    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

           FURTHERING ASBESTOS CLAIM TRANSPARENCY (FACT) ACT OF 2015

    =======================================================================

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON

                               REGULATORY REFORM,

                          COMMERCIAL AND ANTITRUST LAW

                                     OF THE

                           COMMITTEE ON THE JUDICIARY

                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                       ON

                                    H.R. 526

                                   __________

                                FEBRUARY 4, 2015

                                   __________

                                Serial No. 114-7

                                   __________

             Printed for the use of the Committee on the Judiciary

          Available via the World Wide Web: http://judiciary.house.gov

                                        ______

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                           COMMITTEE ON THE JUDICIARY

                       BOB GOODLATTE, Virginia, Chairman
    F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
        Wisconsin                        JERROLD NADLER, New York
    LAMAR S. SMITH, Texas                ZOE LOFGREN, California
    STEVE CHABOT, Ohio                   SHEILA JACKSON LEE, Texas
    DARRELL E. ISSA, California          STEVE COHEN, Tennessee
    J. RANDY FORBES, Virginia            HENRY C. ``HANK'' JOHNSON, Jr.,
    STEVE KING, Iowa                       Georgia
    TRENT FRANKS, Arizona                PEDRO R. PIERLUISI, Puerto Rico
    LOUIE GOHMERT, Texas                 JUDY CHU, California
    JIM JORDAN, Ohio                     TED DEUTCH, Florida
    TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
    JASON CHAFFETZ, Utah                 KAREN BASS, California
    TOM MARINO, Pennsylvania             CEDRIC RICHMOND, Louisiana
    TREY GOWDY, South Carolina           SUZAN DelBENE, Washington
    RAUUL LABRADOR, Idaho                HAKEEM JEFFRIES, New York
    BLAKE FARENTHOLD, Texas              DAVID N. CICILLINE, Rhode Island
    DOUG COLLINS, Georgia                SCOTT PETERS, California
    RON DeSANTIS, Florida
    MIMI WALTERS, California
    KEN BUCK, Colorado
    JOHN RATCLIFFE, Texas
    DAVE TROTT, Michigan
    MIKE BISHOP, Michigan

               Shelley Husband, Chief of Staff & General Counsel
            Perry Apelbaum, Minority Staff Director & Chief Counsel
                                     ------

        Subcommittee on Regulatory Reform, Commercial and Antitrust Law

                       TOM MARINO, Pennsylvania, Chairman

                     BLAKE FARENTHOLD, Texas, Vice-Chairman

    DARRELL E. ISSA, California          HENRY C. ``HANK'' JOHNSON, Jr.,
    DOUG COLLINS, Georgia                  Georgia
    MIMI WALTERS, California             SUZAN DelBENE, Washington
    JOHN RATCLIFFE, Texas                HAKEEM JEFFRIES, New York
    DAVE TROTT, Michigan                 DAVID N. CICILLINE, Rhode Island
    MIKE BISHOP, Michigan                SCOTT PETERS, California

                          Daniel Flores, Chief Counsel

                                C O N T E N T S

                                  ----------

                                FEBRUARY 4, 2015

                                                                       Page

                                    THE BILL

    H.R. 526, the ``Furthering Asbestos Claim Transparency (FACT) Act
      of 2015''......................................................     3

                               OPENING STATEMENTS

    The Honorable Tom Marino, a Representative in Congress from the
      State of Pennsylvania, and Chairman, Subcommittee on Regulatory
      Reform, Commercial and Antitrust Law...........................     1
    The Honorable John Conyers, Jr., a Representative in Congress
      from the State of Michigan, Ranking Member, Committee on the
      Judiciary......................................................     6
    The Honorable Blake Farenthold, a Representative in Congress from
      the State of Texas, and Vice-Chairman, Subcommittee on
      Regulatory Reform, Commercial and Antitrust Law................     7
    The Honorable Henry C. ``Hank'' Johnson, Jr., a Representative in
      Congress from the State of Georgia, and Ranking Member,
      Subcommittee on Regulatory Reform, Commercial and Antitrust Law     8

                                   WITNESSES

    Elihu Inselbuch, Member, Caplin & Drysdale, Chartered, New York,
      NY
      Oral Testimony.................................................    11
      Prepared Statement.............................................    13
    Nicholas P. Vari, Esq., K&L Gates L.L.P., Pittsburgh, PA
      Oral Testimony.................................................    32
      Prepared Statement.............................................    34
    Marc Scarcella, Principal, Bates White Economic Consulting,
      Washington, DC
      Oral Testimony.................................................    45
      Prepared Statement.............................................    47
    Lester Brickman, Benjamin N. Cardozo Distinguished Professor of
      Law, Yeshiva University, New York, NY
      Oral Testimony.................................................    66
      Prepared Statement.............................................    68

                                    APPENDIX
                   Material Submitted for the Hearing Record

    Material submitted by the Honorable Henry C. ``Hank'' Johnson,
      Jr., a Representative in Congress from the State of Georgia,
      and Ranking Member, Subcommittee on Regulatory Reform,
      Commercial and Antitrust Law...................................   128
    Material submitted by the Honorable Suzan DelBene, a
      Representative in Congress from the State of Washington, and
      Member, Subcommittee on Regulatory Reform, Commercial and
      Antitrust Law..................................................   140
    Material submitted by the Honorable David N. Cicilline, a
      Representative in Congress from the State of Rhode Island, and
      Member, Subcommittee on Regulatory Reform, Commercial and
      Antitrust Law..................................................   145
    Response to Questions for the Record from Elihu Inselbuch,
      Member, Caplin & Drysdale, Chartered, New York, NY.............   164
    Response to Questions for the Record from Nicholas Vari, Esq.,
      K&L Gates L.L.P., Pittsburgh, PA...............................   192
    Response to Questions for the Record from Marc Scarcella,
      Principal, Bates White Economic Consulting, Washington, DC.....   195
    Response to Questions for the Record from Lester Brickman,
      Benjamin N. Cardozo Distinguished Professor of Law, Yeshiva
      University, New York, NY.......................................   223
    Congressional Budget Office Cost Estimate for H.R. 527, the
      ``Small Business Regulatory Flexibility Improvements Act of
      2015''.........................................................   227
    Material submitted by the Honorable Henry C. ``Hank'' Johnson,
      Jr., a Representative in Congress from the State of Georgia,
      and Ranking Member, Subcommittee on Regulatory Reform,
      Commercial and Antitrust Law.............................232
                           deg.OFFICIAL HEARING RECORD
          Material Submitted for the Hearing Record but not Reprinted

    GAO Report, GAO-11-819, entitled Report to the Chairman, Committee on
        the Judiciary, House of Representatives, September 2011, Asbestos
        Injury Compensation, The Role and Administration of Asbestos
        Trusts. This report is available at the Subcommittee and can also
        be accessed at:

        http://www.gao.gov/products/GAO-11-819

           FURTHERING ASBESTOS CLAIM TRANSPARENCY (FACT) ACT OF 2015

                                  ----------

                          WEDNESDAY, FEBRUARY 4, 2015

                           House of Representatives,

                      Subcommittee on Regulatory Reform,
                          Commercial and Antitrust Law

                          Committee on the Judiciary,

                                Washington, DC.

        The Subcommittee met, pursuant to call, at 1:04 p.m., in
    room 2141, Rayburn Office Building, the Honorable Tom Marino
    (Chairman of the Subcommittee) presiding.
        Present: Representatives Marino, Goodlatte, Farenthold,
    Issa, Walters, Ratcliffe, Trott, Bishop, Johnson, Conyers,
    DelBene, Jeffries, Cicilline, and Peters.
        Staff present: (Majority) Anthony Grossi, Counsel; Andrea
    Lindsey, Clerk; and (Minority) Susan Jensen, Counsel.
        Mr. Marino. Good afternoon. The Subcommittee on Regulatory
    Reform, Commercial and Antitrust Law will come to order, and
    without objection, the Chair is authorized to declare a recess
    of the Committee at any time. And just to give you a little
    head's up, in about 15 or 20 minutes, that bell is going to
    ring, and we will have to go vote, and it should not be that
    long. I think we only have a couple of votes, and I apologize
    for the inconvenience.
        We welcome everyone to today's hearing on the ``Furthering
    Asbestos Claim Transparency Act of 2015,'' known as the ``FACT
    Act.'' This morning, I am going to recognize myself for an
    opening statement, and then I am going to give my good friend,
    Mr. Hank Johnson, the opportunity for his opening statement.
        This morning, the Subcommittee meets to examine H.R. 526,
    the ``Further Asbestos Claim Transparency Act of 2015,'' or the
    ``FACT Act.'' This legislation is aimed at preventing
    fraudulent activity within the asbestos bankruptcy trust
    system. Following the first successful tort lawsuit against an
    asbestos defendant in the 1970's, asbestos litigation
    dramatically increased to the point that the Supreme Court
    described the ongoing lawsuit as an, and I quote, ``asbestos
    litigation crisis.''
        Under the backdrop of increasing asbestos claims and an
    expanding defendant population, courts and parties initiated
    several attempts to achieve a comprehensive resolution to
    asbestos litigation. Notwithstanding these efforts, no
    resolution has been reached. Likely due to the absence of a
    comprehensive resolution to the onslaught of asbestos
    litigation, companies closed their doors with great cost to the
    economy and their employees. Estimates of the cost of asbestos
    litigation and the ensuing bankruptcies ranged from between
    $1.4 and $3 billion, coupled with a loss of approximately
    60,000 American jobs.
        To allow some companies to emerge from bankruptcy and
    continue their business operations, Congress amended the
    Bankruptcy Code. The amendment includes a provision, Section
    524(g), which forges what is a simple compromise. A company can
    receive a permanent injunction against all of its asbestos
    liability claims if it funds a trust in an amount sufficient to
    pay all present and future asbestos claims. A product of
    bankruptcies that use Section 524(g) is a negotiated
    resolution. A company can continue generating jobs and income
    for the economy with the certainty that it will no longer face
    asbestos liability. Asbestos claimants will have confidence in
    a dedicated pool of money that is reserved to compensate them
    for their injuries.
        Over the past several years, however, the Committee has
    heard complaints regarding the asbestos bankruptcy trust
    system. These complaints have focused on the ability of
    plaintiffs' firms to exert considerable control over the
    formation and operation of the trust, the dramatic reduction in
    transparency from these asbestos trusts, and troubling reports
    of fraudulent activity occurring as a result. The fraudulent
    activity follows a similar pattern where plaintiffs' firms file
    claims against a bankruptcy asbestos trust claiming injury with
    one set of facts. The plaintiffs then file claims against
    defendants in State court based on different and sometimes
    conflicting sets of facts. This conduct is calculated to
    exploit the opaque nature of bankruptcy asbestos trust
    operations.
        Furthermore, fraud of this variety drains the finite funds
    set aside in these asbestos bankruptcy trusts so that when
    future asbestos victims start to develop symptoms and look to
    the trusts for compensation, their recoveries may be diminished
    dramatically.
        I support the Vice-Chairman of the Subcommittee, Mr.
    Farenthold, for introducing the FACT Act, and I am an original
    co-sponsor of this important legislation that will increase
    transparency in the asbestos bankruptcy trust system, and allow
    these trust funds to protect against fraudulent activity.
    Critics of this legislation have raised concerns that this bill
    imposes an undue burden on the asbestos trust. Critics also
    allege that it infringes on asbestos victims' privacy, and is
    not necessary because the critics allege fraud does not exist
    in the bankruptcy asbestos trust system. These concerns should
    be carefully evaluated.
        Thankfully, we have an excellent panel of witnesses before
    us today who will help us build upon the Committee's extensive
    record in support of this measure, and address the concerns
    that have been raised by critics of the legislation. I look
    forward to their testimony.

        [The bill, H.R. 526, follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                       __________
        Mr. Marino. I now recognize the Ranking Member, Mr.
    Johnson, for his opening statement.
        Mr. Johnson. Thank you, Mr. Chairman. And, Mr. Chairman, at
    this time, I know that the Ranking Member of the full
    Committee, Mr. Conyers, has some pressing business. And so I
    will yield to him insofar as his opening statement is
    concerned, and I would like the opportunity to make my own once
    he concludes.
        Mr. Conyers. Thank you so much, Ranking Member Johnson. I
    appreciate your kindness. We are all under time constraints
    here. I mean, the Committee is full of them. But before I make
    my remarks about the subject, I just wanted to congratulate our
    colleague, Tom Marino, on his new role as Chairman----
        Mr. Marino. Thank you, sir.
        Mr. Conyers. Congratulations, sir, on the Subcommittee of
    Regulatory Reform, Commercial and Antitrust Law. And I look
    forward to working with him and hope that he will continue in
    the spirit of collegiality that his predecessor, Spencer
    Bachus, exemplified during his tenure as Chairman of the
    Subcommittee, and I know that he will.
        And I also see the widow of our former colleague, Bruce
    Vento, Mrs. Sue Vento, here and present, and I wanted to thank
    her for coming, acknowledge her presence here in the Judiciary
    Committee. Bruce Vento represented the 4th District of
    Minnesota for almost 24 years until his death from
    mesothelioma, a form of cancer in the lining of the chest
    cavity often linked to exposure to asbestos fibers. Many of us
    remember Bruce fondly, a tireless champion of the American
    worker, the environment, and the homeless. And so, I am very
    pleased that Mrs. Vento has chosen to continue his fight, their
    fight, against those who do harm.
        I also note that she is joined by a number of asbestos
    victims, as well as family members who have lost relatives as a
    result of their exposure to asbestos. Will all they just stand
    up for one moment, please?
        [Audience members stand.]
        Mr. Conyers. I did know it was that many. Congratulations.
    Thank you. And I am sure everyone on this Subcommittee
    appreciates your presence here. You may sit down, please. I
    understand that among them, there are both Democrats and
    Republicans, and you come from across the United States, so
    welcome again. And in spite of your suffering and personal
    loss, you are here today to help enlighten us about your
    concerns regarding this legislation. You are all to be
    commended, and we are glad that you are here. I also want to
    note the presence of our distinguished witnesses.
        I just want to mention before I yield back that H.R. 526,
    the ``Further Asbestos Claim Transparency Act,'' commonly
    referred to as the ``FACT Act,'' gives asbestos defendants new
    weapons with which to harm asbestos victims. It imposes
    invasive disclosure requirements that would threaten asbestos
    victims' privacy when they seek payment for injuries from an
    asbestos bankruptcy trust.
        The bill would require disclosure of claimants' sensitive
    personal information, including their names and exposure
    histories when they seek payment for injuries from these
    trusts. This means asbestos victims will be re-victimized by
    allowing this highly personal and sensitive health information
    to be irretrievably released into the public domain. Just
    imagine what insurance companies, prospective employers,
    lenders, data collectors, and others could do with this private
    information. Worse yet, these asbestos victims would be more
    vulnerable to predators.
        Although H.R. 526's supporters claim that it is intended to
    help victims of asbestos exposure, asbestos victims vigorously
    oppose H.R. 526. In fact, I am not aware of a single victim who
    supports this bill. And so, it is a proposal that is
    fundamentally inequitable and requires these bankruptcy
    asbestos trusts to make certain disclosures that imposes no
    comparable demands on asbestos victims. Remember, these are the
    very companies whose products killed or injured millions of
    Americans. In fact, some manufacturers intentionally concealed
    information about the known risk of asbestos exposure, and used
    every trick in the book to avoid liability. They even fought
    the Federal Government's effort to ban use.
        And so, as a result, asbestos continued to be widely used
    in constructing our homes, offices, public schools, and even
    this very building in which we are all gathered today. But now,
    the very manufacturers want Congress to help them by passing
    H.R. 526, which effectively shifts the cost of discovery away
    from these defendants to asbestos bankruptcy trusts. So, while
    today's majority witnesses may claim that the asbestos trust
    system is rife with fraud, I think we will find out that there
    is very little merit to this assertion.
        And so, I will in closing note that several organizations--
    the Military Order of the Purple Heart, Asbestos Disease
    Awareness Organization, AFL-CIO, the Public Citizen
    Environmental Working, among others--all oppose the
    legislation. And I yield back my time, and thank the Chairman
    for his generosity.
        Mr. Marino. You are welcome. Thank you, Mr. Conyers. The
    Chair now recognizes the Vice-Chairman of the Subcommittee, Mr.
    Farenthold.
        Mr. Farenthold. Thank you very much, and I will be brief.
    This bill is designed to protect future victims of asbestos, or
    victims who have not yet discovered their injury. There are
    limited resources in these trusts. It is designed to prevent
    double dipping. It is designed to prevent fraud as a result of
    filing suits in multiple cases.
        There is a long history of abuses within the asbestos
    litigation system, a lot of which were brought to light in the
    district that I represent in Corpus Christie where Judge Jan
    Jack discovered massive abuses. We are just trying to get the
    facts out. We are not asking anybody who is a victim who gets a
    claim from a trust to give any more information than they would
    give in pleadings in a typical lawsuit. All we are trying to do
    here is set up a system of transparency where we know if you
    have been injured and been compensated, it keeps unscrupulous
    plaintiffs' attorneys, and, in some cases, unscrupulous alleged
    victims from double dipping.
        This is just simple get the facts out there so the lawyers
    and the courts all know what is going on. It is a simple,
    short, 2-page bill, 3 pages if you count the header. And all it
    asks for is a disclosure of information that would normally be
    available in pleadings. It is a quick, easy step to solve a
    problem and preserve limited resources in these trusts for as
    yet undiscovered victims. I will yield back.
        Mr. Marino. Thank you, Mr. Farenthold. The Chair recognizes
    the Ranking Member, Mr. Johnson.
        Mr. Johnson. Thank you, Mr. Chairman. Before I begin, I
    would like to take a moment to congratulate you on your new
    position as Chairman of this very important Subcommittee. I
    enjoyed a terrific relationship with your predecessor,
    Congressman Bachus, and I look forward to continuing that
    relationship with someone that I consider a close colleague and
    a personal friend. Although we will not see eye-to-eye on every
    issue, I look forward to working closely with you on important
    matters this Congress.
        Turning to the substance of today's hearing, I have serious
    concerns with the so-called FACT Act. It is actually a very
    small compact Trojan horse piece of legislation that is quite
    dangerous to the ability of claimants to, particularly those in
    the future, to get an adequate recovery for the harm that was
    done. And I think all of you people here, victims and the
    families of victims, have probably been called perpetrators,
    malingerers, and fraudulent individuals trying to make a dollar
    off of something that you should not even be, you know, trying
    to get. But I recognize you as people who have been aggrieved,
    and this court system is the place to go to receive the relief
    that you are due.
        Not only does this bill create a major hurdle for families
    already facing the insurmountable fight against asbestos-
    related disease, it also violates their privacy by publicizing
    sensitive information about claimants. This information is
    already discoverable if relevant to a claim or defense at
    trial. As written, little would stop this litigation from
    allowing third parties to collect and monetize claimants'
    medical history, or use this information to discriminate
    against victims and their families.
        Federal or State rules of civil procedure already allow a
    defendant to gain all relevant information about a claimant's
    exposure during discovery. Defendants are often wealthy
    corporations represented by experienced, powerful litigators
    who have the knowledge and resources to handle discovery. They
    get paid well to do so. But even if both parties were on equal
    footing, how does a defendant's need for materials outside of
    discovery justify a major privacy intrusion on a vulnerable
    class of persons? This question is especially troubling when we
    stop to consider the equities of these actions where defendants
    and claimants are rarely on equal footing during discovery, or
    any other stage of the litigation.
        Rather than providing for broader transparency for both
    parties in litigation, the FACT Act creates significant hurdles
    for asbestos victims while doing nothing to address the other
    party to the litigation. If we remove the rhetoric behind the
    FACT Act, all we are left with is legislation that creates an
    asbestos death database with the sole purpose of allowing
    Honeywell, Koch Industries, and the two largest asbestos
    insurers, Berkshire and Mutual, to easily gain or easily access
    other asbestos corporations' kill lists so they can determine
    if asbestos victims are getting what they view as too much
    justice and if there is way they can nickel and dime the
    families they have devastated.
        That is what this bill is all about. It is a Trojan horse.
    It guarantees the asbestos industry and its insurers, it
    guarantees that they pay as little to their victims as
    possible. That alone is offensive, but the way the bill
    achieves this objective is morally reprehensible. Moreover, for
    the second straight Congress, the majority has ignored and
    disregarded the hardships and testimony of asbestos victims and
    families. Not one victim or their family is seated at this
    table today to give testimony. At no point were victims or
    family members invited to testify about a bill that would
    seriously affect their lives. After retracting a promise to
    these families last Congress, I am disappointed to report that
    the majority has again shut the doors to these families to
    testify on the real effects of this bill. But these problems
    are only the tip of the iceberg when it comes to my concerns
    about the FACT Act.
        In closing, although I welcome Chairman Marino and look
    forward to working with him on many important issues this
    Congress, I must respectfully voice my deep opposition to this
    legislation. And with that, I yield back.
        Mr. Marino. Thank you, Mr. Johnson. I am going to declare a
    recess in a moment, but I would like to bring out a point that
    my good friend brought out before, just in his comments. The
    procedure has been when the Democrats were in control and we
    have four people at the panel, whoever is in control invites
    three, and the other side invites one. We have continued with
    that under my chairmanship. We invited three. The other side
    invited one. The Democrats could have invited any one of you or
    anyone else--victim--to come and testify. They chose not to.
    They chose to have the attorney that represents the attorneys
    in these cases testify, so I want to make that perfectly clear.
    You could have been invited by my colleagues on the other side
    of the aisle. They chose not to.
        I am going to declare a recess at this point, and we will
    be back within 20 or 25 minutes. We have two votes, and then we
    will introduce our witnesses.
        [Recess.]
        Mr. Marino. The hearing will now resume. Without objection,
    the other Members' of the Committee opening statements will be
    made part of the record.
        We have a very distinguished panel today, and I will begin
    by swearing in our witnesses before introducing them. So, if
    you would, please all rise. Raise your right hand.
        Do you swear that the testimony you are about to give is
    the truth, the whole truth, and nothing but the truth, so help
    you, God?
        [A chorus of ayes.]
        Mr. Marino. Let the record reflect that all the witnesses
    responded in the affirmative. Thank you. Please be seated.
        I would like to introduce from my left to right, first Mr.
    Inselbuch. Is that correct, sir? Okay. Mr. Inselbuch practices
    law at Caplin & Drysdale New York offices. He has 30 years of
    experience practicing on behalf of asbestos plaintiffs' bar,
    and was first retained in that capacity in a landmark asbestos
    bankruptcy case of Johns Manville in 1985. He has represented
    the asbestos plaintiff's bar in a number of complex
    bankruptcies, including those of W.R. Grace, Babcock & Wilcox,
    Pittsburgh Coining, and Armstrong World Industries.
        Mr. Inselbuch earned his undergraduate degree from
    Princeton University, his law degree from Columbia University,
    and a masters of law degree from the New York University School
    of Law. Welcome, sir.
        Mr. Vari is a partner at the Pittsburgh office of the law
    firm of K&L Gates, where he specializes also in asbestos
    litigation. He has over 25 years of asbestos litigation
    experience in both trial and appellate courts in a number of
    States, including: California, New York, Illinois,
    Pennsylvania, Texas, Massachusetts, Michigan, and Ohio. Mr.
    Vari has been recognized repeatedly for the quality of his
    work, including being named one of the best lawyers in America
    and the Pennsylvania Super Lawyer.
        Mr. Vari earned his undergraduate degree in finance from
    the University of Akron and his law degree, summa cum laude,
    from the University of Akron School of Law, where he was the
    managing editor of the Law Review. Welcome, sir.
        Mr. Scarcelli--correct pronunciation?
        Mr. Scarcella. Close enough.
        Mr. Marino. Okay. What is it?
        Mr. Scarcella. Scarcella.
        Mr. Marino. Scarcella.
        Mr. Scarcella. Scarcella, yes.
        Mr. Marino. Okay. Mr. Scarcella--I apologize--is an
    economist and principal with Bates White Consulting Firm. He
    has over 10 years of experience in economic consulting related
    to asbestos litigation, and has extensive knowledge of the
    Administration and operation of asbestos bankruptcy trusts.
    Additionally, Mr. Scarcella regularly provides his expertise to
    ongoing asbestos litigation suits, and has served as an expert
    witness in over 50 individual asbestos-related cases.
        He earned his bachelor's degree in both economics and
    public affairs, as well as a master's degree in economics from
    American University. Again, welcome, sir.
        Mr. Brickman is a former acting dean and professor of law
    at Benjamin N. Cardozo School of Law at Yeshiva University. He
    is a leading scholar and expert on asbestos litigation.
    Professor Brickman has published numerous articles, spoken on
    many panels, and testified frequently before governing bodies
    and courts on the issues related to asbestos litigation.
        Professor Brickman earned his bachelor of science degree in
    chemistry from Carnegie Tech, his law degree from the
    University of Florida where he was a member of the Law Review
    and graduated Order of Coif, and a master's of law degree from
    Yale University where he was a Sterling Fellow.
        Each of the witnesses' written statements will be entered
    into the record in its entirety. I ask that each of you
    witnesses summarize your testimony in 5 minutes or less. And to
    help you stay within the time, there is a timing light in front
    of you. Now, I do not know how good I am going to be about this
    because I am color blind, and I cannot see the last two. They
    look they are on or off all the time. The light will switch
    from green to yellow indicating that you have 1 minute to
    conclude your testimony. When the light turns red, it indicates
    that the witness' 5 minutes have expired. And what I will do is
    if we get to that red light, when someone nudges me, I will
    just politely do a little tap and give you a hint to please
    wrap up.
        Okay. We are going to start with Mr. Inselbuch's testimony.
    Sir, please make sure the microphone is on and pulled up to
    you. Sir, I think you may have to push that button on that
    microphone in front of you. The light should come on.
        Mr. Inselbuch. Yes.
        Mr. Marino. Okay, good. Now, we can hear you. Thank you.

                 TESTIMONY OF ELIHU INSELBUCH, MEMBER,
               CAPLIN & DRYSDALE, CHARTERED, NEW YORK, NY

        Mr. Inselbuch. Thank you, Mr. Chairman. The Committee press
    release says, the ``FACT Act reduces fraud in the asbestos
    bankruptcy system through increased transparency measures.''
    The Committee has been led to believe there is fraud.
    Presumably claims are being paid by trusts based on false
    information, depleting the pool of funds available for
    legitimate claimants.
        Nothing could be further from the truth. I know. Unlike
    these other witnesses, my work involves regular interaction
    with many asbestos trusts. No one, certainly not any of these
    witness, has provided a listing of any such fraudulently paid
    claims.
        Who is telling you this and asking you to help the trusts
    help themselves and their victims? Not one trust or trustee,
    not one victims group, not one victim. There are real victims
    sitting behind me in this room today. Ask them how this bill
    would help them. No, this bill comes through the United States
    Chamber of Commerce on behalf of the asbestos companies and
    their insurers. They presume on your goodwill here and are
    selling a false bill of goods.
        Increased so-called transparency is apparently only a one-
    way imperative for asbestos corporations because nothing in the
    act would require asbestos defendants to provide transparency
    for all the settlements that they demand be held confidential
    and hidden from public view. Presumably, asbestos defendants do
    not want asbestos victims to know what they paid to other
    victims to resolve their conduct.
        And whose private information becomes public? Thousands of
    your constituents, many aging veterans, who might prefer the
    world not know who they are, where they live, that they are
    sick, that they have recently resolved a claim, and are in
    possession of funds. And who pays for this transparency? The
    victims themselves. As Mr. Campbell's letter attests,
    ``Compliance with this act will cost the trust millions of
    dollars each year on Section A alone, with no possible estimate
    for Section B.'' Mr. Scarcella disagrees, but he has never
    worked at any of the trusts in question, and his long-ago
    experiences at the Manville trust hardly qualifies him to
    contradict the people who will actually do the work.
        A word about double dipping. Mr. Vari and his defense
    colleagues are insulting the intelligence of those members who
    have law degrees, and presuming on the ignorance of the tort
    law of those who do not. First, it is imperative that the
    Committee Members understand this point. Each trust only pays
    its respective defendant's share of the harm caused to a
    victim, meaning that there is absolutely no opportunity to
    double dip because each trust and each settling defendant in
    the tort system only pays for their portion of the harm caused.
    No one defendant or trust pays for the harm caused by another
    trust or defendant.
        Also, as the tort law makes clear, an injured person can
    sue and collect from each and every person or entity who
    culpably caused that injury. Asbestos victims are individuals
    exposed during their employment history to dozens of asbestos-
    containing products, and recover from each and every entity
    responsible. Typically, over 99 percent of the time, all the
    claims are settled with tort system defendants and with trusts.
    What the victim receives is the total sum of those settlements,
    and there is no standard by which to measure how well or how
    poorly compensated he or she has been.
        Only in the very rare circumstance that a case goes to
    verdict has a victim been compensated in full. Mr. Vari knows
    about cases like this, at least in New York where his client,
    Crane Company, went to verdict and was found not only liable,
    but recklessly so. And only after such a verdict has been paid
    to a victim, and, of course, the jury finding is always reduced
    by any settlement amounts already received by the victim, if a
    victim then sought and obtained recovery from a trust, could
    there be even a possibility of so-called double dipping. But
    this does not ever happen because after satisfaction of the
    rare verdict, the defendant steps into the shoes of the victim
    and can on its own behalf pursue any unpaid trust claims.
        So why are we here? If the act will not force the trust
    savings, and if no trust or victims group wants this, who does
    and why? I can only surmise that the bill sponsors believe by
    trumping long-developed State law and obtaining information on
    hundreds of thousands of their victims, asbestos corporations
    will be able to pay less for the injuries and deaths they have
    caused. You should not help them. Thank you.
        [The prepared statement of Mr. Inselbuch follows:]

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                                   __________
        Mr. Marino. Thank you, sir.
        Mr. Vari?

                 TESTIMONY OF NICHOLAS P. VARI, ESQ.,
                    K&L GATES L.L.P., PITTSBURGH, PA

        Mr. Vari. Mr. Chairman and Members of the Subcommittee,
    thank you very much for affording me the opportunity to appear
    before you today on the important issue of the FACT Act
    legislation. Just to re-introduce myself, my name is Nick Vari.
    I am an attorney with K&L Gates in Pittsburgh, and for nearly
    25 years I have represented asbestos defendants across the
    United States, and it is those experiences that shape my
    comments today. The reason I am here is that the asbestos claim
    recovery system is broken. There are billions of dollars that
    are being paid every year by entities that collectively do not
    have complete information regarding the claims that are being
    paid.
        There are two competing remuneration systems or
    compensation systems that exist for asbestos claimants. One is
    a trust system, and that trust system was formed by now
    bankrupt entities that have put money into trusts to not only
    pay present claimants, but future claimants who do not even yet
    know that they have a claim. The other system is the civil
    justice, or what we refer to as the tort system, and that is
    where the solvent entities are, and the plaintiffs can seek
    recovery from the solvent entities.
        The mechanisms in each instance are pretty similar. The
    claimant comes forward with information regarding exposure to a
    product or showing circumstances that a trust or entity is
    responsible for the claim. Then they also need to provide
    evidence of a compensable injury that is attributable to that
    asbestos exposure, and then the claim is reviewed. It can be
    contested, and ultimately it is disposed of and often paid.
        The big difference between the two systems, though, is that
    the claim information for the tort system claimants is
    available to the public largely and takes place under the
    sunlight of the disclosure in the court systems. The trust
    system disposition or claims disposition occurs behind closed
    doors, and that information is not available to other
    stakeholders or folks who may need to know or could benefit
    from that information.
        Now, it is the same people, the same claimants, that are
    seeking recovery in each system. And the proposed legislation
    that we are talking about today is not about who is a good guy
    and who is a bad guy, and putting white hats or black hats on
    people or entities. It is just about information, and it is
    about making sure that all of the stakeholders in this claims
    process have access to the same information regarding what
    claims are being made, and of whom, and what is being alleged
    in all of those claims.
        I reference in my comments the Garlock opinion. It is a
    bankruptcy opinion out of the Western District of North
    Carolina. I am sure we will have some more discussion on that.
    But the teaching in that claim or in that decision was that the
    bankrupt entity, Garlock, was paying 10 times more in the tort
    system than the bankruptcy court felt that it should have paid
    had it had access to all of the information regarding other
    exposure claims that its claimants were making.
        Now, while it is correct that I have personally not worked
    with the trusts, I can only presume, though, that each trust
    would benefit from the same information, and knowing what
    claims were made and what allegations of exposure were being
    made, and what diseases were being alleged by the various trust
    claimants. At this point, all these trusts exist in a vacuum.
    If that information was open, it would not only benefit
    defendants. It would benefit the trusts in evaluating the
    claims to it.
        The arguments against transparency even from my perspective
    just do not seem to resonate. An asbestos claimant in the tort
    system makes full disclosures of his or her medical history and
    medical records. They provide Social Security printouts. They
    provide tax returns. They provide all sorts of wage
    information. There is no information that is submitted to the
    trust that is not made available within the civil justice
    system.
        And the most important thing, from my perspective, is that
    nothing in this legislation relates to compensation or costs
    any claimant one cent in compensation. The effect of this
    information and what that may be is a function of state courts
    and the recovery systems that are available on a state-by-state
    basis. All the legislation provides for is information and
    enables all of the stakeholders in that litigation to have
    access to the same information.
        Thank you very much, and I appreciate your time.
        [The prepared statement of Mr. Vari follows:]

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                                   __________
        Mr. Marino. Thank you, sir.
        Mr. Scarcella, please.

                TESTIMONY OF MARC SCARCELLA, PRINCIPAL,
            BATES WHITE ECONOMIC CONSULTING, WASHINGTON, DC

        Mr. Scarcella. Thank you, Mr. Chairman, Members of the
    Subcommittee. I will be addressing a number of Mr. Inselbuch's
    concerns throughout my testimony. But one in particular that I
    think is important to address right off the bat is that while
    it has been a number of years since I was the statistician and
    data management specialist for the Johns Manville trust, I did
    spend more than 7 years as a consultant to trustee boards,
    future claimant representatives, to trustees, where I regularly
    received and analyzed trust data extracts at the claimant level
    that far exceeded the level of detail requested here in the
    FACT Act. And I was able to receive that data in short
    turnaround at far less cost than opponents of this bill seem to
    posture will actually take place.
        I have testified two times before, both in 2012 and 2013.
    And I can say that since that time the problem has gotten
    worse, or, at the very least, the problem has been partially
    exposed by cases such as the Garlock bankruptcy. I do not
    intend to speak at length about the Garlock proceedings, but
    its relevancy to this hearing and this bill is clear.
    Transparency uncovers inconsistent, specious, or potentially
    fraudulent claiming behavior. And moreover, a system of
    standardized transparency, as proposed by the FACT Act, will
    help deter such activity in the future.
        Since I last testified in 2013, there has continued to be a
    rapid depletion of trust assets that far exceeds trust
    forecasted expectations. Since 2009, 23 trusts have had to
    lower the net payout that they provide to claimants because
    claim rates and payments rates have exceeded what they
    expected, 23 trusts.
        There are currently 50 trusts operating over a corpus of
    total assets close to $30 billion, yet there are no
    standardized requirements for reporting or disclosure. To the
    extent that these advanced accelerated rates that exceed what
    the forecasts expected by these trusts have anything to do with
    inconsistent, tenuous, or potentially fraudulent claim
    behavior, transparency would be the appropriate response and
    solution to curbing such activity in the future, thus
    preserving money not just for claimants today, but claimants in
    the future.
        The point I just brought up about 23 trusts lowering their
    net payouts to claimants since 2009, a claimant today receives
    on average 50 percent less in most cases than a similarly-
    situated claimant received just in 2009. And claimants who get
    sick and make claims next year, 5 years now, 10 years from now,
    which are all claimants that these trusts owe a responsibility
    to, are going to receive even less if the problem is not
    stopped now. There is still $30 billion. We should bring some
    more transparency to the system.
        Which will bring me to my final set of points which have to
    do with cost because it is difficult to weigh the benefits of
    any proposed legislation without talking about costs incurred.
    As I mentioned in my opening, I received regularly claimant-
    level data from various trusts at a level of detail that far
    exceeded anything that is being requested here under the
    quarterly reporting requirements of the FACT Act. I received it
    quickly, and I received it at very little cost to anyone. I was
    able to analyze it and make use of it.
        The quarterly reporting requirements of the FACT Act
    require detail in a tabulated form that the trust can produce
    in an easy and repeatable way, especially information regarding
    the site, occupation, and dates of exposure, which is
    information that is submitted electronically through
    standardized claim forms and stored electronically.
        Moreover, the burden of discovery under Part B of this bill
    shifts the cost away from the trusts and onto defendants. If a
    third party defendant or insurer would like to gain additional
    information that is not provided in the quarterly reporting
    disclosures, they can request it, but it is at their cost. And
    I think that shift in cost burden, as well as the transparency
    that could help deter future inconsistent or fraudulent
    claiming activities, makes the FACT Act a reasonable, sound,
    and useful piece of legislation for preserving trust assets for
    future claimants.
        Thank you.
        [The prepared statement of Mr. Scarcella follows:]

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                                   __________
        Mr. Marino. Thank you, sir.
        Professor Brickman?

    TESTIMONY OF LESTER BRICKMAN, BENJAMIN N. CARDOZO DISTINGUISHED
           PROFESSOR OF LAW, YESHIVA UNIVERSITY, NEW YORK, NY

        Mr. Brickman. Mr. Chairman, Members of the Subcommittee, I
    want to thank you for this opportunity to address the critical
    issues of how to check the fraudulent practices that permeate
    mesothelioma litigation today.
        Approximately a year and a half ago, I testified in the
    Garlock bankruptcy as an expert witness for Garlock, that the
    settlements that Garlock had entered into in the period 2005 to
    2010, which the lead plaintiff's expert had relied on for his
    calculation that Garlock should fork over $1.3 billion to the
    trust to cover its asbestos liabilities, was simply not a valid
    basis for these projections. The reason I gave was that these
    settlements were infected by plaintiffs' counsels' strategy of
    suppressing evidence of claimants' exposures to a group of
    large companies that were bankrupted in the years 2000 and
    2001.
        The presiding judge in Garlock, Judge Hodges, agreed,
    finding that, ``The estimate of Garlock's aggregate liability
    are infected with the impropriety of some firms.'' I think the
    attempts by Mr. Inselbuch that you heard today and others to
    marginalize Judge Hodge's finding would not rattle in a
    thimble.
        Permit me to briefly explain how this illegal and unethical
    suppression of evidence is carried out. Plaintiffs' counsel,
    who have effective control over the creation and administration
    of bankruptcy trusts, have used that power to include, amend,
    or add provisions to trust distribution procedures, known in
    the trade as TDPs, designed to limit, if not preclude,
    defendants' ability to use discovery, to access information,
    evidence that a tort plaintiff has filed trust claims. In
    filing a trust claim, a claimant must demonstrate ``meaningful
    and credible exposure to the products of the company funding
    the trust.''
        To facilitate fraud, asbestos trusts have modified or
    adopted TDPs to include provisions designed to allow claimants,
    who are also suing defendants in the tort system, to prevent
    tort defendants from accessing exposure information and other
    vital information submitted by the claimants as part of the
    trust claims. Now, I have more fully described these provisions
    in my written statement and in my scholarship.
        Now, in the teeth of this overwhelming evidence that exists
    today that some plaintiffs' counsels' practices are designed to
    defraud defendants, plaintiffs' counsel continued to deny any
    fraudulent practice or practices in mesothelioma litigation.
    For example, we just heard Mr. Inselbuch, who has testified
    previously as he has testified today, that fraudulent actions
    to suppress the production of exposure evidence submitted with
    claim filings are essentially non-existent. And as for the
    massive fraud in the Canadian case, which I presume some of you
    are familiar with, he testified previously before this
    Subcommittee that it was ``an isolated incident remedied by a
    State court, involving inconsistent trust claims with respect
    to a single claimant, one of the millions who have filed claims
    with asbestos trusts.'' There has also been congressional
    testimony from plaintiffs' counsel, Charles Siegel, to the same
    effect. Now, because of time I will have to rely on my written
    statement that goes further into this.
        Now, much of the evidence that was presented in the Garlock
    proceeding, including my expert report in particular, still
    remains under seal, though I understand that this will start to
    come out in about 2 weeks. Now, the Garlock evidence that Judge
    Hodges did disclose in his order as to the frequency of
    apparently perjurious denials of exposures, the products to
    which plaintiffs had asserted ``meaningful and credible
    exposure,'' coupled with plaintiffs' counsels' brazen
    manipulation of TDPs to facilitate such denials, lead, in my
    opinion, to an inexorable conclusion: the practice of
    deliberately failing to disclose evidence of other exposure is
    far closer to the norm than the exception. Indeed it is likely
    that cases in which fraud has been successfully employed dwarf
    the number of cases in which abuse has been discovered.
        Now, improper trust payments no doubt have amounted to
    billions of dollars to this point. As for tort defendants, it
    is simply not possible to even begin to estimate how much money
    they have paid out as a consequence of plaintiffs making false
    statements as to product exposures. Undoubtedly, it amounts to
    hundreds of millions of dollars, but more likely billions. And
    it is improbable, to say the least, that the scheme to suppress
    evidence of other exposures is being hatched by plaintiffs.
        Mr. Marino. Sir, would you please wrap up your testimony in
    your next sentence?
        Mr. Brickman. Yes, sir. Judge Hodges in his estimation
    order in the Garlock bankruptcy has allowed us to peer behind
    the asbestos curtain that shrouds the inner workings of this
    highly successful scheme to use the judicial system to defraud
    asbestos defendants and their insurers out of billions of
    dollars. It is now up to the Congress to take the critically
    important step of enacting H.R. 526 to contain this massive
    fraud that now permeates mesothelioma litigation.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Brickman follows:]

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                                   __________
        Mr. Marino. Thank you. The Chair now recognizes the
    gentleman from California, Mr. Issa. I have a policy of, since
    I am going to be here, of waiting to go last, and let my
    colleagues go before me.
        Mr. Issa. And, Chairman, I have a policy that if my
    colleague from Texas is walking in, as you recognize me and he
    is supposed to go first, that I yield.
        Mr. Marino. That is fine.
        Mr. Farenthold. I apologize. I picked up a bit of a cough.
    I had to get a cough drop, or I would not have been able to get
    a sentence out. And I appreciate, and I have reviewed you all's
    testimony.
        Mr. Inselbuch, yes, I talked a little bit earlier about a
    judge in the district I represent in Corpus Christie, actually
    retired now, Jan Jack, who exposed widespread fraud in asbestos
    litigation. And while her stand on shady medical litigation
    practices serve to get rid of some of the claims, she said that
    they were neither driven by health or justice. We still have
    strong indications that some of the same activities persist
    today in the asbestos trust system.
        In your written testimony, you state there is not a
    scintilla of evidence of fraud in the asbestos bankruptcy
    system. Yet the judge in the Garlock case where you served as
    counsel to the Asbestos Claimant's Committee, they found a
    startling pattern of misrepresentation in 15 cases where the
    judge allowed full discovery and went on to state that those 15
    cases were not isolated or unique, but rather stated, ``It
    appears certain that more extensive discovery would show more
    excessive abuses.'' Were there misrepresentations in the 15
    cases highlighted in that decision?
        Mr. Inselbuch. No.
        Mr. Farenthold. Okay. Mr. Brickman, you have indicated in
    prior testimony that some of the profit-driven screening
    tactics that Judge Jack pointed out may or soon will be used to
    generate additional claims for asbestos trusts. Can you please
    tell me more about the situation and how the FACT Act would fix
    that?
        Mr. Brickman. Plaintiffs' counsel back at the time of Judge
    Jack's decision in about 2004, 2005, were, just as today,
    denying that there was any fraud in the asbestos litigation
    system. At that period of time, the major cases--that is, the
    majority of cases--were non-malignant cases, asbestosis.
    Hundreds of thousands of asbestosis cases that were the product
    of what Judge Jack said was a scheme by plaintiff lawyers,
    litigation doctors, and screening companies to manufacture
    diagnoses for money. In other words, the vast majority of those
    hundreds of thousands of claims were bogus, fraudulent. I think
    the evidence on that is overwhelming.
        Now, what we heard with regard to that finding by Judge
    Jack is again repeated today with regard to mesothelioma
    litigation. It is the same script, just a few words changed.
    Despite the clear example of massive fraud that she exhibited,
    which confirmed what I had written previously, plaintiffs'
    counsel said----
        Mr. Farenthold. And it is your belief that it is going on
    today, and the FACT Act will help fix it.
        Mr. Brickman. It is going on today, just in a different
    form, except that now more money is involved.
        Mr. Farenthold. Some of my colleagues on the other side of
    the aisle expressed some concern about the privacy of
    plaintiffs and their medical records. Let me read you exactly
    what this says. It says, ``A trust described in Paragraph 2
    shall, subject to Section 107(a), file with the bankruptcy
    court not later than 60 days at the end of each quarter a
    report that shall be made available on the court's public
    document with respect to such quarter, that, one, describes
    each demand the trust received from, including the name and
    exposure history of a claimant and the basis for any payment
    for the trust made for such claimant, and, two, does not
    include any confidential medical records or the claimant's full
    Social Security number.''
        So basically, all we are asking for is you were exposed by
    company X, Y, Z, and you got--I mean, we are just basically
    asking, so you do not go sue three different companies for the
    same deal. One of our goals here is to lower the cost of
    litigation and going through a costly discovery process to get
    to that, which is sometimes difficult to get to. We are trying
    to make it easier for plaintiffs and defendants here. Do you
    think this is an invasion of the medical privacy, or is this
    stuff that would normally come out during any sort of
    litigation?
        Mr. Brickman. That claim is simply a red herring, sir. If
    you file a tort action in a State court or a Federal court
    claiming that you were injured, you have to provide in a public
    forum a great deal more information than is to be disclosed by
    H.R. 526. In other words, the claim that this is an invasion of
    privacy is just utter nonsense. It is a make-way claim that is
    not even gossamer. So the bottom line is, anybody can say
    anything by way of an argument. This is an argument that has no
    credibility whatsoever.
        Mr. Farenthold. Thank you very much. I see my time has
    expired.
        Mr. Marino. Thank you. The Chair now recognizes the
    gentleman from Georgia, the Ranking Member, Mr. Johnson.
        Mr. Johnson. Thank you, Mr. Chairman. Before I begin my
    questions and before we start running the clock, I would like
    to ask unanimous consent to submit several materials into the
    record. These include an internal memo from National Gypsum
    Company stating, ``Just as certain as death and taxes, if you
    inhale asbestos dust, you get asbestosis.''
        Also to be submitted for the record with unanimous consent
    an internal memo from Honeywell stating, ``If you enjoyed a
    good life while working with asbestos products, why not die
    from it?'' Also an internal industry discussion on asbestosis
    resulting in the unanimous decision not to admit liability in
    discussing defensive strategies, as well as an internal memo
    that chronicles damaging industry documents dating to 1934,
    explaining that the plaintiffs' bar will probably take the
    position, not unreasonably, that the documents are evidence of
    a corporate conspiracy to prevent asbestos workers from
    learning that their exposure to asbestos could kill them.
        Mr. Marino. Without objection----
        Mr. Farenthold. While I am not going to object to those
    being admitted, I would like to question their relevance to a
    disclosure. But I have no problem with them going in.
        Mr. Marino. Without objection, the documents will be
    entered into evidence, and if at some point the determination
    needs to be made on an issue that Mr. Farenthold raised, we
    will address that at that time.
        Mr. Johnson. Thank you, Mr. Chairman. Mr. Inselbuch, do you
    agree with this timeline? Excuse me. Let me ask you to take a
    look at the timeline assembled by the Environmental Working
    Group, this timeline, which is a small collection of internal
    memoranda from asbestos corporations that I have submitted into
    the record, represents a century of corporate fraud on the
    public. It contains evidence amply demonstrating the actual
    knowledge of corporations concerning the dangers associated
    with asbestos exposure dating back to 1934, evidence of
    corporations intentionally misleading the public about the
    widespread use and catastrophic effects of asbestos in home
    schools and workplaces.
        Mr. Inselbuch, do you agree that this timeline, along with
    the other examples in your testimony indicate that asbestos
    corporations have defrauded the public for decades through a
    massive corporate cover up?
        Mr. Inselbuch. I have not had an opportunity to look at the
    specific timeline, but I certainly agree with the set of facts
    that you have recited. Indeed the asbestos industry is the most
    outrageous example of corporate misconduct this country has
    ever seen.
        Mr. Johnson. Thank you. Thank you. And the majority
    witnesses have testified that though deeply regrettable,
    evidence of fraud has no bearing on the current corporate
    practices. Please describe contemporary tactics by the asbestos
    corporations to reduce asbestos liability, including recent
    litigation involving Georgia-Pacific, a Koch Industries
    subsidy.
        Mr. Inselbuch. Well, as I said in my opening remarks,
    asbestos victims are exposed in the course of their employment
    to the products of dozens, if not hundreds, of culpable
    defendants. And they have a right to recover from each and
    every one of those defendants in the tort system or when they
    go bankrupt from their trusts. What the current defendants
    would have this Committee believe and the world believe is that
    somehow because the claimants are collecting from trusts, that
    somehow they are being overcompensated by the defendants in the
    tort system.
        Mr. Johnson. And that is something that I want to get
    further elaboration on you from, but perhaps one of the other
    questioners can elicit that information.
        Mr. Inselbuch. Okay.
        Mr. Johnson. I would like to move on now to Mr. Vari. Mr.
    Vari, as a lawyer representing asbestos corporations
    responsible for killing and then covering up the deaths of
    Americans across the country, I am particularly interested in
    hearing your thoughts on this issue of transparency, which
    proponents of the FACT Act, including yourself, argue will add
    more transparency and truth to the asbestos trust system.
        Now, Mr. Vari, your client, Crane Company, routinely seeks
    confidentiality agreements when settling their asbestos
    exposure claims, is that not correct? You routinely use these
    confidentiality agreements, correct? Yes or no.
        Mr. Vari. They are part of settlements, and the reason I
    hesitate is I am here in a personal capacity and not behalf
    of----
        Mr. Johnson. I understand that.
        Mr. Marino. Please let the witness answer your question
    first.
        Mr. Vari. I will say that----
        Mr. Johnson. I do not want the witness to filibuster and
    use my time. I just want a yes or no answer.
        Mr. Marino. Well, we will approach that if that is the
    case, but let the witness answer your question.
        Mr. Vari. I will do my best.
        Mr. Johnson. Mr. Chairman, if he will answer it yes or no,
    that will be----
        Mr. Marino. He has a right to explain reasonably.
        Mr. Johnson. After he answers yes or no.
        Mr. Vari. No. Then the answer would be no.
        Mr. Johnson. All right. Okay. And you seek increased
    transparency from victims, but would you also for purposes of
    leveling the playing field and in the interest of fairness
    support legislation that would ban confidentiality agreements
    from asbestos litigation settlement agreements?
        Mr. Vari. On a personal level, I am not sure. But I can
    tell you that in the tort system----
        Mr. Johnson. So is that a yes or no?
        Mr. Vari [continuing]. The plaintiffs resist disclosure of
    settlement information. In my experience more often
    defendants----
        Mr. Johnson. Well, I am asking about defense policy. Since
    we are talking about transparency, it seems only to be fair
    that if you are going to have transparency from plaintiffs or
    from claimants, you would also seek it from defendants. And one
    way that defendants keep from having to be transparent is to
    insist upon confidentiality agreements. And if you like that
    process, if you support that process, then say you do. If you
    do not, then it is simple to say you do not.
        Mr. Vari. It is unnecessary because the plaintiffs already
    possess the settlement information. The plaintiffs collect the
    settlements. They know what the amounts are. So there is
    nothing being withheld from the plaintiffs in any settlement
    regarding information.
        Mr. Johnson. Mr. Vari, that answer----
        Mr. Marino. Okay. The gentleman's time has expired. The
    Chair now recognizes Mr. Issa from California.
        Mr. Issa. Thank you, Mr. Chairman. Would the ladies and
    gentlemen that were affected by asbestos please stand again?
        [Audience members stand.]
        Mr. Issa. Just a shake of head, if you do not mind. You are
    not under oath. Do you all either have current cases or have
    you settled?
        [Nonverbal response.]
        Mr. Issa. So everybody is involved in that level of either
    a suit or having settled. Thank you.
        Mr. Chairman, my questions for each of the witnesses will
    fall along a simple line. I understand bankruptcy and I
    understand diminishing amounts of money. As I understand it,
    there is a fixed amount of money in the trust of bankrupt
    entities, and this will represent the entire settlement whether
    there is one more litigant, no more litigants, or an infinite
    amount of them. So let me go through the question, because Mr.
    Conyers in his opening statement implied that somehow we would
    be unfair to people if, in fact, we tried to ensure that only
    those who were actually affected by asbestos--not exposed, but
    affected by asbestos--were, in fact, given a settlement.
        So, Mr. Inselbuch, I will start with you and I will go
    right down the line. Would you agree that, in fact, if we run
    out of money before we run out of actual victims, that, in
    fact, the harm will go to those who have been affected by
    asbestos and for whom there is no money left?
        Mr. Inselbuch. Well, the design of these trusts would not
    permit that to happen.
        Mr. Issa. What you are saying is that the amounts will keep
    getting smaller and smaller, so everyone will get something.
        Mr. Inselbuch. That is----
        Mr. Issa. So if some of the people behind you were to get a
    settlement today and it was more in actual dollars, not even
    constant dollars, but in actual dollars, it was more today than
    for somebody 2, or 3, or 4 years from now, that would be a
    horrible thing for the person later who gets a diminished
    amount of money for the same actual damage, would it not be?
        Mr. Inselbuch. Yes, and the trusts try very hard to prevent
    that from happening.
        Mr. Issa. Well, Mr. Vari----
        Mr. Inselbuch. But it is very difficult to predict the
    future with great accuracy.
        Mr. Issa. Well, I am going down each of you, but I think
    for each of you next, if you agree with what has been said,
    that, in fact, there will be diminished payments eventually
    reaching a de minimus amount or nothing if you continue to have
    additional claimants. I am not an economist, but I did take
    accounting in college in addition to economics. My basic
    understanding is for each person that is not a valid claimant
    who is somehow taken out of receiving money through kind of
    reform, whether it is this or others, we are, in fact,
    preserving a larger amount of money for an actual victim. Would
    that not be correct, Mr. Vari?
        Mr. Vari. Yes, that would. And I also would concur in the
    observation that once the money runs out, there is no more
    recovery.
        Mr. Issa. Okay. So you worked with specificity on a lot of
    this. Do you see that exact event happening in which later
    victims are going to be shortchanged or all together left out
    if we do not ensure, at a minimum, that only those who truly
    are dealing with dreaded diseases caused by exposure are put at
    the head of the line?
        Mr. Scarcella. Absolutely. I think it is important for
    everybody to understand that sitting as advisors to many of
    these trustee boards are committees of plaintiff attorneys.
    They advise the trustees as best they can on current trends in
    the litigation. These are men and women who, probably more than
    anybody, have their finger on the pulse of claimant filing
    trends. Yet time and time again, trust forecasts of
    expectations, unclaimed filings, continue to be outpaced by
    reality.
        So, what concerns me is are there bad actors participating
    in this trust compensation system that are staying one step
    ahead of the men and women who are trying to advise these
    trusts on what their future expectations should be. If there
    are such bad actors, then they are going to continue to deplete
    funds and keep money away from those who truly deserve it, and
    if transparency can help deter that, then I see no reason why
    it should not be passed.
        Mr. Issa. And, Mr. Brickman, if you will quickly follow up
    as our time is expiring.
        Mr. Brickman. Trusts are paying out hundreds of millions of
    dollars today to claimants who have no valid claims against
    those particular trusts. People being defrauded today are the
    mesothelioma claimants in particular who are yet to manifest
    with the disease. The people defrauding them are plaintiffs'
    counsel.
        Mr. Issa. Thank you. Thank you, Mr. Chairman.
        Mr. Marino. Thank you. The Chair now recognizes the
    Congresswoman from Washington, Ms. DelBene.
        Mr. Johnson. Mr. Chairman, before Ms. DelBene starts her
    questioning, I would like to raise a point of order. What just
    happened to me with the Chair trying to extract testimony
    beyond the scope of my question and apply our rigorous time
    schedule to my time, what that does is prevents me from moving
    forward with the questions that I have to ask.
        Mr. Marino. Mr. Johnson, you know what the rules are. You
    know what the policies are. If you have additional questions--
    --
        Mr. Johnson. Well, but my point is----
        Mr. Marino [continuing]. You put them in writing. Ms.
    DelBene, you are up next.
        Mr. Johnson. No, no, no. My question----
        Mr. Marino. Ms. DelBene, you are up next.
        Mr. Johnson. My question I have raised----
        Mr. Issa. Regular order. Regular order.
        Mr. Johnson. I have raised a point of order.
        Mr. Marino. You have stated no point of order.
        Mr. Issa. Regular order.
        Mr. Johnson. Parliamentary inquiry. Parliamentary inquiry.
    And my inquiry is what is the policy when a person is asking a
    question on this panel, what is the power of the Chairman to
    take over the questioning from that particular----
        Mr. Marino. We allowed you almost a minute when you were
    introducing documents. I did not time you on that, which is
    normally done. You tried this yesterday in a hearing, and we
    are not going to tolerate this.
        Mr. Johnson. No, no, no.
        Mr. Marino. So, Ms. DelBene, are you going to ask----
        Mr. Johnson. You have not answered my point of inquiry.
        Mr. Marino. Before I go to this side. I have answered your
    question.
        Mr. Johnson. You have not. No, you have not.
        Mr. Marino. Ms. DelBene, are you going to ask questions?
        Mr. Issa. Regular order, Mr. Chairman.
        Ms. DelBene. An opportunity to----
        Mr. Johnson. I am going to yield to Ms. DelBene, but I will
    assure the Chair that I am going to take this matter up and
    make sure that what is good for the Republican side is also
    good----
        Mr. Marino. You will see both sides handled equally the
    same way.
        Mr. Johnson. And I would like for Ms. DelBene to be able to
    ask her questions without interruption.
        Mr. Marino. The Chair will decide what takes place. Please,
    Ms. DelBene.
        Ms. DelBene. Thank you. First, Mr. Chair, I would ask
    unanimous consent to submit two letters for the record from
    victims and their families asking the majority for the ability
    to testify at this hearing and also in the last Congress.
        Mr. Marino. Without objection, but I do not think you were
    here when I stated that the Democrats had the opportunity to
    have those people sit at the table, and they chose not to do
    it. But it is entered for the record.
        Ms. DelBene. I wish they had the opportunity to represent
    themselves. In the interest of transparency, my first question
    is for you, Mr. Vari. You support transparency in terms of the
    victim, information on victims' exposure. And I wondered, do
    you also support transparency for asbestos corporations, the
    ones that you have represented, so that they can be more
    forthcoming with information about the name and location of
    asbestos-contained products, work sites, and exposures? Would
    you support congressional legislation to do that?
        Mr. Vari. I would repeat my answer that the plaintiffs know
    that information. The plaintiffs who settle know how much----
        Ms. DelBene. But this could be publicly-available
    information, which could be important for others to be aware of
    as well in the interest of transparency.
        Mr. Vari. The existence of a settlement is a matter of
    public record in the tort systems. So, to say that my client or
    any client of mine--I am using a hypothetical because I am not
    here on behalf of a particular client. But the fact that a
    client settles has to be a matter of public record, and it is
    on a docket. So the same information that is being requested
    here, which is what is the basis of the suit, that is in a
    complaint. Did my client get sued? Yes. Did the client settle?
    That is already in.
        Ms. DelBene. It seems like there is an inconsistency
    between the depth of information you would require from victims
    and the information required from corporations. That is
    disappointing that we talk about transparency, but we are not
    willing in legislation to look at this in an equal-sided way.
        Mr. Inselbuch, I wanted to ask, you talk about some of the
    State legislation that has also happened in the interest of
    transparency in Ohio, and Oklahoma, and other areas. I wondered
    if you could respond to some of the issues on transparency and
    also what you have seen from the impact of State legislation so
    far.
        Mr. Inselbuch. ``Transparency'' is a funny word. Mr. Vari
    says, well, the plaintiffs know what they know, and they do,
    but the plaintiff who knows about his settlement when he is a
    litigant does not know about the other fellow's settlement. And
    it is the other fellow's settlement and how much that was that
    would be of interest to that plaintiff, and that is what Mr.
    Vari and his clients do not want anybody to know about.
        And, yes, the fact that there was a settlement, that goes
    on a docket someplace, but not the amount of the settlement.
    That is never disclosed, and it is never disclosed because the
    defendants do not want to disclose it. What they are trying to
    accomplish is to get from this Congress a kind of lending
    library of information about hundreds of thousands of trust
    claims filed. And in companion legislation throughout the
    States, they are trying to enact laws, and have been successful
    in some jurisdictions, that would require plaintiffs before
    they bring cases in the tort system to trial to first file and
    resolve their claims against the trusts.
        This will shift a number of the values in how cases are
    resolved in the tort system and will reverse the rule that we
    have longstanding in the tort system that the plaintiff is the
    master of his case and decides who he sues, and who he settles
    with, and when. And the whole purpose of this is to get
    unreasonable reductions and delays in the tort system based
    upon this ironic request for transparency in the trust system.
        I would also add, Mr. Brickman would like you to believe
    that the information that was so-called withheld from the
    Garlock defendant is information that the defendants in the
    tort system never have. Nothing could be farther from the
    truth. I suspect that Mr. Vari, who has been in the tort system
    for 25 years, has an extensive library on where any one of
    these tort system plaintiffs can collect from trusts just based
    on their work history. And if he does not, he can buy it from
    Mr. Scarcella, who sells it to the public based upon his
    ability with a computer to just plug in all of the places where
    trusts will pay, and cross-ref that with the work history of
    any one of these plaintiffs.
        The defendants are not missing anything. They know
    everything. They want this list so that they can further
    prevent asbestos plaintiffs from pursuing their legitimate
    claims in the tort system, and they want to offset the
    plaintiffs' claims in the tort system with things they would
    not otherwise be entitled to.
        Ms. DelBene. Thank you. I know my time is going to expire,
    so I yield back, Mr. Chairman.
        Mr. Marino. Thank you. The Chair now recognizes Mr. Bishop
    from Michigan.
        Mr. Bishop. Thank you, Mr. Chairman, and I would like to
    take a moment to thank everybody that has come today. My heart
    goes to all of you for what you have been through, and I hope
    that this hearing is a reflection of the fact that inasmuch as
    it looks like there is some infighting here, that there is a
    true effort to try and make the system better and address some
    concerns. And I, for one, am grateful for you being here today.
    I am grateful for the panel to be here today to share their
    experience as well.
        Mr. Vari, I have heard varying degrees of testimony today
    with regard to double dipping, and I am wondering if you might
    be able to--I have heard that it does not exist. I have heard
    that it does exist. I assume that it is somewhere in the
    middle, but if you could share with me your experience.
        Mr. Vari. Sure. I do not think that anyone quarrels with
    the notion that no one should recover for the same injury
    twice. Where we seem to be hung up on is how much information
    will be available to allow anyone to make that determination.
        So, you know, are there recoveries that occur that are
    above the true value of the claim? As Mr. Inselbuch said, most
    of these claims are settled, so, you know, in that instance it
    would require an estimation. But certainly there are a lot of
    recoveries going on and occurring in the trust system that are
    not made available to the tort system defendants. So, if
    nothing else, transparency would at least enable one to say
    that it does not happen, but in the absence of a meaningful
    cross-flow of information, it could happen, you know, and it
    likely does happen. But without the information, there is no
    way to really study the question.
        Mr. Bishop. Thank you very much. I also have a question for
    Mr. Scarcella. Sir, I appreciate your testimony, and wonder if
    you might expound a little bit on the portion of your testimony
    where you talked about the discrepancy between disclosures made
    in State court and the asbestos bankruptcy system. It is a lot
    of nuance, and I am wondering if you can share with me the
    difference between the two systems.
        Mr. Scarcella. Was that question for me for Mr. Brickman?
        Mr. Bishop. Either, or, whatever. I know both of you have
    ample knowledge in this area. It was to you, sir, but either
    one would be fine.
        Mr. Scarcella. Well, I will defer to Professor Brickman
    since that who was intended----
        Mr. Bishop. Yes, sir, thank you.
        Mr. Brickman. The issue is very simple once you understand
    the facts. And this Committee has benefitted by the fact-
    finding by Judge Hodges in the Garlock bankruptcy. What he
    found out, based upon the evidence presented, was that
    plaintiffs in the tort system when they sue somebody in State
    court, they are denying exposure to the products of the
    bankrupted companies, like Owens Corning, and GAF, and
    Armstrong World Industries, and U.S. Gypsum, and on and on.
        Now, at the same time in some cases, or during the course
    of that trial, or subsequent to that trial, they are putting in
    claims to the trusts. For example, Pittsburgh-Corning
    manufactured a very, very virulent product in terms of asbestos
    content, Unibestos. In the tort case, they are asked, were you
    exposed to Pittsburgh-Corning's Unibestos. They say no under
    oath in interrogatories, in depositions, and in trial
    testimony, and their lawyers argue to the jury there was no
    such exposures. Then their lawyers file trust claims in which
    they say there is meaningful and credible evidence of exposure
    to Unibestos. That is as plain as I can make it.
        Mr. Bishop. Thank you, sir. I yield back my time.
        Mr. Marino. Thank you. The Chair now recognizes the
    gentleman from New York, Mr. Jeffries.
        Mr. Jeffries. Thank you, Mr. Chairman, and let me thank the
    witnesses for their presence here today, and certainly we thank
    all of the victims and their families for your presence here
    today. And certainly you have been subjected to something that
    no American should have to deal with in terms of the asbestos
    exposure, and now this fight to ensure that you are justly
    compensated.
        Let me start with Mr. Scarcella. You are here today in
    support of the FACT Act, correct?
        Mr. Scarcella. Correct.
        Mr. Jeffries. And as far as you know, the victims of
    asbestos, those who have been exposed unjustly to asbestos and
    mesothelioma, other forms of cancer, they do not support the
    FACT Act, correct?
        Mr. Scarcella. That is what has been told to me today.
        Mr. Jeffries. And as you understand it, the trusts do not
    support the FACT Act, correct?
        Mr. Scarcella. Correct.
        Mr. Jeffries. So other than the asbestos industrial
    complex, who in terms of interested stakeholders actually
    supports the FACT Act?
        Mr. Scarcella. I cannot speak for who else supports the
    FACT Act. I know I support it.
        Mr. Jeffries. Why do you support it, sir?
        Mr. Scarcella. Why do I support it? Because I have had the
    unique perspective of working both in the trust and tort
    system. I know how both processes work, and I know how damaging
    the premature depletion of trust assets can be. Just last
    April, the UNR Asbestos Trust, which was one of the first
    asbestos trusts that was confirmed in the early 1990's, filed a
    motion with its bankruptcy court requesting early termination
    by 2019 because it is simply running out of money. And at the
    heat of their request was a claim that they received more
    claims and paid more claims than they expected.
        Mr. Jeffries. Right. So, you do not believe that there is
    any evidence of fraud as it relates to the administration of
    these trusts, correct?
        Mr. Scarcella. No, I do not think the management of these
    trusts is acting in any fraudulent way. I think it really comes
    down to a system that is set up in a way that could allow and
    incentivize bad actors to infect it. It is not to say that all
    plaintiff attorneys do not act appropriately. Certainly, I
    think the plaintiffs all do. They put a lot of trust in their
    counsel. But it is a system that is set up to allow bad actors
    to take advance of certain loopholes.
        Mr. Jeffries. Right, but we are putting the cart before the
    horse because we are here to try and correct a problem that
    does not exist. There is no evidence, you have just
    acknowledged, of fraud in the administration of the trusts. Do
    you think there is evidence of waste or abuse?
        Mr. Scarcella. Well, no, I believe, at least my
    understanding of your question was that was there fraud being
    conducted at the management level of the trusts.
        Mr. Jeffries. Right.
        Mr. Scarcella. I am concerned that there may be
    inconsistent or potentially fraudulent claimant behavior being
    conducted by bad actors, such as plaintiff attorneys, who file
    with the trusts. That is my concern. You have to keep in mind,
    as Mr. Vari put correctly in his direct testimony today, these
    trusts operate in vacuums. There are 50 trusts controlling
    collectively almost $30 billion in assets, and they do not
    really interact with one another at the claim resolution level.
    I----
        Mr. Jeffries. Sir, let me ask you a question there. Are you
    familiar with the 2011 GAO report that studies the
    administration of these trusts?
        Mr. Scarcella. Very much so.
        Mr. Jeffries. Am I correct that it looked at, I believe, a
    23-year period with respect to these trusts, correct?
        Mr. Scarcella. I do not know that, but I will take that to
    be accurate.
        Mr. Jeffries. 22, 23 years, from 1988 to 2010, and analyzed
    about 3.3 million claims, correct?
        Mr. Scarcella. Again, I will take your word for it.
        Mr. Jeffries. Over $17 billion in payouts, correct?
        Mr. Scarcella. Again, I will take your word for it.
        Mr. Jeffries. And not a scintilla of evidence that so-
    called plaintiff attorney bad actors had actually managed to
    pull off a fraud resulting in an inaccurate payment, correct?
    That is what the GAO concluded.
        Mr. Scarcella. Yes, and I addressed that in my testimony.
    The fact that there was no fraud self-reported by these trusts
    that they interviewed--it was self-reported----
        Mr. Jeffries. Thanks for raising that----
        Mr. Scarcella [continuing]. Is not an indication there is a
    lack of a fraud, but more a serious indication of the lack of
    ability for these trusts----
        Mr. Jeffries. Sir, let me reclaim my time----
        Mr. Scarcella [continuing]. To actually audit properly.
        Mr. Jeffries. Sir, let me reclaim my time only because the
    Chairman has been particularly rigid, as I understand it, with
    respect to the 5-minute rule. The GAO report, which was
    requested by then Republican Chairman, Lamar Smith, never
    contested the GAO report in terms of its methodology. It used a
    whole host of publicly-available documents, interviewed trust
    officials, court officials, professors, used the RAND study.
    And it also had subpoena power if it determined that it was not
    getting accurate information. And so, I think the reality is,
    again, we are trying to solve a problem with the FACT Act that
    simply does not exist. I yield back.
        Mr. Marino. Thank you. The Chair now recognizes Mr. Trott
    from Michigan.
        Mr. Trott. Thank you, Chairman. I want to thank all of the
    folks who came here to testify today, and I apologize I missed
    some of your testimony. I am new to Congress, and they schedule
    you to be in three places at once. I did not know that was part
    of the process.
        But I practiced bankruptcy law for the better part of the
    20 years, did mostly secured creditor work. Never really dealt
    with Section 524(g). Did not handle that kind of litigation.
    But when we had to file a proof of claim on behalf of a client,
    we took that process very seriously. We documented it. We
    attested to it. We attached documents. We knew that the claim
    would be scrutinized by the debtor's counsel, by the court, by
    the U.S. Attorney's Office potentially.
        So this transparency seems to me to be quite logical, and
    the only thing that I heard earlier when the Ranking Member of
    the Subcommittee and the Ranking Member of the whole Committee
    were making their comments, they offered two reasons as to why
    this was a bad idea. And I would be interested to hear from the
    panel briefly, whoever cares to take the question, first that
    the disclosures required by the act would compromise the
    confidentiality of some of the folks that have suffered because
    of asbestos. And then also, that that information would be used
    potentially by employers against them. Do any of the folks here
    today have concern with respect to the use of that information
    given that there are some safeguards in the act?
        Mr. Inselbuch. I do.
        Mr. Trott. And I see people behind you nodding, so I would
    be curious if people who have lost victims or members of their
    family have the same----
        Mr. Inselbuch. Publishing the information about sick and
    dying people for no purpose at all, as the congressman pointed
    out, is really pointless. All you do is subject these people to
    inquiry, to ignominy, to charlatans who will try and take their
    money, and for what purpose? And it is not the same as the tort
    system. This would just be put on a court record.
        In the tort system, if there is a reason why a plaintiff
    wants protection from exposure, there is a judge there. You can
    go to that judge and say do not describe this information about
    my sick or dying child. Do not describe this information. Do
    not publish it.
        Mr. Trott. So do you agree there is abuse in the State
    court system as suggested in some of the testimony?
        Mr. Inselbuch. I am sorry. I could not hear that.
        Mr. Trott. So the lack of disclosure is one of the reasons
    why people can make conflicting claims. Do you disagree with
    that----
        Mr. Inselbuch. I disagree with that entirely.
        Mr. Trott. Okay.
        Mr. Inselbuch. One thing has absolutely nothing to do with
    the other. There is no showing of any fraudulent claims. The
    whole distortion here is that somebody thinks that maybe
    somebody is pulling a fast one somewhere, and for that reason
    these defendants want you to provide them with information that
    the tort system----
        Mr. Trott. Yes, in my experience, I would have to
    respectfully disagree. My experience with the debtor's bar in
    bankruptcy court and my experience in State court and Federal
    court, I think there is substantial abuse, and the act is a
    good idea.
        So let me move to my next question. Mr. Scarcella, in terms
    of the administrative costs of implementing the act, do you
    think those costs are exceeded by the costs of not having some
    transparency?
        Mr. Scarcella. Well, I think the answer to that question
    remains to be seen once we have transparency. To the point that
    was made under the prior line of questioning, the reason why
    the GAO was not provided with any instances of fraud in the 22
    years of the trust operation system is because the trusts are
    unable to properly audit for consistent exposure allegations
    across trusts. The system simply does not allow it, so I am not
    surprised that they were unable to uncover fraud. They are not
    given the equipment to actually seek it out and find it.
        Mr. Trott. All right. Professor Brickman, do you think the
    fact that the trusts are largely set up and organized by the
    plaintiffs' counsel is one of the reasons that has exacerbated
    some of the problems we see?
        Mr. Brickman. That is an understatement. First, let me make
    clear, the trustees are essentially appointed by plaintiffs'
    counsel. So when you hear trustees speak, it is the voice
    controlled by plaintiffs' counsel. Every aspect of the trust is
    controlled by plaintiffs' counsel. They effectively select not
    just the trustees, they populate the two committees that run
    the trusts and set up the rules. In all cases but one, they
    have been responsible for the appointment of the future claims
    representative, who never takes positions opposed to the
    interest of the plaintiffs' bar. So, the fact that the trusts
    do not support the FACT Act is simply saying that plaintiffs'
    counsel do not support the FACT Act because the trustees never
    say anything opposed to the interest of the plaintiffs' bar.
        Now, in terms of the GAO report, that has been
    misrepresented. The GAO report did not look at data. What it
    looked at was what did the trustees say about fraud. And as Mr.
    Scarcella pointed out, the trustees said we do not see any
    fraud. Of course not. They are not looking for fraud. And the
    use of the word ``audit'' is completely misrepresented here.
        Mr. Marino. The gentleman's time has expired.
        Mr. Trott. Thank you, sir.
        Mr. Marino. The Chair now recognizes the gentleman from
    Rhode Island, Mr. Cicilline.
        Mr. Cicilline. Thank you, Mr. Chairman. Thank you to our
    witnesses. I first want to begin by thanking the many victims
    of asbestos injury and illness who are here and have taken time
    out of their lives to be part of this hearing. Thank you for
    being present today, and I hope that we will act consistent
    with the experiences you have had, and do the right thing, and
    defeat this bill.
        I want to say to you, Mr. Inselbuch, thank you for your
    testimony, and for its clarity, and for giving us a really
    important context. And I apologize to witnesses. I have been in
    and out. I am in the middle of another hearing, but wanted to
    come back for a couple of purposes.
        First, I would ask, Mr. Chairman, unanimous consent that a
    letter from the Military Order of the Purple Heart be
    introduced as part of the record; a letter from the Asbestos
    Disease Awareness Organization Voice of the Victims be made a
    part of the record; correspondence from the American Federation
    of Labor, AFL-CIO; a letter from AFSCME, the American
    Federation of State County Municipal Employees; Public Citizen;
    the Environmental Working Group; a letter from asbestos
    patients and their families; and a letter from Douglas Campbell
    of Campbell & Levine.
        Mr. Marino. Without objection, so ordered.
        Mr. Cicilline. Mr. Inselbuch, I want to ask you, Mr.
    Scarcella said that individual trusts operate in vacuums. Can
    you explain why this is not the case?
        Mr. Inselbuch. Well, every document that governs the
    trust's conduct is public. It is on a website. And every one of
    those documents was approved by a bankruptcy judge and a
    Federal district judge. So, there is no mystery about how the
    trust operates.
        More than that, every trust's documents state for the
    public and for the defendants exactly what is required in order
    to recover from that trust. And in many cases, based on that
    information, unlike what Mr. Brickman would have you believe,
    everybody in the world can tell from any plaintiff's work
    history what trusts he can collect from.
        Also about audits, there is no vacuum about the audits
    either. Indeed, the five largest trusts or five of the largest
    trusts that operate and have their claims processed in
    Delaware, when they do audits, the audits are, in fact, cross-
    ref'd, notwithstanding that Mr. Scarcella did not know that.
    They are cross-ref'd one against the other to ensure that the
    trusts are not being given inconsistent information in the
    claims filing process.
        And finally, I would like Mr. Brickman to tell Judge Robert
    Parker, retired from the 5th Circuit Court of Appeals, that he
    is the tool of the plaintiffs' bar. I would like to be in the
    room when that happens.
        Mr. Cicilline. Would you also tell me, Mr. Inselbuch, how
    trusts evaluate demands for payments specifically to prevent
    fraud and abuse, and whether or not the system under which that
    process is undertaken is sufficient to avoid or deter fraud?
        Mr. Inselbuch. First of all, to my knowledge, more than
    half of the claims that are filed with the trusts are not paid.
    So it seems that even though they pay very little attention to
    it, they seem to be figuring out whether or not the claims
    should be paid or not. The information that they get is very
    straightforward. It is not difficult for a mesothelioma victim
    to prove that they have mesothelioma. The doctors that treat
    them will certify to that, and, my god, God bless them, they do
    suffer.
        Now, the next thing is, were they exposed to the
    defendants', the trusts' predecessors, asbestos? That is not
    difficult to prove either when you have the work history. The
    difference, though, sometimes that Mr. Brickman would like you
    to think is fraudulent is the worker 30 years ago when he
    worked in the factory, or in the shipyard, or in the ship's
    hole worked with product that did not have a label on it. So he
    said, yes, I work with insulation products, but he may not have
    known who made them. So when he is asked, as he is at a
    deposition or an interrogatory, did you work with Unibestos, he
    can say I do not know because he does not know.
        If he wants to collect money from Unibestos, it is his
    lawyer's burden to prove to the court and the jury that that
    material that the plaintiff did not know who made it was, in
    fact, Unibestos from Pittsburgh-Corning. Once Unibestos is
    settled up, if Mr. Vari wants to show that the plaintiff was
    exposed to Unibestos, that becomes his burden, and it is his
    job to do it. And just saying that the plaintiff did not know
    it is not an answer to his burden.
        Mr. Cicilline. And just one final question. Can you explain
    why trusts treat claimant submissions as confidential? And
    conversely, can you explain why the defendant corporations
    demand that their settlements be kept confidential?
        Mr. Inselbuch. Well, I think that for many reasons, people
    that resolve tort cases, plaintiffs and defendants, have
    reasons for confidentiality. From the plaintiffs' standpoint,
    they might at least want to be free from charlatans who will
    come after them because they know they have come into a passel
    of money, if for no other reason. From the defendants'
    standpoint, they do not want anybody to know what they are
    paying and to whom they are paying it because they do not want
    to give additional information to plaintiffs. So whether we are
    in the tort system or in the trust system, there is a reason
    for confidentiality.
        But in the tort system, the defendants are perfectly
    entitled to subpoena from the plaintiff what the plaintiff has
    filed with any trust, and they do it all the time, and they get
    it all the time.
        Mr. Cicilline. Thank you. I thank you, Mr. Chairman. I
    yield back.
        Mr. Marino. Thank you. Seeing no others, I am going to ask
    my colleague if he has another question he would like to ask.
        Mr. Johnson. Well, thank you, Mr. Chairman. I believe I
    will. Mr. Scarcella, as an analyst, did you calculate or have
    you ever had occasion to calculate the value of the lives of
    the millions of future claimants killed or injured due to
    asbestos-related disease?
        Mr. Scarcella. Yes. In fact, the bedrock of 524(g)
    bankruptcy, in order to preserve assets for future claimants,
    requires an estimate of what those future financial obligations
    will be.
        Mr. Johnson. And so, you used your best judgment to come up
    with a figure that in the worst case scenario would be high so
    that you would be able to advise your clients in terms of how
    much potential exposure they would have. Is that correct?
        Mr. Scarcella. No, I do not think that would be necessarily
    true to advise on the high side of any range of estimates. It
    depends on the context in which it is being used.
        Mr. Johnson. Okay, thank you. And for Mr. Brickman, do you
    get paid by the Manhattan Policy Institute?
        Mr. Brickman. No, sir. I had to fill out a form like every
    witness did about who he represents. And as I write down on
    every testimony I ever give to Congress, I represent myself.
    Nobody is paying me. Nobody is paying my transportation. Nobody
    is buying my lunch.
        Mr. Johnson. Have you ever represented a claimant or a
    plaintiff before?
        Mr. Brickman. I have not represented anyone. I do not
    practice law, sir.
        Mr. Johnson. Thank you, sir.
        Mr. Marino. I have a couple of questions I would like to
    conclude. Okay. The Chairman of the full Judiciary Committee,
    Mr. Goodlatte, has some questions.
        Mr. Goodlatte. Thank you, Mr. Chairman. No, I am going to
    put my statement before the Committee. First of all, let me
    start by thanking you for holding this hearing on this very
    important legislation that will help those asbestos victims who
    must look to the bankruptcy process to seek redress for their
    or their loved ones' injuries. Unfortunately, on too frequent
    an occasion, by the time asbestos victims assert their claims
    for compensation, the bankruptcy trust formed for their benefit
    has been diluted by fraudulent claims, leaving these victims
    without their entitled recovery.
        The reason that fraud is allowed to exist within the
    asbestos trust system is the excessive lack of transparency
    created by plaintiffs' firms. Due to a provision in the
    Bankruptcy Code, plaintiffs' firms are essentially granted a
    statutory veto right over a debtor's Chapter 11 plan that seeks
    to restructure asbestos liabilities. Plaintiffs' firms have
    exploited this leverage to prevent information contained within
    the asbestos trusts from seeing the light of day. The
    predictable result from this reduced transparency has been a
    growing wave of claims and reports of fraud.
        The increase in claims has caused many asbestos trusts to
    reduce the recoveries paid to asbestos victims who emerge
    following the formation of the trust. In addition, instances of
    fraud within the asbestos trust system have been documented in
    news reports, State court cases, and prior testimony before the
    Judiciary Committee. Most recently, news reports have described
    numerous accounts of fraud that were uncovered during a
    bankruptcy case in North Carolina.
        The FACT Act, introduced by Congressman Farenthold, would
    combat this fraud by introducing long-needed transparency into
    the asbestos bankruptcy trust system. The FACT Act increases
    transparency through two simple measures. First, it requires
    the asbestos trusts to file quarterly reports on their
    bankruptcy dockets. These reports will contain very basic
    information about demands to the trust and payments by the
    trusts to claimants. Second, the FACT Act requires asbestos
    trusts to respond to information requests about claims asserted
    against and payments made by the asbestos trusts.
        These measures were carefully designed to increased
    transparency while providing claimants with sufficient privacy
    protection. To accomplish this goal, the bill leverages the
    privacy protections contained in the Bankruptcy Code, and
    includes additional safeguards to preserve claimants' privacy.
    The FACT Act also was deliberately structured to minimize the
    administrative impact on asbestos trusts.
        I believe that the FACT Act strikes the appropriate balance
    between achieving the transparency necessary to reduce fraud in
    an efficient manner and providing claims with sufficient
    privacy protections. We cannot allow fraud to continue reducing
    recoveries for future asbestos victims.
        I look forward to hearing testimony from today's panel,
    which has already taken place. And I thank the Chairman for
    yielding me the time.
        Mr. Marino. Thank you, Chairman. Mr. Inselbuch, could you
    please tell me who makes up the trust? Who is the trust
    comprised of?
        Mr. Inselbuch. You mean who the trustees are?
        Mr. Marino. Trustees, yes.
        Mr. Inselbuch. They are people selected by the litigants in
    the bankruptcy that includes the representatives of the
    plaintiffs, the futures representative, and the debtor, and
    they are approved by the bankruptcy court.
        Mr. Marino. And is there----
        Mr. Inselbuch. And for the most part, they are retired
    Federal and State court judges.
        Mr. Marino. Who makes up the panel? Is there not a group of
    people who can veto certain issues? Are there not plaintiffs
    that make up a committee that have a say in this?
        Mr. Inselbuch. There are two fiduciaries appointed
    typically under these documents. One is a representative of the
    future claimants, and one is a representative of the present
    claimants, sometimes called the trust advisory committee.
        Mr. Marino. Okay.
        Mr. Inselbuch. That committee consists of plaintiffs'
    lawyers. The futures claimants' representative and the trust
    advisory committee have the same rights under these documents.
    They have very little power. The trustees run these trusts. If
    the trustees want to amend the trust documents, in other words,
    change them from the way they were approved by the bankruptcy
    court, then they need, first, if they can get approval from the
    trust advisory committee and the futures representative. But if
    they do not get that approval, they can go to the bankruptcy
    court.
        Similarly, if the trustees need to or want to change the
    payment percentage, they bring that again to the trust advisory
    committee and the future claimants' representative. And if they
    both consent, then it will be done. If not, the trustees can go
    to the bankruptcy court. Other than that, neither the trust
    advisory committee nor the futures claimants' representative
    have any significant input into the workings of these trusts.
        Mr. Marino. Does the advisory committee have a larger say,
    a larger percentage, that 75 percent have to agree to certain
    matters?
        Mr. Inselbuch. No.
        Mr. Marino. So, are you saying it is split evenly on both
    sides for the plaintiffs and the defendants?
        Mr. Inselbuch. No, there are no defendants there.
        Mr. Marino. Okay. So it is plaintiffs and plaintiffs'
    lawyers----
        Mr. Inselbuch. The trust.
        Mr. Marino. Is it plaintiffs and plaintiffs' lawyers?
        Mr. Inselbuch. The trust advisory committee, and the role
    they have is what I have just described to you.
        Mr. Marino. Okay. So do you think that they are going to
    step forward and say if there is fraud? Do you think they would
    actually step forward and say, yes, there is fraud here?
        Mr. Inselbuch. No, but I would be confident that the
    trustees would.
        Mr. Marino. You say that the court has a major say in this,
    is that correct? The bankruptcy judge has a major role in this.
        Mr. Inselbuch. The bankruptcy judge has to approve the plan
    of reorganization. These are the central documents of that
    plan.
        Mr. Marino. Can anyone on the committee oppose the judge's
    ruling?
        Mr. Inselbuch. On the committee?
        Mr. Marino. Yes.
        Mr. Inselbuch. Well, I would have to think back over 15 or
    20 bankruptcies, but, yes, I can think of one where Mr. Vari's
    firm was concerned where we had opposition from members of the
    plaintiffs' bar. I forget whether they were actually on the
    committee to the plan of reorganization itself.
        Mr. Marino. What was the process for that?
        Mr. Inselbuch. Well, when a plan of reorganization is
    presented to the bankruptcy court, a disclosure statement is
    sent to all creditors. And all creditors have an opportunity to
    file objections, and filed objections, and the objections were
    sustained.
        Mr. Marino. Okay. If you are saying there is no fraud, what
    is the problem then with oversight so you could say, look, we
    told you there is no fraud here? What is the problem with
    looking into these matters? You have heard time and time again
    that in many cases, Oklahoma and Maryland plaintiffs were
    disclosed to have filed inconsistent claims between asbestos
    trusts and the court. In Ohio, a judge described a plaintiff's
    case as lies upon lies after discovering that the plaintiff
    received hundreds of thousands of dollars from asbestos
    bankruptcy trusts, yet alleged in court that a single product
    caused the illness. In Virginia, as the Chairman said, a judge
    stated that the case over which he presided was the worst
    deception he had seen in over 22 years. Do you not think in
    order to clear all this up, there should be some oversight and
    these matters looked into?
        Mr. Inselbuch. Oversight by whom? Oversight by the
    defendants' bar? That is hardly oversight.
        Mr. Marino. I did not suggest that.
        Mr. Inselbuch. That is putting a fox----
        Mr. Marino. Sir, I did not suggest that. Do you not think
    there should be some oversight? Perhaps the courts can get
    involved in that?
        Mr. Inselbuch. I do not see any need for any oversight. I
    do not see any evidence of any rampant or systemic wrongdoing
    here. And all you are doing is doing the bidding of the
    asbestos defendants' bar.
        Mr. Marino. And I am going to go back to saying what I did
    say. Why not take the opportunity to make that known to the
    public based on what I just read here in this short synopsis?
        Mr. Inselbuch. How am I supposed to prove to you that I am
    telling the truth?
        Mr. Marino. You do not have to prove. I am saying that an
    oversight committee of some type looks into what documents,
    looks into testimony, looks into transcripts, looks into
    payouts, looks into the corporations to see if they held
    anything back and should be held accountable for it.
        Mr. Inselbuch. Well, that is the job of these fiduciary
    trustees. That is exactly what they do.
        Mr. Marino. It does not seem like it is working out, sir.
        Mr. Inselbuch. What?
        Mr. Marino. It does not seem like it is working out based
    on what has come to light over the past couple of months.
        Mr. Inselbuch. Perhaps to you, sir. I am there with them
    all the time, and it seems to me that it is working out real
    well. The only people that are complaining about these trustees
    that I know of are the plaintiffs' lawyers who say the trustees
    are too stringent.
        Mr. Marino. And how about the judges? When you just said
    you wanted Mr. Brickman to make a statement, are you willing to
    stand up in front of these judges and simply say to them what
    you are saying is not true?
        Mr. Inselbuch. This is not the place to re-litigate the
    Garlock case.
        Mr. Marino. No, it is not the place to re-litigate----
        Mr. Inselbuch. Bear in mind what the Garlock case was
    about----
        Mr. Marino. What we are here to make sure is that it is
    fair all the way around. Look, there is no one that has more
    sympathy. I had a friend who lost a father to this, and I have
    seen what it does, and my heart goes out. And anybody that even
    is just around this for a short period of time, particularly
    because of their employment, should receive compensation and
    good compensation. I am just trying to make sure that there is
    a way that we can preserve the dollars to make sure both sides
    are playing fair so future victims, who may not even know they
    will have it for 10 years, are compensated. That is all.
        Mr. Inselbuch. Both sides are not playing fair.
        Mr. Marino. Well, that is what we hope to find out, sir. So
    I thank you.
        Mr. Inselbuch. Thank you.
        Mr. Marino. Okay. Ladies and gentlemen, I do not see anyone
    else here, unless my good friend wants to ask another question.
    I am just joking. [Laughter.]
        Mr. Johnson. But I will refrain.
        Mr. Marino. This concludes today's----
        Mr. Johnson. Thank you, Mr. Chairman.
        Mr. Marino. You are welcome. This concludes today's
    hearing, and thanks to all of you witnesses for attending. I
    want to thank the people in the gallery, and I do understand
    what you are going through. My heart goes out. I talk to
    people. I think I am going to talk to some victims after we are
    done here.
        And without objection, all Members will have 5 legislative
    days to submit additional written questions for the witnesses
    or additional materials for the record.
        Mr. Scarcella, Mr. Jeffries had to leave quickly because of
    a conflict. I think you may be contacted to write your answer
    down on his last question when his time expired. If you do not
    know what it was, someone from the Committee will contact you,
    all right?
        Mr. Scarcella. Certainly. Thank you.
        Mr. Marino. This hearing is adjourned. Thank you.
        [Whereupon, at 3:17 p.m., the Subcommittee was adjourned.]

                                A P P E N D I X

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                   Material Submitted for the Hearing Record

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                                   __________

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      Response to Questions for the Record from Elihu Inselbuch, Member,
                   Caplin & Drysdale, Chartered, New York, NY

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        Response to Questions for the Record from Nicholas Vari, Esq.,
                        K&L Gates L.L.P., Pittsburgh, PA

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    Response to Questions for the Record from Marc Scarcella, Principal,

                Bates White Economic Consulting, Washington, DC

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                                EXHIBIT ATTACHED
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    Response to Questions for the Record from Lester Brickman, Benjamin N.
     Cardozo Distinguished Professor of Law, Yeshiva University, New York,
                                       NY
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