the 1.1?
       Judge BECKER. I think it should not be more than a couple of months
    because the everything is going to go up--they are going to use websites,
    I assume, and you can download the form from the websites, and there
    is instruction, and we have a claims facility to process these. You do
    not have causation problems in mesothelioma.
       Senator SESSIONS. Right.
       Judge BECKER. The only known cause is asbestos exposure.
       Senator SESSIONS. Now, what about the concern that as the fund is
    coming online, the legislation is passed, there would be some delay--I
    have heard as much as 2 years--before the mesothelioma claimants would
    get their money? Is that correct?
       Judge BECKER. I don�t think that is true. I think you are talking
    maybe 60 to 90 days.
       Senator SESSIONS. Ms. Seminario, do you have a different view of that?
       Ms. SEMINARIO. The different view is that I think for mesothelioma
    victims, hopefully the start-up will be very quick. But most of the
    victims are not mesothelioma victims, but they are also very sick. And
    so the 2 years applies to everybody who is not terminally ill, and
    based upon the CBO estimates, you are talking about 60,000 to 80,000
    people who fall in that category, who are either pending or claims will
    come in in the first 2 years of the fund.
       So that I think is the bigger concern, this very large number of
    sick people who really will have nowhere to go perhaps up to 2 years
    of time. And I would just point out that--
       Senator SESSIONS. But right now you would admit that the average
    plaintiff that files a lawsuit is waiting 2 years or more before they
    begin to receive any substantial compensation?
       Chairman SPECTER. Senator Sessions, your clock--
       Senator SESSIONS. You are right. I am sorry.
       Chairman SPECTER. It has defective wiring. Your red light has been
    on from the start, so you have not had a timer. We are trying to get
    that fixed. But your time has expired. But if you want to finish up
    that last question, go ahead.
       Senator SESSIONS. I would just ask--
       Ms. SEMINARIO. I think generally for many of them it does, but some
    of them can get very quick access right now in the bankruptcy trust.
    They can go file a claim and get ready compensation. Those are going
    to be extinguished immediately. We think they should remain in place
    while the fund is getting up and going and give people at least a place
    to go to receive compensation from that source of--from that remedy.
       The other thing is a lot of these people have already been waiting
    for years because of the stays of Halliburton, Babcock and Wilcox,
    and others, and we don�t think it is fair that people who have been
    waiting 5 or 6 years have to wait another 2 years. So we think this 2
    years is too long and that there can be more work done on trying to
    deal with the issues for those victims.
       Chairman SPECTER. Thank you very much, Senator Sessions.
       Senator Kennedy?

               STATEMENT OF HON. EDWARD M. KENNEDY, A U.S. SENATOR
                         FROM THE STATE OF MASSACHUSETTS

       Senator KENNEDY. Thank you very much.
       Senator Specter and Senator Leahy have, as we have all noted,
    devoted an enormous amount of time and effort to negotiating this
    revised asbestos trust fund legislation, and they deserve great
    credit for their work. And I want to thank Judge Becker as well.
       But the bill before us still contains serious flaws which make it
    unfair and unworkable, and it does not provide a reliable guarantee
    of just compensation to the enormous number of workers who are
    suffering from asbestos-induced disease, as we have just been listening
    to.
       The problem is that powerful corporate interests responsible for
    the asbestos epidemic have fought throughout this process to escape
    full accountability for the harm that they have inflicted. The real
    crisis which confronts us is not an asbestos litigation crisis; it is
    an asbestos-induced disease crisis. All too often the tragedies these
    workers and their families are enduring become lost in a complex debate
    about the economic impact of asbestos litigation. We cannot allow that
    to happen.
       The litigation did not create these costs. Exposure to asbestos
    created them. They are the costs of medical care, the lost wages of
    incapacitated workers, the costs of providing for the families of workers
    who died years before their time. Those costs are real. No legislative
    proposal can make them disappear. All legislation can do is shift those
    costs from one party to another. Any proposal which would shift more
    of a financial burden onto the backs of injured workers is unacceptable
    to me, and it should be unacceptable to every one of us.
       The legislation before us would close the courthouse doors to asbestos
    victims on the day it passes, long before the trust fund will be able to
    pay their claims, as Peg Seminario just illustrated. Their cases will be
    stayed immediately. Seriously ill workers will be forced into legal
    limbo for up to 2 years. Even those victims who have less than a year
    to live will be forced to stop their cases for 9 months, and many will
    die without receiving either their day in court or compensation from
    the trust fund.
       Experts tell us the asbestos trust created by the legislation is
    seriously underfunded. It is $13 billion less than the amount provided
    in the Committee�s 2003 legislation, even though many of the award
    values have been increased. The funding plan in this bill relies on
    very substantial borrowing in the early years as the only way to pay
    the flood of claims.
       The result of this will be a huge debt service cost over the life
    of the trust fund that could reduce the $140 billion intended to pay
    the claims by 40 percent or more, according to testimony we will hear
    today. The amount remaining would be far too little to pay claims to
    cover all of those who are entitled to compensation under the terms
    of the bill.
       We cannot allow seriously injured workers with valid claims not to
    be paid fully in a timely manner by the trust. That would be a shameful
    injustice.
       I am particularly upset by the change in the way lung cancer victims
    are treated. Under the medical criteria adopted by the Committee
    overwhelmingly 2 years ago, all lung cancer victims who had at least
    15 years of weighted exposure to asbestos were entitled to receive
    compensation from the fund. That provision now has been removed. Under
    this bill, the lung cancer victims who have had very substantial
    exposure to asbestos over long periods of time are denied any
    compensation unless they can show scarring on their lungs.
       The Committee heard expert medical testimony that prolonged asbestos
    exposure dramatically increases the probability that a person will get
    lung cancer even if they do not have scarring on their lungs. Deleting
    the Level VII category will deny compensation to approximately 40,000
    victims suffering with asbestos-related lung cancer, and under that
    legislation as now drafted, these victims are losing their right to
    go to court but receiving nothing from the fund. How can any of us
    support such an unconscionable provision?
       The bill also tampers with the agreed upon medical criteria by
    raising the standard of proof for each disease category. The new
    language requires the workers to prove that asbestos was a substantial
    contributing factor to their disease instead of just a contributing
    factor. This is a major increase in the burden workers must overcome
    to receive compensation, and it is a serious step in the wrong
    direction, raising the bar even higher on injured workers.
       This bill shifts more of the financial burden of asbestos-induced
    disease to the injured workers by unfairly and arbitrarily limiting
    the liability of defendants. It does not establish a fair, reliable
    system that will compensate all those who are seriously ill due to
    asbestos, lacks a dependable funding stream which can ensure that all
    are entitled to compensation actually receive full and timely payment.
    These are very basic shortcomings. We cannot allow what justice
    requires to be limited by what the wrongdoers are willing to pay. Unless
    substantial improvements are made in the legislation to the Committee�s
    markup, I intend to vote no.
       I know my time is just about up, Mr. Chairman. I was just asking
    Peg Seminario about the Title 7 provision, if she could just describe
    briefly for the Committee why those victims were included in the original
    medical criteria and why they should be eligible for compensation in
    the trust fund.
       I thank the Chair.
       Ms. SEMINARIO. The original medical criteria had three categories
    of lung cancer. The Level VII lung cancers were those individuals
    diagnosed with lung cancer that was related--had 15 years of substantial
    occupational exposure to asbestos and a determination made that the
    lung cancer indeed was asbestos-related. And so it was a group that
    did not have scarring on the lungs that showed up on X-ray. And the
    medical studies and the epidemiologic studies will show that people
    without scarring, without these underlying markers indeed are at
    increased risk. It had a higher level of exposure when you did not
    have the X-ray changes than the exposure requirements for those
    individuals who had asbestosis or has pleural disease. And so there
    was a higher burden on them to show exposure, but they indeed were
    covered under this category.
       The other provision was in the bill that each of those cases had
    to be reviewed by a physicians panel, a three-member physicians panel,
    for confirmation. And so we felt pretty comfortable that the evidence
    was strong, but also that they would be reviewed and confirmed by
    experts before payment was made.
       Senator KENNEDY. I thank the Chair. My time is up.
       Chairman SPECTER. Thank you very much.
       Senator Cornyn? We have the early-bird rule, and I commented to
    Senator Cornyn that it was my error in not calling on him earlier.
    But now you have the floor, Senator.

                STATEMENT OF HON. JOHN CORNYN, A U.S. SENATOR FROM
                                THE STATE OF TEXAS

       Senator CORNYN. Thank you, Mr. Chairman. And let me add my
    congratulations to you and the Ranking Member, Senator Leahy, and
    all the people on this Committee who have worked so hard with so many
    people here in this room to try to get us where we are today.
       I regret to say that I cannot support the bill in its current form,
    but I am committed to continuing to work with you and the Committee
    to try to get the bill to the point where I can support it and to
    encourage the legislative process to move forward.
       From my perspective, there are two major criteria by which this
    bill should be judged: number one, its ability to pay only people
    who are sick with asbestos-related disease; and, number two, that it
    provide the exclusive means to do so, completely supplanting the
    current dysfunctional system. And there are a number of provisions
    in this very lengthy bill, and, again, this has been a complex,
    contentious process, I think as Judge Becker said, and we have all
    tried very hard and will continue to try very hard to deal with
    some of the challenges here.
       I am concerned that we still do not yet have good, solid information
    that allows us to predict the viability of the fund. I would just
    note--and I look forward to additional testimony we will have here
    later--that the CBO, for example, on a previous version of this bill
    estimated that about 76 percent of the people who apply for benefits
    will not be eligible for compensation, but will be eligible for
    medical monitoring. Other estimates, from Goldman Sachs, for example,
    go up to 82 percent they estimate will be not eligible for compensation
    but will be eligible for medical monitoring. I think we need to drill
    down and understand better the basis for those estimates.
       And Judge Becker has said in previous testimony--and I again want
    to extend my appreciation to him for his hard work--we really do not
    have good information in many respects by which to estimate the number
    of claims that will actually be made. There are models that we have
    heard about and we will hear more about today which provide some comfort
    level, but none of us should be fooled into thinking that we actually
    know how many claims will be made and what the composition of those
    claims will be.
       We have heard in our previous testimony from representatives, for
    example, of the Manville Trust that has extensive experience with the
    claims composition of asbestos trusts who disagrees with the premise
    upon which this particular trust is made and whether it will be enough
    money. I worry because there are some who I have heard during the
    course of our proceedings who said, well, there is plenty of money and
    we have a cushion, so we should not worry about leakage.
       I agree with Mr. Berrington that there are still leakage concerns
    in this bill. For example, collateral sources, while ostensibly would
    be deducted from the bill, it makes clear also that there are significant
    exceptions to those collateral sources, statutory funds, and which would
    provide an opportunity for double-dipping, which I believe could
    potentially jeopardize the fund.
       If you look at the 9/11 fund, it was estimated there that if there
    were no collateral offset rule there, the fund�s cost would be
    decreased--or the fund�s benefits would be decreased by 29 percent.
    Now, here we have purported to deal with that, but at the same time
    what one page giveth, the other page taketh away. And that is an area
    that I think needs to be addressed as well.
       I am still concerned about the screening program contained here.
    There is, over the life of the fund, $600 million set aside for medical
    screening, and there is no area on this subject that has been more
    rife with abuse and productive of claims without any real medical or
    other justification than the medical screening programs that we have
    heard about during the course of these proceedings. This $600 million
    will pay for approximately 400,000 medical screenings under the course
    of this trust fund.
       So those are some of my concerns. I want to compliment again-- I
    know it sounds like I am being entirely negative. I am not. I think
    there has been substantial movement forward with regard to the
    elimination of Category VII and the holding of attorneys� fees to a
    modest amount, which is commensurate with a no-fault, non-adversarial
    application and a trust fund process.
       Thank you, Mr. Chairman.
       Chairman SPECTER. Senator Feinstein?

               STATEMENT OF HON. DIANNE FEINSTEIN, A U.S. SENATOR
                             FROM THE STATE CALIFORNIA

       Senator FEINSTEIN. Thank you very much, Mr. Chairman.
       Just to kind of relook at history for just a moment, the bill that
    came out of Committee sometime ago was $108 billion, with a $45 billion
    contingent reserve, but that contingent reserve may or may not have been
    triggered.
       Then the Frist bill that went on the floor of the Senate was $104
    billion, with a $10 billion contingent reserve.
       This bill has no contingent reserve. It is a hard $140 billion. And
    essentially the affected business communities have pledged to make
    good that money. As I�ve said before, it is very important to me that
    there be transparency with respect to who is contributing what to this
    fund. It has to stand the test of public scrutiny. So I think that is
    important.
       One of the things that I think Judge Becker knows, and certainly the
    Chairman and the Ranking Member know, that has concerned me for some
    time is the possibility of a takings or a due process suit against the
    bill. There is an ad in this morning�s Washington Times which is put
    there by what I understand to be a coalition, the Coalition for
    Asbestos Reform, which I am told is a combination of trial lawyers
    and businesses that are opposed to the bill. And they make the takings
    argument. Also, a good friend of all of ours from the Chicago School
    of Law, Professor Chemerinsky makes that argument as well. And he says
    that he believes that, ��The Act would violate the Takings Clause by
    taking property without just compensation, specifically violating the
    Constitution because it abrogates rights secured by valid contracts
    of insurance while requiring the firms that held those rights to
    contribute to the trust fund. This kind of double exaction requiring
    firms to contribute to the trust fund as a substitute for tort liability
    while simultaneously taking from firms the very assets they have
    accumulated in order to discharge those liabilities cannot, in my
    judgment, be squared with basic constitutional principles.��
       As Judge Becker knows, I have had some concern about that and have
    proposed that in the start-up, instead of taking the $4 billion from
    the asbestos trusts--Libby, Montana, Western-MacArthur, and I believe
    two others--that those monies be incorporated on a staggered basis
    over a 4-year period of time, a billion, a billion, and a billion each
    year, in the hopes to avoid that problem. But my suggestion was not
    accepted by others, and I would like to ask particularly the lawyers
    here--I have no doubt that there is going to be litigation against the
    fund. And it seems to me we ought to do everything we possibly can to
    see that the takings and the due process arguments are mooted since
    they are now being waged as major attacks against the bill.
       I would like to ask anyone who would care to answer, beginning with
    Judge Becker, how likely the takings/due process argument is to be
    successful, and whether the proposal that I made, which was rejected,
    might ameliorate it.
       Judge BECKER. Well, as all of you know, the $4 billion that is in
    the trusts has to be turned over to the fund. In the event that a
    constitutional challenge prevails, business guarantees the $4 billion.
    There is only $136 billion plus 4, but if that 4 is lost to the fund,
    business in the bill guarantees the other $4 billion. That is just
    background.
       Now, I have read the briefs, as it were, Senator Feinstein. I have
    not heard oral argument yet. I have read the arguments on both sides.
    There is a very convincing letter from Carter Phillips, a leading member
    of the Supreme Court bar from the Sidley Austin firm who says that
    there is no constitutional problem. I have also read Professor Tribe�s
    view. As I said, I have read the briefs. I have not heard oral argument.
       My inclination is that there is not a takings problem, there is not
    a due process problem. These trusts are the creations of the bankruptcy
    courts for the most part. To some extent, they are the creatures of
    contract. But they are all approved by the bankruptcy court and by
    Congress. But Congress has the overarching power under the Commerce
    Clause, it seems to me, to abrogate them. And there are benefits to
    the victims and benefits to the polity.
       Now, will there be a challenge? I suppose there will be a
    constitutional challenge. I don�t know how we can avoid it. The
    judicial review provisions impose upon the courts, including the
    United States Supreme Court, the obligation to give it expedite
    consideration, just as they did in McCain-Feingold. They did give
    it expedited consideration, and I would assume they would give this
    expedited consideration.
       My view is that the constitutional challenge will fail, and argument
    has been made that the trusts will not have enough money to fund the
    constitutional challenge. I don�t know how much the legal fees will be.
    I would be very surprised if you could not get lawyers who would take
    that case.
       Chairman SPECTER. Senator Feinstein has raised an important issue.
    You have asked for the other lawyers on the panel--Gov-ernor Engler,
    you are a lawyer. Do you want to answer that question?
       Governor ENGLER. Well, there are lawyers, and then there are judges
    who are retired heads of circuit courts. I do not want to add much to
    that, what I have heard.
       I would observe I understand that the Supreme Court in one of those
    exhortations to the body politic to act on this has even themselves
    suggested the possibility of a trust fund. But that is unsupported in
    terms of--that is not a legal brief, obviously, for it, but just a
    suggestion that came from on high.
       Chairman SPECTER. Thank you.
       Senator FEINSTEIN. Thank you very much.
       Chairman SPECTER. Senator Coburn?

                    STATEMENT OF HON. TOM COBURN, A U.S. SENATOR
                          FROM THE STATE OF OKLAHOMA

       Senator COBURN. Well, thank you, Mr. Chairman, and thank you for
    the work that you and Senator Leahy have done. And I appreciate the
    work. I was not here through the other 5 years of working on this bill,
    and I would not know that I would want to be here if it is going to
    take 5 more years to do this.
       I have real concerns about this bill. I have concerns that people
    who don�t have disease are going to get compensated under it, which
    just means it is going to lessen the compensation that should go to
    those people who truly have disease related to asbestos. I can tell
    you that the literature does not support the Section VIIs in anyway,
    and there will be medical testimony today to that effect.
       We have no measure in this bill for--we have exposure, but we have
    no measure of exposure in terms of particulate matter, which we know
    is important in terms of causation of disease and asbestos. There are
    a lot of assumptions in this bill both in Section 6 and in Section 8
    where there is not a requirement for particle exposure. And we must
    not forget that background basic lung cancer is high in this country,
    a lot of it associated with smoking. We are rewarding former smokers
    when that most likely was the cause of their lung cancer, and at a
    very high level. So, in fact, the bill�s medical criteria still lacks
    a lot in terms of where it should be to truly compensate people who
    have been injured by asbestos. And that is what we ought to be doing.
       I think it puts at risk the fund. I think a lot of the things in
    the bill, the presumed exposure, puts at risk in the fund, the fact
    that you can have a disease, early disease with asbestos, be compensated
    for it, and then if you end up with a major disease or malignancy, we
    pay you that, but we do not deduct the early compensation, which I
    think is wrong. That is still in the bill. So for a number of reasons,
    I am not to the point where I can support this bill yet. And more
    importantly, I worry about the small businesses. I know Governor Engler
    represents the National Association of Manufacturers. But, you know,
    I am not sure they are at the table, the small businesses, that they
    are going to be put out of business by this fund, who have not had
    any problems but yet might fall into the industry. And who are they?
    What are their names? How many people do they employ? And we are going
    to take from them, when, in fact, they may not have an exposure.
       I think we have to know who those people are before we finish up
    anything on this bill, and they need to be informed. And I would love
    for Governor Engler to answer the question. Who are these people? And
    are they members of NAM? Or are they members of the alliance? Or do
    they not even known this is happening to them? Governor?
       Governor ENGLER. Thank you, Senator. I think your argument is best
    argument for trust fund that has been made to date. The criticism of
    the medical criteria, because this is where I started. I thought, Why
    couldn�t we use criteria to fix the tort system and let these juries
    all over America handle the case? And the problem is we can�t. I mean,
    we are struggling with the medical criteria we are writing in this
    bill, and I think it is a lot better and becomes more of a uniform
    standard to apply across America than simply letting the tort system
    work with three-quarters of a million cases.
       As to your question about the unidentified businesses, one of the
    problems that we have out there, as this thing stays in the tort system,
    as the fees go to the--not to the injured people but to the legal
    process itself and we get literally hundreds of different standards
    being decided by different courts and juries out there, as more companies
    --and we are nearly 80 now. The last one was an Arizona company about
    2 weeks ago that when into bankruptcy. It pushes out deeper and deeper.
    There are 8,400 defendants. We can provide a list of everybody who is
    a defendant today that we at least have found and identified. But as
    we send more people into bankruptcy, Senator, we get deeper into the
    roster of American companies.
       And so I am worried about small and large--most of the membership
    of the National Association of Manufacturers are small, you know, from
    20 employees on up. But there are people we cannot identify, but we
    know they are going to get caught if we do not stop the hemorrhaging
    on this problem.
       Senator COBURN. I want to make another point. Part of my problem
    with what Congress does too often is they do not pay attention to what
    real science is. I am just going to put into the record--we have had
    testimony on pharyngeal and laryngeal cancer associated with asbestos,
    and the studies that are represented to take care of that show a slight
    increase in risk. But the science stinks there because the number one
    cause of both of those in this country is alcohol tobacco, and neither
    one of those confounding factors were in any of those studies. So the
    studies mean nothing. And yet we are going to try to put forward to
    pay people for diseases caused by something else and make those who
    are suffering from asbestos today not be compensated because we are
    going to pay for a disease that is not there.
       There are big problems with the medical criteria and including
    expanding that and not compensating--or not deducting for earlier
    disease against that. And my time is up and, Mr. Chairman, I yield back.
       Chairman SPECTER. Thank you, Senator Coburn.
    Senator Durbin?

               STATEMENT OF HON. RICHARD J. DURBIN, A U.S. SENATOR
                          FROM THE STATE OF ILLINOIS

       Senator DURBIN. Mr. Chairman, I want to thank you and Senator Leahy
    not only for your hard work on this bill but also for your courtesy in
    allowing this hearing. When I suggested it last week, you were prompt
    to say yes, we should have a hearing, and I am heartened by that. You
    have been eminently fair throughout this process, and I thank you for
    that.
       Senator Leahy, though we may disagree on this bill, you are my
    friend and we have had a courteous and constructive relationship, which
    I am sure is going to continue even as we debate this bill.
       I also want to thank Judge Becker. I know you are not on the payroll,
    but you might as well be. You have done an awful lot of hard work to try
    to bring us to this day, and though I may disagree with your work
    product, I certainly respect your contribution and public service in
    so many different ways.
       What troubles me about this hearing is that it is so sterile and
    so bloodless. It is a hearing about money. Who pays? How much do they
    pay? I just see this issue so differently. This is about more than
    money. It is about justice. It is about fairness. And as Senator Kennedy
    has said, it is about innocent people who, among these victims, knowingly
    exposed themselves to deadly asbestos. At best, a small, small
    percentage may have. But most of the people who were victims of this
    illness did not even know they were being exposed at the time. They
    are innocent workers, innocent bystanders, innocent family members
    doing the laundry of workers. Through no fault of their own, they have
    been exposed to this deadly poison. And we know that companies like
    Libby and W.R. Grace knew long ago the danger of asbestos, kept mining
    it, kept producing it, kept making profits on it, willing to take the
    risk that no matter how much they were sued for, they were going to
    make more money selling the product. That is what it was all about.
      What is unfortunate in the hearing today is we don�t see the faces
    of victims who could tell us stories that may, just may touch the
    hearts of some of the members of this Committee to think twice, not
    just about how much companies and insurance companies are going to
    give to this fund or trust funds are going to give up but, rather,
    how much victims and their families will recover as a result of what
    we do today, saying to them that they can no longer go to the courtroom,
    no longer appeal to their neighbors and friends for fairness and justice
    but, rather, be turned into this administrative law system.
       A couple of those victims are here today, and since I have not spoken
    to them ahead of time, I am not going to ask them to stand unless they
    want to. But their stories, one in particular here, Paul Sigelbaum I
    believe is here today. Paul, if you want to stand up, you are welcome to.
       My friends on the Committee, this is the face of a mesothelioma
    victim, and if you look at it, look at Paul standing here, you may not
    know that a year ago he went through a surgery in Omaha, Nebraska, that
    lasted 10 hours, and as a result of that surgery, removing tumors and
    other organs and things from his body, he weighed 33 pounds less at
    the end of that 10-hour surgery. He is fighting mesothelioma. His wife
    is with him today, I believe. Not with you? But you have said in the
    statement that you said to me you think there are possibly four different
    exposures in your life that could have resulted in this mesothelioma.
    You have recovered some money from some. You are hoping to recover money
    from others so that your wife can be taken care of, you can be taken
    care of from this point forward.
       Understand what this bill does. Paul, thank you for standing up.
    But understand what this bill does. It says that whatever Paul has
    recovered from those who are culpable of exposure will be set off and
    deducted from the maximum amount he can receive under this bill. It
    means that even if there are companies still liable to him for what he
    has gone through, we are cutting off their responsibility to pay him
    and to pay his family.
       Ellen Patton is here from Annapolis, Maryland, and, Ellen, I thank
    you for standing up. This is the face of a mesothelioma victim, 45
    years old. She was exposed to it, she believes, because her father did
    home repairs and used materials that exposed her to asbestos. She has
    been through five different bouts of aggressive chemotherapy, struggling
    at great expense to keep living every day, never knowing if this is
    going to come back.
       Ellen, thank you for being here today, and thank you for sending
    along this little blue band as a reminder that this debate is about
    people. Thank you for standing up. It is about what they will recover.
    And though $1.1 million seems so large and so generous, it is not.
    The medical bills which these people have incurred are in the hundreds
    of thousands of dollars.
       And so while we are saying that the companies and insurance companies
    are going to battle one another now as to who is going to pay into this
    trust fund, I would just say to Judge Becker: You said earlier if you
    have a meso case in trial, you are okay, finish your trial. But is it
    not true, Judge--and you know this for a fact-- if the defendant has
    successfully argued to continue the case beyond the date of signing
    this bill, you are finished. Your day in court is over. No matter how
    much you have been through, no matter how much you have worked to
    prepare your case, for companies that are liable for the illness which
    is slowly taking away your life, your days are over simply because one
    judge in one court has said, ��I will grant the defense motion for a
    continuance.�� That is true, isn�t it, Judge?
       Judge BECKER. Yes, sir.
       Chairman SPECTER. Senator Durbin, you are well beyond time.
       Judge BECKER. Yes, that is correct.
       Senator DURBIN. I don�t think there is fairness and justice in that.
    Thank you.
       Chairman SPECTER. Senator Durbin, I am a little surprised by your
    complaint about victims not being called when you asked for three
    witnesses and you got three witnesses. If you wanted to call some of
    the victims, you had people to call. You chose instead to call Mr.
    Mark Peterson from the American Trial Lawyers Association, Dr. Philip
    Landrigan from the American Trial Lawyers Association and Professor
    Eric Green also on my sheet marked ATLA.
       Let the record also show that I personally met with Linda Reinstein
    and with Ellen Patton, and I understand their objections to the bill.
    And my staff met with them on many other occasions, and if it is to be
    testimony from victims, we would have been able to have many, many
    more than there are spaces for seats in this room. But it does surprise
    me that when you have three witnesses, you complain that no victims
    were called.
       Senator DURBIN. May I respond, Mr. Chairman?
       Chairman SPECTER. By all means. I would like to hear a response.
       Senator DURBIN. Well, I would like to give you a response. Thank
    you for this hearing. But understand we are planning on spending 3 or
    4 hours on this bill in a hearing. We should be spending much more time
    because of the gravity and severity of this issue and because it affects
    so many people.
       I had to choose, and I tried to bring in the expert testimony. But
    the point I am making to you, Mr. Chairman, is that there are many
    people who could be called, who should be called. It is interesting to
    me that the proponents of this legislation are not calling victims
    either because you understand, as I do, that many of them are
    disappointed with this legislation.
       Now, I could have called a victim. Maybe I should have. But I picked
    expert witnesses. The point I want to make to you is I wish this was
    more than just a 3- or 4-hour hearing. I think this bill and its
    importance and gravity require more.
       Chairman SPECTER. Well, Senator Durbin, when you say we should be
    spending more time on this bill, don�t include me.
       [Laughter.]
       Chairman SPECTER. Don�t include me. We had about 40 sessions on
    this bill. I didn�t see you attend one.
       Senator DURBIN. I beg your pardon, Mr. Chairman. When you have had
    hearings on this bill and Senator Hatch before you, I have been in
    attendance. I sat through the hearings a year or more ago. I will just
    wager to say with the exception possibly of the Chairman and Ranking
    Member, I spent more time at the table than any other member. And I
    wish that you would take a look at the record before you would make a
    statement like that.
       Chairman SPECTER. Well, the statement I heard you make was that we
    should spend more time on the bill. And the last time I looked, ��we��
    was the plural first person. Don�t include me for spending more time.
    And I am not going to nitpick about how many hearings there have been,
    but this bill has not suffered from lack of analysis and consideration.
    And when you ask for a hearing and I give it to you immediately and you
    have got a lion�s share of the witnesses, three witnesses, I think it
    is just out of line for you to complain about no victims being called.
       Senator DURBIN. Mr. Chairman--
       Chairman SPECTER. Senator Leahy, do you want recognition?
       Senator LEAHY. Just this, and maybe we should get back on the subject
    at hand. I know the Senator from Illinois is very concerned about the
    victims. Every Senator here is concerned about the victims. We would not
    be having these hearings if we were not.
       I have met with dozens and dozens of victims, many of whom have
    testified in previous hearings. My staff has met with them. We have had
    countless meetings with Judge Becker and others. Victims and those
    representing victims have been invited and have been in attendance at
    most if not all of these meetings, as have the trial lawyers, as have
    labor and insurance and industry.
       Like any piece of legislation, I suppose we could meet with every
    single person involved. We are talking about tens of thousands of
    people. But I think throughout I have not heard a single discussion
    where the question of the victims, especially those victims who are
    facing in effect a death sentence, have been discussed.
       Senator DURBIN. Mr. Chairman, may I say a word?
       Chairman SPECTER. You may.
       Senator DURBIN. I just want to say I understand the time that you
    have spent on and put in this bill, Senator Leahy as well. And I am
    not being critical of that. I think you will concede the fact that
    many of the meetings which you have had have not been open to the
    members of this Committee.
       Chairman SPECTER. No, that is not true.
       Senator DURBIN. Well, I will just tell you that your negotiations
    that led up to the presentation of this bill did not--there was not an
    open invitation to members of this Committee to come attend those
    meetings.
       Chairman SPECTER. Well, that simply is not true.
       Senator DURBIN. Well, Mr. Chairman, I am sorry, but it is true.
    And three weeks ago, we were handed this bill and saw it for the first
    time.
       Chairman SPECTER. Excuse me, excuse me, Senator Durbin. I am still
    the Chairman here.
       Senator DURBIN. I understand that.
       Chairman SPECTER. And 39 sessions presided over by Judge Becker
    and attended by me were open. Let�s move on.
       Senator Feingold?

          STATEMENT OF HON. RUSSELL D. FEINGOLD, A U.S. SENATOR
                       FROM THE STATE OF WISCONSIN

       Senator FEINGOLD. Mr. Chairman, I want to compliment you and Senator
    Leahy and all the hard work--
       Senator KENNEDY. Mr. Chairman? Mr. Chairman?
       Senator FEINGOLD. Mr. Chairman, do I have the floor?
       Chairman SPECTER. Senator Feingold is recognized.
       Senator KENNEDY. Could Judge Becker answer the last question that
    Senator Durbin asked? He had gone 52 seconds over. Sessions had gone
    a minute and a half over. So can�t we have Judge Becker answer Senator
    Durbin�s last question?
       Chairman SPECTER. Senator Durbin, do you have a question pending
    for Judge Becker?
       Senator DURBIN. I asked the judge for his comment about the 9-month
    hiatus on these mesothelioma cases, and I want to make it clear--
       Judge BECKER. Senator Durbin, I don�t really understand Peg
    Seminario�s you have got to wait 2 years. These claims are--the exigent
    claims, including the meso claims, get priority. And I do not anticipate
    that it is going to take 2 years to get around to these claims. These
    claims are going to be expedited. They have the offer for judgment
    proposal of Senator Feinstein, and there is the contracting out. So
    these claims are going to be expedited.
       The 9 months is if they are not--if the system is not up and running
    and processing the claims in 9 month, then they go back to the tort
    system. But that doesn�t mean the claims will wait 9 months. I think
    these claims with the contracting and the offer for judgment will be
    moved ahead more quickly. And with respect to other sick people who
    are not exigents, it does not mean that they will wait 2 years. It
    just means that if the system is not up and running and processing
    the claim within that period, then they can go back to the tort system.
    But I would anticipate with an efficient administrative system, these
    claims will be processed well before the 9 months or well before the
    2 years.
       Senator FEINSTEIN. Mr. Chairman, can I say one thing on this point?
       Chairman SPECTER. Senator Feinstein?
       Senator FEINSTEIN. If you would allow me, Senator Durbin, because
    I wrote this language, we wrote it with the view of trying to get the
    quickest consideration for the sickest victims. This was the goal of
    this legislative part of the bill. And I started at lesser months, but
    the view was that it could not be done, the system could not be gotten
    up and running in that period of time. So it is my belief that this is
    the shortest period of time in which the system could be up and running.
       Secondly, as Judge Becker pointed out, the private contracting out
    there is to minimize any chances that a mesothelioma victim will not
    be dealt with in this 9-month period. So we have got the shortest
    period and then we have got some additional protection for that. I want
    it, you know, to be just as soon as possible, and this was my
    overwhelming concern. And I just wanted to be able to say that to you.
       Chairman SPECTER. Senator Feingold?
       Senator FEINGOLD. Thank you, Mr. Chairman. I want to thank you and
    Senator Leahy for all the hard work you have put in on the bill. I
    know you have put your heart and soul into it and you are trying to
    accommodate many competing interests and seemingly irreconcilable points
    of view, and I do appreciate that kind of active leadership from a
    chairman. And I do want to thank Judge Becker as well for the enormous
    effort he has put into these negotiations.
       Mr. Chairman, you and I had a good conversation on the phone
    yesterday. I support the concept of a trust fund to pay victims of
    asbestos disease. I am not unalterably opposed to any asbestos bill
    that asbestos bill that might be brought forward. But I do find myself
    in much the same position that I was almost 2 years ago, when Senator
    Hatch made his proposal and we actually spent 6 weeks marking it up
    in the committee. I will only support a bill that in my judgment is
    fair to all parties, all parties involved, including most especially
    the victims of asbestos disease. That means not only do medical
    criteria and claims values have to be fair, but the design and funding
    of the system has to be adequate to pay the victims promptly and
    completely.
       And again, I know you have been working hard on this and so has
    Senator Leahy. But now that you have agreed on a bill, I don�t think
    that you should rush it through the committee. It is a complicated
    bill that varies in significant respects from the bill we saw last
    year. We need to examine it, we need time to examine it and propose
    changes to it. We need to have a real markup in this committee so that
    amendments can be offered. The bill we are considering today, in my
    view, is a marked improvement from the bill that was taken up on the
    floor last year, but it is also inferior in a number of respects to
    the bill that was reported out of committee in July 2003, and I had
    to vote against that bill because I didn�t think it went far enough
    to fairly and adequately compensate current and future victims of the
    horrible diseases that asbestos causes.
       Mr. Chairman, I want to ask some questions of our witnesses, so I
    won�t discuss all of the concerns I have. But let me mention one.
    There has been and will continue to be great disagreement about
    whether the trust fund will be adequate to keep paying victims
    throughout its life. Everyone is working on estimates and there are
    many variables that are simply not knowable with any certainty at this
    time. In some ways, it doesn�t really matter whether the fund is $120
    billion or $140 billion or $200 billion. Any of these estimates could
    be too low or too high. So there are two key things we have to do
    absolutely. First, we have to be sure that there is adequate money
    right away to pay the approximately 300,000 claims that we know will
    almost be filed immediately. And second, there has to be a strong
    sunset provision that will allow victims in the future to file suit
    if this trust fund isn�t able to pay their claims.
       The risk that this trust fund will not work because it is not
    adequately funded at the front end cannot be borne by the victims.
    I want to say it again: The risk that this trust fund will not be
    adequately funded cannot be borne by the victims. I will not vote
    for any bill that does not recognize that basic principle of
    fundamental fairness.
       So let turn to a question that actually relates to the discussion
    that we were just having. One concern I have with this bill is the
    treatment of currently pending, including exigent, claims. The bill
    provides that when the President signs the bill into law, all pending
    claims are stayed. There are then differing provisions on how those
    claims are treated, depending on whether they were exigent or not,
    in other words, if the claimant has a terminal illness. There are
    very complicated provisions for cases going back to the tort system
    after a certain period of time if the fund is not up and running.
       What I don�t understand is why we need to stay any claims where
    someone is sick. As this bill currently stands, there will be 50,000
    people, who are now sick and who have now filed claims in court or
    through a bankruptcy trust, who have nowhere to go. I would like to
    hear from everybody on the panel, what would be wrong with a system
    that says that all the claims where the claimant is sick can continue
    in court or in the bankruptcy trust until the administrator certifies
    that the fund is ready for business; that is, that there is sufficient
    money available to pay claims and that the administrative structure is
    in place to handle those claims? And if the money is paid in settlements
    of court cases or by a bankruptcy trust through its claims process
    between the time the bill is signed and the day of that certification,
    then the entity making that payment gets a dollar-for-dollar credit
    against its eventual liability to the fund if the administrator
    determines that the payments were reasonable.
       If we do that, then it doesn�t matter whether it takes 9 months
    or 24 months or 36 months to get this fund up and running. And I would
    say Judge Becker�s reassurances of a few moments ago would be consistent
    with my point. If he is right, these cases are going to get immediate
    attention, fine; then there is not a problem. But why shouldn�t these
    cases go forward until we are sure? People whose claims are already
    advanced can get paid and the defendants are no worse off in their
    overall liability.
       So I would start with Judge Becker and like to hear each of the
    panelists� comments on this point.
       Judge BECKER. First of all, Senator, with respect to the three-- you
    say the 300,000 claims we know will be filed. I addressed that in my
    testimony. I have discussed that with David Austern. Not only have the
    claims showed a sharp decline, but the vast bulk of the putative
    300,000 are either Level I or people who are maxed out. And the number
    which, according to the most experienced person in this field, will
    be filed is considerably less. But there still will be a lot of claims.
    And I will say to you, Senator, that we have discussed this in our
    negotiations. And as we all know, this is a compromise. The business
    folks said that if we do that, the costs in the tort system and, unless
    you impose tort reform and say that the ones who are the unimpaired
    cannot get paid in the tort system--
       Senator FEINGOLD. You say ��do that,�� you mean not stay the cases?
       Judge BECKER. If we don�t stay the cases, the tort system will
    continue. And the predictions as to the cost to the business and
    insurance folks in the court system are astronomical in terms of the
    verdicts in the tort system. When you say dollar-for-dollar credit,
    but the dollar-for-dollar credit would be on the verdicts in the tort
    system.
       The bottom line is, Senator, that in terms of concept and principle,
    what you say makes a lot of sense. In terms of the kinds of
    accommodations that are necessary--Senator Durbin says, well, it is a
    shame that it is all about dollars. And I understand and respect your
    concern, Senator Durbin, but at a certain level, if there is going to
    be a bill, it has to be about dollars because there has to be a level
    of funding that business pays and insurance pays. And unless this can
    be agreed upon, there simply isn�t going to be a bill. And in terms of
    the give-and-take and the kind of compromise, although what Senator
    Feingold proposes was suggested, it was simply a non-starter and the
    negotiations just totally failed.
       Senator FEINGOLD. Well, I appreciate that answer. I want to be clear.
    I am suggesting that only people who are sick can continue.
       Mr. Berrington?
       Mr. BERRINGTON. Yes, sir, thank you. We have a little bit different
    view, which is that we believe the trust fund is clearly the way to
    compensate victims quickly and fairly. Certainly the tort system has
    not been a great alternative for most victims; it takes years for them
    to get compensation. So we believe the trust fund will get started
    quickly, the cases can be taken care of quickly. And to have any
    incentives in the bill for litigation to continue afterwards we think
    are very troubling, and will indeed encourage those who want to keep
    the tort system--want to keep the new system set up in the legislation
    from actually taking effect, to have an opportunity to do so. Let me
    give you an example.
       The Department provides operational certification, which doesn�t
    mean that there are not cases being processed prior to operational
    certification, it is a judgment under the bill that the program is
    operating sufficiently, that all litigation ought to be cut off. When
    the Department makes that operational certification judgment, even
    under the current bill, my guess is that those who want to keep the
    litigation system going will seek to tie up the Department in court.
    That is a very big problem with regard to the current version of the
    bill. The way that the bill works is that we will pay into the trust
    fund and then we will pay on top of that for all of these cases that
    will come into the tort system. That just isn�t acceptable.
       Your comment about having offsets--I didn�t read the language or
    the idea previously as being that the total amount of money that we
    would have to put into the trust fund would be reduced, but merely
    that the individual insurer or defendant that was paying would have
    an offset against its own payments. Well, the result is that that just
    gets passed around among everyone and we are paying above the $46
    billion. I agree that the issue is about victims and about getting
    them compensation. The trust fund, if you let the trust fund concentrate
    and this legislation concentrate on getting this thing started, once
    the bill is enacted, rather than encouraging everyone to try to continue
    litigation in one way or another, the process will go much faster and
    victims will get compensation much more quickly.
       Senator FEINGOLD. This isn�t about discouraging the concept of--
       Chairman SPECTER. Senator Feingold, you are almost 4 and a half
    minutes over. I know the answers you have been wanting. If you have
    one more question.
       Senator FEINGOLD. I am just trying to get answers to the one question
    that I asked. I haven�t asked an additional question. But, Mr. Chairman,
    if you--I would just like to hear Governor Engler�s response and the
    other responses.
       Governor ENGLER. The other point that, I agree with Mr. Berrington,
    the analysis -- but one point that needs to be made if we stay in the
    tort system, we lose half to 60 percent of the awards. So even in the
    example the Senator from Illinois used earlier, if you net out at 1.1,
    you have actually had to win 1.6 or 1.7 in today�s system because of
    the costs going to the lawyers on the other side. Now, maybe if you
    are suggesting that once this passes, the lawyers would forego the fees
    in order to pay net dollars, the net award, you know, you have a
    different ballpark here. But I think you can�t--conceptually, you want
    to move to the trust fund away from the tort system so that you are
    getting what I think is more money to the plaintiff. If it is about
    money, how much do they get? Today more than half of it is being lost.
    How fast can we resolve these? I think when it is up and running, it
    will be faster. There is that transfer period, but I think it is a bit
    unfair to suggest that you fund dual systems during that changeover.
    You have to stop one and start the other. And I think all of the concern
    about DOL or whatever department--agency, or, if it is independent,
    however it is set up--gets this up and going, we are very keen on getting
    it started very quick.
       Chairman SPECTER. Ms. Seminario, would you like to make a comment
    on that?
       Ms. SEMINARIO. Yes, I would. I would just point out that when the
    bill was reported out of this committee 2 years ago as S. 1125, it
    included an amendment that Senator Feinstein had offered and it was
    unanimously adopted by the committee, which said--it allowed that all
    victims could continue to go in court with their case until the fund
    was up and running and that there would be an offset by the defendants
    or the insurers against the money paid out. So the committee considered
    it, in the interest of justice it was unanimously adopted in the
    reported bill. The provisions in S. 2290 were ones that were put in
    by the business people, insurers, who didn�t like that provision.
       So dealing with the issue of the transition is really, really
    important. As you said, Senator Feingold, the idea that we don�t know--
    and we don�t know exactly how many claimants will come to the fund,
    what will happen 10 years out, 20 years out. We do know right away
    that there are thousands and thousands of people who are sick, who
    have pending claims, and when this fund is up and running, many of
    them will have nowhere to go as it is currently crafted. We think
    that is unfair. We think it does make more sense to allow people to
    go forward. They can make the choice as to whether it is in their
    interest to wait and go to the fund or continue with the litigation.
       And so, again, as a matter of fairness here for victims--and think
    about it from their perspective. What will they do, how will they
    pay their medical bills? You are even extinguishing the existing
    bankruptcy trust where people now have a right to go for no reason
    at all. And so you are leaving many of these victims with nowhere
    to go. We know there is going to be litigation from the bankruptcy
    trust, we know there is going to be litigation from the insurers over
    their formula of contributions. And so the idea that this will all
    get up and going very quickly, while we would all like that to happen,
    there is no certainty that that is the case.
       Senator FEINGOLD. Mr. Chairman, 10 seconds just to respond?
       I just want to say, I am trying to find a way here to resolve some
    of my concerns about the bill, and that was a perfect comment we
    just heard. My comments aren�t adverse at all to the idea of a trust
    fund. It is just at the front end--and these are people that may die
    before this thing is up and running. It is just making sure they get
    something. And it is no way an attempt to keep the tort system going.
    It is just this potential gap. And that is the spirit in which I asked
    the question. Thank you for the additional time.
       Chairman SPECTER. Thank you, Senator Feingold.
       Thank you very much, Judge Becker, Governor Engler, and Ms.
    Seminario, Mr. Berrington, thank you very much.
       We will turn now to our second panel, Dr. James Crapo, Professor
    Eric Green, National Legislative Director Hershel Gober, Dr. Philip
    Landrigan, Ms. Carol Morgan, Mr. Mark Peterson, Dr. Francine Rabinovitz,
    Mr. Alan Reuther.
       Senator COBURN. Mr. Chairman?
       Chairman SPECTER. Senator Coburn.
       Senator COBURN. I just want to put something in the record to make
    sure it is part of our testimony today.
       Chairman SPECTER. Go ahead.
       Senator COBURN. There is somewhere between 700 and 900 background
    cases of mesothelioma a year in this country that have absolutely
    nothing to do with asbestosis. And it is important as we consider all
    these claims that everybody is aware of that. Because to take away
    compensation from those that truly have asbestosis-related mesothelioma
    without making sure that we are not paying for the idiopathic cases
    that we know are not related to that is important. I just wanted to
    make sure that that was in the record.
       Chairman SPECTER. Thank you very much, Senator Coburn.
       Our first witness on Panel II is Dr. James Crapo, professor of
    medicine at the National Jewish Medical and Research Center in Denver,
    Colorado. Medical degree from the University of Rochester, magna cum
    laude from Brigham Young University.
       Thank you for joining us, Dr. Crapo, and we look forward to your
    testimony.

             STATEMENT OF JAMES D. CRAPO, M.D., PROFESSOR OF MEDICINE,
             NATIONAL JEWISH MEDICAL AND RESEARCH CENTER, UNIVERSITY
             OF COLORADO HEALTH SCIENCES CENTER, DENVER, COLORADO

       Dr. CRAPO. Thank you, Chairman Specter, and members of the committee.
    It is an honor to be asked to appear here and comment on this bill. I
    testified regarding this bill about 2 years earlier and have taken the
    opportunity to reevaluate the new and revised bill being considered at
    this time, particularly with emphasis on the medical criteria.
       Now, I want to compliment Chairman Specter and Mr. Leahy on changes
    that have occurred in this bill that I think have significantly
    strengthened it. The deletion of the old Level VII, exposure-only lung
    cancers, is a significant improvement of this bill. I also compliment
    the addition of the concept of substantial occupational exposure as an
    important concept in this bill.
       On reviewing this, it is my opinion that the medical criteria still
    need to be additionally changed in order to appropriately represent
    the best scientific and medical evidence today and design this bill
    so that it will compensate those who are truly injured by asbestos
    without expending large amounts of the trust fund compensating
    individuals who are not injured by asbestos, and thus bringing the
    fiscal stability of the bill into question.
       So, now, the primary issues that I want to address are contained
    in my written statement. I am only going to summarize a couple today.
    The two areas that I think are major concerns that need to be addressed
    in the markup of this bill are, first, pleural changes. Pleural disease
    is really a reaction. Most of it is a small callous on the chest wall
    that does not involve the lung and, in the vast majority of cases, is
    not associated with impairment or disability. One of the problems I
    have with the way the medical criteria in this bill are constructed
    is that it allows pleural change to be a marker of impairment or injury
    that extends through seven of the nine levels in this trust.
       For example, Level I and Level II. The only difference in those two
    levels is that pleural disease is present, but in Level II the
    individual has evidence of mild obstructive lung disease. That is
    caused primarily by smoking. And one of the changes is to compensate
    Level II--instead of doing medical monitoring, creating a situation
    where a smoker with a pleural plaque then suddenly qualifies for
    substantial compensation under this act. At later stages, at Level
    IV and V, for example, pleural disease is allowed to be the primary
    radiographic marker to indicate the presence of severe or disabling
    asbestosis. And in fact, in Level V, with the changes of this bill,
    a person with pleural disease only, who smokes and develops a mild
    decrease in defusing capacity, could qualify as disabling asbestosis.
       These are some incongruities that could be easily and properly
    straightened out. For example, on Level V, it is not appropriate to
    call disabling asbestosis in the absence of any lung parenchymal
    changes on radiographic changes or significant pulmonary function
    changes as indicated by total lung capacity. The gold standards for
    asbestosis are a significant ILO reading on chest radiographs and a
    low total lung capacity with functional disability. Those should be
    the criteria used to look for the high levels of compensation that
    this trust intends for people with disabling asbestosis.
       A second area is in the area of other cancers. The current version
    of the bill under, I think, Level VI, would compensate a large number
    of GI cancers. And provided in my written report, on Table 4, when one
    does a thorough cohort analysis of all the cohorts in which asbestos
    and colon cancer have been evaluated, the meta-SMR for that, as you
    will see on Table 4 in my report, is only 0.89. Now, what that means
    is when you do a meta-SMR, you are looking at all of the cohorts. SMR
    stands for ��standard mortality ratio.�� And a normal or no-change
    from control would be 1.0. For colon cancer, that meta-SMR, looking
    at all the available best medical data, is less than 1, which means
    there is no associated risk between asbestos exposure and colon cancer.
    And yet, there are over 50,000 colon cancers in the United States
    today, and they would qualify, if they have evidence of exposure and
    some pleural disease, to compensation under the trust. I think that
    could deplete the values of the trust and I think we should re-look
    at that.
       And then finally, I have identified several areas that should be
    carefully looked at. Enhanced quality assurance, the use of chest CT
    scans, for which we don�t have the standards today to apply these to
    the field. And I have also encouraged them to look at the issue of
    substantial occupational exposure, where our definition is really good
    to start, but it defines it by exposure duration, not by exposure
    intensity, and it would allow individuals exposed to products where
    they have an encapsulated, let�s say, product, with very, very trivial
    exposures, to qualify as a heavy exposure under the criteria. We need
    to include in the criteria--
       Chairman SPECTER. Dr. Crapo, your time is up. Could you summarize,
    please?
    Dr. CRAPO. Sure. Just one word--we need to include in the criteria not
    only duration of exposure, but intensity of the exposure, to define
    substantial occupational exposure correctly.
       Thank you.
       Chairman SPECTER. Thank you very much, Dr. Crapo.
       [The prepared statement of Dr. Crapo appears as a submission for
    the record.]
       Chairman SPECTER. We now turn to Professor Green, who is the
    court-appointed legal representative for future asbestos claimants
    in the Halliburton case. He is a professor of law at Boston University,
    graduate of Harvard Law School and, with honors, from Brown University.
       Thank you for joining us, Professor Green. We look forward to your
    testimony.

                STATEMENT OF ERIC D. GREEN, PROFESSOR OF LAW,
                    BOSTON UNIVERSITY LAW SCHOOL, BOSTON,
                              MASSACHUSETTS

       Mr. GREEN. Thank you, Senator Specter. You are Senator from my
    native State, and Senator Kennedy, Senator from my home State.
       I commend the committee for the work it has done, for all the effort
    Judge Becker and the rest of you have put in. I am a professor mediator
    as well as a law professor, and I have been mediating all kinds of
    commercial and personal injury disputes for 25 years and I have been
    mediating every aspect of the asbestos litiga-tion--every aspect of
    it--from single cases to class actions to insurance disputes to
    reinsurance disputes. I have served as a special master for courts.
    I recognize the necessity for consensus and compromise in trying to
    achieve anything. And I also recognize as a mediator the desire of
    the mediator, of the consensus-builders, to get something done. But
    one of the criteria for any good result is workability. I am very
    concerned that this bill as presently constructed will turn out not
    to be workable and we will be back here in a few years with a bigger
    problem and we will be sorry that we didn�t address the things that
    need to be addressed if this is going to be workable.
       I know you want it to work out. I know your motives and intentions
    are the highest and honorable. But there is a significant risk in this
    bill that the funding will turn out to be illusory or highly contested
    in court, that the actual funding will not be in place on time. Whether
    claims can be processed in 90 days, Senator Fein-stein, or 9 months is
    not the issue, I think. The issue is when the claims will be processed
    and paid. And the funding has to be there to pay the claims once they
    are processed.
       I predict that the litigation that I have been struggling with at
    one level for all these years will simply be shifted to another level
    once this bill passes, because the funding is not specified and made
    clear and the commitments aren�t there. I have friends in industry, I
    have friends in the insurance industry, I have friends on the
    plaintiffs� side. I am in the middle. I am a mediator. But I think
    this bill presents illusory protection for all of them because the
    ultimate responsibilities and amounts are not made clear and transparent
    ahead of time. I think the litigation that could ensue could result
    in delays of funding of the trust, delays in payment, incurring of
    huge debts, and ultimately a downward spiral for the trust that will
    then trigger the sunset provisions. Unfortunately, I think the sunset
    provisions are subjective, not automatically triggered, as in Senator
    Biden�s amendment, which was in a previous version of this bill, and
    will create a limbo which will then only ultimately be resolved by
    throwing the victims back into a tort system and a trust system that
    has been essentially annihilated for the asbestos victims.
       So I think these problems must be addressed and fixed. They are
    tough problems. The insurance industry deserves to know what they are
    going to pay and who is going to pay it. The manufacturers, all of
    them, the 1,500 small players as well as the 20 or 40 big players,
    deserve to know exactly how much they are going to be assessed. They
    deserve to know whether they are going to have to pay supplemental
    assessments if this trust falls short. The taxpayers of America
    deserve to know whether there is truly a government backstop here,
    whether the Federal financing will be backed up by the taxpayers of
    the United States. All of these issues, I believe, are swept under
    the rug and the risks ultimately are thrown onto the least able to
    protect themselves, the individual victims, the people who stood up
    behind me, to whom I would gladly yield my time at this podium.
       Otherwise, my remarks, Senator Specter, with a great deal of
    respect for the work you have been doing on this, I would submit.
       Chairman SPECTER. Thank you, Professor Green.
       [The prepared statement of Mr. Green appears as a submission for
    the record.]
       Chairman SPECTER. We turn now to the Honorable Hershel W. Gober,
    national legislative director for the Military Order of the Purple
    Heart. Mr. Gober served as deputy secretary of the U.S. Department of
    Veterans Affairs and then acting secretary for some 8 years, has a
    very distinguished military career, cum laude graduate from Alaska
    Pacific University, and someone I worked with extensively when I
    chaired the Veterans Affairs Committee, a considerably easier job than
    chairing this committee.
       Welcome, Mr. Gober, and we look forward to your testimony.

              STATEMENT OF HERSHEL W. GOBER, NATIONAL LEGISLATIVE
                DIRECTOR, MILITARY ORDER OF THE PURPLE HEART,
                             MCLEAN, VIRGINIA

       Mr. GOBER. Thank you, Mr. Chairman. Members of the committee, I
    am honored to be here on behalf of the Military Order of the Purple
    Heart in strong support of S. 852.
       Tragically, the asbestos litigation crisis has hit veterans extremely
    hard. Men and women of our Nation�s armed forces were unknowingly
    exposed to asbestos due to its prevalent use by the military during
    and after World War II, particularly in the insulation products built
    into ships for the U.S. Navy, bulkheads, pipes, ceiling, floors, and
    machinery, which were all coated with asbestos. Moreover, those who
    worked in shipyards and dry docks building and repairing U.S. Navy
    vessels were also heavily exposed to asbestos.
       Due to the long latency period from the time of asbestos exposure
    to the first signs of symptoms of an asbestos-related disease,
    veterans who served before the 1980s are still being diagnosed with
    life-threatening and terminal illnesses. Individuals with military
    service make up a significant number of the total asbestos victims
    in the United States. The avenues open to veterans to seek compensation
    through the tort system, however, are very limited. The Federal
    Government, as you know, has sovereign immunity, thereby restricting
    veterans� abilities to recover from the Government, and most of the
    companies that supplied the asbestos to the Federal Government have
    gone bankrupt or disappeared, or they are only providing a fraction
    of the compensation that should be paid to asbestos victims.
       Even if there is a solvent company for a veteran or his family to
    pursue, there remains a lengthy, costly, and uncertain ordeal of filing
    a civil lawsuit. Moreover, under the current system, far too much money
    is being diverted to claimants with no illness or injury. Victims too
    often receive widely divergent recoveries depending simply on where
    the lawsuit is filed or who their attorney is. And the attorney fees
    and other transaction costs are consuming far too much money that
    would otherwise be available to compensate those who are ill.
       The Department of Veterans Affairs continues to receive claims for
    benefits from veterans for illnesses related to asbestos exposure while
    serving in the military. However, due to the difficulty of proof, less
    than one-third of the known VA asbestos claimants receives
    service-connected compensation for those asbestos diseases.
       Veterans and their families with asbestos-related diseases desperately
    need and certainly deserve relief, as the current system is simply not
    meeting their needs or treating them fairly. The Military Order of the
    Purple Heart strongly supports S.852, the FAIR Act, because we believe
    it will provide an immediate and effective solution to the current
    asbestos litigation problem for victims and will provide many positive
    benefits for veterans.
       First, it will establish a new Federal Office of Asbestos Disease
    Compensation for the processing and payment of asbestos claims.
       Second, it will preserve the benefits currently available to veterans
    and exclude any recoveries under the Veterans Benefits Program from
    the requirement that awards under the act be reduced by prior recoveries.
       Third, there will be no requirement to prove exposure to a particular
    defendant�s asbestos product. And unlike veterans benefits, there will
    be no service-related requirement, easing the burden of proof for
    veterans. The bill will also include heavily weighing for pre-1976
    and World War II shipyard exposures.
       Fourth, the bill will expressly apply to exposures to U.S. citizens
    occurring on U.S.-owned or flagged ships occurring overseas while
    working for U.S. entities.
       Fifth, the bill will provide medical monitoring.
       Sixth, the bill will establish a claimant and legal assistance
    program.
       And finally, the legislation will provide for $1 million in grant
    for each of fiscal years 2005 to 2009 for each of up to 10 mesothelioma
    disease research and treatment centers. These centers will be closely
    associated with the U.S. Department of Veterans Affairs medical centers
    to provide research and benefits.
       Mr. Chairman, the Military Order of the Purple Heart is joined by
    18 other organizations in supporting the issues embodied in this bill.
    I would like to submit for the hearing record a copy of a letter sent
    to the Senate last week by 17 of those veterans organizations in support
    of the trust fund solution embodied in S. 852.
       In closing, Mr. Chairman, I want to thank you and the members of
    the committee for your hard work on this issue. I know that there may
    be still some work to do, but you are headed in the right direction.
    The current system is broke; it ain�t working.
       Thank you, sir.
       Chairman SPECTER. Thank you very much, Mr. Secretary.
       [The prepared statement of Mr. Gober and the letter appear as
    submissions for the record.]
       Chairman SPECTER. We turn now to Dr. Philip Landrigan, professor
    and chair of the Department of Community and Preventive Medicine, Mount
    Sinai School of Medicine, New York City. A very distinguished career.
    A degree from Harvard Medical School in 1967 and a master of science
    in occupational medicine and industrial health from the University of
    London in 1977.
       Thank you for coming today, Dr. Landrigan, and we look forward to
    your testimony.

               STATEMENT OF PHILIP J. LANDRIGAN, M.D., PROFESSOR OF
                OCCUPATIONAL AND ENVIRONMENTAL MEDICINE; CHAIRMAN,
                 DEPARTMENT OF COMMUNITY AND PREVENTIVE MEDICINE;
                 PROFESSOR OF PEDIATRICS, THE MOUNT SINAI SCHOOL
                        OF MEDICINE, NEW YORK, NEW YORK

       Dr. LANDRIGAN. Thank you, Mr. Chairman. It is a pleasure to be here
    and an honor. Senator Leahy and I have worked before on the Food
    Quality Protection Act. Senator Kennedy, of the State where I grew
    up, all Senators.
       I want to begin by commending you for having worked together to
    take on a terribly complex issue. Looking at this situation from the
    perspective of lung cancer, the issue that clouds the whole debate
    and makes it so difficult is the fact that there is a great deal of
    lung cancer in the American population. Of course we all know that
    the predominant cause of that lung cancer is cigarette smoking. Where
    it gets difficult is that there exists a powerful synergy between
    cigarette smoking and asbestos in the causation of lung cancer. Let
    me give you some numbers.
       People who smoke who have no exposure to asbestos have 10 or 11
    times the background rate of lung cancer. People who have been exposed
    to asbestos, but who never smoked have about 5 times the background
    rate of lung cancer. But people who have worked with asbestos and who
    have also smoked, who are at double jeopardy, have in fact 55 times
    the background rate of lung cancer. So one way to look at this is
    you could say that you could prevent 90 percent of those lung cancers
    by eliminating asbestos exposure and you could eliminate about 90
    percent of those cancers by eliminating smoking. And parsing this out
    in issues of causality is fraught with difficulty, as I do not have
    to tell you.
       Another causal conundrum that confronts you here is the fact that,
    contrary to what some have said at this hearing, fibrosis is not on
    the critical pathway to the development of lung cancer. Or to say that
    in plain English, a person who has been exposed to asbestos, does not
    need to have asbestosis, to develop lung cancer. The development of
    fibrosis is one pathological process; the development of a cancer is
    a second pathological process. The occurrence of asbestosis, either
    parenchymal or pleural, is most certainly a marker of exposure, but
    it is not an inevitable precursor of the development of cancer. I
    will come back to that point in a moment.
       Finally, it is important to remind us all that duration of exposure
    is only a surrogate for actual exposure. Actual exposure is a multiple
    of the duration of time a person was exposed and the intensity of
    their exposure. So when we talk about duration, I understand it is
    a necessary shorthand because we mostly lack information on levels of
    exposure; that is, the lack of exposure information is the Achilles
    heel of medical research in this arena. But we have to be mindful of
    the fact that when we are talking about duration, we are talking about
    an incomplete measure of the total reality.
       So that is by way of background.
       A couple of specific comments on the bill. First of all, I am
    worried about the criteria that have been proposed that discount more
    recent exposures. I have put some calculations into my written testimony
    indicating that a person who began exposure to asbestos in 1974 would
    need 52 years of actual work with asbestos to meet the 12-year weighted
    exposure criterion for lung cancer Level VII. For cancers other than
    lung, the so-called malignant Level VI, I calculate that for a person
    who started exposure in 1976, it is going to take him 105 years of
    work to meet the criterion. For some of us that might be possible,
    but probably for most of us not. It is a tough barrier to get over.
       Finally, coming back to the point that fibrosis is not an inevitable
    precursor of the development of cancer, I am very much concerned by
    the elimination of what was previously called Category VII, cases of
    lung cancer without fibrosis. I feel that setting aside the estimated
    40,000 people that fall into that category is going to result in people
    who truly have lung cancer that was caused by asbestos being denied
    compensation.
       Final point, there is a lot of debate about whether cancers other
    than lung and mesothelioma are caused by asbestos. The evidence is
    certainly not so strong as for lung cancer or for mesothelioma, but
    I would certainly not go so far as my distinguished colleague has
    done to dismiss those cases out of hand on the basis of one
    meta-analysis. A meta-analysis is a procedure that lumps many studies
    together and reduces them to the lowest common denominator. Another
    way to present those data would be the way that Dr. Crapo presented
    the data for multiple studies on lung cancer, actually laying out the
    actual data. If we were to look at the data on, for example, pharyngeal
    or laryngeal cancer, in that modality we would see that there are
    some studies that show quite strong relative risks.
       Thank you, sir.
       Chairman SPECTER. Thank you very much, Dr. Landrigan.
       [The prepared statement of Dr. Landrigan appears as a submission
    for the record.]
       Chairman SPECTER. We turn now to Ms. Carol Morgan, who is president
    and general counsel of National Services Industries. Very distinguished
    career with that company since 1981. A bachelor�s degree with
    distinction from Rhodes College and a J.D. cum laude from the University
    of Georgia.
       Thank you for coming in today, Ms. Morgan, and the floor is yours.

                  STATEMENT OF CAROL MORGAN, PRESIDENT AND GENERAL
                     COUNSEL, NATIONAL SERVICE INDUSTRIES, INC.,
                                   DORAVILLE, GEORGIA

       Ms. MORGAN. Thank you, Chairman Specter, and members of the
    committee. I appreciate the opportunity to be here.
       I am actually representing the Coalition for Asbestos Reform, and
    my focus today is on the issues of concern to smaller businesses. The
    coalition is actually made up of a very diverse array of businesses
    and insurance companies. But we all share one passionate interest; we
    want to reform and resolve the current asbestos litigation crisis.
    And we are particularly focused on being sure that funds are directed
    toward those who are truly injured, like the people who have been
    with us today. We know you share that concern and we applaud your
    efforts to date in trying to find a solution to this problem.
       We believe, though, that the trust fund, the FAIR Act as it is
    presented, is not the right solution and that in fact it will create
    more problems than it will solve. I want to cover three main points
    as it impacts the smaller businesses.
       The first point, as Senator Feinstein recognized earlier, is there
    is an issue about the constitutionality of this bill. We believe that
    there is an unconstitutional taking of private property. Insurance
    assets are private property. And smaller businesses have particularly
    relied on their insurance to pay their claims in the past. And the
    FAIR Act strips these companies of these assets. Without these assets,
    many of these companies will not be able to continue to survive. So
    this unconstitutional taking is much more eloquently explained in a
    letter that was written to Chairman Specter by Professor Strauss at
    the University of Chicago Law School, and I commend that letter to you.
       My second point, really, builds on the first one. Not only does the
    FAIR Act strip smaller companies of their insurance assets, but it adds
    insult to injury and requires disproportionate payments from smaller
    companies. These payments will force many smaller companies out of
    business, as Senator Coburn expressed concern earlier, and we appreciate
    that.
       Let me explain this. Because of their prior asbestos expenditures,
    many smaller companies are going to find themselves in Tier II. Now,
    they may be at the sub-tier, the bottom sub-tier of Tier II, but even
    so, their payment will be $16.5 million a year for 30 years. Now, that
    single payment in one year is more than many of these companies have
    paid out of pocket during the entire life of asbestos litigation. But
    more importantly, many of these smaller companies simply can�t afford
    to make that payment.
       Now, ironically, in the same tier are some of the largest companies
    in the world. And these companies will be capped at the top of Tier II
    at $27.5 million a year. Well, let�s do the math. A $50 billion company
    that pays $27.5 million a year will actually end up paying less than
    one-tenth of one percent of their annual revenues. And that is a pretty
    good deal. But a smaller company, say one with $400 million in annual
    revenues that is paying $16.5 million a year, will pay 4 percent of
    their revenues. And in today�s economy, that is more profit margin
    than many small companies make. They simply won�t be able to make the
    payment and they will go out of business.
       My question is, is that the kind of rough justice that Judge Becker
    was referring to earlier. It sounds to me like it is more of a bailout
    for the larger companies that are maybe less insured, and at the expense
    of smaller companies which are better insured. There are efforts in
    the FAIR Act to address this problem through the inequity and the
    hardship provisions, but they are woefully inadequate. They are
    discretionary, and there is no guarantee of funding for them. And as
    Senator Feinstein pointed out earlier, we are not really sure exactly
    what the source of funds is for the business contribution. We haven�t
    seen that data, and that needs to be scrutinized very carefully. But
    in any event, we are very concerned there won�t be sufficient funds
    for hardship and inequity to address the problem of the small
    businesses.
       We just don�t think these problems are fixable in the current FAIR
    Act. We believe it would be better to tackle the fundamental problem,
    which is payments to claimants who aren�t injured, and the medical
    criteria bills that are being passed now in States and being considered
    by the House of Representatives should address that in a way that
    actually cures the problem and doesn�t create more problems.
       Thank you.
       Chairman SPECTER. Thank you very much, Ms. Morgan.
       [The prepared statement of Ms. Morgan appears as a submission for
    the record.]
       Chairman SPECTER. Our next witness is Mr. Mark Peterson, who has
    had 20 years of experience in asbestos litigation and mass tort
    litigation; special advisor to the courts on the Manville Trust Fund
    and advisor to four district and bankruptcy courts. A Harvard Law
    School graduate, and a doctorate in social psychology from UCLA.
       Thank you for coming in today, Mr. Peterson. We look forward to
    your testimony.

               STATEMENT OF MARK A. PETERSON, PRESIDENT, LEGAL
               ANALYSIS SYSTEMS, INC., THOUSAND OAKS, CALIFORNIA

       Mr. PETERSON. Thank you, Chairman Specter, and thank you also to
    Senator Leahy for the work that you have done here. I have to say,
    although obviously I have issues with this bill, I think you have
    made amazing accomplishments in constructing a matrix and method
    for dealing with liabilities. I am impressed with the progress and
    the accomplishments, and hopefully that will continue to be something
    that can be built upon.
       I would also like to thank Senator Feinstein for her interest. She
    is my Senator. She is the Senator for Dr. Rabinovitz, too.
       I want to clear up one thing you said, Chairman Specter. I am not
    associated with ATLA. I am not here as an ATLA member. My work in this
    case is--I am not an ATLA member, although I once was because the RAND
    Corporation�s Institute for Civil Justice paid my dues because--
       Chairman SPECTER. Did ATLA request your presence as a witness?
       Mr. PETERSON. No. Not to my knowledge. It was some Senators that
    requested my presence here. I have talked with persons from ATLA, but
    I have also spent time talking with the staffs of Senator Cornyn,
    previously Senator Nickles. My attempt is to speak to anyone that wants
    to speak to me.
       I would also like to take a bit a discursion and deal with an issue
    that Judge Becker mentioned about claims and forecasts and claims coming
    in. It is true that the Manville Trust claims experience in the last
    year have been reduced substantially because of the new trust
    distribution procedures and also, frankly, because of the specter of
    this bill--no pun intended. They have received roughly 120,000 claims,
    60,000 claims average per year. The most recent forecast of claims by
    Manville is that they will receive in 2005 and forward roughly 600,000
    claims to 1,600,000 claims. When you add together the claims that they
    have already dealt with but which will be put in the billion, that
    brings it up to between 1 million and 2 million, which brackets the
    numbers that I have used and other people have used. And indeed, the
    ASG and proponents of the bill have repeatedly and consistently assumed
    that there were 300,000 claims pending prior to 2003, even when you
    have taken into account the collateral source rule. Since then, there
    have been a number of claims filed in 2003 and 2004.
       I would also note that although the Manville Trust recent filings
    are down, the number of mesothelioma claims are up greatly. And within
    the current claims distribution procedures with which Manville is
    dealing, fully 6.2 percent of the claims are for mesothelioma--compared
    to about 2 percent historically and 2 percent that I think we have all
    assumed here.
       So what is happening is that there may be some reduction in the
    number--it is different from what the judge said--some reduction in the
    number of less serious claims, but there is an increase in the number
    of the more serious claims. And there is no evidence that there has
    been much payment of collateral source in the last 2 years because
    asbestos defendants who are in litigation now have no incentive to
    rush to settlement because they are not going to get any credit for
    the bill. They are paying money that they don�t have to pay. And the
    other consideration is that most of the major asbestos defendants
    are now in bankruptcy and not paying anything.
       Let me turn to the main point i wanted to make. This bill is a bill
    that transfers asbestos liabilities to the Federal Government. That
    is what it primarily does. There are going to be a huge number of
    claims filed initially, as I have just described, against the fund
    and little money initially, or frankly forever in comparison with the
    liability, from asbestos defendants in insurance companies. Virtually
    all of the money that will be paid to claimants from this fund is
    going to be money from the Federal Government. The relatively small
    amount of money that will be paid before the fund sunsets, that is
    paid by defendants and insurance companies, mostly goes to pay interest.
    When you add the debt load, the interest charges, and the indemnity
    payments, this fund will fail quickly, probably within 5 years but,
    even using optimistic assumptions put out by proponents of the
    legislation, within 10 years. It won�t be able to borrow any further
    because its liabilities exceed all of the income it will ever have.
       The fund will pay only a fraction of the claims of asbestos victims.
    It will pay less than half of the asbestos victims. Instead of being
    a $140 billion payment to asbestos claimants, only $70 billion will
    go to asbestos claimants. This is not a $140 billion payment fund for
    victims, this is a $70 billion--it is a lot of money, but it is a lot
    different. The remainder will be paid in interest.
       The one final thing I want to say is that when this bill sunsets,
    there will be obligations owed by this fund to the Federal Government
    of probably $60-70 billion, with little prospect that it will ever be
    repaid because the companies that will have to pay that over 30 years
    will now be subject to a double burden of asbestos litigation plus
    payment under the bills, and the companies that are depended upon to
    be major providers of funding for the bill, those that are now in
    bankruptcy will certainly go back to bankruptcy.
       Chairman SPECTER. Mr. Peterson, your time has expired. Could you
    sum up, please?
       Mr. PETERSON. The only point I have to say is I admire greatly the
    liability side of what you have done. If this committee and Congress
    want to set up a bill that is funded by the Federal Government, it is
    getting that, but it should recognize that it is doing that. And
    frankly, if that is the intention, there should be a more careful
    scrutiny and determination of how defendants and insurance companies
    would pay off that debt, because they are stiffing the taxpayers.
       Chairman SPECTER. Thank you very much, Mr. Peterson.
       [The prepared statement of Mr. Peterson appears as a submission
    for the record.]
       Chairman SPECTER. We have about 8 minutes left on the vote, so we
    will recess briefly to vote. And I shall return immediately, and that
    would be my request of the other members.
       We stand in recess for a few minutes.
       [Recess from 11:50 a.m. to 12:04 p.m.]
       Chairman SPECTER. Our next witness is Dr. Francine Rabinovitz,
    executive vice president of Hamilton, Rabinovitz & Alschuler. Extensive
    experience as an expert witness in administrative and financial
    management, a court-appointed expert in many asbestos-caused
    bankruptcies. A B.A. degree from Cornell and a Ph.D. from MIT.
       Dr. Rabinovitz, we appreciate your being here today, and the floor
    is yours.

                  STATEMENT OF FRANCINE RABINOVITZ, HAMILTON,
                  RABINOVITZ & ALSCHULER, CARMEL, CALIFORNIA

       Ms. RABINOVITZ. Thank you, Senator Specter.
       I am here today to speak about the reasonableness of the claims
    projections that support the FAIR Act. I want to address three issues:
    the starting point for the claims projections, the adjustments of those
    claims projections to conform with the disease categories under the
    FAIR Act, and perhaps most important, lessons learned from the claims
    filing experience over the last 2 years.
       At the outset, it must be said that there is uncertainty in
    forecasting asbestos claims under the fund. It stems from two factors
    primarily, but not exclusively. First, there is not national database
    or registry for asbestos claims, and second, there is no past experience
    with the National Compensation Fund employing the medical criteria,
    diagnostic standards, and exposure requirements of S. 852. But that
    being said, the estimates of future asbestos-related claims expected
    to be made under the FAIR Act have been calculated by well-accepted
    methods, are reasonable, in my view, and are likely to be conservative
    in light of recent experience and changes in the FAIR Act.
       First, the starting point. The starting point was the substantial
    data and forecasts available from the Manville Personal Injury Trust.
    There is general consensus reflected in court rulings that the Manville
    Trust will eventually see virtually all of the asbestos personal injury
    claims in the current system. Because claims filed against Manville
    represent virtually all asbestos claimants, it is the best and most
    comprehensive for a future claims estimate.
       Second, as to the adjustments of the base figure for the FAIR Act
    criteria, because the Manville Trust estimate was not conducted with
    the disease levels and medical criteria of S. 852 in mind--in-deed, it
    was created through a process completely independent of the legislation
    --the question is how did we adjust the forecast to reflect the FAIR
    Act�s disease categories.
       Two studies allow greater precision in the distribution of the
    claims. The first, with respect to non-malignant claims, is a study
    conducted by the AFL-CIO of sheet metal workers, which provides
    information on how the non-cancer claims will be distributed in
    categories I through V of the bill. The approach is conservative, and
    by ��conservative�� I here mean that it produces a higher estimate
    than I actually expect experience will produce. Because the sheet
    metal workers were more heavily exposed to asbestos than the population
    expected to make claims under the act and will be prone to more and more
    serious diseases.
       As to lung cancer cases, data from a study that I myself conducted
    for the Manville Trust was used to distribute claims in the lung cancer
    categories. Specifically, that study projects smoking rates and the
    degree of underlying asbestos-related disease for lung cancer claimants.
    I should add that eliminating the S. 2290 Category VII claims from a
    forecasting perspective--that is, the claims for lung cancer without
    evidence for underlying asbestos-related disease--removes a substantial
    source of uncertainty for the estimate.
       Those studies, thing with the existing Manville Trust claims data,
    allow us to project the number of claimants who will qualify in each
    of the categories under S. 852.
       Lessons from the past 2 years� experience have to be brought to
    bear. To me, they suggest that the estimate based on Manville data
    will prove to be very conservative. The overall forecasts for those
    years are holding up very well against experience, and the claims are
    qualifying at Manville now in lower categories than previously.
    Comparing the Manville Trust overall projections for 2003 and 2004
    against its actual experience indicates that the aggregate estimate
    has been accurate. In addition, the experience of the trust and others
    in 2004 suggests that overall claim rates may very well be dropping.
       As to the distribution of those claims, Manville�s recent experience
    demonstrates the effect of more stringent medical and exposure criteria.
    In 2002, in the face of escalating claims, particularly by claimants
    with non-malignant conditions, the trust revised its eligibility
    requirements to strengthen the medical and exposure requirements. The
    trust recently completed an analysis of the change in claims filings
    under the new requirements, and the results are quite dramatic. Only
    one-third of the claims could meet the new requirements of showing
    substantial occupational exposure, and there was a significant failure
    to meet the more stringent medical criteria under the new eligibility
    requirements.
       These two factors operate independently and reduce the number of
    claimants qualifying in the more severe categories. As an example,
    under the old requirements, half of the qualified claimants were at
    the lowest categories. Under the new stricter standards, 84 percent of
    claimants fall into the lowest categories. In addition, the new
    requirements would have reduced the claims compensation outflow from
    Manville by 40 percent. These current results provide evidence that
    the trust-weighted mean estimate is likely to be conservative.
       Chairman SPECTER. Dr. Rabinovitz, you are over time. Could you
    summarize, please.
       Ms. RABINOVITZ. Yes. I think these current estimates and the basis
    for the prior estimates should provide substantial comfort for those
    assessing the likely future cost of the FAIR Act.
       Thank you.
       Chairman SPECTER. Thank you very much, Dr. Rabinovitz.
       Our next witness is Mr. Alan Reuther, legislative director of the
    International Union, United Auto Workers. Held that position since 1991.
    He is a graduate of the University of Michigan Law School. In 1982, he
    was transferred to the Washington office here to handle all legislative
    matters.
       Thank you for coming in, Mr. Reuther. I know you were before the
    Health, Education, Labor, and Pension Committee today. It is a busy
    day for you testifying.

                STATEMENT OF ALAN REUTHER, LEGISLATIVE DIRECTOR,
               INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE
               & AGRICULTURAL IMPLEMENT WORKERS OF AMERICA (UAW)

       Mr. REUTHER. Thank you, Mr. Chairman. The UAW appreciates the
    opportunity to testify before this committee on S. 852, the asbestos
    compensation legislation introduced by yourself and Ranking Member
    Leahy. The UAW supports this legislation and urges the committee to
    give it prompt, favorable consideration.
       This bill provides $140 billion in private money for compensating
    the victims of asbestos-related diseases. Many of those victims would
    otherwise get little or no compensation. The bill establishes a system
    which promises to provide the money to victims more quickly, more
    consistently, and less wastefully than the current tort system. The
    bill spreads the cost among defendant corporations and insurance
    companies more equitably.
       There is widespread agreement that the current tort system does
    not fairly compensate asbestos victims. Most unfair are the situations
    where victims receive little or no compensation because the defendant
    company is bankrupt, the source of the asbestos can�t be identified,
    the workers compensation system prevents them from suing their employer,
    or where their employer was the government and is immune from any
    liability. In addition, there are often years of delay before victims
    receive any compensation. Awards to victims are highly unpredictable,
    with similarly afflicted individuals receiving vastly different amounts.
    Transaction costs, including at-torney�s fees, are extremely high and
    reduce the amounts actually received by victims.
       The UAW represents over a million active and retired employees in
    the automobile and other industries. Some of our members were exposed
    to asbestos in plants that produced brakes, in foundries, and among
    maintenance and service trades working with process insulation. Those
    members who have or will develop asbestos-re-lated diseases as a result
    of this exposure may receive some inadequate compensation under State
    worker compensation statutes, but are barred by those statutes from
    suing their employer.
       As a result of the massive lawsuits filed against companies that
    produced or used products containing asbestos, a number of auto parts
    companies have been forced into bankruptcy. In addition, rising claims
    against major auto manufacturers threaten to expose them to significant
    liabilities in the future, posing a major long-term threat to their
    economic health and the jobs and benefits of hundreds of thousands of
    active and retired UAW members.
       The Specter-Leahy bill addressed these serious problems by replacing
    the current tort system with the National Asbestos Trust Fund to
    compensate the victims of asbestos-related diseases. This approach
    would ensure that the victims would receive the full amount of their
    award regardless of whether a particular company has filed for
    bankruptcy. By creating a no-fault administrative system for processing
    claims, this approach would provide victims with speedier compensation
    while reducing the substantial attor-ney�s fees and other transaction
    costs in the current adversarial litigation system. By compensating
    victims pursuant to a fixed schedule of payments for specified disease
    levels, this approach would also provide predictable awards to
    individuals with similar illnesses and ensure that the most compensation
    goes to the most seriously ill victims.
       The UAW is especially pleased that the Specter-Leahy bill does not
    permit any subrogation against worker compensation or health care
    payments received by asbestos victims. We believe this is essential
    to ensuring that victims receive adequate compensation. The UAW is also
    pleased that the Specter-Leahy bill establishes a transparent mechanism
    for defendant companies and insurers to contribute to the National
    Asbestos Compensation Fund, thereby spreading the cost of compensating
    victims across a broad section of the business and insurance community.
       Because the Specter-Leahy bill replaces the current adversarial
    litigation system with a no-fault administrative system for processing
    claims, the difficulties and costs involved in bringing asbestos claims
    will be greatly reduced. Thus, the UAW believes the attorney fees
    provided under the legislation are more than adequate to attract
    competent representation for asbestos victims.
       The UAW believes the Specter-Leahy bill can be improved in two areas.
    First, while the legislation provides that CT scans showing asbestosis
    may be considered as evidence qualifying lung cancer victims for
    compensation, it does not expressly allow CT scans showing pleural
    disease to be considered. We believe this distinction is contrary to
    the current state of medical science, and therefore urge the committee
    to make CT scans admissible as evidence for all categories of claims.
       Second, the criteria for triggering the statute of limitations for
    bringing claims should be clarified to make sure they are workable,
    and so individuals with non-malignant diseases that may get
    progressively worse are not forced to rush to file their claims in
    order to preserve their legal rights.
       In conclusion, the UAW firmly believes that the asbestos compensation
    system established under the Specter-Leahy bill would be vastly
    preferable to the current tort system. We therefore urge the Judiciary
    Committee to promptly approve this important legislation.
       Thank you.
       Chairman SPECTER. Thank you very much, Mr. Reuther.
       [The prepared statement of Mr. Reuther appears as a submission for
    the record.]
       Chairman SPECTER. This is a good point to put into the record the
    letter from the International Union of Operating Engineers dated April
    20th in support of the legislation and a press release from the
    Asbestos Workers dated April 25th in support of the legislation. They
    go along with your testimony, Mr. Reuther, from UAW.
       Ms. Morgan, I note in this morning�s Hill newspaper there is a
    full-page ad for the Coalition for Asbestos Reform, and I note a
    representation of representing a coalition of manufacture, construction,
    energy, and insurance companies. And in your testimony, you commented
    about the unavailable information on who is in what tier. Are you able
    to provide to this committee a list of your members and what tier they
    fall in?
       Ms. MORGAN. We can provide a list of some of the members. Some of
    the members are not wanting to be public, just because they are
    concerned about being targeted as a defendant. But there are others of
    us who obviously are willing to be more public.
       Chairman SPECTER. So some of your people want to advertise but not
    tell us who they are?
       Ms. MORGAN. There are some members who are not willing to be public,
    but we are representing them as well.
       Chairman SPECTER. Some of them will tell?
       Ms. MORGAN. Yes, absolutely. I am here today.
       Chairman SPECTER. We would like to know that.
       Ms. MORGAN. But as far as knowing what tiers we are in, we really
    don�t know exactly where we will end up in terms of the sub-tiers until
    we have more information.
       Chairman SPECTER. Well, tell us the companies and perhaps we can
    tell you the tier.
       I note in your advertisement an assertion that ��they will be
    creating the potential for liability for the U.S. Treasury to pay
    substantial sums in damages.�� A little hard for me to understand that
    when we have a figure of $140 billion--which wasn�t my idea; that is
    a figure which was voluntarily suggested by the manufacturers and the
    insurers. The AFL-CIO wanted more. And last fall, Senator Daschle, who
    was leader of the Democrats, and Senator Frist, the majority leader,
    got together and agreed to the $140 billion figure, which met the amount
    which had been voluntarily agreed to. Now, if that proves to be
    insufficient, the bill is explicit that claimants go back to court.
    Once you take away the right to jury trial, which is a very major right
    in our society, if the money isn�t there, Senator Feingold made the
    point that it shouldn�t be the claimants who bear the burden if the
    fund doesn�t hold up--something I agree with him totally--what is the
    basis for your asserting that the Government will have a responsibility
    here?
       Ms. MORGAN. Well, I think there are some provisions about going back
    to companies with a guaranty payment surcharge in the event there are
    insufficient funds.
       Chairman SPECTER. Going back to companies--well, that has nothing
    to do with going to the Government.
       Ms. MORGAN. Well, the next point is if they weren�t able to get
    financing through the Federal Financing Bank that there would be an
    effort to go back to companies. And our concern is, though, ultimately
    this could fall on the taxpayers because there may not be enough money
    generated from the businesses in order to cover this funding.
       Chairman SPECTER. Well, that may be a concern, but there is no basis
    for it.
       Dr. Rabinovitz, your testimony about the amount of the fund, as I
    understand it, is that before the Section 7s were eliminated, your
    expert projections came in at a total cost to cover all the claims of
    $125 billion. Is that correct?
       Ms. RABINOVITZ. Yes, although the value side of that equation is
    estimated by Goldman Sachs. But you are right that the claims provided
    the values.
       Chairman SPECTER. And if you took out the Section 7 claimants, it
    would be down to $118 billion?
       Ms. RABINOVITZ. Yes.
       Chairman SPECTER. And if you added in the additional monies which
    we have increased at the request of Senator Kennedy and others on some
    of the tiers, it would go back to $120 billion?
       Ms. RABINOVITZ. Yes, as I understand it.
       Chairman SPECTER. Okay, well, we can all do the math. The cushion
    of a $140 billion contribution, as compared with a projection of a
    cost of $120 billion.
       Professor Green, your critique of the bill was scathing. But when
    you compare it to the present system, how would you evaluate it? Let
    me give you a two-part question, because after my red light goes on I
    meticulously observe it. The two-part question is, however bad this
    bill is, isn�t it a whole lot better than what we have now? And the
    second part of the question is, what is the answer if this isn�t the
    best possible answer?
       Mr. GREEN. Those are fair questions, Senator Specter. I appreciate
    them. I think it is a myth that this is better than the system we have
    now, for several reasons. First of all, Congress already established
    a system which is working pretty well, not perfect, with � 524(g) of
    the Bankruptcy Code.
       Let me give you one example, Senator Specter. It is an example of
    a company which is kicked around a lot by liberals in my home State
    of Massachusetts, Halliburton. But they used Section 524(g) of the
    Bankruptcy Code to stand up to their entire full set of asbestos
    liabilities, past, present, and future. They negotiated with their
    insurers, they negotiated with the asbestos victims, and they
    negotiated with me as the representative of the future victims. And
    we negotiated a deal which has been completed in less than a year to
    pay all of those victims 100 percent using stock and insurance
    proceeds. The stock of Halliburton was given to the future claimants
    at $19 a share. We sold 59-1/2 million shares at $42.50 a share,
    making $2.5 billion, creating new money by lifting the asbestos
    uncertainty overhanging that company.
       Today that company has fully met and set up a trust for all of
    its victims into the future--no delays in payment, Senator Feinstein.
    They get paid immediately. The insurers have paid their share, by
    agreement. Halliburton has paid its share. And that stock today--I
    checked--is trading at $44 a share.
       That mechanism is available to lots of companies and would have
    been utilized by many more companies, especially these big ones, if
    they didn�t have the prospect for 2 years, 3 years of this legislation.
    This has put the brakes on that.
       Now, in the tort system, for a long time we have been processing
    and paying in the tort system exigent cases, mesotheliomas, in one
    year from start to finish in most jurisdictions across the country.
    California and Massachusetts led the way in courts, advancing the
    mesothelioma cases. Now, this bill, if some of the projections are
    right, Senator, is going to require $50-70 billion of the $140 billion
    to go to debt service, to banks. Is that any better than going to tort
    lawyers, which is some of the criticisms? I don�t think we are fixing
    the problem.
       Chairman SPECTER. My time is up, but provide us documentation on
    that point, would you please?
       Mr. GREEN. I am sorry--
       Chairman SPECTER. Provide us documentation on that expansive debt
    service figure you just stated.
       Mr. GREEN. It is in Dr. Peterson�s projections, Senator Specter.
       Chairman SPECTER. Senator Kennedy?
       Senator KENNEDY. Thank you very much, and I welcome you, Professor
    Green. Just on this point, you have had extensive expertise in the
    field. A number of courts look to you for assistance in highly complex
    subjects, and we are fortunate to have your comments. But in your
    testimony, to get back to this point, you state that by its fourth
    year the fund would need to borrow $50 billion to meet its liabilities,
    the fund�s liabilities will outstrip its revenues. Also, Mr. Peterson,
    you had a similar kind of a comment. You are telling us the level of
    borrowing required will actually be huge. Interest rates will consume
    40 or 50 percent of the entire fund. The fund would only have between
    70 and 85 left to pay the claims. That is not nearly enough to
    compensate the victims.
       How do you get there? Maybe just each one of you respond.
       Mr. GREEN. Well, very quickly, Senator, it is not enough to just
    look at the absolute amounts of funding. You have to look at the cash
    flow. You have to look at payments in and what will be available and
    then payments out.
       Even if the trust is fully funded, all these contributions that
    have not been specifically identified to particular insurers or
    manufacturers, even if they all came in, if you look at the backlog
    of mesotheliomas alone at $1.1 million per and the 3,000 additional
    a year that will continue to come, the cash flow is not adequate.
    After a few years you have to start borrowing. And the borrowing curve
    simply goes up. And then, as we all know, when we are caught personally
    with debt that we are trying to pay off, the money is eaten up by the
    debt service, and you get further and further into debt.
       But it is even worse because the trust is not going to be fully
    funded by these companies. The insurers are going to sue. The trusts
    are going to sue. The companies are going to sue. It is going to take
    time. Even using the liens, Senator Specter, it is going to take--we
    know it is going to take time. And so there is going to be a delay
    of--what? Six months? A year? Two years? Three years? The debt service
    will mount.
       Senator KENNEDY. Is there anything you want to add to that, Mr.
    Peterson?
       Mr. PETERSON. Two things I would say. What Professor Green described,
    looking at cash flow analysis, is precisely what we have done, and
    we have looked at five different scenarios with regard to claims
    forecasts, one of which was the CBO forecast done last year, which we
    have updated for present value.
       The other thing I want to say is that fully 40 percent of the
    liabilities are from mesothelioma, and so when you are looking at this
    fund, the biggest chunk of money goes to the mesothelioma victims.
    That is great. That is what this bill should do. But it means these
    are--when we hear about being expedited claims and pushed forward and
    wanting rapid payment, they are going to put heavy pressure initially
    on there that need to be funded.
       Senator KENNEDY. Professor Green, in your written testimony, you
    make the point in the entire history of asbestos, only a handful of
    industrial firms and even fewer insurers have voluntarily faced up to
    the cost of resolving the full asbestos liabilities. The rest of the
    firms and insurers being counted on under this bill to pay their
    allocated contributions have by and large fought and resisted every
    attempt to hold them accountable.
       What makes anyone think that they will now accept their allocated
    responsibilities and pay up their shares on time and without any fuss?
       Mr. GREEN. Either just willful blindness or hopeless optimism. I
    think this is a little bit of a ��Wizard of Oz�� operation here. And
    I think we have to face the realities that the insurers have not
    willingly stepped up to pay ever. The companies have resisted for
    years and years and years. And we have already heard that the smaller
    companies think that the large companies are getting a bail-out. They
    are not going to do this willingly.
       I know that the trusts are gearing up and have hired Ted Olson to
    mount a constitutional challenge to the taking of their assets. So
    there is going to be--
       Senator KENNEDY. What is the practical effect of this? How long can
    this go along? How long can this continued litigation go on?
       Mr. GREEN. Well, you know that the American lawyer can continue
    litigation as long as he is allowed to. There are provisions for the
    administrator to make interim payment allocations on, say, insurers
    and so forth, but those can be challenged as well. This can go on
    for--it will go on for many years.
       Senator KENNEDY. Just finally, Dr. Landrigan, particularly on the
    lung cancer VII, could you just expand on this point that asbestos
    exposure can be a contributing factor to a patient�s lung cancer even
    if there is no evidence of the bilateral pleural thickening or
    asbestosis? Can you elaborate on that? Is 15 weighted years of exposure
    to asbestos a sufficient level of exposure to cause lung cancer?
       Dr. LANDRIGAN. Yes, Senator, I would be glad to. The point here is
    that asbestos--the scarring that asbestos causes in the human lung is
    typically not symmetrical. Very often it begins on one side and only
    subsequently, and not in every case, does it spread to the other side.
    And so I am concerned that an insistence that runs through this bill
    that evidence of asbestosis be bilateral is creating a very high
    standard, a very high criterion that is going to serve as a barrier
    to people that clearly have had asbestos disease, that clearly have
    suffered lung injury, but by whatever fluke of the circulation of air
    in their lungs has not produced damage on both sides.
       Senator KENNEDY. My time is up. Thank you.
       Chairman SPECTER. Thank you, Senator Kennedy.
       Senator Cornyn?
       Senator CORNYN. Thank you, Mr. Chairman.
       Professor Green�s comments reminded me that I asked former Solicitor
    General Ted Olson to write me a letter expressing his concerns with the
    takings issue and other constitutional questions that he had with regard
    to the asbestos trust funds, which would be swept into this larger
    Federal asbestos trust fund, and I would like, Mr. Chairman, if there
    is no objection, to make that a part of the record.
       Chairman SPECTER. Without objection, it will be part of the record.
       Senator CORNYN. Thank you very much.
       And I know, Ms. Morgan, you mentioned other constitutional concerns
    that you have, and as I understood it, it is essentially for those
    companies who have potential asbestos liabilities but who believe they
    have adequate insurance to cover it, they would be forced, is it your
    contention, to basically give up that coverage and then pay a dollar
    figure into this fund in order to meet their allocation? Is that what
    your concern is?
       Ms. MORGAN. That is correct. The smaller companies are relying on
    their insurance assets today to pay their claims, and those insurance
    assets under the FAIR Act would be taken away, and they would be
    required to pay out of their own pocket for the trust fund payments.
       Senator CORNYN. Do you have any concept of how many companies we
    are talking about? I know a number of Senators have expressed concerns
    about the fairness of the allocation system with regard to smaller
    companies. There is a level below which you are exempted and do not
    have to pay any money into the fund. But from your standpoint, how
    clear is it what that cutoff is? And what kind of impact on those
    companies that do have adequate insurance but, nevertheless, would
    be forced to pay money under this fund, what kind of impact do you
    believe that would have on those companies and their ability to keep
    their doors open and employ people?
       Ms. MORGAN. Well, I know about those within the coalition who fall
    in that category who do have adequate insurance today in the tort
    system and would not be able to make payments going forward without
    their insurance assets. I know those that have come forward and are
    part of the coalition.
       We are concerned that there are a number of other companies who
    rely on their insurance entirely to defend their claims and really have
    no idea about the dire consequences of this Act. So we have not
    identified everyone. We certainly know of those that are part of
    the coalition. And there are a number of companies that are in this
    position.
       Senator CORNYN. Well, I know everyone on the Committee and in the
    Congress is doing the best they can to solve a very difficult and
    challenging problem. But I think that is certainly something we need
    more information on, and I would appreciate any additional information
    you might have that would shed light on that.
       With regard to the adequacy of the fund itself, I know, Mr. Peterson,
    you and Dr. Rabinovitz have a different view over the adequacy of the
    fund and in terms of the composition of claims that will actually
    likely be made against the fund. As I recall, Mr. Peterson, you do not
    think $140 billion is anywhere near enough, and, Dr. Rabinovitz, you
    think it is plenty.
       Part of my problem is that we have to resolve that difference in
    this bill and make the best decision we can as to who is right and who
    is wrong. At the same time, we have to decide between the physicians
    here, who is right here and who is wrong about matters of science and
    medicine. And we are not particularly well equipped to resolve those
    differences although I assure you we will continue to do the best we
    can.
       But if you would, Mr. Peterson, could you just speak briefly to
    the composition again of the fund? As I recall, you said that we may
    see a rate of mesothelioma claims that vastly exceeds the prediction
    that Dr. Rabinovitz has given, thus absorbing a lot of this money very
    quickly from those very serious claims?
       Mr. PETERSON. Yes, thank you. I think that the differences between
    the forecasts--I have not seen Dr. Rabinovitz�s forecast. I have seen
    earlier ones by ASG consultants and I have seen some by CBO that have
    used those. I assume that the numbers of mesothelioma claims would be
    fairly similar and they don�t differ much from my forecast. That is
    not the area of difference.
       The standard forecasting--I mean, this is something we do routinely--
    the standard forecasting for mesothelioma is that they are going to
    come in at a rate of 2, 2.5 percent of the claims. Manville, even with
    the reduced volume of claims they are getting--well, probably because
    of that, they are coming in at 6 percent.
       So when you multiply that out, the product of multiplying how many
    claims they say are going to be coming in, 1 million, 2 million,
    suggests that there are going to be something like 60,000 mesothelioma
    claims, if you just do the math on that. ASG�s earlier forecasts were
    somewhere on the order of 40 to 45,000 mesotheliomas. So there is a
    potential there that there may be a third again as much. That is
    Manville�s experience.
       Generally, the perception of what is going on is that the plaintiffs
    lawyers are concentrating on trying to get mesothelioma claims
    represented, and indeed they are advertising extensively on the Internet.
       Can I comment also on the 140? I think there are two reasons that
    are there are differences there. One is the underlying forecasts that
    we have distributed. The other is that I don�t believe that Dr.
    Rabinovitz takes into account interest costs, and let me give you an
    example.
       Last year, CBO estimated for the bill current at the time that there
    would be $139 billion of indemnity costs and $1 billion of
    administrative costs. I have taken the new values of the current bill,
    including the elimination of Category VIIs, just CBO�s numbers which
    derive from ASG�s earlier work, and now that 139 becomes 147. So they
    are already over the 140 just on the liability. You add another $1
    billion for administrative costs and that gets in there.
       But when you then add in the cost of interest, because the interest
    is inevitable--the claims are coming in at a big bulk at the beginning;
    the money is not there and they are going to have to borrow. When you
    add that in, they get to over $190 billion, with interest.
       Dr. Rabinovitz--I mean, I don�t know. If she believes there isn�t
    going to be interest, then her number would stick. But if there are
    going to be interest charges--it is hard to imagine there wouldn�t be
    some--it would add to it.
       Senator CORNYN. I know my time is up, Mr. Chairman.
       Chairman SPECTER. Thank you, Senator Cornyn.
       Senator Leahy.
       Senator KENNEDY. Can she answer the question?
       Ms. RABINOVITZ. Just if I may--
       Chairman SPECTER. Dr. Rabinovitz, if you would like to comment on
    that last question, go ahead.
       Ms. RABINOVITZ. Thank you. With respect to the mesothelioma
    forecasts, I want to straighten out one misconception. The Manville
    Trust had 100,000 claims in 2003, and last year, in 2004, it had
    14,000. From the first quarter of 2005, it suggests they will only
    have 20,000 this year.
       Well, of course, the percentage of mesothelioma claimants has given
    up. It has gone up because the number of non-malignancy claims has gone
    down radically. So more of their resources are going to be devoted to
    the mesothelioma claimants.
       If there is anything we have more modest uncertainty about, it is
    the projection of the mesothelioma claims. Those are projected according
    to work originally done at Mount Sinai. They are tracked, in actuality,
    from a series, the survey of epidemiology and end results, which shows
    what the actual experience of a sample of weighted sample of hospitals
    is experiencing with respect to mesothelioma claims.
       Those projections have held up extremely well, both based on
    epidemiology and also based on real-world experience from hospitals and
    a government series. So there is uncertainty about the projections, but
    I would say that with respect to the mesothelioma claims, relatively
    speaking, there is less uncertainty than about almost any other category
    of claims. Of course, the percentage has gone up, and that is good
    because the number of non-malignancy claims has gone down.
       Chairman SPECTER. Thank you, Dr. Rabinovitz.
       Senator CORNYN. Mr. Chairman, could I ask, perhaps, quickly that
    Dr. Rabinovitz provide us a table of projections over future years
    and across each claims level? That would be very helpful in resolving
    some of these questions.
       Chairman SPECTER. I think that is a good idea, Senator Cornyn.
       Senator CORNYN. Thank you very much.
       Chairman SPECTER. Can you do that, Dr. Rabinovitz?
       Ms. RABINOVITZ. Yes.
       Chairman SPECTER. Thank you very much.
       Senator Leahy.
       Senator LEAHY. Thank you, Mr. Chairman.
       The hearing has been fascinating. In case you didn�t know it, you
    are on an internal channel here in the Senate, and I was able to follow
    a lot of your testimony even though I was out of the room for a short
    while. C-SPAN is carrying it, too.
       Mr. Reuther, I want to thank you, and I want to thank you also for
    what the leadership of the UAW did. They were the first labor union to
    endorse our bipartisan legislation. I agree with the statement in your
    testimony where you said, quote, ��It is easy for critics who want to
    maintain the current tort system to point out shortcomings in the
    legislation.�� I think we both know that if you craft legislation with
    some powerful interests involved, it is never easy, but the Supreme
    Court has called on the Congress many times to do just that. I believe--
    and obviously you do--that it is time to create a fair and more
    efficient compensation system for the thousands of people suffering
    from asbestos-related diseases.
       Your testimony alludes to the difficulties that many of your own
    UAW members face in the current tort system. Can you tell us about
    some of those problems and why you feel our legislation is preferable
    to the current tort system?
       Mr. REUTHER. Yes, Senator. Because of the worker�s comp statutes,
    most of our members are barred from suing their employers. So they
    have no recourse whatsoever there and they are limited to the inadequate
    payments under State worker compensation statutes.
       Also, of course, there is the difficulty that they, along with
    others, face that defendant companies often go bankrupt. So even if
    a lawsuit is filed against some other company that produced the product,
    there may be no recourse whatever. Your bill that you and Senator
    Specter have introduced would solve both of those problems.
       Senator LEAHY. I understand from your testimony that the protection
    against subrogation of victim awards is very important to, I guess,
    the nearly million members of the UAW. Is that correct?
       Mr. REUTHER. Yes. We believe that that is essential in order to
    assure that the overall amount of compensation received by victims is
    fair and adequate.
       Senator LEAHY. Thank you.
       Mr. Gober, I am always pleased when I see the Military Order of
    the Purple Heart come up here. The members have already proved their
    sacrifices. They have been awarded the Purple Heart. They have proved
    their service and sacrifices to our Nation.
       Could you tell me about the special problems--and I understand from
    the material we have received from you the special problems faced by
    the men and women of our Nation�s armed forces in the current tort
    system if they are trying to seek redress for asbestos-related injuries
    that they received while they were in the military.
       Mr. GOBER. Yes, sir. The reason we got involved in this is people
    were not looking at the veterans, and if you stop and think about it,
    all of us served in--particularly people my age served in barracks
    where you had asbestos around the pipes and when they got ready to
    remodel, they just came in and knocked it off. They didn�t do an
    abatement or anything else. So we got involved.
       It is interesting because the Wall Street Journal says that 26
    percent of all meso cases are veterans, 16 percent of all other lung
    cancer cases are veterans, and 13 percent of all disabling lung
    diseases are veterans. So we think this is working. I personally
    know of cases--one, in particular, where a veteran died on Veteran�s
    Day in 2001. The case has not come to court. They haven�t even taken
    depositions, and he was diagnosed with mesothelioma.
       Senator LEAHY. With this bipartisan trust fund legislation, do you
    think we can finally provide our Nation�s veterans with the compensation
    they deserve?
       Mr. GOBER. Yes, sir. That is why there are 19 veterans organizations
    that have signed on. I gave Senator Specter�s staff member a copy of
    the letter listing all of the veterans groups that have signed on.
    The current system is just not working.
       Now, is this the best bill in the world? I am not a lawyer, so I
    don�t know that. All I know is that right now it is not working.
    Veterans are dying. The World War II guys that were aboard those ships
    are dying. Their families are not being compensated, and when they
    are, the lawyers are taking 40 percent of it, plus expenses. That
    isn�t fair. It is not working, it is broke. It needs to be fixed.
    With all due respect to the legal minds in the house, it is just not
    working.
       Senator LEAHY. Thank you, Mr. Gober, and thank you for your service
    to our country.
       Chairman SPECTER. Thank you, Senator Leahy.
       Senator Sessions.
       Senator SESSIONS. Ms. Morgan, you represent a group, but what I am
    curious about--I will be frank with you. Are we dealing with a serious
    number of individual companies and entities that are openly opposed
    to this bill, or are we dealing with some people that are leveraging
    at the last minute to try to get the thing a little fairer for problems
    that they see in the bill?
       Would you be prepared to tell us who objects, who would like to see
    this bill fail? And do some in your coalition favor some sort of reform,
    but would just like to see it fixed? Who do you represent and how would
    you characterize that opposition?
       Ms. MORGAN. Well, I think first and foremost, as I said in my
    statement earlier, we are passionately interested in reforming the
    system. There is no question about that, and we want the focus to be
    on making sure that funds and resources are directed to those who are
    truly injured. That is clearly our focus.
       It is a wide variety of folks who range from business, as I said,
    and also to a very significant number of insurance companies. I think
    right now our members total somewhere between 30 or 40 different
    companies that have come forward.
       Senator SESSIONS. Are they willing to put their names out and say
    they oppose this bill?
       Ms. MORGAN. Well, we have, we actually have. A number of folks have
    written letters to this Committee. Exxon is on the list. Du-Pont and
    Shell are some of the bigger companies. Some of the smaller companies
    are like Oglebay Norton, Hopeman Brothers, Foster Wheeler, Iuna Nosroc.
       Senator SESSIONS. The figure earlier was 8,000 companies. How many
    do you have on your list that may be paying into this?
       Ms. MORGAN. Well, everyone in the coalition would be paying into
    this. Everyone is an asbestos defendant.
       Senator SESSIONS. Would you agree with that number, about 8,000,
    total?
       Ms. MORGAN. I have heard that. I don�t know that for a fact, but
    I do know that there are a lot of defendants who are being represented
    by insurance companies in their asbestos litigation and really probably
    are not aware of the impact of this bill. They have just been able to
    have all of their claims covered by insurance.
       Senator SESSIONS. Well, I have heard that, and this is a serious
    question that we have got people out here that unless they have been
    paying asbestos claims, or their insurance company has, they are not
    going to be covered and have to pay into this fund. Is that correct?
       Ms. MORGAN. No. As I understand it, any asbestos defendant, whether
    their claims have been paid by insurance or whether their claims have
    been paid out of their own pocket, would be subject to this fund.
       Senator SESSIONS. But if you haven�t been paying any claims, you
    are not going to be dragged into this and have to pay.
       Ms. MORGAN. No, I am not referring to those defendants. Those are
    some lucky defendants.
       Senator SESSIONS. I am serious about this question. We have been
    moving this bill for a number of years. The Chairman has had hearings
    and hearings and hearings. At the last minute, we have some people
    representing certain groups that object. I would like to see what
    companies are objecting and precisely what they object to. I think
    it is a bit late for some of the groups that have come in here to
    start complaining, frankly.
       Ms. MORGAN. Well, to your point about being late, we have actually
    been very vocal for a long time. In 2003--
       Senator SESSIONS. Well, I accept that. Some have not. Who, and what
    are their claims, what are their objections? Can you give us objections
    that are fixable or is it to the whole bill that you think is hopeless?
       Ms. MORGAN. Well, our concern is as long as the premise is that
    insurance assets will be taken away, and as long as the premise is that
    there has to be a $90 billion funding by industry, mathematically we
    can�t get there based on the data we have today.
       Now, once we know more about the exact source of funds for that $90
    billion, which is not certain right now--that is still a mystery, what
    companies, what their shares are, and most importantly whether they
    have the ability to pay. We don�t have that information yet. When we
    do, then we can talk meaningfully about is there a way to fix this.
       Senator SESSIONS. What is it that you lack to allow a company that
    knows the formulas and their own situation and how much they have had
    to pay so far--why can�t they figure out pretty close what their
    liability would be?
       Ms. MORGAN. Well, we can. We can estimate, we can guess.
       Senator SESSIONS. Okay.
       Ms. MORGAN. And based on that, we know what our personal, individual
    situations are, and there are a number of us, as I mentioned before,
    who would simply not be able to make the payments without our insurance
    assets.
       Senator SESSIONS. Well, I don�t know how to solve that problem,
    except I think we need people to step forward to show what they are
    paying and why they think it is too much, why they think it is unfair,
    put their names out there, and let�s see if we can fix it, Mr. Chairman.
    If they are not willing to do that, they don�t have as much credibility
    with me as they otherwise would.
       Chairman SPECTER. We have got quite a few good cross-examiners,
    former prosecutors, and Senator Sessions comes at the top of the list
    today.
       Senator Feinstein.
       Senator FEINSTEIN. Thank you very much, Mr. Chairman.
       Just continuing this line of thinking, Ms. Morgan, I read the ad
    today in the Washington Times and I was very much struck by it. Now,
    apparently, there are a number of anonymous companies out there that
    are prepared to say they won�t be able to make the payments.
       I would like to ask each one of you to begin reading the bill from
    page 135 onward, and let me just summarize a few things about what the
    bill says. The first is that there is a small business exemption. As
    I understand it, no company with 500 or less employees would have to
    pay into this fund, period.
       Secondly, there is a $300 million--and the wording of the bill is
    ��the aggregate total of financial hardships adjustment under paragraph
    2 and inequity adjustments under paragraph 3 in effect in any given
    year shall not exceed $300 million, except to the extent additional
    monies are available for such adjustments.�� So there is ample
    provision, it seems to me, that the administrator has the power to
    make certain adjustments as things go on.
       Now, I would like to make the offer that any company that is unhappy
    with this come in and see me specifically with the specifics of your
    unhappiness. But, frankly, it doesn�t change my mind to read an ad that
    is filled with generalities that don�t have a backup in terms of the
    wording of the bill. So I would just like to make that statement.
       If I might, I wanted to ask a question. Mr. Berrington isn�t here,
    but--
       Mr. BERRINGTON. Senator, that is not so.
       Senator FEINSTEIN. Well, I wanted to ask you on the exigents-- and
    I guess maybe somebody on the panel can answer this. In California law,
    and I think to some extent in Massachusetts law, exigents can have their
    cases heard in court within 120 days, and we have expedited
    administrative procedures. Even with those, I don�t know how you can
    ask Congress to tell terminal victims that they should be put in a
    worse position than they are now and have no place to have their claims
    resolved while the Department of Labor performs the necessary tasks to
    get the claims facility and the trust up and running.
       That was my understanding of what your written comments say, and
    this is the most important part of the bill for me to get the sickest
    people paid fairly the quickest on a no-fault trust medical judgment.
    I don�t know how we could do it any quicker.
       Mr. BERRINGTON. May I comment?
       Senator FEINSTEIN. If you would, and if anybody else would like to
    comment.
       Chairman SPECTER. Step to a microphone, Mr. Berrington.
       Mr. BERRINGTON. Thank you very much and I appreciate the opportunity
    to comment on it. Our goals are absolutely the same. The sickest people
    need to be compensated the fastest and the fairest. We spent weeks
    putting together the administrative structure in the bill working with
    friends from all the stakeholder groups to make sure that the
    administrative structure in the Labor Department would do that.
       I think Judge Becker said earlier, and I would agree with it, that
    the Labor Department can almost certainly be up and running, prepared
    to receive claims and to pay claims within just a couple of months.
    And I think that those are the easiest cases to decide. Those aren�t
    the toughest cases and they should move through very quickly.
       I think also I heard earlier that in one of the States--I am not
    an expert on the State laws that you have referenced--that you can
    move the mesothelioma cases through in about a year. Well, I don�t
    think that is acceptable in the court system, and the trust fund
    would have these cases move through much, much more quickly.
       I was struck in the offer of judgment provision, which I think was
    absolutely done in good faith with the effort to move this forward,
    that it is a 200-day process in the offer of judgment language dealing
    with these exigent claims. Well, the Labor Department is going to be
    resolving these cases way before 200 days are up, and I think it
    doesn�t work, therefore, to keep the litigation system going. I think
    it will work much better for the claimants to have the Labor Department
    move quickly and smartly ahead consistent with the processes that we
    have put in.
       Senator FEINSTEIN. My time is up, but let me just say if you don�t--
       Chairman SPECTER. Go ahead, Senator Feinstein.
       Senator FEINSTEIN. --if you don�t have this weight over the
    companies� heads, then I think there will be a problem. But I think
    the fact that these people can return to the courts immediately, as
    quick as possible, if they don�t have satisfaction or if they want
    to settle and a settlement isn�t granted--there is a specific process
    spelled out here.
       Mr. BERRINGTON. I am sorry. Should I respond?
       Senator FEINSTEIN. Yes, please, please.
       Chairman SPECTER. Go ahead.
       Mr. BERRINGTON. The way the bill is set up is that if there is not
    operational certification within nine months, which means not that
    claims aren�t being paid, but that certification isn�t given, people
    can go back to court. The offer of judgment provision continues
    litigation. It continues the litigation with regard to the individual
    claimants. It also continues litigation among potential defendants
    because the process that is laid out has all the defendants, then,
    who may be involved with one particular claimant then litigating among
    themselves as to their shares.
       Then, finally, the offer of judgment process that the bill has gets
    kicked off by an individual filing with the defendants exactly the same
    information that the plaintiff would file with the Labor Department.
    Well, filing it at one place, with all the quick procedures in the
    Labor Department, is going to work a lot better.
       I should also add, of course, that these are additional monies
    outside the trust fund. There is some contribution level, I understand,
    but these are funds that add to the $46 billion. And I think that
    clearly the fastest way will be through the Labor Department process.
    I had some experience with this many years ago.
       Senator FEINSTEIN. You are saying don�t allow a settlement? Is that
    what you are saying?
       Mr. BERRINGTON. I am saying once the--
       Senator FEINSTEIN. Are you saying don�t allow--do you favor the
    ability to settle for a lump sum within 30 days?
       Mr. BERRINGTON. I think the bill has a general provision now with
    regard to settlements that occur prior to the enactment date and that
    are finalized within 30 days. So I think that is already taken care of
    in the bill, Senator.
       Chairman SPECTER. Thank you, Senator Feinstein.
       Senator COBURN.
       Senator COBURN. Thank you, Mr. Chairman. I would note for the record
    that the CBO numbers on asbestosis were about a third less than Mr.
    Peterson�s estimate, and I think that needs to be in the record.
       I also would note that I am not a trial attorney and I am not good
    at cross-examination, but I can take a heck of a history from a patient
    and I want to do that. I also will note that after we had our hearing in
    January, I asked CRS to give me every study done in the world in
    relationship to cancers and asbestos outside of the lung. And I spent
    the two-week break we had reading 93 scientific articles on that and I
    want to say I am flabbergasted that if anybody would actually do the
    research and would ever think that there is a connection between any
    other area of the body and asbestosis, based on what the scientific
    literature is today, I can�t see it and I can�t find it.
       I have been accused of not being the best doctor, but I have never
    been accused of being a dumb ringer who can�t read a scientific journal.
    I want to ask Dr. Crapo to refute some of the things that we have heard
    here today because I just flat don�t buy it based on the science I have
    read.
       But I want to make a point. When you talk about cancer of the larynx
    and you look at the meta-analysis of all the studies it has been done
    for associated with asbestos, not one of those studies took out the
    confounding variables that we know cause cancer of the larynx. So those
    studies have no value in terms of telling us whether or not cancer of
    the larynx is caused by asbestos.
       Now, it may be that we need to have a study, but the fact is that
    we can�t rely on the science that is out there. And for us to have
    testimony that says that there is a causation when there, in fact, is
    not any causation is wrong. When we are going to start moving the
    science to what we want rather than what science really reveals, which
    happens a lot up here, we are in trouble as a Nation. End of talk.
       Dr. Crapo, talk to us about markers, asbestos exposure and lung
    cancer, because what I have heard here today is something that I just
    don�t buy.
       Dr. CRAPO. Well, your question is on markers of asbestos exposure
    and lung cancer. There is clearly an association between asbestos
    exposure and lung cancer. That has been well demonstrated in the
    literature. But it has also been well demonstrated that it is not
    just exposure; it is those that are very highly exposed that contain
    the highest risk.
       For example, if you look at the cohorts of asbestos workers in
    which there is not significantly high enough exposures so that there
    are no deaths due to asbestosis, so these are the kinds of workers
    who have asbestos exposure, but nobody has died from it, there are at
    least eight cohorts that have been studied that meet that criteria--no
    deaths due to asbestosis. In those eight cohorts, there is no increased
    risk of lung cancer. There is actually a zero increased risk, not even
    a small one.
       What that demonstrates is it is not just exposure that creates the
    risk, but rather a substantial exposure that is on the very high end.
    And most of the studies have suggested that the association is with
    those who have X-ray evidence of fibrotic lung disease that carries
    the increased risk, and there are a large number of studies that
    demonstrate that. So it is erroneous to conclude that just exposure
    alone dramatically increases a person�s risk for lung cancer,
    according to the best scientific evidence as I read it.
       Senator COBURN. Some of our testimony today states that there is
    causation of exposure without evidence of any pleural signs of any
    asbestosis, any restrictive lung disease and lung cancer. How would
    you go about proving that? I mean, that is the testimony we have today.
       Dr. CRAPO. I don�t think you can prove it.
       Senator COBURN. I don�t either.
       Dr. CRAPO. There is no way to prove that. In fact, the proof is
    the other way. The proof is the medical evidence suggests that there
    is not an association in the absence of some other marker of lung
    disease, and that is only for lung cancer. It doesn�t apply to the
    other cancers.
       Senator COBURN. Right, and so you feel comfortable telling this
    Committee that without signs of significant disease from asbestos
    either through a marker or restrictive lung disease, or a combination
    of both of those, that it is highly unlikely that you are going to
    see--based on the science, you are going to see a primary lung cancer
    that is associated with that?
       Dr. CRAPO. I would agree with what you just said. Based on the
    science, that would be my conclusion.
       Senator COBURN. And, remember, we are not distinguishing the types
    of lung cancer, are we?
       Dr. CRAPO. No.
       Senator COBURN. No, and there are multiple types of lung cancer.
    So there is no association, and we have done nothing as far as the
    amount of exposure in terms of particle load in this criteria, which
    is probably something we should do.
       Dr. CRAPO. That is true, although in this kind of a trust you
    probably can�t assess particle load. But there is good evidence that
    the higher the particle load in terms of asbestos particles, the
    higher the risk of this type of disease occurring.
       Senator COBURN. Thank you very much.
       Chairman SPECTER. Dr. Landrigan, would you like to comment on what
    Dr. Crapo just said?
       Dr. LANDRIGAN. Thank you, sir. I would. One of the nice things about
    medicine as compared to economic modeling is you can turn to data. In
    our very large occupational medicine practice at Mount Sinai, we have
    seen cases--I can�t tell you how many, but I can provide them for the
    record--of lung cancer in asbestos workers with many years of
    substantive exposure to asbestos, as defined in the bill here, who
    have developed lung cancer who had no asbestosis visible on X-ray. I
    edit the American Journal of Industrial Medicine. I have for more than
    15 years been editor-in-chief, and we have published cases of lung
    cancer in asbestos workers who had no radiographic evidence of
    asbestosis.
       Going beyond our own experience at Mount Sinai, I refer you to the
    Scandinavian Journal of Work, Environment and Health, arguably one of
    the three or four best journals internationally in the field of
    occupational medicine. Back in 1997, they convened an international
    expert meeting on asbestos to develop the so-called Helsinki Criteria
    for asbestos, asbestosis and cancer, which were published in the
    Scandinavian journal in 1997. It says right in here, a direct quote
    from page 6 of this article, ��Heavy exposure, in the absence of
    radiological-diagnosed asbestosis, is sufficient to increase the risk
    of lung cancer,�� a direct quote.
       Senator COBURN. Mr. Chairman, might I respond to that?
       Chairman SPECTER. Go ahead, Senator Coburn.
       Senator COBURN. It is very important because the statements that
    were just made show no association with the disease. You are trying
    to prove the negative. The observation that you have seen cases with
    lung cancer who have asbestos exposure, but don�t have asbestos disease
    does not prove that the asbestos caused the lung cancer. The background
    rate on lung cancer, we all know, in this country is high, not counting
    for those people who have never smoked and never had any exposure.
       So the assumption that it is caused by asbestos, with lack of proof,
    is a false assumption. That is the kind of study that we can�t use to
    make scientific decisions. Now, I have not seen that. I would be happy
    to read that and look at it, but if it is based on the same assumptions,
    anecdotal evidence of disease in the absence of true exposure or true
    markers of disease, you don�t know that that is not a background cancer
    anyway.
       Dr. LANDRIGAN. Well, if I may, Senator.
       Chairman SPECTER. Go ahead, Dr. Landrigan.
       Dr. LANDRIGAN. Senator, in this same article from the Scandinavian
    journal that I just cited, a couple of lines above the line that I just
    read you, it does say the following. Let me offer you a partial
    concession, but by no means a complete yielding to your point of view.
       It says, ��Because of the high incidence of lung cancer in the general
    population, it is not possible to prove in precise deterministic terms
    that asbestos is the causative factor for an individual patient.�� That
    is where the rub is, but what epidemiologists do--and I think having
    served for 15 years in the U.S. Public Health Service and directed
    epidemiology at NIOSH for 6 of those years, I can tell you that what
    we epidemiologists do is when we are looking at a population of people
    that have a cancer such as laryngeal cancer, we take into account the
    smoking history in those with the disease, the smoking history and
    the alcohol history in those without the disease.
       Though the exercise is no more perfect than the creation of
    legislation, there are techniques for holding the smoking history
    and the alcohol history steady and looking at the effect of asbestos.
    And what we see is very much what Dr. Crapo said that people with a
    heavier exposure are at the greatest risk of disease, and that is a
    cause and effect relationship that shines through the inevitable murk
    of those confounding exposures.
       Chairman SPECTER. Thank you.
       Senator COBURN. I just would make one comment. In the studies that
    I have seen that CRS gave to me, those confounding variables were not
    taken out of the studies to show causation in terms of pharyngeal and
    laryngeal cancer. I would love to see your studies that have those
    where that has been taken out as a confounding variable and considered
    appropriately so that you could see causation.
       Senator COBURN. Thank you, Mr. Chairman.
       Chairman SPECTER. Thank you, Senator Coburn.
       Senator Durbin.
       Senator DURBIN. Thank you, Mr. Chairman.
       Let me follow up on this, Dr. Landrigan, because even if you concede
    Dr. Coburn�s point that there are some cases without scarring and there
    is a question as to whether it is related to lung cancer, that is not
    what this law says; that is not what the bill says.
       I have read your testimony and it goes further. If you have evidence
    of asbestos scarring and lung cancer, but only find the scarring in one
    lung, then you are disqualified from coverage under this bill. And you
    say, and I quote, ��Requiring that the damage be bilateral, both lungs,
    has no basis in biology or medicine.��
       So even conceding Dr. Coburn�s point, I don�t see how we came up
    with a standard that says one lung is not enough; asbestos scarring
    in one lung is not enough. Can you respond to that?
       Dr. LANDRIGAN. I would agree with you, sir.
       Senator DURBIN. Well, that troubles me because it means a cohort
    of people with lung cancer and asbestos scarring in one lung will not
    have an opportunity to recover under this bill.
       Dr. LANDRIGAN. That is my read of the bill, yes, sir.
       Senator DURBIN. That is the way I read it, too.
       I also want to go to this question that has been raised repeatedly
    about whether there will be enough money to pay the claims. I am going
    to offer an amendment here, because it has been stated so often this
    morning, which says if this program is not prepared to pay meso victims
    in 60 to 90 days, they can return to court. We have heard that over and
    over again--60 to 90 days. Judge Becker said that. It has been said by
    Mr. Berrington from the insurance industry.
       Well, let�s make that part of this law. Sixty to 90 days--it sounds
    so simple. But then when I heard the explanations from Ms. Morgan,
    representing some businesses--Mr. Olson sent us some testimony
    representing others about the fact that this is going to be contested
    in court. I mean, it is likely that we are going to have protracted
    litigation. Professor Green mentioned that earlier.
       We are going to have meso victims who are going to be told you cannot
    even take a deposition in your lawsuit; you can�t take your own evidence
    deposition if you are near death for nine months while we wait and see
    if this is up and running. This 60 to 90 days, to me, seems like wishful
    thinking. I think it is going to be, unfortunately, a protracted period
    of litigation to determine the liability under this case.
       Mr. Peterson, let me go to your point. Are you arguing that in order
    for this fund to pay anything, it is going to have to borrow substantial
    sums of money at the outset, in the beginning, and start paying interest
    on that as the years go on? Is that correct?
       Mr. PETERSON. Well, that is not precisely true. It will have
    presumably some small billions of dollars to pay a few claims.
       Senator DURBIN. If you assume the trust funds worth $4 billion
    willingly pay over their money rather than contest it in court.
       Mr. PETERSON. Well, they are probably worth $7 billion. That is the
    current estimate of the values. But, yes, if they came in, but still
    the liability in the first year could be as high as $60 billion in the
    first year. Even using conservative estimates the CBO did, I think it
    is $35 to $40 billion. So there is going to be a shortfall. I did an
    analysis like this two years ago. If you don�t have borrowing, claims
    will have to wait decades to get paid.
       Senator DURBIN. So look at the situation here. You are telling people
    currently with cases pending in court, sick people with mesothelioma,
    suspend your court case, take no discovery, no depositions, don�t
    schedule a trail and wait. And if they wait, under the best of
    circumstances the question is whether or not this fund will have
    enough money to ever pay them within their lifetime, or certainly
    within the first several years, based on whether or not the money can
    be borrowed, whether there is ultimately going to be enough money in
    the fund.
       Your estimate, Mr. Peterson, is this fund, borrowing this money as
    anticipated, may only have a life of eight or nine years, maybe ten.
       Mr. PETERSON. I don�t believe that. I think it is too optimistic.
    That is using the optimistic assumptions that the proponents of the
    legislation were using a year ago. I don�t know what they are using
    now. They change from time to time as the law changes.
       But using their best estimate, the most optimistic and rosy picture--
    the rosy picture is you pay less than 25 percent of the claimants.
    That is the rosy picture. But with that rosy picture, you could get
    to ten years. If you pay 50 percent of the victims, you can get to
    maybe 4 or 5 years.
       Senator DURBIN. At which point the trust fund is exhausted.
       Mr. PETERSON. Yes. That is with the borrowing.
       Senator DURBIN. So four or five years from now, if this is signed
    into law, we may be in a position where there is no trust fund, where
    people have walked away from their litigation, their right to make a
    claim in court. And then I guess the theory is either the Federal
    Government steps in and bails out the fund--
       Mr. PETERSON. Well, either that or these people go back in and start
    litigating again.
       Senator DURBIN. Back into the tort system and start all over again.
       Mr. PETERSON. More than half of the claimants will be in that
    position.
       Senator DURBIN. Well, that concerns me as we get into this in terms
    of whether or not this is going to be able to make the payouts.
       I see my time is expired.
       Chairman SPECTER. Dr. Rabinovitz, would you care to comment on the
    last exchange?
       Ms. RABINOVITZ. Just very briefly, I am not the person who estimates
    the borrowing and financial situation of the fund. Goldman Sachs is.
    With our claims projections and their estimation of the financial
    contributions and the flow of funds based on cash flow analysis,
    Goldman Sachs seems satisfied that the fund is sound.
       Chairman SPECTER. Thank you very much. Well, thank you all.
       Senator KENNEDY. Mr. Chairman, could I just include a statement by
    President Sweeney of the AFL-CIO expressing his concerns about this
    legislation?
       Chairman SPECTER. Without objection, it will be made a part of the
    record.
       Senator KENNEDY. I thank the Chair.
       Senator DURBIN. Mr. Chairman, I have a series of statements I would
    like to ask to be part of the record relative to constitutional issues
    and rights of victims.
       Chairman SPECTER. They will, without objection, all be made a part
    of the record.
       In conclusion, two of the comments I think might bear special
    scrutiny: Senator Feinstein�s comment about reading the bill and finding
    a lot of provisions in the bill which have answered many of the
    objections which were raised here today, and Senator Sessions� comments
    about who is interested in what, what are the interests behind a good
    bit of the testimony characterized by the Coalition for Asbestos Reform,
    but other testimony as well.
       When we come to the medical evidence, there has been a healthy
    exchange here. We have had some very, very healthy exchanges with the
    conferences that we have had. We should be able to come to some sort
    of terms on what the science portends. We are asking IOM to do a study,
    and Senator Coburn, who has very extensive medical experience in the
    field, is going to be adding on some criteria there.
       What we are facing essentially is whether the current system, which
    is racked in ruin, is preferable to go on to what we have in this
    legislation. And to repeat, Senator Leahy and I have crafted, after
    a lot of very tough work, the core principles, and we are continuing
    to work right along to see if we can find accommodations to many, many
    interests, and we have and we will continue to do that.
       Senator Lindsey Graham couldn�t be here today, but he just sent
    some good news. He wants to cosponsor the bill.
       Thank you very much, Dr. Crapo, Professor Green, Mr. Gober, Dr.
    Landrigan, Ms. Morgan, Mr. Peterson, Dr. Rabinovitz and Mr. Reuther.
       That concludes the hearing.
       Senator LEAHY. Mr. Chairman, I thank it has been a good hearing.
    I think it has moved the legislation forward.
       Chairman SPECTER. It is a good hearing, like a good bill, Senator
    Leahy.
       [Whereupon, at 1:18 p.m., the Committee was adjourned.]
       [Questions and answers and submissions for the record follow.]

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