[Congressional Record Volume 151, Number 23 (Thursday, March 3, 2005)]
[Senate]
[Pages S1979-S1997]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005
The PRESIDING OFFICER. The Senate will resume consideration of S.
256, which the clerk will report.
The assistant legislative clerk read as follows:
A bill (S. 256) to amend title 11 of the United States
Code, and for other purposes.
Pending:
Leahy Amendment No. 26, to restrict access to certain
personal information in bankruptcy documents.
Dayton Amendment No. 31, to limit the amount of interest
that can be charged on any extension of credit to 30 percent.
Feinstein Amendment No. 19, to enhance disclosures under an
open end credit plan.
Nelson of Florida Amendment No. 37, to exempt debtors from
means testing if their financial problems were caused by
identity theft.
Durbin Amendment No. 38, to discourage predatory lending
practices.
Rockefeller Amendment No. 24, to amend the wage priority
provision and to amend the payment of insurance benefits to
retirees.
The PRESIDING OFFICER. The Senator from Alabama.
Amendment No. 31
Mr. SHELBY. Mr. President, I rise in opposition to the amendment
offered by my colleague from Minnesota, Senator Dayton. Basically, he
has offered an amendment to create a Federal usury law. While I
understand and appreciate the good intentions of my colleague, I cannot
support what amounts to Federal price controls. This is a mode of
regulation from a bygone day.
Price controls are a failed experiment that often hurt those who they
are intended to help. Even if the price control envisioned in this
amendment was never triggered, it would set a very bad precedent.
Credit underwriting is the assessment of the risk. Interest rates are
intended to reflect the risk of a particular credit. They have to.
While I appreciate my colleague's concerns, I fear that his amendment
will result in credit becoming less accessible to more Americans.
Market forces are the best regulator of prices. As chairman of the
Banking Committee, which has jurisdiction over consumer credit and
price controls, I must oppose this amendment and encourage my
colleagues to do so. We are going to have some hearings on similar
matters in the Banking Committee, and I hope Senator Dayton would work
with us in that regard.
The PRESIDING OFFICER. The Senator from Maryland.
Mr. SARBANES. Mr. President, I rise to underscore the statement just
made by the chairman of the Banking Committee. This issue embraced in
this amendment is very far-reaching. There have been no hearings on it.
The chairman has indicated he intends to do some hearings on issues
relating to the matter that is before us. It does not seem to me to be
a wise or prudent course to consider what would, in effect, be a very
major legislative step in the absence of appropriate consideration by
the committee of jurisdiction; therefore, I intend to also oppose this
amendment, primarily on those grounds.
The substance is a complicated issue, and in any event it is very
clear it needs to be very carefully examined and considered. I do not
think that has occurred in this instance, and I hope my colleagues
would perceive the matter in the same way.
I thank the Chair.
The PRESIDING OFFICER. The Senator from Massachusetts.
Amendment No. 44
Mr. KENNEDY. Mr. President, I send an amendment to the desk.
The PRESIDING OFFICER. Without objection, the pending amendments are
set aside.
The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Massachusetts [Mr. Kennedy], for himself,
Mrs. Clinton, Mr. Kerry, Ms. Mikulski, Mr. Feingold, and Mr.
Dayton, proposes an amendment numbered 44.
Mr. KENNEDY. Mr. President, I ask unanimous consent that the reading
of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
[[Page S1980]]
(Purpose: To amend the Fair Labor Standards Act of 1938 to provide for
an increase in the Federal minimum wage)
At the appropriate place, insert the following:
TITLE __--FEDERAL MINIMUM WAGE
SEC. __01. SHORT TITLE.
This Act may be cited as the ``Fair Minimum Wage Act of
2005''.
SEC. __02. MINIMUM WAGE.
(a) In General.--Section 6(a)(1) of the Fair Labor
Standards Act of 1938 (29 U.S.C. 206(a)(1)) is amended to
read as follows:
``(1) except as otherwise provided in this section, not
less than--
``(A) $5.85 an hour, beginning on the 60th day after the
date of enactment of the Fair Minimum Wage Act of 2005;
``(B) $6.55 an hour, beginning 12 months after that 60th
day; and
``(C) $7.25 an hour, beginning 24 months after that 60th
day;''.
(b) Effective Date.--The amendment made by subsection (a)
shall take effect 60 days after the date of enactment of this
Act.
SEC. __03. APPLICABILITY OF MINIMUM WAGE TO THE COMMONWEALTH
OF THE NORTHERN MARIANA ISLANDS.
(a) In General.--Section 6 of the Fair Labor Standards Act
of 1938 (29 U.S.C. 206) shall apply to the Commonwealth of
the Northern Mariana Islands.
(b) Transition.--Notwithstanding subsection (a), the
minimum wage applicable to the Commonwealth of the Northern
Mariana Islands under section 6(a)(1) of the Fair Labor
Stnadards Act of 1938 (29 U.S.C. 206(a)(1)) shall be--
(1) $3.55 an hour, beginning on the 60th day after the date
of enactment of this Act; and
(2) increased by $0.50 an hour (or such lesser amount as
may be necessary to equal the minimum wage under section
6(a)(1) of such Act), beginning 6 months after the date of
enactment of this Act and every 6 months thereafter until the
minimum wage applicable to the Commonwealth of the Northern
Mariana Islands under this subsection is equal to the minimum
wage set forth in such section.
Mr. KENNEDY. Mr. President, this amendment will increase the minimum
wage from $5.15 an hour to $7.25 an hour over roughly a 2-year period.
My friend from Pennsylvania, Senator Santorum, will offer his own
minimum wage amendment, and he will do so later on in the afternoon. We
intend to debate this and vote on it, subject to the agreements of the
leaders, probably late Monday afternoon, and we will take the
opportunity during Monday afternoon to get into greater details. Both
Senator Santorum and I have agreed that we would each make a brief
presentation on this item at this time.
We have not seen an increase in the minimum wage for 8 years. At the
present time, the minimum wage has fallen to the second lowest level in
the last 45 years. Since 1938, the minimum wage has been increased on
eight different occasions. On most of those occasions it has been with
bipartisan support. Republicans have recognized that we ought to treat
people fairly and decently, and those at the lower level of the
economic ladder ought to be able to have a livable wage. President
Eisenhower felt that way, President Ford felt that way, and the first
President Bush felt that way. We are asking the Senate to join us in
going back to having the minimum wage at least increase to a reasonable
level.
Now, who are the minimum wage earners? The minimum wage earners are
men and women of dignity. Even though they get paid at a minimum wage,
they work hard, they take a sense of pride in what they achieve, and
they do a hard day's work. More often than not, they not only have one
job, but they have two jobs and sometimes even three jobs.
What sort of jobs do the minimum wage workers have? First, many of
them are teachers' aides in our school systems, working with the young
students of America. Many others are working in our nursing homes,
looking after the parents who were part of the ``greatest generation,''
men and women who sacrificed for their own children, men and women who
brought this country through the Great Depression. These are men and
women of dignity who take a sense of pride in their work.
Beyond that, who are they? This is basically a women's issue because
the great majority of the millions of people who would benefit from
this minimum wage increase are women. It is a children's issue because
a one-third of those women have children. So it is a women's issue and
it is a children's issue. It is also a civil rights issue because many
who earn the minimum wage are men and women of color. So it is a family
issue, a women's issue, a children's issue, a civil rights issue, and,
most of all, it is a fairness issue. Americans understand fairness.
What they understand is anyone who will work 40 hours a week, 52 weeks
of the year, should not have to live in poverty in the United States of
America. That is what this issue is all about. That is what the vote
will be on, on Monday next, whether we are going to say to millions of
our fellow citizens that they will not have to live in poverty,
although they will still be earning below the poverty rate.
What the amendment will do is the following. It is the equivalent of
2 years of childcare. It will provide full tuition for a child in a
community college, or a year-and-a-half of heat and electricity, or
more than a year of groceries, or more than 9 months of rent.
This might not sound like very much to the Members of this body who
have seen their pay increase seven times since we have last increased
the minimum wage. But we ought to be able to say here and now that we
will join the traditions of an Eisenhower, a Ford, and the first
President Bush, Democrat and Republican Presidents alike, and say those
working Americans who work at some of toughest and most difficult jobs,
men and women of pride and dignity, ought to be paid a fair wage. That
is what this amendment is about. We look forward to a further debate
when we have the opportunity to do so on Monday next.
The PRESIDING OFFICER. The Senator from New York.
Mr. SCHUMER. Mr. President, I ask unanimous consent to temporarily
set aside the pending amendments to offer an amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 42
Mr. SCHUMER. The amendment is at the desk. I ask for its immediate
consideration.
The PRESIDING OFFICER. The clerk will report the amendment.
The assistant legislative clerk read as follows:
The Senator from New York [Mr. Schumer], for himself, Mr.
Bingaman, Mr. Durbin, and Mrs. Feinstein, proposes an
amendment numbered 42.
Mr. SCHUMER. I ask unanimous consent the reading of the amendment be
dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To limit the exemption for asset protection trusts)
On page 205, between lines 16 and 17, insert the
following:
SEC. 332. ASSET PROTECTION TRUSTS.
Section 548 of title 11, United States Code, as amended by
this Act, is further amended by adding at the end the
following:
``(e) The trustee may avoid a transfer of an interest of
the debtor in property made by an individual debtor within 10
years before the date of the filing of the petition to an
asset protection trust if the amount of the transfer or the
aggregate amount of all transfers to the trust or to similar
trusts within such 10-year period exceeds $125,000, to the
extent that debtor has a beneficial interest in the trust and
the debtor's beneficial interest in the trust does not become
property of the estate by reason of section 541(c)(2). For
purposes of this subsection, a fund or account of the kind
specified in section 522(d)(12) is not an asset protection
trust.''.
Mr. SCHUMER. Mr. President, I will be very brief. This amendment
closes the so-called millionaires loophole. If any of you happened to
read yesterday's New York Times, there is in existing law a hidden
loophole which basically says if you are a millionaire and want to file
a certain trust in one of five States, you can hide all your money even
though you declare bankruptcy. So the irony is, in this bill, while we
are talking about people who make $35,000 or $40,000 or $45,000 and we
want to make sure they do not abuse bankruptcy, the law allows this
abuse of bankruptcy.
The Bankruptcy Abuse Prevention and Consumer Protection Act, which I
am introducing along with my colleagues Senators Durbin, Feinstein, and
Bingaman, and I believe Senator Clinton as well, will close this
loophole.
You do not have to be a resident of these five States, but you can be
a millionaire or billionaire and stash away assets: mansions, racing
cars, yachts, investments, in a special trust, and you can hold onto
that windfall after bankruptcy. That is not fair. We will debate the
amendment later this afternoon. I want to notify my colleagues and
place it in order on the floor.
[[Page S1981]]
The amendment has been read?
The PRESIDING OFFICER. Yes, it was.
Mr. SCHUMER. It is now in order so I will yield the floor.
Mr. KENNEDY. Will the Senator yield?
Mr. SCHUMER. I am happy to.
Mr. KENNEDY. One of the concerns many of us had in this bill is the
interest of fairness. I think fairness ought to be standard for any
piece of legislation. As it is currently before us, we will have those
who will be able, with their homestead exemption, to preserve
homesteads valued at millions and millions of dollars and, on the other
side, individuals will lose completely all of their savings because
they will lose their homes. There is no fairness there.
The Senator from New York is pointing out in another area the issue
of fairness. Those who have resources and have wealth and have the
contacts will be able to shelter their resources while basically
middle-income working families, the working poor who are trying to get
by and have seen an explosion of different costs, on housing, on health
care, on tuition, will be buried.
This will be another dramatic example where those who have it will be
able to preserve it and those who have been struggling will lose it.
Mr. SCHUMER. I thank my colleague. He is exactly on point. It is
outrageous that someone worth millions or billions of dollars can
declare bankruptcy and then shield their assets in this trust so they
do not come before the bankruptcy court. The Senator, my friend from
Massachusetts, is exactly right; we are talking about people who make
$45,000 and we are going after them, yet we are allowing millionaires
and billionaires to use this loophole. Of course, it is not all
millionaires and billionaires, it is a small number who go into
bankruptcy and who abuse it. We can close it. We will debate this
amendment later this afternoon, but let us hope that we do not have a
lockstep, let's vote ``no'' on everything. It would be hypocritical to
say we have to close abuses on middle-income people and not close
abuses on the very wealthy.
I will be happy to continue to yield to my friend.
Mr. KENNEDY. I will ask a final question. A third of all the
bankruptcies are among those who are earning below the poverty line.
Does the Senator think they will be able to take advantage of this
loophole?
Mr. SCHUMER. I would say to my colleague from Massachusetts, they
can't even afford the lawyer to write the first page of the trust that
these others can. Again, the question answers itself. What is good for
the goose is good for the gander. What is good for someone below the
poverty line certainly ought to be good for millionaires and
billionaires who want to abuse the bankruptcy process.
I yield the floor in deference to my colleague from Pennsylvania.
The PRESIDING OFFICER (Mr. Alexander). The Senator from Pennsylvania
is recognized.
Amendment No. 44
Mr. SANTORUM. Mr. President, I understand I only have a couple of
minutes, so I will be very brief. I want to speak on the issue of
minimum wage. I know the Senator from Massachusetts has offered this
amendment on the minimum wage to this package. I will be opposing the
Kennedy amendment and will be offering an alternate to this amendment.
But let me explain first why I oppose the Kennedy amendment.
First, it doesn't belong on this bill. Even the amendment I will
offer as an alternative does not belong on the bill. I have spoken to
Senator Kennedy and others about what I believe is the appropriate
place for this discussion. That is the welfare reform bill. It will be
a bill that will come here and have a lot of amendments and it focuses
on how we help those who are transitioning from welfare to work, how we
help them and give them the support they need to be able to have work
that pays well enough for them to get out of poverty. I think this
discussion fits best, and I would argue has the better chance of
actually ending up in a final bill and being sent to the President, on
the welfare bill as opposed to here, which I think everyone recognizes
is a bill that has been worked on for years and years and years.
We have a bill that has bipartisan support, with the hope of trying
to get this to the President at a propitious time. So I would make the
argument, No. 1, first and foremost I would oppose the Kennedy
amendment on that ground.
Second, I suggest----
Mr. KENNEDY. Will the Senator yield for a question on that part?
Mr. SANTORUM. I only have about 1 minute and I am happy to yield to
the Senator from Massachusetts for a brief question.
Mr. KENNEDY. I offered the amendment on the TANF bill last year and
the bill was pulled because it was offered as an amendment. So that is
part of our frustration.
Mr. SANTORUM. I respect the Senator from Massachusetts. I think there
is a little different environment. I think there is a broad group who
will deal with the reauthorization of welfare and deal with that and
get a bill passed and sent to Congress this year, and you will
certainly have my support trying to get that done in a fashion that I
believe reinstates work requirements, which have fallen off because of
the drop in the welfare rolls across America.
The second reason I oppose the Kennedy amendment is because the
increase is too dramatic at this point. We are talking about an over $2
increase, over a 40-percent increase in the minimum wage. While I do
support a modest proposal, something about half that amount, I think
that is the wise thing to do in this economy, which is not to put a
jolt of that nature into what is already a concern about inflation. To
be able to put that kind of minimum wage increase in I think would fuel
inflationary fears. It would have strong negative repercussions in our
economy, broadly.
While I do understand the need now that it has been almost 8 years
without a minimum wage increase, I think what I will be offering is a
modest one that comports with and will fit within this economy. We do
some things to address the issue of small businesses, which the
amendment of the Senator from Massachusetts does not do.
We don't want to disproportionally affect those poor communities, or
hurt the small business neighborhood store or cleaners or whatever the
case may be that is trying to make ends meet by putting this kind of
increased cost on them as high as the Kennedy amendment would be, or
even as high as what I would suggest, without some sort of relief to
compensate very small businesses. I think that would be unwise and it
would hurt the community. We want to help by providing more resources.
Increasing the minimum wage does not help those small businesses in
that community. I think it would have a bad, overall negative effect on
the very poor communities of our society.
I see my time is up. I yield the floor.
Amendment No. 31
The PRESIDING OFFICER. Under the previous order, the hour of 2 p.m.
having arrived, there will be 4 minutes equally divided on debate in
relation to amendment No. 31.
Who yields time?
The Senator from Minnesota.
Mr. DAYTON. Mr. President, this legislation is entitled ``The
Bankruptcy Abuse Prevention and Consumer Protection Act.''
Unfortunately, there is actually very little consumer protection in it.
My amendment would add some much needed consumer protections to the
bill and end one of the principal abuses that drives people into
bankruptcy--exorbitant interest rates.
My amendment would limit the maximum annual interest rate that could
be charged to any consumer by any creditor to 30 percent. Thirty
percent is still a very high interest rate--far too high, in my view.
Inflation is currently running around 2 percent. The interest rate on
3-month Treasury bills is 2.75 percent. The prime lending rate is 5.5
percent. So 30 percent is exorbitantly high, but it is much less than
the 384 percent that is being charged by money centers in Minnesota, or
the 535-percent annual interest rate charged by centers in Wisconsin,
or the 1,095-percent interest rate being charged by the County Bank of
Rehoboth Beach in Delaware. That is not just predatory lending, that is
``terroristic'' lending.
My amendment would apply to any rate of interest charged by any
creditor to any borrower for any purpose. However, it would not preempt
any State,
[[Page S1982]]
local, or private restriction that imposes a lower rate of interest.
For example, 21 States, which include my home State of Minnesota, cap
interest rates for credit cards. Minnesota's ceiling is 18 percent.
That would still apply. Yet when money centers operate in Minnesota at
384 percent interest, that limit would be 30 percent.
Again, under my amendment, whenever a creditor is limited to a lower
interest rate, that lower rate would apply. Whenever there is no
interest cap, or wherever that cap is higher than this amendment's 30-
percent limit, then this 30-percent annual interest rate would apply.
I urge my colleagues to support this amendment. It has the support of
the Consumer Federation of America, the National Association of
Consumer Advocates, and the U.S. PIRG.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. HATCH. Mr. President, let me just say a few words about why this
amendment is not a good amendment and one that should be voted down.
This would cap the interest rate for consumer credit extensions at 30
percent in this country, and, frankly, would preempt many States' usury
laws unless the State has a lower interest rate.
In other words, preemption of State laws is something we sought to
avoid in this bill. We have refused to do so in the homestead
provisions, so there is no reason to touch the State usury laws as
well.
There is no dispute that lending agencies are already heavily
regulated. We have already restricted usury rates on first-lien loans.
Additionally, special usury provisions in the National Bank Act and
Federal Deposit Act preempt State usury laws for national State banks.
We did not preempt these State laws haphazardly as we would do today
by passing the Dayton amendment.
I believe we should stick with the bill as written. We have taken
this into consideration. We have worked long and hard over 8 years to
get this right. And, frankly, I think this amendment is an
inappropriate amendment and should be voted down.
I hope our colleagues will vote it down.
I yield the remainder of our time.
Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The question is on agreeing to the amendment. The clerk will call the
roll.
The assistant legislative clerk called the roll.
Mr. DURBIN. I announce that the Senator from Wisconsin (Mr. Feingold)
and the Senator from Hawaii (Mr. Inouye) are necessarily absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 24, nays 74, as follows:
[Rollcall Vote No. 20 Leg.]
YEAS--24
Akaka
Bayh
Boxer
Byrd
Clinton
Conrad
Corzine
Dayton
Dodd
Dorgan
Feinstein
Harkin
Jeffords
Kennedy
Lautenberg
Levin
Lieberman
Mikulski
Murray
Pryor
Rockefeller
Salazar
Schumer
Stabenow
NAYS--74
Alexander
Allard
Allen
Baucus
Bennett
Biden
Bingaman
Bond
Brownback
Bunning
Burns
Burr
Cantwell
Carper
Chafee
Chambliss
Coburn
Cochran
Coleman
Collins
Cornyn
Craig
Crapo
DeMint
DeWine
Dole
Domenici
Durbin
Ensign
Enzi
Frist
Graham
Grassley
Gregg
Hagel
Hatch
Hutchison
Inhofe
Isakson
Johnson
Kerry
Kohl
Kyl
Landrieu
Leahy
Lincoln
Lott
Lugar
Martinez
McCain
McConnell
Murkowski
Nelson (FL)
Nelson (NE)
Obama
Reed
Reid
Roberts
Santorum
Sarbanes
Sessions
Shelby
Smith
Snowe
Specter
Stevens
Sununu
Talent
Thomas
Thune
Vitter
Voinovich
Warner
Wyden
NOT VOTING--2
Feingold
Inouye
The amendment (No. 31) was rejected.
Amendment No. 37
The PRESIDING OFFICER. Under the previous order, there will be 4
minutes equally divided for debate in relation to amendment No. 37.
The Senator from Florida.
Mr. NELSON of Florida. Mr. President, there is one exception the
Senate should consider to this bankruptcy bill in filing bankruptcy,
and that is when someone incurs debts due to no fault of their own.
When someone incurs debts through no fault of their own because their
identity has been stolen and they are forced to go into bankruptcy, why
should we force them not to take chapter 7 in bankruptcy, instead to go
through chapter 13?
If you don't think identity theft and bankruptcy therefrom is a
problem, look at the top consumer complaints of the Federal Trade
Commission and notice 39 percent are identity theft. Don't think you
are immune from identity theft. Did you hear the news on Friday night
that Bank of America has had the records of 1.2 million Federal
employees stolen, including 60 Senators in this Chamber? You are
potential victims, including this Senator. I am on the list. So why
should we not hear the pleas of people all across the land?
A story from Florida where identity was stolen, they ran up $40,000.
They can't pay that off. Another case in New York, a friend stole
identity and ran up $300,000. The person had no choice but go into
bankruptcy. Surely this is an example of an exception to this bill that
we should make.
The PRESIDING OFFICER. The Senator from Utah.
Mr. HATCH. Mr. President, I rise in opposition to the Nelson
amendment, although I commend the Senator from Florida in his work on
this issue of identity theft. This amendment is written so broadly, it
actually invites fraud despite its well-intentioned purposes. I
understand there will be several hearings on the issue of identity
theft, and I look forward to working with my friend from Florida and my
other colleagues to find a solution. But for now, this is written so
broadly that I think it actually invites fraud. I hope my colleagues
will oppose the amendment because it would cause a lot of difficulty on
this bill.
Mr. NELSON of Florida. Will the Senator yield for a clarification?
Mr. HATCH. I am happy to yield.
Mr. NELSON of Florida. Does the Senator realize that in my amendment
anyone who incurs less than $20,000 of debt as a result of identity
theft would not be eligible to become an exception under the bankruptcy
bill?
Mr. HATCH. I do. But it is written so broadly that anybody who claims
they have been defrauded, whether they have or have not, qualifies
under your amendment. That is way too broad under this bill. I am happy
to work with the distinguished Senator, and we will see what we can do
later in this Congress. I hope everybody will vote down this amendment.
The PRESIDING OFFICER. The question is on agreeing to amendment No.
37.
Mr. LEAHY. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The clerk will call the roll.
The legislative clerk called the roll.
Mr. DURBIN. I announce that the Senator from Wisconsin (Mr. Feingold)
and the Senator from Hawaii (Mr. Inouye) are necessarily absent.
The PRESIDING OFFICER (Mr. Coleman). Are there any other Senators in
the Chamber desiring to vote?
The result was announced--yeas 37, nays 61, as follows:
[Rollcall Vote No. 21 Leg.]
YEAS--37
Akaka
Baucus
Bayh
Boxer
Byrd
Cantwell
Clinton
Conrad
Corzine
Dayton
Dodd
Dorgan
Durbin
Feinstein
Harkin
Jeffords
Kennedy
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Murray
Nelson (FL)
Obama
Pryor
Reed
Reid
Rockefeller
Salazar
Sarbanes
Schumer
Stabenow
NAYS--61
Alexander
Allard
Allen
Bennett
Biden
Bingaman
Bond
Brownback
Bunning
Burns
Burr
Carper
Chafee
Chambliss
Coburn
Cochran
Coleman
Collins
Cornyn
Craig
Crapo
DeMint
DeWine
Dole
Domenici
Ensign
Enzi
Frist
Graham
Grassley
[[Page S1983]]
Gregg
Hagel
Hatch
Hutchison
Inhofe
Isakson
Johnson
Kyl
Lott
Lugar
Martinez
McCain
McConnell
Murkowski
Nelson (NE)
Roberts
Santorum
Sessions
Shelby
Smith
Snowe
Specter
Stevens
Sununu
Talent
Thomas
Thune
Vitter
Voinovich
Warner
Wyden
NOT VOTING--2
Feingold
Inouye
The amendment (No. 37) was rejected.
Mr. McCONNELL. Mr. President, I move to reconsider the vote and lay
that motion on the table.
The motion to lay on the table was agreed to.
The PRESIDING OFFICER. The majority whip.
Mr. McCONNELL. Mr. President, I ask unanimous consent that Senator
Byrd be recognized for up to 10 minutes and that at 3:25 the Senate
vote in relation to the Durbin amendment No. 38 with no amendments in
order prior to the vote.
The PRESIDING OFFICER. Is there objection?
Mr. DORGAN. Mr. President, reserving the right to object.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. DORGAN. Mr. President, I did not quite understand the last
portion of the unanimous consent request. I understand Senator Byrd
shall be recognized for 10 minutes, and then what transpires?
Mr. McCONNELL. Then we move to the Durbin amendment, with a vote at
3:25.
Mr. DORGAN. My understanding is Senator Byrd will take 10 minutes. I
have no objection to the vote at 3:25, but I ask unanimous consent that
the request be modified and I be recognized following Senator Byrd's
comments.
Mr. McCONNELL. I ask unanimous consent that Senator Dorgan be
recognized at the conclusion of Senator Byrd's remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from West Virginia.
Mr. BYRD. Mr. President, I thank the Chair, and I thank Senator
McConnell and also my own leadership for the kindness in arranging for
me to speak at this time.
(The remarks of Mr. Byrd pertaining to the introduction of S. 515 and
S. 514 are located in today's Record under ``Statements on Introduced
Bills and Joint Resolutions.'')
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. DORGAN. Mr. President, we are dealing with the bankruptcy bill. I
am going to send an amendment to the desk. I ask the pending amendment
be set aside so my amendment may be considered.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 45
(Purpose: To establish a special committee of the Senate to
investigate the awarding and carrying out of contracts to
conduct activities in Afghanistan and Iraq and to fight the
war on terrorism)
Mr. DORGAN. I send the amendment to the desk and ask for its
immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:
The Senator from North Dakota (Mr. Dorgan), for himself and
Mr. Durbin, proposes an amendment numbered 45.
Mr. DORGAN. I ask unanimous consent the reading of the amendment be
dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is printed in today's Record under ``Text of
Amendments.''
Mr. DORGAN. Mr. President, I send that amendment to the desk on
behalf of myself and Senator Durbin, who joins me as a cosponsor of the
amendment.
The bankruptcy reform bill on the floor of the Senate today
ostensibly deals with the subject of those who would attempt to cheat
with respect to filing bankruptcy. We have had a lot of discussion on
the floor about the abuse of bankruptcy. There is no question about
that; there is some of that. It is called cheating. But there is
another form of cheating going on now to which very little attention is
paid, and my amendment attempts to deal with it.
I am going to put up a chart that shows $2 million dollars on a
table, in a room somewhere in Iraq. These are Americans holding this
cash. This cash is to be deposited in a plastic bag to pay contractors
in Iraq. The contractors are told ``bring a bag and we will fill your
bag with cash.'' That is the way you pay bills over there.
This particular picture was given to us by this gentleman here, who
was working in Iraq. He said it was like the Wild West; just bring your
bag and fill it with cash.
His testimony, which we heard at a hearing of the Democratic Policy
Committee, followed the testimony of others that we have received about
the massive waste, fraud, and abuse in contracting that has been going
in Iraq. The American taxpayers are taking it on the chin, but none of
the authorizing committees of jurisdiction in the U.S. Senate are
holding hearings about this.
Well, the Democratic Policy Committee has held some oversight
hearings. The testimony at the hearings is absolutely devastating.
Halliburton charges for 42,000 meals to be served in a day to
American soldiers. It is determined, however, that the company is only
serving 14,000 meals a day. So they are charging the taxpayer for
42,000 meals to be served to soldiers when in fact they are only
serving 14,000 meals.
We hear about the payment of $7,500 a month to lease SUV vehicles. We
hear about the ordering of 50,000 pounds of nails, that turn out to be
of the wrong size, and just get dumped by the side of the road. We hear
about $40 to $45 a case for soda pop.
A senior manager from the Defense Department, who used to be in
charge of providing fuel for vehicles in war zones, testified that
Halliburton was charging $1 more per gallon for gasoline than they
should have. There are overcharges adding up to $61 million on that
issue alone.
One fellow came to a DPC hearing and he held up towels. He worked for
a subsidiary of Halliburton. He ordered towels because the soldiers
needed the towels and they got a requisition order. Guess what. KBR,
Halliburton's subsidiary, charged nearly double the cost of regular
towels because they insisted on having the KBR logo embroidered on the
towels. So the U.S. taxpayer gets soaked because the company wants
their logo on the towels. It is extraordinary what is happening here,
and nobody seems to care that much.
We heard of contractors that were driving $85,000 brand new trucks in
the country of Iraq, and whenever they had flat tires or a plugged fuel
lines, they abandoned the vehicles and just bought new ones. The
American taxpayer is paying for all of that, and nobody seems to care.
Well, in the years of 1940 and 1941, Harry Truman, as we were about
to enter World War II, got into his car and drove around this country
touring air bases and military installations. He came back and
suggested a special committee be impaneled in Congress. That committee
became known as the Truman Committee, and was active for several years.
They saved, by today's accounts, somewhere close to $15 billion by
exposing waste, fraud, and abuse. That was a Democratic Senator working
at a time when there was a Democrat in the White House. He didn't care
whether anyone was embarrassed. On behalf of the American taxpayer, he
insisted that we get to the bottom of waste, fraud, and abuse.
I offer today an amendment that would establish a special bipartisan
committee of the Senate on war, reconstruction, and contracting. Four
members of the committee would be selected from the majority and three
members from the minority. It would have subpoena power, and it would
put a magnifying glass on the massive amounts of money being wasted,
being abused, and in some cases simply being defrauded from the
American taxpayer. We owe it to the American taxpayers to do this.
We have pending right now before this body another request for $82
billion. Most of that is to provide resources for the soldiers, not all
of it but most of it. In addition to that, there is some $15 billion to
this yet unspent for the reconstruction of Iraq. That is American
taxpayers' money which is in the pipeline.
You hear about all of this waste, fraud, abuse, and the
whistleblowers, and then you ask, Who is minding the store? Who is
looking after all this?
Another witness testified at the hearing we held recently about a
company
[[Page S1984]]
that went to Iraq. Two guys went to Iraq with no experience and no
money. They just showed up. They wanted to be a contracting company.
Guess what. They won a contract, all right. They had delivered to them
$2 million in cash, and they were suddenly a security contractor at the
airport. Then their employees turned whistleblowers on them. They said
the company was taking forklifts, repainting them, and selling them
back, and setting up front companies offshore so they could buy and
sell at overinflated charges. A couple of employees turned
whistleblowers and they were threatened to be killed for doing it. That
company, I am told, got over $100 million in contracting in the country
of Iraq.
One final point: Do you know that when the allegation was made that
this contractor was ripping off the Coalition Provisional Authority,
which was a U.S. creation and represented us in Iraq, the U.S. Justice
Department failed to intervene under the False Claims Act because they
said defrauding the Coalition Provisional Authority is not the same as
defrauding the American taxpayer. There is something fundamentally
wrong with that. This amendment would address that as well, by
specifying that the investigation called for in this amendment should
include the Coalition Provisional Authority spending.
I have the amendment at the desk. I said I offered it on behalf of my
colleague, Senator Durbin, and myself, and I hope others as we move
along. I understand this is not strictly a bankruptcy amendment, but we
must waste no more time to establish a committee by which there is real
oversight in the matter of contracting abuses that waste billions of
dollars of the American taxpayers' money.
Mr. BYRD. Mr. President, will the distinguished Senator yield for a
question?
Mr. DORGAN. I am happy to yield.
Mr. BYRD. Actually, the question will be very easy to answer. But for
the moment, I must say to the very distinguished Senator that this is
one Senator who is not at all surprised at what he found. I can
remember when we had Mr. Bremer before the Senate Appropriations
Committee to be heard. I asked him, after a while during which he
delivered testimony and answered questions, if he would be able to
remain or come back before the committee for some additional
questions--meaning the same day--if the chairman should ask him to do
so. His answer was, ``I am too busy.''
I came back to our caucus on that day, and I believe he came to the
caucus at the same time. I told this to my caucus while Mr. Bremer was
there. It was a shocking thing to me--an individual claiming he is too
busy, and yet he is asking for quite a great amount of money to be
appropriated, $2 billion.
I am not at all surprised at this. I believe as time goes on we will
find more and more of these kinds of stories. I congratulate the
distinguished Senator on the excellent work he is doing in bringing
these things to light.
Now the question: Will the distinguished Senator add me as a
cosponsor to his amendment?
Mr. DORGAN. Mr. President, I would be happy to do so.
Mr. President, I ask unanimous consent that the Senator from West
Virginia be added as a cosponsor.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BYRD. I thank the Senator.
Mr. DORGAN. I thank the Senator from West Virginia.
I see the hour of 3:25 has arrived. I believe by a previous order we
have other business. I appreciate the opportunity to offer my
amendment, and hopefully we will have a vote on it at some point in the
future.
Amendment No. 38
Mr. President, I ask for the yeas and nays on the Durbin amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The question is on agreeing to the amendment. The clerk will call the
roll.
The assistant legislative clerk called the roll.
Mr. DURBIN. I announce that the Senator from Wisconsin (Mr. Feingold)
and the Senator from Hawaii (Mr. Inouye) are necessarily absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 40, nays 58, as follows:
[Rollcall Vote No. 22 Leg.]
YEAS--40
Akaka
Baucus
Bayh
Bingaman
Boxer
Byrd
Cantwell
Clinton
Collins
Conrad
Corzine
Dayton
Dodd
Dorgan
Durbin
Feinstein
Harkin
Jeffords
Kennedy
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Murray
Nelson (FL)
Obama
Pryor
Reed
Reid
Rockefeller
Salazar
Sarbanes
Schumer
Stabenow
Wyden
NAYS--58
Alexander
Allard
Allen
Bennett
Biden
Bond
Brownback
Bunning
Burns
Burr
Carper
Chafee
Chambliss
Coburn
Cochran
Coleman
Cornyn
Craig
Crapo
DeMint
DeWine
Dole
Domenici
Ensign
Enzi
Frist
Graham
Grassley
Gregg
Hagel
Hatch
Hutchison
Inhofe
Isakson
Johnson
Kyl
Lott
Lugar
Martinez
McCain
McConnell
Murkowski
Nelson (NE)
Roberts
Santorum
Sessions
Shelby
Smith
Snowe
Specter
Stevens
Sununu
Talent
Thomas
Thune
Vitter
Voinovich
Warner
NOT VOTING--2
Feingold
Inouye
The amendment (No. 38) was rejected.
The PRESIDING OFFICER. The Senator from Arkansas is recognized.
Amendment No. 40
Mr. PRYOR. Mr. President, I ask unanimous consent that the pending
amendment be set aside and I call up amendment No. 40.
The PRESIDING OFFICER. Without objection, it is so ordered.
The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Arkansas [Mr. Pryor] proposes an amendment
numbered 40.
Mr. PRYOR. Mr. President, I ask unanimous consent that further
reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To amend the Fair Credit Reporting Act to prohibit the use of
any information in any consumer report by any credit card issuer that
is unrelated to the transactions and experience of the card issuer with
the consumer to increase the annual percentage rate applicable to
credit extended to the consumer, and for other purposes)
At the appropriate place, insert the following:
SEC. __. LIMITATION ON USE OF CONSUMER REPORTS.
(a) In General.--Section 604(d) of the Fair Credit
Reporting Act (15 U.S.C. 1681b(d)) is amended to read as
follows:
``(d) Limitation on Use of Consumer Report.--
``(1) In general.--A credit card issuer may not use any
negative information contained in a consumer report to
increase any annual percentage rate applicable to a credit
card account, or to remove or increase any introductory
annual percentage rate of interest applicable to such
account, for any reason other than an action or omission of
the card holder that is directly related to such account.
``(2) Notice to consumer.--The limitation under paragraph
(1) on the use by a credit card issuer of information in a
consumer report shall be clearly and conspicuously described
to the consumer by the credit card issuer in any disclosure
or statement required to be made to the consumer under this
title.''.
(b) Technical and Conforming Amendment.--Section
604(a)(3)(F)(ii) of the Fair Credit Reporting Act (15 U.S.C.
1681b(a)(3)(F)(ii)) is amended by inserting ``subject to
subsection (d),'' before ``to review''.
Mr. PRYOR. Mr. President, I offer my amendment because I want to
address a practice in the credit card industry. Basically, what happens
with some card companies--and not all of them, certainly--is they make
it a practice to look at their cardholders' credit reports on a monthly
basis. When they find that the cardholder has a late payment maybe on a
utility bill, or a car note, or whatever the case may be, they will
actually raise the interest rate on the cardholder, even though they
may have made every credit card payment on time. They use that as a
justification to raise the interest rate on the cardholder.
I think that is an unfair practice. It is fraught with all kinds of
problems, including the problem that many of these credit reports
contain errors. I
[[Page S1985]]
have certainly been subject to those. I am sure almost every Senator in
this Chamber has been subject to an error on their credit report at one
time or another. The credit card companies don't take that into
consideration. They will routinely increase interest rates. I think it
is an unfair business practice.
We are talking about bankruptcy. We all know that one of the main
reasons people get into financial trouble is because they have credit
cards. Sometimes they abuse them. Sometimes the interest rate is so
high that it creates great difficulty on our citizens.
I think this amendment is important. I think it is one we can
certainly justify, and I think it is one that, if people take a look at
it, they would think this is a bad industry practice and this is a way
to, hopefully, decrease the number of bankruptcies and the number of
families in America who get into financial trouble, if some of these
hidden methods of increasing interest rates are taken away.
With that, I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. SPECTER. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 48
Mr. SPECTER. Mr. President, I have sought recognition to support a
technical amendment, which I send to the desk.
The PRESIDING OFFICER. Without objection, the pending amendment is
laid aside. The clerk will report the amendment.
The assistant legislative clerk read as follows:
The Senator from Pennsylvania [Mr. Specter] proposes an
amendment numbered 48.
The amendment is as follows:
(Purpose: To increase bankruptcy filing fees to pay for the additional
duties of United States trustees and the new bankruptcy judges added by
this Act)
On page 194, strike line 13 and all that follows through
page 195, line 22, and insert the following:
SEC. 325. UNITED STATES TRUSTEE PROGRAM FILING FEE INCREASE.
(a) Actions Under Chapter 7, 11, or 13 of Title 11, United
States Code.--Section 1930(a) of title 28, United States
Code, is amended--
(1) by striking paragraph (1) and inserting the following:
``(1) For a case commenced under--
``(A) chapter 7 of title 11, $200; and
``(B) chapter 13 of title 11, $150.''; and
(2) in paragraph (3), by striking ``$800'' and inserting
``$1000''.
(b) United States Trustee System Fund.--Section 589a(b) of
title 28, United States Code, is amended--
(1) by striking paragraph (1) and inserting the following:
``(1)(A) 40.63 percent of the fees collected under section
1930(a)(1)(A) of this title; and
``(B) 70.00 percent of the fees collected under section
1930(a)(1)(B);'';
(2) in paragraph (2), by striking ``one-half'' and
inserting ``75 percent''; and
(3) in paragraph (4), by striking ``one-half'' and
inserting ``100 percent''.
(c) Collection and Deposit of Miscellaneous Bankruptcy
Fees.--Section 406(b) of the Judiciary Appropriations Act,
1990 (28 U.S.C. 1931 note) is amended by striking ``pursuant
to 28 U.S.C. section 1930(b)'' and all that follows through
``28 U.S.C. section 1931'' and inserting ``under section
1930(b) of title 28, United States Code, 31.25 of the fees
collected under section 1930(a)(1)(A) of that title, 30.00
percent of the fees collected under section 1930(a)(1)(B) of
that title, and 25 percent of the fees collected under
section 1930(a)(3) of that title shall be deposited as
offsetting receipts to the fund established under section
1931 of that title''.
(d) Sunset Date.--The amendments made by subsections (b)
and (c) shall be effective during the 2-year period beginning
on the date of enactment of this Act.
(e) Use of Increased Receipts.--
(1) Judges' salaries and benefits.--The amount of fees
collected under paragraphs (1) and (3) of section 1930(a) of
title 28, United States Code, during the 5-year period
beginning on the date of enactment of this Act, that is
greater than the amount that would have been collected if the
amendments made by subsection (a) had not taken effect shall
be used, to the extent necessary, to pay the salaries and
benefits of the judges appointed pursuant to section 1223 of
this Act.
(2) Remainder.--Any amount described in paragraph (1),
which is not used for the purpose described in paragraph (1),
shall be deposited into the Treasury of the United States to
the extent necessary to offset the decrease in governmental
receipts resulting from the amendments made by subsections
(b) and (c).
Mr. SPECTER. Mr. President, this amendment, as I have noted, makes a
technical correction to ensure that the bill does not violate our
budget laws. It has come to my attention that the bankruptcy bill could
draw a potential point of order because of two provisions in S. 256.
The first provision is section 1223 of the bill, which authorizes the
creation of 28 new bankruptcy judgeships. According to the CBO's most
recent cost estimates for S. 256, these new judges will account for $45
million in direct Federal spending over a 10-year period. Specifically,
the mandatory spending would be earmarked for the judges' pay and
benefits.
The second provision subject to this amendment, section 325,
addresses the filing fees for bankruptcy and amounts that are directed
to a trust fund that compensates bankruptcy trustees. Under current
practice, a percentage of bankruptcy filing fees paid by a debtor is
allocated to a trust fund that compensates bankruptcy trustees, while
the remaining percentage of the filing fee is paid into the Treasury
and counted as Federal revenue.
Section 325 of the bill, however, will now increase the allocation
percentages from the filing fees that are directed to the trust fund.
But because the bill's percentage increase will result in a
corresponding decrease of Federal revenue, CBO has reported this
provision will result in a net revenue loss for the Treasury.
Specifically, the Congressional Budget Office estimates the revenue
loss at $226 million over 5 years, $456 million over 10 years.
After reviewing this matter with the Budget Committee, we are
proposing through this amendment to offset the direct spending from the
judgeships and revenue losses from the section 325 percentage by
increasing the bankruptcy filing fees in chapters 11 and 7.
The amendment also tries to limit revenue losses by sunsetting after
2 years the increased allocation percentage measure in sections 325(b)
and 325 (c). By doing so, we estimate that the bill will provide
sufficient offsets to cover the potential budgetary problems facing
this bill.
Specifically, the amount of the increased filing fees that is greater
than the amount that would have been collected, but for this
legislation, is earmarked towards the payment of salaries and benefits
for the judges. The remaining amounts from the increased filing fees
are also used to offset the Federal revenue loss caused by section 325
for the 2 years that the provision stays in existence. I believe this
amendment represents the best way of creating offsets within the bill.
It will obviate the need to strike the bankruptcy judgeships provision
altogether and, most importantly, allow this bill to survive a
potential budget point of order.
To the extent there are concerns that the increase in bankruptcy
filing fees will make it more difficult for financially strapped
debtors to use chapter 7, let me remind my colleagues that I pushed for
an amendment in committee during the 105th Congress to give bankruptcy
courts the discretion to waive filing fees for lower income debtors.
The committee accepted that amendment and it is now embodied in section
418 of the bill.
This amendment removes a significant procedural obstacle that could
jeopardize the prospect of this bill's passage in the Senate. As such,
I urge my colleagues to support this amendment.
What this all boils down to is we need new bankruptcy judges. We have
to pay their salaries and their health benefits, and we do not want to
run afoul of the budget laws which would strike down the entire bill
unless we got 60 votes.
Mr. President, in the absence of any other Senator seeking
recognition, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. DURBIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 49
Mr. DURBIN. Mr. President, I ask unanimous consent to set aside the
pending amendment, and I send an amendment to the desk.
The PRESIDING OFFICER. Without objection, it is so ordered.
[[Page S1986]]
The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Illinois [Mr. Durbin] proposes an
amendment numbered 49.
Mr. DURBIN. Mr. President, I ask unanimous consent that the reading
of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To protect employees and retirees from corporate practices
that deprive them of their earnings and retirement savings when a
business files for bankruptcy)
On page 499, strike line 3 and all that follows through
page 500, line 2, and insert the following:
SEC. 1402. FRAUDULENT TRANSFERS AND OBLIGATIONS.
(a) Federal Fraudulent Transfer Amendments.--Section 548 of
title 11, United States Code, is amended--
(1) in subsection (a)(1)--
(A) by striking ``one year'' and inserting ``4 years'';
(B) in subparagraph (A), by striking ``or'' at the end;
(C) in subparagraph (B), by striking the period at the end
and inserting ``; or''; and
(D) by adding at the end the following:
``(C) made an excess benefit transfer or incurred an excess
benefit obligation to an insider, if the debtor--
``(i) was insolvent on the date on which the transfer was
made or the obligation was incurred; or
``(ii) became insolvent as a result of the transfer or
obligation.'';
(2) in subsection (b), by striking ``one year'' and
inserting ``4 years''; and
(3) in subsection (d)(2)--
(A) in subparagraph (C), by striking ``and'' at the end;
(B) in subparagraph (D), by striking the period at the end
and inserting ``; and''; and
(C) by adding at the end the following:
``(E) the terms `excess benefit transfer' and `excess
benefit obligation' mean--
``(i) a transfer or obligation, as applicable, to an
insider, general partner, or other affiliated person of the
debtor in an amount that is not less than 10 times the amount
of the mean transfer or obligation of a similar kind given to
nonmanagement employees during the calendar year in which the
transfer is made or the obligation is incurred; or
``(ii) if no such similar transfers were made to, or
obligations incurred for the benefit of, such nonmanagement
employees during such calendar year, a transfer or obligation
that is in an amount that is not less than 25 percent more
than the amount of any similar transfer or obligation made to
or incurred for the benefit of such insider, partner, or
other affiliated person of the debtor during the calendar
year before the year in which such transfer is made or
obligation is incurred.''.
(b) Fair Treatment of Employee Benefits.--
(1) Definition of claim.--Section 101(5) of title 11,
United States Code, is amended--
(A) in subparagraph (A), by striking ``or'' at the end;
(B) in subparagraph (B), by inserting ``or'' after the
semicolon; and
(C) by adding at the end the following:
``(C) right or interest in equity securities of the debtor,
or an affiliate of the debtor, held in a pension plan (within
the meaning of section 3(2) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002(2))), including an
employee stock ownership plan, for the benefit of an
individual who is not an insider, officer, or director of the
debtor, if such securities were attributable to--
``(i) employer contributions by the debtor or an affiliate
of the debtor other than elective deferrals (within the
meaning of section 402(g) of the Internal Revenue Code of
1986), and any earnings thereon; and
``(ii) elective deferrals (and any earnings thereon) that
are required to be invested in such securities under the
terms of the plan or at the direction of a person other than
the individual or any beneficiary, except that this
subparagraph shall not apply to any such securities during
any period during which the individual or any beneficiary has
the right to direct the plan to divest such securities and to
reinvest an equivalent amount in other investment options of
the plan;''.
(2) Priorities.--Section 507(a) of title 11, United States
Code, is amended--
(A) by redesignating paragraphs (8) and (9) as paragraphs
(9) and (10), respectively;
(B) by redesignating paragraphs (6) and (7), as
redesignated by section 212, as paragraphs (7) and (8),
respectively;
(C) in paragraph (7), as so redesignated, by striking
``Sixth'' and inserting ``Seventh'';
(D) in paragraph (8), as so redesignated, by striking
``Seventh'' and inserting ``Eighth'';
(E) in paragraph (9), as so redesignated, by striking
``Eighth'' and inserting ``Ninth'';
(F) in paragraph (10), as so redesignated, by striking
``Ninth'' and inserting ``Tenth''; and
(G) by striking paragraph (5), as redesignated by section
212, and inserting the following:
``(5) Fifth, allowed unsecured claims for contributions to
an employee benefit plan--
``(A) arising from services rendered before the date of the
filing of the petition or the date of the cessation of the
debtor's business, whichever occurs first; but only
``(B) for each such plan, to the extent of--
``(i) the number of employees covered by each such plan
multiplied by $15,000; less
``(ii) the aggregate amount paid to such employees under
paragraph (4), plus the aggregate amount paid by the estate
on behalf of such employees to any other employee benefit
plan.
``(6) Sixth, allowed claims with respect to rights or
interests in equity securities of the debtor, or an affiliate
of the debtor, that are held in a pension plan (within the
meaning of section 3(2) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002(2)) and section
101(5)(C) of this title), without regard to when services
were rendered, and measured by the market value of the stock
at the time the stock was contributed to, or purchased by,
the plan.''.
Mr. DURBIN. Mr. President, this is the bankruptcy reform bill. It is
about 500 pages long. If I went to Illinois and asked the people I
represent what they think we should do when it comes to bankruptcy, I
am virtually certain that the first thing they would say to me is, you
have to do something about these horrible corporate bankruptcies,
Enron, WorldCom, and the list goes on, and the abuses which these
officers and CEOs have demonstrated as heads of these corporations, the
fact that because they were feathering their own beds when their
companies went bankrupt, hurting shareholders, hurting employees,
hurting investors in pension plans, and hurting retirees.
I think my constituents in Illinois are right. When it comes to
bankruptcy, that is the scandal in America. We read about it every day.
There is another criminal trial. Somebody is on trial because of
corporate malfeasance that lead to bankruptcy. It is going on right
now.
When one takes a look at this 500-page bill, how many pages in this
bill address corporate bankruptcies? Five. Ninety-nine percent of this
bill hardly relate to corporations at all. Ninety-nine percent relates
to individuals and families who, through no fault of their own, in most
circumstances, are crushed by debt and go to bankruptcy court. Ninety-
nine percent of this bill relates to bankruptcies of people who have a
medical diagnosis they never anticipated and end up in treatment
incurring medical expenses that their health insurance does not cover.
That is almost half of the cases in bankruptcy court.
So this bill is designed to make the bankruptcy process more
difficult for those individuals and families to get out from under
their debt. That is what this is about. So that at the end of the day,
when we pass this legislation--and surely we will--the credit card
companies and the banks will end up keeping people in debt longer. So
that people facing a crushing debt, when all is said and done, will not
be able to walk out of that court, having been declared bankrupt, and
start their lives again. That is what this bill addresses.
My amendment goes to the 5 pages about corporate bankruptcy. I
believe this: If we are going to hold Americans and families to a high
moral standard, if we are going to say to them that before they go into
a bankruptcy court, pay their bills and prove to the court that they
cannot pay their bills before we let them off the hook, if we are going
to say that it is immoral and unjust for someone to go into a
bankruptcy court and ask to be declared bankrupt and leave their bills
and assets behind, if they, in fact, can pay, then fair enough.
But my amendment says, if we are talking about justice and high moral
standards, should we not also talk about these corporate CEOs and
insiders? Should they not be held to a high moral standard? Should they
not be held to the standard of justice? Sadly, this bill does not do
it.
When a corporation files for bankruptcy, their workers are left
standing at the back of the line behind all the other creditors. Many
of them lose their retirement savings, health care benefits and
opportunities to get back to work and back on their feet.
The story of Bethlehem Steel Corporation is a good illustration.
After years of decline in the steel industry, Bethlehem Steel dissolved
in January of last year. Along with the end of Bethlehem Steel, 95,000
retired steelworker employees, who literally helped build America, lost
the health care benefits they were promised. These are workers who, at
the expense of their own health, went to work every day, played by the
rules, paid into their pension plans, anticipated their health care,
and yet because of the bankruptcy of Bethlehem Steel they were
[[Page S1987]]
left unprotected. They lost their pension. They lost their benefits.
They have nothing.
The problem is not limited to just steel companies. WorldCom, a
telecommunications company; Adelphia, a cable company; PG&E and Enron,
energy companies; Conseco, an insurance company; Financial Corporation
of America and HomeFed, banks; United Airlines, U.S. Airways, TWA, all
in the transportation business; Texaco, K-Mart, Polaroid, household
names. These are some of the once great corporate giants that ended up
in bankruptcy. They employed hundreds of thousands of Americans, but
once the companies filed for bankruptcy, their employees were left with
nowhere to turn.
This bankruptcy bill does not even talk about those bankruptcies and
those employees and the problems that they face.
Many of the companies that filed for bankruptcy over the past few
years are also associated with world-class scandals: Global Crossing,
WorldCom, Adelphia, and, of course, the grand-daddy of them all, Enron.
Those corporate giant names are synonomous with corruption,
malfeasance, and greed; they are synonomous, from my point of view,
with immoral corporate conduct and unjust treatment of their
shareholders, workers, and retirees.
It is even more painful to think that while the workers and retirees
of these scandal-tainted companies were left with little more than
their dignity, the corporate executives and the insiders escaped with
their treasures.
When companies are headed for bankruptcy, the corporate insiders know
it is going to happen long before the worker out in the plant, and that
is especially true when these same insiders are cooking the books. They
know where the corporate loot is hidden, and they are going to get
their hands on it when they can.
One might say that as soon as he saw the tip of the iceberg far ahead
of the ship, the captain of the Titanic sneaked out on the deck, jumped
in the lifeboat, went overboard with food, water, and life-vests, and
left everybody else behind. That is what happened. Bon Voyage!
Let me describe a case study of the worst: Enron. This is the poster
child for corporate corruption.
Enron of Houston, TX. During the 1990s, Enron was the envy of every
executive in corporate America: creative, aggressive, growing fast,
money coming in hand over fist, Fortune 500's top 10 list of assets
with close to $100 billion, and doing business in far-flung reaches of
commerce.
By the year 2000, Enron stock had increased in value by 1,700 percent
since its first shares were issued in the 1980s. It had 21,000
employees in the United States and all around the world.
But not everything was coming up roses for Enron. Behind the glass
walls of the corporate skyscraper in Houston, something very opaque was
going on.
Listen to these famous names: Ken Lay, Jeff Skilling, Andrew Fastow.
The company's top three executives obviously realized their
astronomical success was not based on reality or truth. It was based on
hype, speculation, and deceit. It was all smoke and mirrors.
Wall Street analysts later were forced to admit that they made out-
of-control valuations of this company based on the puffery of these
corporate bandits. All the while, these executives cooked up ingenious
schemes to move assets on and off the books, create phony partnerships,
offshore accounts, and so-called ``special purpose entities.''
These were just corporate accounting tools designed to move around
assets on paper. Why would they do that if they had nothing to hide?
Ken Lay, Jeff Skilling, Andrew Fastow, and others at Enron were
undeniably the masters of manipulation.
We talk in this bankruptcy bill about what we are going to do with
people who are abusing the bankruptcy court. This bill addresses the
waitress with a second part-time job who is a single mother raising a
couple of children who just was diagnosed with breast cancer and ends
up with medical treatment and bills she cannot pay. She is forced
finally to go to bankruptcy court.
This bill says, we are going to take care of her. In this bill we
will give her a long list of things to do to prove that she is not
taking advantage of the bankruptcy court.
But when it comes to these smoothies--Ken Lay, Jeff Skilling, and
Andrew Fastow at Enron, and other corporations--this bill is silent. We
are for morality when it comes to working families. Obviously, we are
not for morality when it comes to these corporate cheats.
They kept the perception up at Enron that they were making money even
when they were not, but eventually it fell apart.
On October 16, 2001, Enron reported a third-quarter loss of $618
million and shareholder equity loss of $1.2 billion. The date October
16, 2001, is important. A week later, on October 22, the Securities and
Exchange Commission announced an inquiry into the company.
On November 8, 2001, Enron filed an amendment to its financial report
revising its income back 4 years to 1997, 4 years of lies, it turns
out, once they were caught. They came forward and disclosed $586
million in losses, and obviously investor confidence and their stock
values cratered.
The next day Ken Lay entered into a deal with Dynergy Corp. to sell
Enron for $10 billion, in a desperate attempt by him to keep that
company afloat. A few days later he was forced to admit that Enron was
not worth the amount he wanted to sell it for.
Naturally the deal with Dynergy was called off, and on December 2,
2001, Enron filed for bankruptcy.
Let me tell you what happened to two groups of Enron employees during
the last few weeks of the company's solvency.
Here is Mr. Lay. Everybody knows his face now. CEO Ken Lay is the man
who made over $200 million from Enron stock, and $19 million in
bonuses. Other executives in the Enron Corporation received bonuses as
high as $5 million. While that was going on, while the company was
heading toward a bankruptcy, there were over 5,000 employees who lost
their jobs and thousands more who lost millions in retirement savings.
Our bill goes after the employees who lost their jobs. Our bill goes
after the employees who lost their health care. Our bill goes after
retirees who ended up penniless and were forced into bankruptcy court.
We are going to get real tough on them.
But how about Mr. Lay? What price is he going to pay for his
misconduct? In this bill, no price at all. Everyone knows about Ken
Lay's extravagance.
I won't venture to assert whether Ken Lay had any actual insight or
knowledge which he took advantage of insider information as he made
sales of stock he held in Enron. Those are decisions for a judge and
jury.
But what is certain is that Ken Lay pocketed $81.5 million in loan
advances from his company while Enron was cascading toward bankruptcy--
$81.5 million for this man who couldn't run his company correctly. All
told, he received over $200 million in Enron stock and $19 million in
bonuses.
During the same time Jeff Skilling raked in $66.9 million.
The board of directors was sharing in these good times as well.
Sixteen members of the corporate board made a combined total of $164
million, just on selling shares they had in the company. If you add all
the other corporate insiders and executives at Enron with the corporate
directors and all the amounts they pilfered from the company from 1998
to 2001, the grand total comes to well over $1 billion.
Now let's see how the employees at Enron fared.
There is an old country song by Jerry Reed called, ``She Got the
Goldmine, I Got the Shaft.'' It could be the theme song for Enron
workers.
Of the 21,000 people worldwide who worked for Enron, 12,200 were
enrolled in their pension plan. Over 60 percent of the assets in the
plan invested in Enron stock and all of Enron's matching contributions
went into company stock as well. But the Enron stock, which once sold
as high as $90 during its heyday, became worthless. The workers' losses
were aggravated during the course of the weeks when they were locked
out of the pension plans and could not even sell the stock as the value
of the stock was cratering.
Under Federal law, companies are not allowed to let their employees
withdraw their investment while the company switches pension plan
administrators. And wouldn't you know it,
[[Page S1988]]
Enron chose to switch their plan administrator on October 16, 2001.
Remember that date? That's the very same date I mentioned earlier,
when they announced they were writing off more than $1 billion in
charges to their books. This meant that thousands of employees sat by
helplessly and watched their retirement plan literally disappear before
their eyes.
On October 18, 2001, while Enron workers were frozen out of amending
their pension plan, the stock price was down to $32 a share. By the
time the hurricane blew over and they finally could get to their funds,
Enron stock value plummeted to 26 cents per share. Needless to say, the
company went into bankruptcy. The employees at Enron could do nothing
but sit by and watch their savings melt away during that time.
Thousands of these employees lost their jobs as a result of the Enron
bankruptcy. Hundreds, perhaps thousands, were forced into bankruptcy
themselves. But during the months and years that led up to this
disaster, 29 Enron insiders and top execs walked away with over $1
billion.
I have talked to some of these Enron executives. There is no good
explanation. Sadly, this legislation on bankruptcy we are discussing
today will not hold them accountable.
Let me give another case study: Polaroid. This is a company that many
of the people in Congress from Massachusetts know all about. It filed
for chapter 11 protection on October 12, 2001, just a couple of months
before Enron did.
Let me show you the chart on Polaroid. CEO Gary DiCamillo ran the
company into the ground but received $1.7 million. Other executives got
$4.5 million. Over 6,000 employees lost health and life insurance, and
thousands lost severance pay. Forced to invest 8 percent of their pay
in company stock, they lost their retirement savings, too.
So these corporate insiders--whether Enron or Polaroid or WorldCom or
others--were lining their own pockets, taking money out of the company
destined for bankruptcy, and the ultimate losers were the employees and
the retirees.
The amendment which I sent to the desk is an attempt to level the
playing field for employees, pensioners, and others who find themselves
shut out of court when companies they work for file for bankruptcy.
There are two provisions in this amendment to protect employees of
bankrupt companies.
First, my amendment would address fraudulent transfers made by
corporate insiders, all those huge payouts and loans and bonuses and
transactions that went to these corporate executives as the company was
headed to bankruptcy, these are payouts that exceed anyone's sense of
what is reasonable compensation. Under my amendment, those payouts will
have to be scrutinized by the bankruptcy court.
Think about that for a minute. These executives were being rewarded
with millions, sometimes hundreds of millions of dollars out of
corporations headed for bankruptcy.
Most of the time, you are rewarded with a bonus for a good job. They
are being rewarded as their company is heading into debt and eventually
disbanding. So they know what is going on. They are grabbing the money
before they hit bankruptcy court. The money they grab out of the
corporation is at the expense of people who loaned money to the
corporation, especially at the expense of their workers and retirees.
They end up taking the money that otherwise would have gone into the
pension funds and putting it in their own pockets.
My amendment gives the bankruptcy court the tools to investigate and
treat these fishy, self-serving deals Ken Lay and Jeff Skilling and
Andrew Fastow and others at Enron cut for themselves. It gives the
judge the power to review questionable insider transfers. That is only
reasonable.
It includes a fair and workable formula for what the court can
determine might be excessive.
It also extends the period of time a bankruptcy court can go back and
recapture the assets of these executives, a 4-year reachback instead of
the 1 year allowed under current law and the 2 years proposed in this
bill.
As I described in the Enron example, some of the most outrageous
transactions by the Enron executives took place 3 or 4 years before the
company filed bankruptcy, so this bill would not even touch them. This
bill lets those corporate insiders end up in their mansions with
hundreds of millions of dollars squirreled away at the expense of the
retirees who lost their pensions and their health care. By recapturing
these assets, this provision would make more money available for
employees and retirees and act as a deterrent to future corporate
executives seeking the same sort of sweetheart deal.
But this is not all about Enron. Let me give you other examples in
the headlines today.
WorldCom CEO Bernie Ebbers. He took $366 million in personal loans
and his contract called for a $1.5 million yearly pension. Not bad. Mr.
Ebbers ought to be proud. His skills and talents as CEO took his
company, WorldCom, into the record books as the largest bankruptcy in
the history of the United States. While he is grabbing all of the money
out of the corporation, it is sinking like a rock.
John Jenkins, the former president of Global Crossing. He took more
than $1 million in pension benefits--something called ``transitional
assistance,'' consulting fees, and other benefits, as his company was
spiraling downward.
Let us take a look at Kmart and its CEO, Chuck Conaway. As Kmart was
falling apart, eventually becoming the largest American retailer to
file bankruptcy, Mr. Conaway received a $9 million golden parachute.
About one-half of it was a severance package. But his former employer
decided to give him a little break as he left this bankrupt
corporation. A $5 million loan was forgiven. Talk about a Blue Light
Special at Kmart, this one takes the cake.
John Rigas of Adelphia Communications took about $1 million per month
from the company while he and others used it as their personal piggy
bank. According to the indictment from the U.S. Attorney, the Rigas
family used company loans to buy Adelphia shares and engage in insider
transactions between Adelphia and other companies controlled by the
Rigas family. Here is one example of how they fared. Rigas and his sons
used $2.3 billion in off-balance-sheet loans from the company to build
themselves a private 18-hole golf course at the cost of $13 million.
Not bad for a cable guy. He raided his corporation for $2.3 billion at
the expense of shareholders and retirees.
What does this bill do to that kind of corporate bandit? Nothing.
This bill focuses on the employees who lost their jobs. This bill
focuses on the retirees who lost their health care and their pension.
This bill makes it tough for them.
This is inspired by our feeling that we need more morality and
justice in our bankruptcy courts. But wouldn't you start at the top?
Wouldn't you start with the biggest thieves in the business--the people
who broke a record when it comes to bankruptcy and raiding these
corporations?
These insiders knew what they were doing. They saw their companies
going down, and they grabbed everything they could get their hands on.
They canceled their workers' pension plans and benefits.
My amendment says we would go back 4 years before the bankruptcy to
recover that money and put it in the hands of creditors, employees, and
retirees.
The second part of my amendment directly helps employees of these
companies with some relief in bankruptcy court. This gives them a place
in line as creditors that they currently don't have.
The amendment gives them a priority unsecured claim in bankruptcy for
the value of company stock which was held for their benefit in an
employee pension plan, unless the plan beneficiary had the option to
invest the assets in some other way.
Under current law, these retirees who ended up with the short end of
the stick in these retirement plans have nowhere to turn. They are not
even in line in priority for these claims. My amendment would fix that.
The amendment determines the value of these claims to be measured by
the market value of the stock at the time it was contributed to the
plan.
In other words, the employee who was not at fault in the collapse of
his employer corporation ought to have a fair claim for the fair value
of his contribution to his pension plan as it was
[[Page S1989]]
valued when he made that contribution. That's only fair.
My amendment is simple, yet necessary. I urge my colleagues to
support it.
In conclusion, I am proud of the support of the groups behind this
amendment--the U.S. Public Interest Research Group, the National
Consumer Law Center, Consumers Union, Consumer Federation of America,
Consumer Action, AFL-CIO, United Auto Workers, United Steel Workers of
America, and the American Federation of Teachers.
I ask unanimous consent to have their letters of support printed in
the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
American Federation of Labor and Congress of Industrial
Organizations,
Washington, DC, March 3, 2005.
Dear Senator: The bankruptcy-reform bill currently before
the Senate will result in severe injustice to thousands of
workers and consumers and we urge you to oppose it. The
Bankruptcy Abuse Prevention and Consumer Protection Act of
2005 (S. 256) is basically unchanged from the version drafted
by the financial services industry in the mid-1990s, It
remains a one-sided attempt to favor creditor interests at
the expense of working families who have suffered the loss of
a job, high medical bills, and other unforeseen financial
emergencies. Senators Rockefeller, Kennedy, Durbin and
Feingold will offer amendments to improve this bill, and we
urge you to support them.
Supporters of S. 256 suggest that the current system is
riddled with ``high rollers'' who are gaming the system to
get out of paying their fair share. To the contrary, studies
suggest that 90% of these filing for bankruptcy do so because
of circumstances largely outside their control. In recent
years, business failures and mass layoffs resulting from
corporate fraud have lead to innumerable individual
bankruptcies, Rather than correcting deficiencies in current
law that fail to protect workers in these circumstances, the
bill places new burdens on working families when they are
most vulnerable.
We strongly support Senator Rockefeller's amendment to
raise the current wage priority cap from $4,950 to $15,000
because the amounts owed to workers frequently exceed the per
employee cap. Senator Rockefeller's amendment would also
eliminate arbitrary payment rules that prevent workers from
collecting compensation owned to them by a bankrupt employer.
Importantly, Senator Rockefeller's amendment will compensate
workers who lose retiree health benefits by requiring
bankrupt companies to provide cash payments for replacement
coverage.
The AFL-CIO also urges you to support amendments that will
he offered by Senator Kennedy to protect low-income families
from means testing and unnecessary paperwork and to protect
workers who declare bankruptcy after becoming unemployed
because of outsourcing or a mass layoff.
We also support Senator Feingold's amendment to remove
provisions that impose substantial new requirements on small
businesses attempting to reorganize under Chapter II. There
is no justification for increasing the hurdles that small
businesses already face in trying to survive financial
distress.
Finally, we urge you to support amendments that will be
offered by Senator Durbin to restrain bankrupt employers from
rewarding corporate insiders and other senior managers with
large bonuses and excessive perks at the same time that their
employees suffer economic devastation from the loss of a job
or their savings in a company 401(k).
In sum, S. 256 is an unnecessarily harsh and one-sided bill
that will penalize countless working Americans facing
financial crises beyond their control. The AFL-CIO strongly
urges you to support the above-mentioned amendments to this
deeply flawed bill.
Sincerely,
William Samuel,
Director, Department of Legislation.
____
March 2, 2005.
Hon. Richard J. Durbin,
U.S. Senate,
Washington, DC.
Dear Senator Durbin: The undersigned national consumer
organizations applaud you for offering amendments to the
Senate bankruptcy bill (S. 256) that would better protect
employees and retirees in the event of a corporate
bankruptcy. The inclusion of these amendments will bring
much-needed balance to a harsh and one-sided bill that would
harm many families that have suffered genuine financial
misfortune.
The raft of corporate scandals in the last few years has
exposed many flaws in a system of market oversight that used
to be the envy of the world. Many investors lost faith in our
markets, tens of thousands of employees lost their jobs and
workers and retirees have lost significant portions of their
pension plans.
It is essential that Congress take a comprehensive approach
to reform. The Sarbanes-Oxley Act to reform corporate
accounting practices took an important first step. It is
bringing much needed improvements to the quality and
independence of the audits of public companies and help to
restore investor confidence. But this law was never intended
to give employees and retirees more power to combat the
tactics of corporate officers who systematically loot their
corporations and line their pockets, even as their companies'
financial position starts to deteriorate. To do that, one
must change corporate bankruptcy laws.
These amendments will help employees and retirees prevent
corporate officers from pillaging their earnings and
retirement savings in two of important ways:
It increases the power of bankruptcy judges to nullify
fraudulent transfers of benefits and money by corporate
officers, and to examine off-book transactions. This will
increase the ability of employees to recover assets that have
been stripped.
It increases the ability of employees to recover the value
of company stock, when the stock was purchased because
employees were not allowed to choose other investment
options.
These amendments are the important ``next step'' in
reforming our corporate accountability laws. It is being
introduced at a time when Congress is poised to pass a
personal bankruptcy law that will make it more difficult for
moderate-income individuals who have been harmed by economic
disruption, corporate scandals and personal misfortune to get
a financial fresh start. We commend you for focusing on the
kind of bankruptcy reform that will help, not hurt,
employees, retirees and working families.
Sincerely,
Travis B. Plunkett,
Legislative Director, Consumer Federation of America.
Edmund Mierzwinski,
Consumer Programs Director, U.S. Public Interest Research
Group.
Susanna Montezemolo,
Policy Analyst, Consumers Union.
Linda Sherry,
Editorial Director, Consumer Action.
John Rao,
Staff Attorney, National Consumer Law Center.
Mr. DURBIN. Mr. President, these groups and their members know what
happened with these companies.
I am troubled by the fact that the Senate has spent this entire week
talking about bankruptcy abuse and making it tough for families trying
to pay medical bills, making this process more difficult for the
guardsmen and reservists who were activated to go overseas to serve our
country only to lose their business at home and face bankruptcy when
they return.
There is nothing in this bill to help them. There is nothing in this
bill to help them with medical bills.
Senator Kennedy was here on the floor yesterday. He had an extreme
suggestion, a radical idea. Senator Kennedy said, if you lose
everything because of medical bills, we are going to protect your
little home--$150,000 worth of your home--so that when it is all said
and done, as sick as you may be, you will at least have a home. But
that proposal was rejected. I am not sure of the vote on that
amendment, 58-39, somewhere in that range but a partisan vote. Everyone
on this side--virtually everyone--voted against it.
According to that vote, we can't help those people. They have to face
the reality. They have to face up to the fact they won't have a home to
go to when it is all over.
But what about the mansions these CEOs go to, the millions of dollars
they have drained out of these corporations for their own personal
benefit to buy mansions, to buy golf courses, to create a lifestyle
with $30,000 shower curtains? Are we going to hold them accountable for
raiding these corporations and driving them into bankruptcy? The answer
is no. Not a word in this bill holds them accountable.
I urge my colleagues. If you can work up a rage over the possibility
that someone with medical bills that are overwhelming goes to
bankruptcy court seeking relief from their debts, can you work up a
little bit of discomfort over these CEOs and bandits of the major
corporations? Can you bring yourselves to say maybe we will hold them
accountable, too, for their misconduct?
It would be a new day in this Senate, a grand departure from the
debate as it has gone down at this point. We have never come close to
this yet. I haven't heard a word yet from the other side--not a word on
this floor by the supporters of this bankruptcy bill about these
corporate bankruptcies and what they have done to hundreds of
thousands, if not millions, of unsuspecting investors, workers, and
retirees.
[[Page S1990]]
The Durbin amendment will give my colleagues a chance to do something
about it.
I urge my colleagues to support it.
I yield the floor.
The PRESIDING OFFICER. The Senator from New Jersey.
Mr. LAUTENBERG. Mr. President, I ask unanimous consent I be permitted
to speak as in morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The remarks of Mr. Lautenberg are printed in today's Record under
``Morning Business.''
Mr. LAUTENBERG. I yield the floor.
The PRESIDING OFFICER (Mr. DeMint). The Senator from Massachusetts is
recognized.
Amendment No. 49
Mr. KENNEDY. Mr. President, this legislation that we have before us
cracks down unfairly on large numbers of hard-working families that are
in dire financial straits because of a sudden serious illness or
because their loved ones are fighting in Iraq. Yet, this bill blatantly
ignores the real abuses in our bankruptcy laws: the corporate abuses
that have become epidemic in recent years. It is the worst corporate
misconduct since before the Great Depression.
Some of these companies were brought down by outright criminal
activities. Many more of them were driven into bankruptcy by the greed
and mismanagement of a small group of reckless insiders who ignored
their responsibility to their employees and their stockholders alike.
Current law on corporate bankruptcy is grossly inadequate in dealing
with these problems. Often, the very insiders whose misconduct brought
the company down do very well in bankruptcy. The people who suffer the
most are the innocent victims, the employees, the retirees.
Increasingly, the bankruptcy court has become a place where corporate
executives go to get permission to line their own pockets and break
their promise to their workers and retirees. That kind of abuse is
terribly wrong, and it is our responsibility to prevent it.
Instead, we are considering a 500-page bankruptcy bill that virtually
ignores this issue. It does nothing to address the corporate looting by
high-level insiders. It does nothing to protect a company's workforce
from losing their jobs, their health care, and their pensions. This
bill should not move forward until those glaring omissions are
corrected, and the Durbin amendment is the way to do it.
Take a close look at the examples of executives in some of America's
largest corporations, and see how lavishly they benefitted while their
companies went into bankruptcy. Top executives made sure they were well
provided for at the company's expense. Yet, loyal employees and their
families were left to struggle on their own.
A major corporation in Massachusetts, Polaroid, filed for bankruptcy
in 2001. In the months leading up to the company's filing, $1.7 million
in incentive payments were made to its chief executive officer on top
of his $840,000 salary. The company also received the approval of the
bankruptcy court to make $1.5 million in payments to senior managers to
keep them on board. And these managers collectively received an
additional $3 million when the company's assets were sold.
Yet, just days before Polaroid filed for bankruptcy, it canceled the
health and life insurance benefits for more than 6,000 retirees. It
also canceled the health insurance coverage for workers with long-term
disabilities, and halted the severance benefits for thousands of
workers who had recently been laid off.
Polaroid employees had been required to contribute to the company's
Employee Stock Ownership Plan. When the company failed, their
retirement savings were virtually all wiped out.
The loss was devastating for workers like Karl Farmer, a Polaroid
engineer in Massachusetts for more than 30 years. He had been required,
as had other Polaroid employees, to pay 8 percent of his pay into the
company's Employee Stock Ownership Plan. At its peak, this stock was
worth over $200,000. But after the company declared bankruptcy, the
stock was worthless. And he also lost his severance pay and medical
benefits.
Or take Betty Moss of Smryna, GA. Betty and her husband retired and
were traveling across the country in their camper when they learned
that Polaroid had stopped her severance pay and that they had lost her
health insurance and life insurance. Because of the fall in Polaroid
stock, her retirement savings plunged from $160,000 to only a few
hundred dollars.
The loss of health insurance and life insurance benefits was
particularly devastating for long-term disabled workers. With their
disabilities, they cannot go back to work, and they have no way to
obtain other insurance coverage.
Sally Ferrari of Saugus, MA, was diagnosed with Alzheimer's disease
after working for Polaroid for 20 years. In recent years, she required
round-the-clock care. Yet, Polaroid cut off her health care benefits in
bankruptcy, which meant that her husband had to stay at work full time
until he recently passed away in order to provide medical coverage for
his wife.
I also have letters from other employees.
This letter is from David Maniscalco. He was injured while
working for Polaroid. Now he is unable to work, and his
medical bills are consuming his family's savings and his
retirement because Polaroid took away total health care
coverage. He points out:
After Polaroid declared bankruptcy, they terminated all the
people on long term disability, and terminated all of our
Medical, Life and Dental Insurance. I wear a fiberglass back
brace and sleep in a hospital bed and am not able to work. My
wife changed jobs in order to have medical insurance for
herself. And I am on Medicare and a secondary insurance. The
cost to us is $895.00 a month for medical insurance alone.
The problem is, we're using our retirement money to help with
the cost of our medical insurance.
Here you have the corporate officials well taken care of, and the
loyal employees were notified with less than 24 hours. And this is how
they end up. How? Because they go to bankruptcy court. Does this bill
do anything about protecting those individuals? Absolutely zero.
Absolutely nothing. Absolutely nothing.
We have here a letter from Elaine Johnson. She lost a lung to cancer.
When Polaroid went into bankruptcy, she lost her health insurance, too.
She writes:
When Polaroid declared bankruptcy, I lost my life
insurance, medical and dental insurance. Because of my
disability, I'm unable to get other insurance and another
job.
Once you have these serious illnesses, it is virtually impossible to
ever get your health insurance again. I have a son who had osteosarcoma
at 12 years old. He, as an individual--he is 43 years old--cannot get a
health insurance policy today no matter what he is prepared to pay for
it, unless he goes into some kind of group. Why? Because he had cancer
at one particular time.
Here you have individuals who have disabilities who are tied into
their company's program. The company has made a commitment to them. And
then what happens? At the time they go into bankruptcy court, one of
the first things that happens is the corporate officials free
themselves from the obligations to pay the employees' health insurance,
and they are left out in the cold.
The list goes on. Polaroid employees, like Betsy Williams of Waltham,
MA, were financially devastated by the loss of medical and health care
benefits. Betsy was with Polaroid for 28 years, and she thought, when
she came down with lupus, her company's disability, health and life
insurance would cover her. She writes:
When I received an unsigned letter from Polaroid
Corporation in July of 2002 stating that I (along with other
employees on Long Term Disability) would be terminated by the
company and my medical, dental and life insurance benefits
would end, I was shocked and dismayed. Unable to work because
of my disabilities, my husband (who is also disabled) and I
are forced to pay approximately $1,125/month for a Medicare
Health plan and an additional $400-$500/month for
prescription co-payments, supplies, etc.; no available dental
plan, and I was only able to get 50% of my life insurance at
an exorbitant rate. We now have two mortgages; our groceries
are bought with a credit card; and we are holding on
financially by a thread.
There it is. That is the person who is going to get burned with this
bill. That is the person who is going to be marched in. That is the
person who is going to be required to pay $10, $15, $20 a week, $80 a
month on into the future under this bill. But do we do anything about
the corporate executives? Absolutely nothing.
And the list goes on. These are hard-working people who were crushed
when
[[Page S1991]]
Polaroid cut their benefits. Yet, while they suffered, Polaroid
executives filled their pockets to overflowing.
When the chief financial officer left, she got a $600,000 pension.
Recently, she received $1 million in severance pay from Royal Dutch/
Shell Company, even though she left under a cloud of scandal. And
Polaroid's former president is now the president and CEO of one of the
country's largest staff outsourcing companies. He plans to take the
company public soon and will reap enormous profits.
Enron, as my friend and colleague, the Senator from Illinois, pointed
out, is another flagrant example of massive company looting while
employees lost everything. Enron executives cashed out more than $1
billion of company stock when they knew the company was in trouble. And
just before the company declared bankruptcy, its top executives were
paid bonuses as high as $5 million each to stay on.
Enron workers, however, were forced to hold their company stock until
the age of 50. They were subject to blackout periods that executives
were not.
They lost a total of $1 billion in retirement savings. Thousands of
them lost their jobs. Thousands lost their health insurance. Thousands
of them will be dragged into bankruptcy court under this particular
legislation.
Yet we have WorldCom, another shameful case. Bernie Ebbers is on
trial for corporate fraud. I don't know how many Americans read the
newspapers yesterday, but Bernie Ebbers is on trial. He received
millions of dollars in personal loans from the company and was
originally granted a pension worth $1.5 million a year. This week he
denied knowing anything about the biggest accounting fraud in history.
``I don't know about technology. I don't know about financing. I don't
know about accounting,'' he claimed.
What about those people I just mentioned who worked for Polaroid all
their lives and because of the bankruptcy lost their health insurance,
do you think they will be able to give those kinds of answers? Not
under this bill.
Ordinary Americans will not have this defense when they are facing
bankruptcy. Countless WorldCom employees who honestly knew nothing
about the fraud wound up losing their jobs and their retirement.
Another example is the popular retailer Kmart. As Kmart was teetering
on the edge of bankruptcy, the company bought two new corporate jets.
Once it finally went into bankruptcy, CEO Chuck Conaway was given a $9
million golden parachute. Meanwhile 57,000 Kmart workers lost their
jobs, and the company closed 600 stores.
Abuses like these have made the headlines, but this bankruptcy bill
doesn't deal with them. It comes down hard on those families who have
critical health bills, families who are touched by cancer and heart and
stroke, families who have children with disabilities. It comes down
hard on those individuals and lets these people off free. And we call
that fair? Take away their homes if they live in 40-odd States, but let
them keep millionaire homes in Texas and Florida. And they do nothing
about it, the proponents of this bill, nothing. Call that fair? Call
this bill fair?
We know what it is. It is making the various bankruptcy courts the
collection agencies for the credit card companies. Mr. American
Taxpayer, you are going to be paying for more bankruptcy judges and
staff and buildings because there are going to be so many more people
who are going to be thrown into bankruptcy. The fastest growing group
of bankruptcy filers is the elderly, individuals fifty-five and older,
who are being hit with increased medical costs. As I mentioned the
other day, they are seeing increased premiums on Medicare--wait until
they get their new prescription drug program and start paying the costs
for that, which is an inadequate program that has special provisions in
it that have giveaways to the HMOs and to the prescription drug
companies. They are just going to end up paying more and more, Mr.
American Taxpayer, to support these courts of bankruptcy, and they are
going to squeeze our fellow citizens out all the more. Meanwhile other
people are getting $9 million golden parachutes.
Senator Durbin's amendment will stop the travesty of high-level
corporate insiders walking away with millions of dollars in bankruptcy
while workers and retirees are left emptyhanded. This amendment will
strengthen the ability of bankruptcy courts to invalidate fraudulent
transfers by corporate insiders. The current legislation does zero,
nothing. The proponents of this legislation have opposed this effort by
the Senator from Illinois. This amendment will strengthen the ability
of bankruptcy courts to invalidate fraudulent transfers. Currently the
court can only compel the return of money improperly taken out of the
company in the preceding year. In many instances the looting has taken
place over a number of years, and the court has no authority to go
after those lost assets. This amendment will allow bankruptcy judges to
reach back as far as 4 years to recover corporate assets.
It also empowers the court to review and set aside the excess benefit
transfers made to corporate management while the company was insolvent
or which contributed to the company's insolvency. These sweetheart
deals often take the form of huge bonuses, golden parachutes, and other
payments to corporate executives before the public learns that the
company is in trouble. Such payments violate the most basic principle
of fiduciary duty, and the bankruptcy court should have the power to
correct these wrongs. Every dollar recovered from these outrageous
inside deals is another dollar that will be there to compensate
workers, retirees, and other creditors.
Finally, our amendment--I welcome the opportunity to cosponsor it
with the Senator from Illinois--will give a priority claim in
bankruptcy to employees who are forced to invest their retirement
savings in employer stock.
Polaroid workers lost their retirement because they were required to
invest 8 percent of their pay in their company as a condition of
holding their jobs. Workers at Enron were also forced to keep their
company stock until the age of 50 and subject to blackout periods
during which they couldn't sell their stock, but the company executives
could. Under current bankruptcy law, workers have no way to recover
from these losses. They deserve a chance to recover some of what they
lost. This amendment will provide it.
The issue is simple fairness. We learned even yesterday about the new
loophole, about trusts that are going to be created so those
individuals who may go into bankruptcy and who have resources can go
out and hire a lawyer and shelter their income from any kind of
bankruptcy court. But the average worker can't do that. The average
worker out there working a lifetime for a company and then dismissed,
the company then goes into bankruptcy, can't do that.
They can't hold onto their homes like so many of the wealthiest
individuals in our country. In Florida they will be able to do it, but
they won't be able to do it in most of the other States. In Texas they
can do it, but not in most of the other States. Yet here on the floor
of the U.S. Senate, the Senate refused, absolutely refused to show any
consideration to home ownership for people who have worked hard all of
their lives, just having $150,000 in equity.
This issue is about fairness. If a corporation has gone into
bankruptcy, those who ran the ship aground certainly should be not be
enriched at the very time those who depend on the company for their
livelihood are driven into poverty. Yet that is what happens all too
often in corporate bankruptcy today. Any bankruptcy bill which fails to
address these critical issues is a cruel hoax on the American people.
I urge my colleagues to support the Durbin amendment, recognizing
that bankruptcy reform has to apply to corporations, too.
I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. SCHUMER. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 42
Mr. SCHUMER. Mr. President, I rise in support of my amendment No. 42
and will call for the yeas and nays on my amendment at the appropriate
time.
[[Page S1992]]
Mr. President, I rise to speak to my amendment to the Bankruptcy
Abuse Prevention and Consumer Protection Act to close an ugly loophole
that protects millionaires, while at the same time this bill will
punish, among others, veterans' families and sick people with mountains
of medical bills.
The front page of yesterday's business section in the New York Times
ran a story on a shocking loophole in bankruptcy law that is a windfall
for the wealthy, called the millionaire's loophole. Let me read to you
a little bit about it. I am going to read from the New York Times here.
The headline is:
Proposed law in bankruptcy has loophole; wealthy could
shield many assets in trust.
The bankruptcy legislation being debated by the Senate is
intended to make it harder for people to walk away from their
credit card and other debts. But legal specialists say the
proposed law leaves open an increasingly popular loophole
that lets wealthy people protect substantial assets from
creditors, even after filing for bankruptcy.
Here is the problem. In five States--Alaska, Delaware, Nevada, Rhode
Island and Utah--millionaires and even billionaires can stash away
their assets--whether it be a mansion, racing car, a yacht, or any kind
of financial asset or investment, or even a suitcase filled with cash--
in a special kind of trust, so that they can hold on to that windfall
even after filing for bankruptcy. When they file for bankruptcy, these
wealthy people, creditors would not be able to reach anything in those
trusts. So here you have wealthy people filing for bankruptcy and yet
having huge amounts of assets protected in a little trust hidden away.
The bill tries to address the infamous homestead exemption by
attaching a $125,000 ceiling to it. But it doesn't matter. A
millionaire doesn't need a home to protect his or her assets. All they
need is a good lawyer, a pencil, paper, and one of these trusts.
As one legal expert said: With this loophole, the wealthy won't need
to buy houses in Florida or Texas to keep their millions. So if anyone
is manipulating the system, it is these guys. By the way, you don't
have to be in these five States. All you have to do is file the trust
in one of these States. My great State of New York, I am happy to say,
is blessed with many millionaires. We hope there are more of them. But
they should not be allowed to file in Delaware, or Utah, or Alaska a
trust that allows them to declare bankruptcy and yet keep their assets.
It is a basic way for wealthy people to not pay their debts.
We have heard a lot in this bill about people who gamble profligately
and waste their money and declare bankruptcy. That is an abuse that the
bill should, in my judgment, close. But then why are we continuing to
allow it to remain in the law? It is not this bill that does it; it is
in the law. But as we close those methods of using bankruptcy
abusively, how can we leave this one open? This ``million dollar
bankruptcy baby'' deserves an Oscar for the best legal loophole for the
wealthy. This millionaire's loophole is so bad that it must be knocked
out before this fight is over. There is no question that, without this
amendment, the bankruptcy laws will continue to make it easier for
millionaires to keep their millions than for poor people to simply stay
afloat.
I hope my colleagues on the other side of the aisle will join me in
that amendment. I know there seems to be some kind of edict that you
cannot vote for any amendment. Can we please make an exception for this
one? I am sure just about everybody agrees with us. I am joined in this
amendment by my colleagues Senators Bingaman, Durbin, Feinstein, and
Clinton; they have cosponsored the amendment. This amendment closes
this millionaire's loophole by forcing those who seek to use these
trusts to cheat. It only allows them to protect as much as $125,000 in
assets in these trusts and not a penny more. In other words, it makes
it analogous to what we do for homes in the homestead exemption in this
bill.
Again, if we don't want wealthy people to be able to hide their
assets in their homes and escape the rigors of the bankruptcy law, why
would we allow them to do that in trusts? To clarify, the amendment
doesn't adversely affect retirees who have saved for a lifetime to
build a retirement nest egg. The solution is straightforward. It is
written in the spirit of the bill. In fact, when looking at statements
made by some of this bill's greatest champions, you would think they
would have no problem accepting this amendment in the bill.
The bill's sponsor is a good man. I am now on his committee. He is
known as having a great deal of integrity. Well, here is what Senator
Grassley said about the bill. This was in one of his State's local
papers: Filing for chapter 7 bankruptcy, he said, ``was not intended to
be a convenient financial planning tool where deadbeats can get out of
paying their debts scot-free, while honest Americans who play by the
rules have to foot the bill.''
I agree with that statement. This amendment fits the words of Senator
Grassley exactly. Why would we not include this amendment in the bill?
That is the essence of the amendment we have. Deadbeats exist in all
tax brackets. There are some middle-class deadbeats. There are some
poor deadbeats, of course. What about the wealthy deadbeats? Why are
they treated differently than everybody else?
I hope my friends on the other side of the aisle, because of this
grand edict ``don't vote for any amendment,'' don't end up protecting
wealthy deadbeats from the same punishment they are doling out to those
who are not so financially fortunate.
I have listened to my Republican friends and their concerns about the
abuse of our bankruptcy system by gamblers, hustlers, and cheaters. I
have listened for a number of years, and I share those concerns. But I
hope my colleagues will come to the floor to vote for this amendment
that will end the egregious millionaire's loophole. Make no mistake
about it, I am not against millionaires and billionaires. I think it is
great when an American achieves success and makes a lot of money. But
don't declare bankruptcy and hide your assets and shed your debts. The
people who should least be able to do this are the wealthy.
I hope my colleagues will vote for this amendment, which will end the
egregious millionaire's loophole. We cannot let a few bad apple
millionaires evade the system by cutting and running on their debts.
This bill, I am afraid, of course, doesn't go after just the bad
apples. That is an issue my colleague from Massachusetts has been ably
taking up on the floor, as have many other of my colleagues. It
actually labels the whole bushel of bankruptcy filers rotten.
I wish the bill made more of a distinction between those who are
abusive, who gamble, or who are profligate and try to shake off their
debt, and those who have run into real hardship because they are in the
military or because they have health care problems. The bill makes no
distinction between those two groups and that is wrong. We need to make
sure the bill targets the Nation's cheats and not its cheated. I urge
my colleagues to close the millionaire's loophole by voting for this
amendment.
Mrs. FEINSTEIN. Mr. President, I rise today to join my colleague from
New York, Senator Schumer, in offering an amendment which would address
a serious loophole in the bankruptcy bill we are now considering it
allows rich debtors to unfairly shield assets from their creditors.
In recent years a number of financial and bankruptcy planners have
taken advantage of the law of a few States to create what is called an
``asset protection trust.'' These trusts are basically mechanisms for
rich people to keep money despite declaring bankruptcy. They are
unfair, and violate the basic principle of this underlying legislation
that bankruptcy should be used judiciously to deal with the economic
reality that sometimes people cannot pay their debts, but to prevent
abuse of the system.
This loophole is an example of where the law, if not changed,
permits, or even encourages, such abuse.
The amendment is simple: It sets an upper limit on the amount of
money that can be shielded in these asset protection trusts, capping
the amount at $125,000. This amount parallels the limit placed on the
similar ``homestead exemption'' elsewhere in the bill. The homestead
exemption allows some assets to be protected from creditors in
bankruptcy where they are in the form a residential home.
[[Page S1993]]
The bottom line: Wealthy people will be able to preserve only
$125,000 in an asset protection trust.
This amount, $125,000, is not a small sum. It is more than enough to
ensure that the debtor is not left destitute. But I believe it is a
reasonable amount. It is deliberately based on the now-accepted
$125,000 limit for the homestead exemption, which will also remain
available to a debtor.
Yesterday the New York Times, in an article entitled Proposed Law on
Bankruptcy Has Loophole detailed the potential problem in this bill.
The article quotes Professor Elena Marty-Nelson, a law professor at
Nova Southeastern University in Florida, who states:
[i]f the bankruptcy legislation currently [before the
Senate] gets enacted, debtors won't need to buy houses in
Florida and Texas to keep their millions [t]he millionare's
loophole that is the results of these trusts needs to be
closed.
Professor Elizabeth Warren of Harvard Law School is also quoted in
the article. She notes that:
[t]his is just a way for rich folks to be able to slip
through the noose on bankruptcy and, of course, the double
irony for her is that the proponents of this bill keep
pressing it as designed to eliminate abuse.
I unanimously consent that the full text of the article be printed in
the Record.
[From the New York Times, Mar. 2, 2005]
Proposed Law on Bankruptcy Has Loophole
(By Gretchen Morgenson)
The bankruptcy legislation being debated by the Senate is
intended to make it harder for people to walk away from their
credit card and other debts. But legal specialists say the
proposed law leaves open an increasingly popular loophole
that lets wealthy people protect substantial assets from
creditors even after filing for bankruptcy.
The loophole involves the use of so-called asset protection
trusts. For years, wealthy people looking to keep their money
out of the reach of domestic creditors have set up these
trusts offshore. But since 1997, lawmakers in five states--
Alaska, Delaware, Nevada, Rhode Island and Utah--have passed
legislation exempting assets held domestically in such trusts
from the federal bankruptcy code. People who want to
establish trusts do not have to reside the five states; they
need only set their trust up through an institution in one of
them.
``If the bankruptcy legislation currently being rushed
through the Senate gets enacted, debtors won't need to buy
houses in Florida or Texas to keep their millions,'' said
Elena Marty-Nelson, a law professor at Nova Southeastern
University in Fort Lauderdale, Fla., referring to generous
homestead exemptions in those states. ``The millionaire's
loophole that is the result of these trusts needs to be
closed.''
Yesterday in Washington, Republicans in the Senate beat
back the first in a series of Democratic amendments aimed at
softening the effects of the bankruptcy bill on military
personnel, and the majority leader of the House vowed to get
quick approval of the bill if the Senate did not
significantly alter it.
``We will grab hold of it just like we did class action if
it is a good and clean bankruptcy reform bill,'' said
Representative Tom DeLay, a Texas Republican, referring to
the quick action the House took last month on a measure
limiting class-action lawsuits.
The Senate bill is favored by banks, credit card companies
and retailers, who say it is now too easy for consumers to
erase their debts through bankruptcy. It is almost identical
to previous versions that have been introduced in Congress,
unsuccessfully, since 1998. Perhaps because the current bill
was written so long ago, some legal authorities say, it does
not address the new state laws that have allowed asset
protection trusts to flourish.
``This is just a way for rich folks to be able to slip
through the noose on bankruptcy, and, of course, the double
irony here is that the proponents of this bill keep pressing
it as designed to eliminate abuse,'' said Elizabeth Warren, a
law professor at Harvard Law School. ``Yet when provisions
that permit real abuse by rich people are pointed out, the
bill's proponents look the other way.''
Senator Charles E. Grassley, an Iowa Republican, is the
main sponsor of the bankruptcy bill. His press secretary,
Beth Levine, said the senator's staff was unaware of the
trusts and the loophole for the wealthy that they
represented. ``The senator is always open to suggestions for
closing these loopholes,'' she said.
Money held in asset protection trusts can elude creditors
because federal bankruptcy law exempts assets governed by
``applicable nonbankruptcy law.'' Intended to preserve rights
to property under state law, the exemption makes it difficult
for creditors to get hold of assets that they would not be
able to seize through a nonbankruptcy proceeding in state
court.
Asset protection trusts have become increasingly popular in
recent years among physicians, who fear large medical
malpractice awards, and corporate executives, whose assets
are at greater peril now because of new laws. The Sarbanes-
Oxley legislation, for example, requires chief executives and
chief financial officers to certify that their companies'
financial statements are accurate; anyone who knowingly
certifies false numbers can be fined up to $5 million. In
addition, under Sarbanes-Oxley, executives may have to
reimburse their companies for bonuses or other incentive
compensation they received if their company's financial
reports have to be restated in later years. ``Given all the
notoriety of what we're seeing today, from HealthSouth to
WorldCom, there is probably more of an impetus for executives
to consider going this route,'' said Scott E. Blakeley, a
lawyer at Blakeley & Blakeley in Irvine, Calif. ``And yet in
the bankruptcy bill, this topic is not touched.''
While it is difficult to quantify how much money is sitting
in domestic asset protection trusts, their popularity is
undeniable, bankruptcy specialists said. ``I've heard figures
for foreign asset protection trusts and those probably are in
the billions,'' said Adam J. Hirsch, a law professor at
Florida State University. ``I haven't seen any figures for
domestic asset protection trusts, but they could very well be
the same.''
Current federal bankruptcy law protects assets held in a
type of trust, known as a spendthrift trust, traditionally
set up by one family member to benefit another. But current
law does not protect the assets of people who set up
spendthrift trusts to benefit themselves. And the law limits
the purposes of the trusts that qualify for exemption.
Retirement planning or paying for education are two approved
purposes for such trusts. By contrast, domestic asset
protection trusts can be set up by the same people who plan
to benefit from them. In addition, there are no caps on the
dollar amount of assets they can hold and no restrictions on
their purpose, Ms. Marty-Nelson said. One limitation is that
the trusts cannot be set up by people who are already
insolvent.
The states that allow these trusts do so to attract the
significant money management and trustee fees that accompany
them, Mr. Hirsch said. ``It's what is known in the parlance
of legal policy analysis as a race to the bottom,'' he said.
The authors of the Delaware law, for example, noted when it
was passed in 1997 that it was meant to ``maintain Delaware's
role as the most favored jurisdiction for the establishment
of trusts.''
In some ways, asset protection trusts are similar to the
homestead exemption that keeps homes in Florida, Texas and
other states out of the reach of creditors. But the
bankruptcy law now under consideration limits this exemption
to $125,000 for those who purchased the home within 40 months
of their bankruptcy filing or for those who have committed
securities fraud.
Ms. Marty-Nelson said the bankruptcy bill should at least
apply such a cap to domestic asset protection trusts. Better
yet, she said, the bill should exclude these trusts from the
federal exemption altogether.
``Congress can and should close this huge loophole,'' she
said.
Mrs. FEINSTEIN. I believe it is critical that we appropriately reform
our bankruptcy system, and I applaud the efforts of Senator Grassley
and others to do that. But it is important that we ensure that,
wherever possible, loopholes subject to abuse are closed. This is just
such a loophole. I hope that my colleagues will join me and Senator
Schumer in closing this one.
Mr. KENNEDY. Mr. President, the most disturbing thing about this
supposed ``bankruptcy reform'' is the utter lack of fairness and
balance in the legislation. It gets tough on working families who are
facing financial hardship due to a health crisis, a job loss caused by
a plant closing, or a military call up to active duty. The laws of
bankruptcy are being changed to wrest every last dollar out of these
unfortunate families in order to further enrich the credit card
companies.
However, the authors of this legislation look the other way when it
comes. to closing millionaire's loopholes and ending corporate abuse.
The bill fails to deal effectively with the unlimited homestead
exemptions in a few States which allow the rich to hold on to their
multi-million dollar mansions while middle class families in other
States lose their modest homes. And, the bill totally fails to address
the shocking abuse of millionaires hiding their assets in so-called
``asset protection trusts,'' placing them completely beyond the reach
of creditors. They can hold on to their wealth merely by signing a
paper placing title their bank accounts, stocks, bonds, and other
holdings in the name of a trust. The wealthy debtors don't even have to
change their residences or put all of their money into a country estate
in Florida or Texas. All they need to do is file a trust document in
one of the five States that allow this subterfuge. They do not have to
relinquish control over their property and it can continue to be used
to support their extravagant lifestyle.
Unfortunately, average families facing bankruptcy don't have large
bank
[[Page S1994]]
accounts and stock portfolios so they cannot take advantage of this
loophole. Most couldn't even afford to hire a lawyer to set up the
trust. However, that's all right because the asset protection trust
scam was not designed for them. It was designed to protect millionaire
deadbeats, people who ran their companies into the ground leaving their
creditors and their former employees holding the bag. It was designed
to protect those who took the money and ran.
Somehow the authors of this bill, after eight years of studying the
bankruptcy code in search of ways to tighten the law so that more
people would be held accountable for their debts--somehow they
overlooked this loophole. I wonder how they could have missed this one.
I guess they were just too busy finding ways to make working families
pay a few more dollars to the credit card companies.
Fortunately, the New York Times did expose this outrageous loophole
and Senator Schumer has offered an amendment to close it. It will
empower the bankruptcy court to reach out and pull the assets in these
abusive trusts back into the bankruptcy, using those assets to help pay
creditors. The vote on this amendment will be a real test of the
sincerity of those who say their goal is to hold debtors more
accountable for the money they owe. I would hope that same desire to
enforce personal responsibility applies to the millionaire deadbeat who
hides his assets as well as the working family struggling to survive.
Mr. GRASSLEY. Mr. President, I oppose the Schumer amendment. This is
an issue that just needs more time for us to determine whether there is
an abuse that needs to be addressed. We need to ensure that this
amendment doesn't have unintended consequences. For instance, it
doesn't define the term ``asset protection trust'' and therefore we
aren't even sure what we are being asked to vote on. Further, it not
only covers asset protection trusts, but also covers ``similar
trusts.'' Until we have had time to really understand whether this is a
loophole, and if it is, how to close it in a way that doesn't harm
innocent third parties.
In addition, this issue is even more complex because it implicates 50
different State laws. We don't know enough at this point about how it
works. This would override at least some State laws, like the homestead
cap would. I think it is important to look at this issue, have a
hearing and consult with senators whose States might be uniquely
affected. Be sure, however, that my opposition to this amendment
doesn't mean that I will not ultimately find that this issue needs to
be addressed at some future date. I think that all the work we have
done on this bill, the compromises we have reached should not be
disrupted by this last-minute proposal that has not been well thought
out.
I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. McCONNELL. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. McCONNELL. Mr. President, I ask unanimous consent that the Senate
now proceed to a series of stacked votes in relation to the following
amendments: Schumer amendment No. 42 and Rockefeller amendment No. 24;
further, that no amendments be in order to the amendments prior to the
votes; that the second vote be limited to 10 minutes in length; and
that there be 1 minute on each side to explain these amendments prior
to the vote.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 48
Mr. McCONNELL. Mr. President, I ask unanimous consent that the
pending Specter amendment No. 48 be agreed to and the motion to
reconsider be laid upon the table.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment (No. 48) was agreed to.
Amendment No. 42
Mr. McCONNELL. Mr. President, I ask for the yeas and nays on the
Schumer amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be a sufficient second.
The PRESIDING OFFICER. Who yields time on the amendment?
Without objection, time is yielded back.
The question is on agreeing to amendment No. 42 offered by the
Senator from New York, Mr. Schumer. The yeas and nays have been
ordered. The clerk will call the roll.
The legislative clerk called the roll.
Mr McCONNELL. The following Senator was necessarily absent: the
Senator from Oklahoma (Mr. Inhofe).
Further, if present and voting, the Senator from Oklahoma (Mr.
Inhofe) would have voted ``no.''
Mr. DURBIN. I announce that the Senator from California (Mrs. Boxer),
the Senator from New Jersey (Mr. Corzine), the Senator from Wisconsin
(Mr. Feingold), and the Senator from Hawaii (Mr. Inouye) are
necessarily absent.
The PRESIDING OFFICER (Mr. Thune). Are there any other Senators in
the Chamber desiring to vote?
The result was announced--yeas 39, nays 56, as follows:
[Rollcall Vote No. 23 Leg.]
YEAS--39
Akaka
Baucus
Bayh
Biden
Bingaman
Byrd
Cantwell
Chafee
Clinton
Conrad
Dayton
Dodd
Dorgan
Durbin
Feinstein
Harkin
Jeffords
Kennedy
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Murray
Nelson (FL)
Obama
Pryor
Reed
Reid
Rockefeller
Salazar
Sarbanes
Schumer
Stabenow
Wyden
NAYS--56
Alexander
Allard
Allen
Bennett
Bond
Brownback
Bunning
Burns
Burr
Carper
Chambliss
Coburn
Cochran
Coleman
Collins
Cornyn
Craig
Crapo
DeMint
DeWine
Dole
Domenici
Ensign
Enzi
Frist
Graham
Grassley
Gregg
Hagel
Hatch
Hutchison
Isakson
Johnson
Kyl
Lott
Lugar
Martinez
McCain
McConnell
Murkowski
Nelson (NE)
Roberts
Santorum
Sessions
Shelby
Smith
Snowe
Specter
Stevens
Sununu
Talent
Thomas
Thune
Vitter
Voinovich
Warner
NOT VOTING--5
Boxer
Corzine
Feingold
Inhofe
Inouye
The amendment (No. 42) was rejected.
Mr. McCONNELL. Mr. President, I move to reconsider the vote.
Mr. HATCH. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. McCONNELL. Mr. President, let me announce to all Members that
following the next vote we will vote in relation to the Durbin
amendment No. 49. We will have an explanation of 2 minutes equally
divided. Both of these votes are going to be 10 minutes. We are going
to enforce the time on this vote. Everybody please stay in the Chamber
at the convenience of all Members so we can finish this vote and the
next vote within 10 minutes each, particularly this one.
The PRESIDING OFFICER. There are 2 minutes evenly divided prior to
the vote on the Rockefeller amendment.
Who yields time?
The Senator from West Virginia.
Mr. ROCKEFELLER. Mr. President, this amendment is critical to making
corporate bankruptcies fairer to the people who have worked in those
corporations and toiled during the course of their lives and expect,
reasonably, at end of their service, to have something to show for it.
My amendment does three things.
First, it allows employees to recover up to $15,000 in backpay or
other compensation that is owed them.
Second, my amendment would eliminate the accrual time period for
calculation of priority claims. And, if we do not eliminate the accrual
period, then increasing wage priority in the bill is meaningless.
Finally, my amendment would provide at least some compensation to
retirees whose promised health insurance has been taken away.
Under my proposal, each retiree would be entitled to payment equal to
the cost of purchasing comparable health insurance for a period of 18
months.
[[Page S1995]]
I encourage the support of my colleagues.
Mr. BYRD. Mr. President, the great union leader, John L. Lewis, spoke
of those who sup at labor's table and who have been sheltered in
labor's house.
That image thrives in West Virginia, where children are raised to
believe that the fruits of their labor ought to yield a decent wage and
comfortable living. Many work long hours, concerned less about titles
and honors than providing for their families in the present and
securing their retirement in old age.
They devote themselves to their labors and take pride in their work
and their employer. These workers are committed, hard-working
individuals who contribute much and ask for nothing more than simple
fairness. And so imagine how they are made to feel--the anguish,
frustration, and betrayal they are made to feel--when they learn the
pension they worked for, the health benefits they labored for, the
security they toiled for, has vanished.
That is what is happening in West Virginia to an alarming degree.
Special Metals, Horizon Natural Resources, Weirton Steel, Wheeling-
Pitt, Kaiser Aluminum--all have filed for bankruptcy, endangering the
health and pension benefits of workers and retirees.
I scold not those who have sought to protect their employees but
those scoundrels who have used bankruptcy to abandon their obligations.
It is shattering to those workers and retirees affected. It cripples
their faith in the moral values of an honest day's work for an honest
day's pay. It's terrifying for retirees who cannot begin new careers.
These independent, proud men and women fear becoming a burden to their
children and grandchildren.
I understand how they are made to feel, and I seek to help them, as I
always have sought to help them. I support the Rockefeller amendment,
and I commend my colleague for his endeavors in this regard.
The PRESIDING OFFICER. The Senator from Utah.
Mr. HATCH. Mr. President, this amendment would provide a nearly
fourfold increase in claim amounts and strike the time period. That
means it would be much harder to confirm a plan under Chapter 11. It
will cost us jobs, because the debtor companies would not be able to
survive the bankruptcy process.
My colleague from the Finance Committee is concerned about the co-
provisions. Rest assured, they are bad. We all know how many
compromises have been made on this bill. This amendment would undo
years of hard work.
I urge my colleagues to vote no on this amendment.
I yield the remainder of my time.
The PRESIDING OFFICER. The question is on agreeing to the amendment.
Mr. HATCH. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The clerk will call the roll.
The assistant legislative clerk called the roll.
Mr. McCONNELL. The following Senators were necessarily absent: the
Senator from Oklahoma (Mr. Inhofe) and the Senator from Pennsylvania
(Mr. Specter).
Mr. DURBIN. I announce that the Senator from California (Mrs. Boxer),
the Senator from New Jersey (Mr. Corzine), the Senator from Wisconsin
(Mr. Feingold), and the Senator from Hawaii (Mr. Inouye) are
necessarily absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 40, nays 54, as follows:
[Rollcall Vote No. 24 Leg.]
YEAS--40
Akaka
Baucus
Bayh
Bingaman
Byrd
Cantwell
Clinton
Collins
Conrad
Dayton
Dodd
Dorgan
Durbin
Feinstein
Harkin
Jeffords
Johnson
Kennedy
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Murray
Nelson (FL)
Obama
Pryor
Reed
Reid
Rockefeller
Salazar
Sarbanes
Schumer
Snowe
Stabenow
Wyden
NAYS--54
Alexander
Allard
Allen
Bennett
Biden
Bond
Brownback
Bunning
Burns
Burr
Carper
Chafee
Chambliss
Coburn
Cochran
Coleman
Cornyn
Craig
Crapo
DeMint
DeWine
Dole
Domenici
Ensign
Enzi
Frist
Graham
Grassley
Gregg
Hagel
Hatch
Hutchison
Isakson
Kyl
Lott
Lugar
Martinez
McCain
McConnell
Murkowski
Nelson (NE)
Roberts
Santorum
Sessions
Shelby
Smith
Stevens
Sununu
Talent
Thomas
Thune
Vitter
Voinovich
Warner
NOT VOTING--6
Boxer
Corzine
Feingold
Inhofe
Inouye
Specter
The amendment (No. 24) was rejected.
Mr. FRIST. Mr. President, I move to reconsider the vote and to lay
that motion on the table.
The motion to lay on the table was agreed to.
The PRESIDING OFFICER. The majority leader is recognized.
Mr. FRIST. For the information of our colleagues, this will be the
last rollcall vote tonight. We will have probably two votes at 5:30 on
Monday.
Amendment No. 49
The PRESIDING OFFICER. The Senator from Illinois.
Mr. DURBIN. Mr. President, pursuant to unanimous consent, on the next
amendment you should keep in mind Kenneth Lay who, on the road to
bankruptcy, took $200 million out of Enron. Bernie Ebbers took $366
million in personal loans out of WorldCom, and John Rigas took $2.3
billion in loans for a golf course--driving the companies into
bankruptcy at the expense of the stockholders, employees, and retirees.
This amendment reaches back and brings that money to the people who
need it. It also gives a claim in bankruptcy for the pension rights
that are extinguished in bankruptcy. I ask for Members' support.
The PRESIDING OFFICER. The Senator from Utah.
Mr. HATCH. Mr. President, this is an important matter, but this
amendment is too. I ask Members to vote no on the amendment.
The PRESIDING OFFICER. The question is on agreeing to amendment No.
49.
Mr. DURBIN. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The clerk will call the roll.
Mr. McCONNELL. The following Senators were necessarily absent: the
Senator from Oklahoma (Mr. Inhofe) and the Senator from Pennsylvania
(Mr. Specter).
Mr. DURBIN. I announce that the Senator from California (Mrs. Boxer),
the Senator from New Jersey (Mr. Corzine), the Senator from Wisconsin
(Mr. Feingold) and the Senator from Hawaii (Mr. Inouye) are necessarily
absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 40, nays 54, as follows:
[Rollcall Vote No. 25 Leg.]
YEAS--40
Akaka
Baucus
Bayh
Biden
Bingaman
Byrd
Cantwell
Carper
Clinton
Conrad
Dayton
Dodd
Dorgan
Durbin
Feinstein
Harkin
Jeffords
Johnson
Kennedy
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Murray
Nelson (FL)
Obama
Pryor
Reed
Reid
Rockefeller
Salazar
Sarbanes
Schumer
Stabenow
Wyden
NAYS--54
Alexander
Allard
Allen
Bennett
Bond
Brownback
Bunning
Burns
Burr
Chafee
Chambliss
Coburn
Cochran
Coleman
Collins
Cornyn
Craig
Crapo
DeMint
DeWine
Dole
Domenici
Ensign
Enzi
Frist
Graham
Grassley
Gregg
Hagel
Hatch
Hutchison
Isakson
Kyl
Lott
Lugar
Martinez
McCain
McConnell
Murkowski
Nelson (NE)
Roberts
Santorum
Sessions
Shelby
Smith
Snowe
Stevens
Sununu
Talent
Thomas
Thune
Vitter
Voinovich
Warner
NOT VOTING--6
Boxer
Corzine
Feingold
Inhofe
Inouye
Specter
The amendment (No. 49) was rejected.
Mr. LOTT. I move to reconsider the vote, and I move to lay that
motion on the table.
[[Page S1996]]
The motion to lay on the table was agreed to.
Mr. LOTT. Mr. President, I ask unanimous consent to speak as in
morning business for a couple minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The remarks of Mr. Lott are printed in today's Record under
``Morning Business.'')
Mr. LOTT. I yield the floor, and I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. REID. Mr. President, I ask unanimous consent the order for the
quorum call be rescinded.
The PRESIDING OFFICER (Mr. Allen). Without objection, it is so
ordered.
Amendment No. 50
Mr. REID. I ask unanimous consent the pending amendment be laid
aside.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REID. I send an amendment to the desk on behalf of Senator
Baucus.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:
The Senator from Nevada [Mr. REID], for Mr. Baucus,
proposes an amendment numbered 50.
Mr. REID. I ask unanimous consent the reading of the amendment be
dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To amend section 524(g)(1) of title 11, United States Code,
to predicate the discharge of debts in bankruptcy by any vermiculite
mining company meeting certain criteria on the establishment of a
health care trust fund for certain individuals suffering from an
asbestos related disease)
On page 47, strike lines 12 through 14, and insert the
following:
SEC. 202. EFFECT OF DISCHARGE.
Section 524 of title 11, United States Code, is amended--
(1) in subsection (g)(1), by adding at the end the
following:
``(C)(i) Congress finds that--
``(I) the vermiculite ore mined and milled in Libby,
Montana, was contaminated by high levels of asbestos,
particularly tremolite asbestos;
``(II) the vermiculite mining and milling processes
released thousands of pounds of asbestos-contaminated dust
into the air around Libby, Montana, every day, exposing mine
workers and Libby residents to high levels of asbestos over a
prolonged period of time;
``(III) the responsible party has known for over 50 years
that there are severe health risks associated with prolonged
exposure to asbestos, including higher incidences of asbestos
related disease such as asbestosis, lung cancer, and
mesothelioma;
``(IV) the responsible party was aware of accumulating
asbestos pollution in Libby, Montana, but failed to take any
corrective action for decades, and once corrective action was
taken, it was inadequate to protect workers and residents and
asbestos-contaminated vermiculite dust continued to be
released into the air in and around Libby, Montana, until the
early 1990s when the vermiculite mining and milling process
was finally halted;
``(V) current and former residents of Libby, Montana, and
former vermiculite mine workers from the Libby mine suffer
from asbestos related diseases at a rate 40 to 60 times the
national average, and they suffer from the rare and deadly
asbestos-caused cancer, mesothelioma, at a rate 100 times the
national average;
``(VI) the State of Montana and the town of Libby, Montana,
face an immediate and severe health care crisis because--
``(aa) many sick current and former residents and workers
who have been diagnosed with asbestos-related exposure or
disease cannot access private health insurance;
``(bb) the costs to the community and State government
related to providing health coverage for uninsured sick
residents and former mine workers are creating significant
pressures on the State's medicaid program and threaten the
viability of other community businesses;
``(cc) asbestos-related disease can have a long latency
period; and
``(dd) the only significant responsible party available to
compensate sick residents and workers has filed for
bankruptcy protection; and
``(VII) the responsible party should recognize that it has
a responsibility to work in partnership with the State of
Montana, the town of Libby, Montana, and appropriate health
care organizations to address escalating health care costs
caused by decades of asbestos pollution in Libby, Montana.
``(ii) In this subparagraph--
``(I) the term `asbestos related disease or illness' means
a malignant or non-malignant respiratory disease or illness
related to tremolite asbestos exposure;
``(II) the term `eligible medical expense' means an expense
related to services for the diagnosis or treatment of an
asbestos-related disease or illness, including expenses
incurred for hospitalization, prescription drugs, outpatient
services, home oxygen, respiratory therapy, nursing visits,
or diagnostic evaluations;
``(III) the term `responsible party' means a corporation--
``(aa) that has engaged in mining vermiculite that was
contaminated by tremolite asbestos;
``(bb) whose officers or directors have been indicted for
knowingly releasing into the ambient air a hazardous air
pollutant, namely asbestos, and knowingly endangering the
residents of Libby, Montana and the surrounding communities;
and
``(cc) for which the Department of Justice has intervened
in a bankruptcy proceeding; and
``(IV) the term `Trust Fund' means the health care trust
fund established pursuant to clause (iii).
``(iii) A court may not enter an order confirming a plan of
reorganization under chapter 11 involving a responsible party
or issue an injunction in connection with such order unless
the responsible party--
``(I) has established a health care trust fund for the
benefit of individuals suffering from an asbestos related
disease or illness; and
``(II) has deposited not less than $250,000,000 into the
Trust Fund.
``(iv) Notwithstanding any other provision of law, any
payment received by the United States for recovery of costs
associated with the actions to address asbestos contamination
in Libby, Montana, as authorized by the Comprehensive
Environmental Response, Compensation, and Liability Act of
1980 (42 U.S.C. 9601 et seq.), shall be deposited into the
Trust Fund.
``(v) An individual shall be eligible for medical benefit
payments, from the Trust Fund if the individual--
``(I) has an asbestos related disease or illness;
``(II) has an eligible medical expense; and
``(III)(aa) was a worker at the vermiculite mining and
milling facility in Libby, Montana; or
``(bb) lived, worked, or played in Libby, Montana for at
least 6 consecutive months before December 31, 2004.''; and
(2) by adding at the end the following:
Mr. KENNEDY. Mr. President, Senator Sessions, on the floor yesterday,
criticized Elizabeth Warren's study on bankruptcies, and the high
percentage of bankruptcy filers who file because of significant debt
related to illness and medical costs, uses.
Senator Sessions cited a U.S. Trustee Program ``survey'' from 2002
that looked into medical costs as a factor in bankruptcy. He argued
that ``only slightly more than 5 percent of unsecured debt reported in
those cases was medically related;'' ``54 percent of the cases listed
no medical debts whatsoever. I want to repeat that,'' he said.
He also said that ``they found that 90 percent of the cases that did
have medical debts reported debts of less than $5,000.''
Elizabeth Warren sent a letter to the Judiciary Committee last month
which pointed out many of the problems with this U.S. Trustee Program
``survey'':
The survey underreported both the breadth and impact of medical
bankruptcies because of the way it was conducted.
U.S. trustee's sample was limited only to chapter 7 cases and omitted
chapter 13 cases. Families filing for bankruptcy under chapter 7 have
an annual median income of $19,000. Therefore, the average medical debt
identified by the U.S. trustee--the average is $5,000 for those with
medical debt--is quite substantial for those families trying to cope
with medical problems. Mr. President, $5,000 in medical debt is more
than 25 percent of the annual income for that family.
The petition data used by the Office of the U.S. Trustee does not
include any medically related debts charged onto credit cards such as
prescription medications, doctors visits, rehabilitation treatments,
medical supplies, hospital bills, or even second mortgages that people
have put on their homes to pay off hospital bills and other medical
expenses, or cash advances, bank overdrafts or payday loans that people
have incurred to pay for medical services when they are delivered or to
pay medical bills that are outstanding. If any of these bills were paid
by being charged on a credit card, then the trustee's survey would not
include them in its figures.
For these and other reasons, the petition data gathered by the U.S.
Trustee Program provides very little information about medical
bankruptcy. This is why it is so important to survey the
[[Page S1997]]
debtors themselves in order to collect accurate data, the way the
Harvard study actually did.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. FRIST. Mr. President, I ask unanimous consent that that the order
for the quorum call be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
____________________