[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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                          Washington, DC 20402-0001    
      
      
                       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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  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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