[Congressional Record Volume 152, Number 15 (Thursday, February 9, 2006)]
[Senate]
[Pages S879-S898]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           FAIRNESS IN ASBESTOS INJURY RESOLUTION ACT OF 2005

  The PRESIDING OFFICER (Mr. Chafee). Under the previous order, the 
Senate will resume consideration of S. 852, which the clerk will 
report.
  The assistant legislative clerk read as follows:

       A bill (S. 852) to create a fair and efficient system to 
     resolve claims of victims for bodily injury caused by 
     asbestos exposure, and for other purposes.

  Mr. FRIST. With the authority of the majority of the Judiciary 
Committee, I withdraw the committee amendments, and I send a substitute 
amendment to the desk.
  The PRESIDING OFFICER. The committee amendments are withdrawn.


                           Amendment No. 2746

  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Tennessee [Mr. Frist], for Mr. Specter and 
     Mr. Leahy, proposes an amendment numbered 2746.

  (The amendment is printed in today's Record under ``Text of 
Amendments.'')
  The PRESIDING OFFICER. The Senator from Pennsylvania.
  Mr. DURBIN. I ask for the yeas and nays on the substitute amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  Mr. SPECTER. Mr. President, I suggest the absence of a quorum.

[[Page S880]]

  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for the quorum call be rescinded.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. 2747 to Amendment No. 2746

  Mr. SPECTER. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Pennsylvania, [Mr. Specter] proposes an 
     amendment numbered 2747 to amendment No. 2746.

  Mr. SPECTER. 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:

       On the appropriate page, insert the following and number 
     accordingly:
       Guidelines.--In determining which defendant participants 
     may receive inequity adjustments the administrator shall give 
     preference in the following order:
       (A) Defendant participants that have significant insurance 
     coverage applicable to asbestos claims, such that on the date 
     of enactment, 80 percent or more of their available primary 
     insurance limits for asbestos claims remains available. 
     (Note: I recognize that this may not be the most adequate 
     indicator of insurance matching liabilities--however, it's a 
     political reality that must be addressed).
       (B) Defendant participants where, pursuant to the guidance 
     set forth in section 404(a)(2)(E), 75% of its prior asbestos 
     expenditures were caused by or arose from premise liability 
     claims.
       (C) Defendant participants who can demonstrate that their 
     prior asbestos expenditures is inflated due to an unusually 
     large, anomalous verdict and that such verdict has caused the 
     defendant to be in a higher tier.
       (D) Any other factor deemed reasonable by the administrator 
     to have caused a serious inequity.
       In determining whether a company has significant insurance 
     coverage applicable to asbestos claims, such that on the date 
     of enactment, 80% or more of their available primary 
     insurance limits for asbestos claims remains available, the 
     administrator shall inquire and duly consider:
       (1) The defendant participant's expected future liability 
     in the tort system and accordingly the adequacy of insurance 
     available measured against future liability.
       (2) Whether the insurance coverage is uncontested, or based 
     on a final judgment or settlement.

  Mr. SPECTER. Mr. President, there are a number of issues to be 
discussed, but the distinguished Senator from Utah has been awaiting 
recognition. I yield now to Senator Bennett so he can make his 
comments. We managers will be here all day and can speak later and not 
tie up the Senate.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. BENNETT. I thank the Senator from Pennsylvania for his courtesy 
and pay tribute to him and the Judiciary Committee for their effort in 
dealing with this most vexatious problem.
  When the asbestos problem burst into the American consciousness, 
everyone was concerned there would be a way to compensate those who are 
victims of this difficulty. Unfortunately, certain members of the trial 
bar developed what I would call a business plan that was based on two 
fundamental principles: No. 1, venue shopping; and No. 2, a deliberate 
pattern of overwhelming the legal system so the various cases could not 
be heard on their merits.
  Those who adopted this business plan have been tremendously 
successful. They have driven 75 companies into bankruptcy. They have 
created enormous litigation all over the country. Unfortunately, the 
outcome in terms of the victims has not been what anyone would want, 
with the possible exception of those who were behind the creation of 
the business plan in the first place.
  The net effect of what we have seen in the asbestos litigation is to 
take an American tragedy and turn it into an American disaster, with a 
relative pittance for the victims; an undeserved windfall for people 
who have no health problems; and an overwhelming bumper crop of cash 
for the trial lawyers who developed the plan in the first place.
  There is a great uprising of demand that we do something about this. 
That demand is legitimate. The Congress should act. We do need a 
national solution, even though we have seen progress take place--not at 
the Federal level but at the State level. It is very interesting to 
watch what has been happening as various States have grappled with this 
challenge and done their best to deal with the two problems I have 
identified: the venue shopping and the strategy of overwhelming the 
system.
  One breakthrough in this regard came from a Federal judge. Her name 
was Janis Jack. I am told she had something of a medical background. 
She was trained as a nurse. So when these cases came before her she 
instinctively realized there was something fundamentally wrong with the 
medical claims. Without going into the detail of what happened before 
Judge Jack, I quote the statements she made as she handed down her 
scathing decision:

       These diagnoses were driven by neither health nor justice, 
     they were manufactured for money. The court finds that filing 
     and then persisting in the prosecution of silicosis claims, 
     while recklessly disregarding the fact there is no reliable 
     basis for believing that every plaintiff has silicosis, 
     constitutes an unreasonable multiplication of the 
     proceedings.

  I pause here to say she is highlighting what I talked about before, 
that there was a conscious business plan to overwhelm the system. She 
calls it ``an unreasonable multiplication of the proceedings.''
  Continuing the quote:

       When factoring the obvious motivation, overwhelming the 
     system to prevent examination of each individual claim, and 
     to extract mass settlements, the behavior becomes vexatious, 
     as well. Therefore, the court finds that the firm will be 
     required to satisfy personally the excess costs, expenses, 
     and attorney fees reasonably incurred because of such 
     conduct.

  I am not a lawyer, but I understand when a Federal judge uses the 
words ``vexatious'' it is probably not good for the people who are in 
her court listening to her. And she is requiring the law firm that 
brought the case to pay all of the costs of the case. That has sent a 
chill throughout the plaintiff's bar who thought they had a free ride 
with their business plan.
  The other thing that has happened as various States have looked at 
this has been the setting up of inactive dockets, or deferral 
registries, two terms with which I was unfamiliar before I got into 
this. They make eminent good sense. All they do is say to those 
plaintiffs who, in fact, are not sick: We will let your claim stand, we 
will not dismiss it out of hand, but we will put it in an inactive 
docket or a deferral registry. In other words, your claim cannot be 
pursued until you get sick. Just because you have a doctor's 
certificate that says you might get sick does not mean you are entitled 
to damages.
  Interestingly enough, the fallout from Judge Jack's ruling where she 
found that doctors had gone beyond medical practice in order to give 
these certifications that would allow people to come forward as if they 
were plaintiffs, means that some doctors are facing jail time and some 
lawyers are facing jail time as a result of the findings in Judge 
Jack's court.
  The combination of a judge who finally says, You need to focus on 
whether people are ill, and State legislation that says, We will not 
allow the courts to be overwhelmed by the claims of those who are not 
ill, has begun to taper off the level of asbestos cases and has caused 
some people to say we have turned the corner; that the trust fund 
established in the bill before us is an idea whose time has gone; that 
it is not necessary to have a trust fund to deal with these issues. 
Others say: No, we have to have the trust fund. We have to have the 
bill before us.
  One of the perplexing things to me, as I listened to people in the 
business community discuss this, has been to discuss how split the 
business community is, how there are so many companies that come to me 
passionate in their insistence this bill be passed, or they say there 
will be disaster going on uninterrupted into the unknown future.
  Just as passionate are other companies who come to my office, sit 
down with me and say: This bill is the biggest disaster we have ever 
seen. You cannot allow it to happen. If this bill happens, we will go 
out of business.
  That is not a minor gulf between the proponents and the opponents. I 
have tried to figure out why business men and women examining this as 
dispassionately as they can have come to

[[Page S881]]

such diametrically opposite positions. I have found, for me, what is an 
explanation. I have prepared two charts that will demonstrate this. 
Both of these are based on assumptions. We must understand that this 
entire debate is based on assumptions. No one really knows.
  There are those who say the $140 billion called for in the trust fund 
will be more than enough to take care of all of the claims. There are 
those who say it is nowhere near enough.
  There are those who say the claims will go down as a result of the 
trust fund, and there are those who say the claims will increase as a 
result of the trust fund. No matter how you slice it, every argument 
everybody is making, including the ones I will make, is based on an 
assumption that is not provable. But I have done the very best I can to 
come up with sources that are reliable.
  So here is why I think the business community is split. It has to do 
with where you fall on the trust fund chart, what tier you are in, and 
basically how much money you have to pay.
  Here is the first list that comes up, and this is compiled by a 
consulting firm to the bankruptcy court that looked at asbestos claims. 
I have summarized in this column of the chart, if there is no trust 
fund, the estimated liabilities of the companies listed. That means, 
Armstrong World Industries, according to the consulting firm, if there 
is no trust fund, will face a liability of roughly $2 billion. Babcock 
& Wilcox will face a liability of roughly $2 billion--and so on all the 
way down--U.S. Gypsum, $4 billion. I will come back to U.S. Gypsum in a 
minute because it helps make my point. So this is the column that shows 
the liability of these 10 companies if the trust fund is not enacted.
  Now, this is the column that shows what they will pay to the trust 
fund. In other words, their liability will go from this number to this 
number, if the trust fund is established. Here in this column is the 
difference. For these 10 companies, it is $20 billion.
  If I were the CEO of any one of those companies, I would be very 
strongly for the trust fund. Now, I reject the idea this is being 
driven by K Street and lobbyists. This is a very logical business 
decision on the part of the CEOs of these companies, and I do not think 
any of them had anything to do with this allocation. It is the way the 
trust fund was structured. As they read the details, they said: This 
makes good sense for us. Let's be for it.
  But out of this chart comes a fundamental question that I have at the 
bottom of the chart. If there is a $20 billion difference between their 
liabilities and their contributions, who will make up the difference?
  So now let's go to the second chart.
  On this chart is a list of companies with estimated outlays, if there 
is no trust fund, that will be substantially less than those on the 
first chart. Foster Wheeler--I understand this number may change. These 
are estimates. All of these numbers may change. But I have heard, just 
this morning: Hey, we are trying to recalculate that, Senator. We want 
you to be exactly accurate. It might be $79 million, but it may not. 
But it will be relatively low compared to the number on the next chart. 
So let's understand all of these.
  But here is Foster Wheeler, Oglebay Norton. They will have no 
obligation--no obligation--if the trust fund does not pass. Why? 
Because they have insurance. They took precautions. They have insurance 
that will pay the claims. They will have no obligation. National 
Service Industries will have $11 million if the trust fund is not 
enacted, and so on.
  Now, Oglebay Norton will owe the trust fund $495 million in order to 
be relieved of zero obligation if the trust fund does not pass. Who 
will make up the difference? It will be made up by companies like 
these, some of which earn so much lower numbers than the numbers that 
are here that this could very easily jeopardize their survival. Some of 
the companies on this chart might not survive if the trust fund is 
passed. You have no obligation, but you have to pay half a billion 
dollars over a 30-year period?
  There are some companies here whose total revenue is $100 million a 
year, and their annual responsibility to the trust fund is $19 million. 
Twenty percent of their total revenues will be required, and they have 
no exposure or relatively no exposure. There is not a company here with 
exposure, no matter how high it may be, that would not be satisfied by 
2 or 3 years' contribution to the trust fund, but they are going to 
have to make that contribution for 30 years.
  The companies on the first chart will see their stocks go up 
dramatically as soon as this bill is passed, and I do not begrudge them 
that. I think that is wonderful. But the other companies that will make 
up the difference will not only see their stocks fall, they may 
disappear and see their employees put out of jobs, their employees put 
on the unemployment line.
  I do not think there was anything sinister about the way in which the 
trust fund decisions were made. But I do not think it has been analyzed 
properly with respect to the real-world impact of those decisions. So, 
to me, that is why we have the split in the business community, with 
some companies saying this is a great idea, and other companies saying, 
with some irony, over our dead body, because they may be very much 
dealing with a dead body here.
  All right. Does that argue that we should not have Federal 
legislation? No. The progress in the States, causing this level of 
litigation to level out and begin to turn down, is not even throughout 
the country. We need a national standard. Ohio has led the way. Ohio 
has bills that are causing the litigation to begin to dry up. We are 
seeing the pattern of venue shopping dry up. But we still do not have 
any action out of California or New York. And, if I may, I remember 
when the Governor of Utah was once asked: What is the greatest economic 
development agency you have in Utah? And he said: The California State 
Legislature.

  I think we can wait a long time before the California State 
Legislature can be depended upon to deal with this issue. So we do need 
a national bill.
  But the one thing everybody on either one of these charts wants is 
certainty.
  Let's go back to the first chart and the example I was talking about 
with respect to U.S. Gypsum or USG. Within the last week or two, USG 
announced they were setting up a reserve for their asbestos 
liabilities. They said: We are setting up the reserve with $900 million 
in cash and $3 billion in contingent notes. Their stock went up 15 
percent the next day because their investors said there is a degree of 
certainty.
  Now, if you take that $3.9 billion figure they determined was the 
amount of their liability and you compare it to what the consultants 
said their liability was--$4 billion--you are very much in the ballpark 
with roughly the same figure. Now, the interesting thing about the 
contingent notes they said they would sign for the $3 billion is the 
contingency. The contingency was whether this bill passes. If this bill 
does not pass, they will then be on the hook for the $3 billion in 
contingent notes. If the bill does pass, they are out with only the 
$900 million. As we see, they are only required to pay, under the trust 
fund, $797 million. So as to the $900 million, they may even get a 
refund from that if this bill passes.
  That demonstrates the value of certainty. They came up with 
certainty, one way or the other, and their stock went up 15 percent. We 
can give people certainty with the right kind of Federal bill that does 
not have the problems that this trust fund has.
  So what do I search for in a bill? Well, the first one should be 
obvious from the presentation I have made: a restructuring of the 
liabilities in the trust fund. And if the trust fund were to go away, 
that would not bother me either, if we could have an understanding of 
how we could take the experience in the States and make it work on the 
Federal level.
  Back to Judge Jack and her rulings and the actions of the various 
States, we discovered there really are only a few things that need to 
be done to tame this monster.
  The first one is to stop the venue shopping. Well, if we pass a 
Federal bill, we can do that. The Judiciary Committee has worked hard 
in that direction, and I commend them for it.
  No. 2, building on what Judge Jack discovered, we can have the right 
kind of medical certification. All she did was force these people to 
prove they were injured and the claims went away. I am not satisfied 
the medical certification in this bill is strong enough. I

[[Page S882]]

would prefer to take the kind of medical certification we have at the 
State level, particularly Ohio, and say if we can write that into the 
Federal bill, then we are on our way toward realizing Judge Jack's goal 
in eliminating those who are not medically certified.
  The third thing we can do is adopt the position that many of the 
State courts have adopted, which simply says: You can file your claim 
if you are not sick because you think you might be, but we are going to 
put that claim in an inactive docket, or a deferral registry--pick 
whichever term of art you prefer--and it will sit there unacted upon 
until you can come in and prove you are sick.
  If we can do those three things--stop the venue shopping, get a 
legitimate medical certification, and set up inactive dockets--at the 
Federal level, the State experience says we can solve this problem. 
Whether there is a role in all of that for the trust fund, I am not 
sure.
  I am enormously respectful of the senior Senator from Pennsylvania. 
He is a close, personal friend and has been the entire time I have been 
in the Senate. I commend him and the members of the Judiciary Committee 
for their efforts in working on this bill. But I do have a sense that 
in their focus on the disaster this has been throughout our history 
they have crafted a solution that, like the generals in the Army, may 
be the solution to the last war. They may have been fighting the last 
war instead of addressing what has currently happened.
  So I understand the Senator from Texas has an amendment, which I 
intend to support. I understand the Senator from Arizona, Mr. Kyl, has 
a provision that presumably will affect this difference between people 
on the two lists. I am interested in that. I am not sure it is the 
solution, but I want to move in this direction. I think we need a bill. 
I want to support a bill. As the bill currently stands, I think it is 
in need of the kinds of changes I have outlined.
  Mr. DURBIN. Mr. President, will the Senator yield for a question?
  Mr. BENNETT. I am happy to yield.
  Mr. DURBIN. I would like to commend the Senator from Utah. He and I 
come from different parts of the political spectrum, and his life 
experience in business and otherwise is quite different from my own 
life experience. But I will tell you that I agree completely with your 
analysis. I think you have carefully looked at the impact of this 
pending bill on real-life companies, real-world companies, and there 
are clearly winners--and big winners--and losers--and big losers--in 
the course of creating this trust fund.
  Without assigning any motive as to why some companies do so well and 
others do so poorly, I think what you have suggested as an alternative 
is the sensible middle ground. And the sensible middle ground, which I 
think will soon be offered by the Senator from Texas, is to look at 
successful efforts in States that have changed the whole environment on 
asbestos litigation.
  I am looking to this amendment. I want to read it carefully before 
making any commitment on my part, but this seems to me to be the right 
move to make, to capitalize on the State efforts before we create a 
trust fund.
  I would like to ask the Senator if he has any knowledge or personal 
experience with the creation of other trust funds in the past in an 
effort to solve problems like black lung, and even in the trust funds 
that were created by companies like Johns Manville, and whether the 
initial estimates of cost turned out to be accurate in the long run.
  Mr. BENNETT. I thank the Senator for his kind words. We will continue 
to be on opposite sides of the spectrum, but we will continue to be 
good friends.
  In response to his specific question: Yes, the GAO has done a study 
of Federal trust funds and has found that as a general rule, the 
creation of a trust fund creates roughly twice as many claims as was 
anticipated at the time of their creation. This doesn't automatically 
mean twice as much money. In some cases, it means substantially more 
than twice as much money. And in one case, it means the amount of money 
stayed the same because the amount proclaimed was less than projected.
  The one thing we can draw from that experience is what I said at the 
beginning of my remarks. Virtually everything we are saying about this 
is a guess. Everything we are assuming is based on an extrapolation 
based on other assumptions. We cannot, with any certainty, say that the 
trust fund will be sufficient or that it will not be sufficient. The 
one thing that we can say with certainty is, this is how much you will 
have to pay if the trust fund is created. That, as I say, is the reason 
for the split in the business community. As people have done the 
numbers, some say: I am better off in the tort system. Others say: I 
will pay anything to get out of the tort system.
  The trust fund needs to be manipulated, if we are going to keep the 
trust fund, to make sure that there is a greater degree of fairness on 
the part of those who are contributing to it.
  This is taxation with a vengeance on the part of the Federal 
Government for many of these companies. And some companies are saying: 
We are willing to pay that tax rate. Others are saying: Under no 
circumstances.
  It will be very interesting if a conversation is held with those 
companies fighting for the bill and the proposition is made, if you 
really want the bill, will you increase the amount of your contribution 
to the trust fund so that the amount for some of these other companies 
will go down? That will be an interesting conversation. I understand 
some people are thinking about having it. I would like to be present 
when it is had, to see where we go with this.
  Mr. DURBIN. I thank the Senator.
  Mr. BENNETT. I yield the floor.
  The PRESIDING OFFICER. The minority leader.
  Mr. REID. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Ensign). Without objection, it is so 
ordered.
  The Senator from Texas.


                Amendment No. 2748 to Amendment No. 2746

  Mr. CORNYN. I send an amendment to the desk and ask for its immediate 
consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Texas [Mr. Cornyn], for himself, Mr. 
     Coburn, Mr. Graham, Mr. Thune, Mr. Ensign, Mr. Inhofe, Mr. 
     Martinez, Mr. Crapo, Mr. Bennett, Mr. Smith, Mr. Craig, Mr. 
     Sununu, Mr. DeMint, Mr. Thomas, and Mr. Bunning, proposes an 
     amendment numbered 2748 to amendment No. 2746.

  Mr. CORNYN. I ask unanimous consent that 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. REID. Mr. President, I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  The yeas and nays were ordered.
  Mr. CORNYN. Mr. President, I rise to join my colleagues in a call for 
asbestos reform. No other issue more readily highlights the toll that 
excessive litigation has placed on our society and, even more 
poignantly, on the lives of those who are dying with asbestos-related 
disease who are left with inadequate legal recourse and compensation by 
virtue of the massive waive of litigation, primarily by those who are 
not sick and who suffer no impairment as a result of their exposure to 
asbestos. Make no mistake about it: Today we are not just talking about 
liability reform, we are talking about scandal reform.
  The legislation before us represents a genuine effort--I dare say, a 
Herculean effort--by the chairman of the Judiciary Committee and the 
ranking member and others who have worked together with them to try to 
bring us to where we are today; that is, with a good-faith proposal to 
address this complex problem. No one has worked harder or driven the 
members of the Judiciary Committee harder than our chairman, Senator 
Specter. He has tried hard to reach consensus among so many disparate 
parties and on so many different complicated issues.

[[Page S883]]

  The question before us is whether a national trust fund of the 
magnitude contemplated is the appropriate method to ensure victims will 
be compensated fairly and efficiently and that the trust fund can 
reasonably expect to remain solvent and viable.
  After countless hours of reviewing and studying the options and hours 
of working with my colleagues to achieve reform, I unfortunately 
conclude that in its current form and with its current significant 
weaknesses, it is not. Rather, I believe the likelihood is far greater 
that the trust fund will sooner, rather than later, prove unsustainable 
and return us to the same broken tort system, then leaving thousands of 
Americans in the wake of a failed Government program, wondering where 
to go and why they must now go back to court. This simply cannot be the 
outcome.

  I offer an alternative solution, a simple solution that has been 
tested in States around the country and a solution that would target 
the key causes of the asbestos liability crisis. I am pleased to offer 
this amendment on behalf of 14 cosponsors: Senators Coburn, Graham, 
Thune, Ensign, Inhofe, Martinez, Crapo, Bennett, Smith, Craig, Sununu, 
DeMint, Thomas, and Bunning. We are working closely with our colleagues 
on the Democratic side who are looking for an alternative solution. I 
do believe, before the close of business today, we will have bipartisan 
cosponsorship of this amendment.
  We are looking for a solution that provides a simple but effective 
approach and one that establishes a national floor with respect to the 
medical criteria required to bring a claim into court, one which tolls 
the statute of limitation to ensure that victims get their day in court 
and virtually eliminates the likelihood of fraud in the medical 
screening industry, which has proven to be a corrupt cottage industry.
  In short, that is basically what this amendment would do. It is about 
50 pages, not 400 pages. It requires no complicated administrative 
scheme, no complex funding formulas that require a Ph.D. in economics 
to understand. There are no complex constitutional questions, no 
litigation that will arise over the constitutionality of the proposal, 
and no real cost to the American taxpayer or, for that matter, to the 
businesses that would otherwise have to contribute to this $140 billion 
trust fund. There is no question about favoring one constituency 
differently than another constituency. Most importantly, I am confident 
that our solution is a system more likely to ensure that those 
individuals who are truly sick from exposure to asbestos will receive 
fair and efficient adjudication of their claims against those who were 
actually responsible for their injuries.
  This proposal is embraced by such a diverse group as the American Bar 
Association that studied it. You can imagine getting lawyers to agree, 
with their divergent interests, on what solution to this problem would 
likely work best and be the least disruptive to our civil justice 
system. They believe this is it. Indeed, our legislation would target 
directly the well-documented causes of the asbestos liability scandal 
plaguing our civil justice system.
  The oft-quoted RAND Corporation, in its research, has discovered:

       Almost all the growth in the asbestos caseload can be 
     attributed to the growth in the number of nonmalignant claims 
     which includes claims from people with little or no 
     functional impairment.

  In other words, these are people who are not sick. Those are the main 
claimants today under the asbestos liability system. Their research 
reveals that up to 90 percent of the plaintiffs filing claims have no 
physical impairment, but they have clogged our courts and delayed 
justice for those who are sick with asbestos disease. These claims 
brought by unimpaired plaintiffs often are generated through mass 
screenings and supported by questionable medical evidence, backed by 
doctors who do not claim to have a doctor-patient relationship but who 
will screen thousands of x-rays and who, not surprisingly, more often 
than not, overwhelmingly find some evidence of asbestos-related 
disease. When those same x-rays are given a second opinion by someone 
without a vested interested in finding asbestos-related disease, only a 
minute fraction actually are confirmed. So this is a cottage industry 
of fraudulent claims which has further contributed to the broken system 
we have today.
  Under the status quo, forum shopping is rampant. For example, between 
1998 and 2000, five States captured 66 percent of the filings; 66 
percent of the asbestos lawsuits were filed in just five States because 
of rampant forum shopping. They were the States of Texas--my State--
Mississippi, New York, Ohio, and West Virginia. It is not surprising 
that each of these States has now enacted or is seriously considering 
enacting asbestos liability reform at the State level. The good news 
is, as the Senator from Utah, Mr. Bennett, pointed out, these State 
reforms appear to be working. They are working because they rightfully 
focus on the causes. So, too, should a national solution. Doctors and 
medical providers take the Hippocratic oath which says: First, do no 
harm. We in the Congress, particularly in the Senate, have a 
Hippocratic responsibility to, first, do no harm in the legislation we 
pass.
  Notwithstanding the Herculean efforts undertaken by the chairman and 
the Judiciary Committee, I believe we cannot honestly take that oath 
and represent to the American people that we have done no harm in the 
proposal currently before us. We need an alternative which we have 
offered with this amendment.
  The past several years have witnessed encouraging signs from States 
known to have been havens of the worst of the asbestos litigation 
abuses. As I mentioned, States such as Texas, Mississippi, Ohio, 
Florida, and Georgia are taking action. During the time that we have 
debated in the Nation's Capitol what to do, the States have acted.
  Some States have created special dockets for unimpaired claimants, 
allowing only those who are sick to proceed to trial. It makes sense. 
The modest venue reforms and limits on consolidation have been adopted, 
and at least 4 States, including, last year, Texas, have enacted 
objective medical criteria.
  The Texas bill, in the context of asbestos-related claims, allows 
claimants who are actually impaired to pursue their claims in the 
judicial system and merely defers the claims of those who are exposed 
but not impaired. It does this by establishing medical criteria that a 
claimant must meet to demonstrate some impairment before proceeding 
with the lawsuit. The good news for these individuals who are not 
impaired and have been exposed, and for the system generally, is the 
vast majority of them never will get sick.
  Under the perverse limitations required by the statute of limitations 
that require you to file a lawsuit or risk being forever barred under 
the current system, they must file now, thus contributing to the huge 
clog of our court system and the bankruptcies that have racked up 
seemingly one after another. These State efforts are, in fact, working.
  While it is difficult to assess the nationwide impact in the short 
time they have been implemented, anecdotal evidence indicates there has 
been a real impact. For example, one Texas tort reform observer, in 
2006, said this:

       We are still waiting on more definitive figures, but rough 
     estimate at this point--filings of new claimants in Texas 
     have dropped in excess of 50 percent since the State bill 
     passed in July. Based on the terms of the act, the time has 
     just run for claimants to file medicals to avoid the [multi 
     district litigation in Federal Court]. The effect will be 
     that at least 75 percent of pending claims will be dismissed 
     or abated. Thousands of claims from unimpaired claimants have 
     been rendered dormant and will not proceed.

  Perhaps the most important point is the ones that justifiably should 
proceed because they have real manifestations of asbestos-related 
disease will have priority, will have their day in court, and will not 
be left with pennies on the dollar, which many are today because of the 
bankruptcies that have been created by this flood of litigation.
  One example of the claims history of a company in Texas--we will call 
it ``company A'' because we don't want to necessarily point out or talk 
about a particular company, but company A, between 1980 and 1996, had 
134,000 new claims. In 1987, they had 25,000. You can see the rest of 
the numbers. The height of their claims experience was in 2001, when 
they had 56,000 claims. In 2005, after this legislation passed in Texas 
imposing strict medical criteria, creating a dormant docket for those 
who

[[Page S884]]

were exposed but not impaired, while letting those who are sick go to 
court, only 13,272 claimants came forward. There has been a 77-percent 
decline in new filings over the last 5 years. This is due largely to 
the legislation and fair enforcement of the law in States such as 
Florida, Mississippi, Ohio, Texas, Georgia, and Illinois.
  Company B, in Mississippi, has experienced a 90-percent decrease in 
claims since their legislation was enacted. The point is, some might 
say why don't we leave this up to the States? Unfortunately, we have 
seen claims migrate to States that don't have similar reform 
legislation, thus mandating, in my opinion, a national solution. That 
is what this amendment proposes.
  Company C reports a significant decrease in new litigation filings 
since September 1, 2005. This is in Texas. The mix of the claims is 
important because there have been zero, none, malignancy cases, and 10 
mesothelioma claims--the most pernicious cancers that are caused by 
asbestos exposure. In terms of the other types of claims, they have 
dropped precipitously. So 34 new filings in 5 months, all malignancy 
cases, which can be adjudicated in court based upon their respective 
merits.
  We will go through a couple more here. Company D, in 2003, 
experienced 32,444 filings. In 2004, that number dropped to 5,000--from 
32,000 to 5,000, roughly. In 2005, it dropped to 2,415, with 6,791 
dismissals.
  As we can see, there have been significant declines in the number of 
claims, making way for people who truly are sick to have their day in 
court, while those who have been exposed but are unimpaired and not 
sick can preserve their claims for a later date, if and when they 
happen to get sick.
  The national solution we have crafted is designed to ensure that 
those who truly are sick get their day in court, as I said. It 
establishes specific medical criteria to be used to distinguish claims 
between people who are physically impaired due to exposure to asbestos 
and the claims of people who are not experiencing any physical 
problems. This legislation will prioritize the claims of the truly sick 
through the use of reasonable, objective medical criteria. It requires 
physical impairment. It requires supporting documentation to verify 
that the claimant can demonstrate impairment based on reasonable and 
objective medical criteria. It requires that the diagnosing physician 
actually have a doctor-patient relationship with the claimant, avoiding 
the millions in this cottage industry doing fraudulent screenings, 
which has generated problems for the current system. It allows the 
claimant who acquires a nonmalignant condition to pursue a separate 
recovery if the person later develops an asbestos-related cancer.
  I could go on, but I think it is clear from not only the simplicity 
of this approach, and due to the fact that it has broadly been embraced 
among organizations such as the ABA, which has both defense lawyers and 
plaintiff's lawyers and represents the legal profession generally, it 
is their considered judgment that this represents a reasonable and, in 
fact, a better solution to our current problem. It observes the 
``Hippocratic oath'' that I submit should apply to legislation as much 
as it should to the practice of medicine, that it does no harm to 
the current system. In fact, it is narrowly focused on the causes of 
the problems that confront our system today.

  The Federal trust fund may well be a fine solution to the current 
problem but only if structured appropriately and only if we can 
reasonably expect that it will proceed.
  I am sorry to say that S. 852, as drafted, cannot, in my opinion, 
succeed. It would create an unsustainable Federal entitlement, with 
costs that would likely far exceed the $140 billion price tag presently 
contemplated. Enacting this legislation without significant 
modification would undermine recent State reforms and would create at 
least as many problems as it would solve.
  I sincerely believe this alternative amendment my colleagues and I 
have offered today is the best hope we have of accomplishing the goal 
that I believe all of us operating in good faith share, and that is 
ensuring prompt payment for victims and allowing those exposed but not 
sick to have their day in court if and when they do become sick.
  I invite all of my colleagues to join the 14 of us who are cosponsors 
to this amendment. I predict by the close of business today we will 
have a bipartisan amendment. We are continuing to reach out to our 
colleagues in the Senate, and I know this is a complex issue and many 
on the Judiciary Committee have spent years trying to get us to where 
we are today. Frankly, I applaud their efforts, as I have the 
leadership of our chairman. I believe, and the cosponsors of this 
amendment believe, this is the best approach; that is, to pass this 
amendment and send it to the House of Representatives so we can provide 
a simple and effective solution to the current asbestos scandal.


                Amendment No. 2749 to Amendment No. 2748

  Mr. CORNYN. Mr. President, before I conclude, I send a second-degree 
amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The bill clerk read as follows:

       The Senator from Texas [Mr. Cornyn], for himself, Mr. 
     Coburn, Mr. Graham, Mr. Ensign, Mr. Crapo, Mr. Inhofe, Mr. 
     Martinez, Mr. DeMint, Mr. Thune, Mr. Bennett, Mr. Smith, Mr. 
     Craig, Mr. Bunning, Mr. Thomas, and Mr. Sununu, proposes an 
     amendment numbered 2749 to Amendment No. 2748.

  Mr. CORNYN. 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 printed in today's Record under ``Text of 
Amendments.'')
  Mr. DURBIN. Will the Senator yield for a question?
  Mr. CORNYN. Yes.
  Mr. DURBIN. Mr. President, I thank the Senator for bringing this 
important amendment to debate. I will ask him a question or two about 
his amendment.
  I think the Senator is on the right track in noting that several 
States have made significant progress in dealing with the asbestos 
litigation. In some States, there has been an agreement between what 
are usually warring and opposing parties as to how the system can be 
improved. I wish to ask the Senator from Texas whether the approach he 
has suggested to the Senate today would preempt existing State laws and 
standards in this area?
  Mr. CORNYN. I thank the Senator for his question. It is an important 
one. Our intention would not be to preempt local State laws but, 
rather, to create a national forum, in a way that would provide 
uniformity and would avoid the migration of claims from those States 
that have reform to those that do not, thus continuing the status quo.
  Mr. DURBIN. One of the more controversial parts of the amendment 
relates to joint and several liability, which those of us who have 
practiced law know a little more about than those who have not. If a 
State already has joint and several liability in these cases, would 
your amendment preempt that State's joint and several liability 
standard?
  Mr. CORNYN. Mr. President, I appreciate the question. This amendment 
calls for several liability, not joint liability. The Senator raises a 
good question and, frankly, one I want to make sure I do a little 
research on and confer with him, perhaps, so I can give him a more 
definitive answer.
  Mr. DURBIN. Mr. President, I thank the Senator for allowing me to ask 
a question. I thank him also for offering the amendment. It is a 
valuable part of the debate. Parenthetically, I concur completely with 
the Senator from Texas in the fact that many States are doing very 
positive things to deal with this issue, and I think it would be wise 
for us to look to their leadership in some of these areas. Secondly, I 
think he feels as I do, that the underlying trust fund has some 
fundamental flaws.
  I yield the floor.
  Mr. CORNYN. Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from New Hampshire is recognized.
  Mr. GREGG. Mr. President, I wish to speak a little bit about the 
status of the points of order that have been discussed, at least in the 
media, relative to this bill, that arise from the Budget Act.
  There are four potential issues here. One, we have not seen the final 
language, so many of these have not been resolved as to their 
applicability.

[[Page S885]]

  Talking about the one which has received a significant amount of 
attention, there is a reserve fund that was created in the last budget, 
the purpose of which was to allow this bill to come forward. The 
reserve fund has a series of conditions attached to it, and the effect 
of the reserve fund is that it sets up the ability of the budget 
chairman to release dollars--in this case an allocation--if those 
conditions have been met.
  As Budget chairman, I find myself in what would be called a position 
of a referee or a fair arbiter on this issue. I have views on this 
bill. I don't happen to support the bill. Those views are not relevant 
to the decision I need to make as chairman of the Budget Committee 
relative to releasing a reserve fund.
  The key issue on the reserve fund is whether at some point in the 
future taxpayers will become obligated for the claims which would be 
made under this asbestos claims bill.
  How do I come to a conclusion as to whether taxpayers would be 
obligated in my role as a fair arbiter or referee? Basically, I turn to 
our professional, nonpartisan, fair whistle caller, sort of like the 
referee on the football field on an instant replay going up to the guys 
in the stands who just viewed the play and get their opinion. That 
group is the CBO, the Congressional Budget Office. They take a look at 
the bill, and they score whether the bill is fully paid for. If it is 
not fully paid for, then it is arguable, of course, the taxpayers may 
end up picking up some of the bill in the outyears, which would 
undermine the purposes of the reserve fund.
  The initial response from CBO, which was sent to the chairman of the 
committee, Chairman Specter, essentially said they don't know. They 
estimate the potential income to the fund is about $140 billion. That 
is the number talked about around here. The potential administrative 
cost of the fund is about $10 billion, but they are not sure whether 
the claims will exceed $130 billion. If they exceed $130 billion, 
theoretically taxpayers might become liable; if not, the taxpayers 
would not become liable. So they essentially said they don't know. 
Since they are dealing with outyear numbers, it is, to some degree, 
guesswork.
  We have not seen the final product, but the final product was 
delivered to CBO last night. They are now rescoring it. I don't know 
what they are going to say. They may come back and say, yes, it is 
clearly outside the revenues and, therefore, taxpayers may end up with 
it. They may come back and say, no, clearly it is not the final 
version. Or, again, they might say they really can't tell.
  Again, as referee, I have to look at this information and make a 
decision. My inclination is that if there is no clear one-way-or-the-
other call from CBO, that it either, A, is under, in which case clearly 
we would release, or B, it is over, in which case we clearly would not 
release. If they are, rather, of the opinion this is too far out and 
too difficult to call and are dealing in a range of $10 billion, which 
they were in their first letter, then it would probably be unfair--to 
stop this bill on that point of order--to the bill, to the manager, and 
to the people who believe they have a right to get a fair hearing on 
this bill. But that final decision has not been made.
  There are three other points of order, however, that lie whether or 
not this point of order is made ripe. Those three other points of order 
are still potentially there. There has been representation that these 
points of order are technical. They are not. At least one of them 
certainly is not because it was put in place to address the issue of 
one Congress binding later Congresses to major programmatic activity.
  We will address those as we go down the road. However, I did want to 
update people generally on where this specific point of order relative 
to the reserve fund lies because there has been a lot of representation 
in the press, as occasionally happens, that has been a little bit off 
target.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Pennsylvania.
  Mr. SPECTER. Mr. President, I had hoped to engage in a short colloquy 
with the Senator from Texas on his amendment, but I had to leave the 
floor for a moment or two. I want to make a couple of very brief 
points--and I will elaborate on them more extensively later--and that 
is the medical criteria bill does not do anything for the employees of 
companies which have gone bankrupt. There are some 77 of those, and 
more imminently, so that we have a large group of people suffering from 
mesothelioma and other deadly, serious diseases who will not be 
compensated.
  Then we have the veterans who have had exposure to asbestos in a 
variety of ways, a lot through Government work, where they do not have 
anybody to sue. So a medical criteria bill will not help them.
  Then we have basic consideration of the medical criteria bill that 
does not really take these cases out of the court system. It does not 
stop the suits from being filed. It does not stop the extensive 
discovery process, the depositions, the interrogatories, the medical 
examinations. When we deal with the question as to injury, it is 
subject to contest and subject to litigation. So the medical criteria 
bill is a diversion--I wouldn't call it a poison pill because I don't 
want to engage in any inflammatory language, but it does not do what 
the trust fund does, and that is provide a remedy for compensation for 
thousands of very seriously ill people.
  While I am on the Senate floor, I want to take up one other point 
briefly while the Senator from Illinois is on the floor. He has made an 
argument--an extensive argument--about knowing who is going to put up 
the money.
  When I pointed out yesterday that the lists were available to him to 
know who is putting up the money, that his staff, in fact, had looked 
at them, he then shifted his ground from not knowing who was putting up 
the money to the specious argument that they were secret from the 
public in general and that there is some effort to conceal something 
which, of course, is not the case.

  Then on a mutation, he moves from that to a contention that these 
people who had to be subpoenaed have written the bill because somehow 
they have provided some information as to how much money is going to be 
put up, which goes into the bill.
  I don't think I require any extensive reply to that. I think of my 
sister Shirley in Elizabeth, NJ, who likes the Senator from Illinois, 
as I do--sometimes--pointed out to me that she could see through those 
arguments. But not making the materials available beyond the Senator 
and the staff--and I can see they ought to be able to copy them--I will 
stand by that--so that Senator Durbin doesn't have to look at them, his 
staff can look at them, copy them, and show them to Senator Durbin, all 
within the range of confidentiality. But that doesn't mean there is 
some secret being kept from the American people, not as long as Dick 
Durbin knows what they are; he will protect the American people. 
Frankly, so will Arlen Specter protect the American people. But it 
doesn't mean these sinister forces have written the bill because the 
bill was written by the committee. Senator Durbin is on the committee. 
He helped write the bill. He made amendments. I think some were even 
adopted. I won't swear to that. I know one was and then it was changed 
when we finally understood what it was. We adopted one in about 4 
minutes one day--right?--and then we had to change it when we found out 
what it really was. We do that from time to time.
  I have taken a look at the issue of confidentiality because I 
reserved that yesterday during the discussion. I find there are a 
couple of provisions that are very problematic. One is section 1905 of 
title 18 of the United States Code which makes it an offense--and I am 
not sure what, with the abbreviated version I have here, the penalties 
are, but it prohibits any officer or employee of the United States to 
divulge information--I will have this printed in the Record--``which 
information concerns or relates to trade secrets, processes, 
operations, style of work, or apparatus,'' et cetera.
  It is hard to interpret it without doing some more research, but I 
think it may well cover this.
  There is also a Senate rule, rule XXIX(5), which relates to 
prohibition against any Senator, officer, or employee of the Senate 
disclosing secret or confidential business proceedings of the Senate. 
It does not appear on its face to conclusively cover these kinds of 
records, but it may. It may be part of the records of the Senate. But I

[[Page S886]]

think there is more than a colorable prohibition against disclosure on 
confidentiality. At least at this time, I wouldn't rule it out 
completely. I would like to have maximum disclosure, frankly, if it can 
be done consistent with the law and consistent with the rules of the 
Senate and consistent with fairness to the companies which provided the 
information.
  Mr. President, I ask unanimous consent that this document entitled 
``FAIR Act Transparency,'' which includes the references to which I 
just alluded, be printed in the Record at the conclusion of my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. DURBIN. Mr. President, will the Senator yield for a question?
  Mr. SPECTER. I do.
  Mr. DURBIN. Mr. President, is the Senator prepared today to tell us 
who prepared this list, the entity he had to subpoena to get the 
information about how the trust fund will be funded?
  Mr. SPECTER. I am prepared to have the Senator told because I don't 
have it at my fingertips. But I am prepared to have that information 
given to the Senator from Illinois. Yes.
  I yield the floor.

                               Exhibit 1

                         FAIR Act Transparency

       Funding is guaranteed. The $140 billion in defendant 
     participant contributions to the Fund under the FAIR Act are 
     guaranteed by the manufacturers and industry.
       Certification. The fund cannot be deemed operational until 
     the Fund Administrator publishes a list of defendant 
     participants and their required payments in the Federal 
     Register.
       Senator Durbin's assertions that outside groups wrote the 
     FAIR Act is flat wrong. S. 852 creates an allocation formula 
     whereby contributions are based directly on a manufacturers 
     ``prior asbestos expenditure'' in the tort system. This was a 
     FORMULA created and drafted by SENATORS. Our Congressional 
     subpoena was directed at the corporations to identify, by 
     computing their ``prior asbestos expenditure'' what tiers of 
     the funding formula they would fall into.
       Process. I have met with many Senators individually 
     including, at different times, Senator Cornyn (4/12/05) and 
     Senator Feinstein (5/10/05) on the issue of transparency. The 
     Judiciary Committee issued three subpoenas in an effort to 
     learn more about the companies likely to pay into the Fund 
     created by the FAIR Act. The subpoenas were dispatched 
     between September 30 and December 1 to groups representing 
     companies on both sides of this bill.
       These transparency efforts led to the creation of a 
     spreadsheet with the names and anticipated tier assignments 
     of companies. The staff came up with their estimates based 
     upon publicly available information included in SEC filings 
     and data gathered through hundreds of phone calls. In light 
     of this information, Judiciary Staff held at least two 
     transparency briefings, the first of which occurred on 
     October 7, 2005.
       All Senators and their staff can view a list compiled now. 
     This list is confidential because it includes confidential 
     information from businesses.
       Confidentiality. In issuing the subpoenas and making 
     telephone calls, my office informed companies that the 
     information obtained would be held confidential pursuant to 
     Rule XXIX of the Standing Rules of the Senate and under 18 
     U.S.C. 1905. Rule XXIX (5) of the Standing Rules provides:
       ``[a]ny Senator, officer, or employee of the Senate who 
     shall disclose the secret or confidential business or 
     proceedings of the Senate, including the business and 
     proceedings of the committees, subcommittees, and offices of 
     the Senate, shall be liable, if a Senator, to suffer 
     expulsion from the body; and if an officer or employee, to 
     dismissal from the service of the Senate, and to punishment 
     for contempt.''
       Similarly, Section 1905 of Title 18 of the United States 
     Code provides:
       Whoever, being an officer or employee of the United States 
     . . . divulges, discloses, or makes known in any manner . . . 
     any information coming to him in the course of his employment 
     or official duties or by reason of any examination or 
     investigation made by, or return, report or record made to or 
     filed with, such department or agency or officer or employee 
     thereof, which information concerns or relates to the trade 
     secrets, processes, operations, style of work, or apparatus, 
     or to the identity, confidential statistical data, amount or 
     source of any income, profits, losses, or expenditures of any 
     person, firm, partnership, corporation, or association; . . . 
     . shall be fined under this title, or imprisoned not more 
     than one year, or both; and shall be removed from office or 
     employment.
       In light of the foregoing, the Senate Judiciary Committee 
     reiterates what we have said from the beginning of this 
     exercise: we are prepared to share the spreadsheet with any 
     Senator or designated member of their staff. The staff may 
     even make a copy of the spreadsheet so long as they sign an 
     acknowledgement form indicating they understand the 
     information is to remain confidential pursuant to Rule XXIX 
     and 18 U.S.C. 1905.

  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Mr. President, I thank the Senator from Pennsylvania, and 
I say with genuineness that I respect him more often than not. I go 
beyond ``sometimes'' which he said of me, and say I respect him more 
often than not. I respect his great work on this issue. This is not 
easy.
  What the Senator is trying to do is nothing short of revolutionary. 
He wants to close down the court system of America for hundreds of 
thousands of individuals who otherwise would go to court, to a judge or 
a jury, and ask for fair compensation for their injuries.
  The Senator from Pennsylvania has decided that system is wrong or 
inadequate or broken and has suggested that we are going to do away 
with the court system in America for these victims and create a brand 
new system.
  That is a daunting task. I am not sure, given the 2 or 3 years that 
the Senator has put into it, that I could even come up with a 
suggestion that I would have confidence would work.
  This is what we know about the trust fund and the system we are being 
asked to vote for in the Senate.
  First, the cost of this is being estimated over a period of 50 years. 
Over 50 years, what are we likely to pay to those Americans who have 
been injured and died from asbestos exposure? If you will follow some 
of the best prophets and predictors in Washington, you will find them 
woefully inadequate to predict what is going to happen next year, let 
alone in 50 years.
  So I have challenged the Senator from Pennsylvania and those in his 
corner, including my friend, the Senator from Vermont, Mr. Leahy, to 
tell me where you came up with the figure of $140 billion. The response 
we have been given is: Why, that is what Senators have been talking 
about for a long time, $140 billion.
  I think that falls short of the kind of certitude that we should have 
before we close down the court system of America to hundreds of 
thousands of injured people and their families.
  The second question I asked yesterday, which we again explored today, 
is; Who is going to pay for this? Who is going to provide the $140 
billion, if it is not the taxpayers, to pay the people who were 
injured?
  I am afraid today the Senator from Pennsylvania continues along the 
same line of reasoning. Someone--an undisclosed company--which he has 
promised he will now tell me, some undisclosed private entity decided 
which businesses in America would pay into this trust fund and how much 
they would pay. A curious thing: I don't know who contacted this 
private group to create this information. It is certainly essential to 
this concept of a trust fund. But the group that created the 
information was so loathe to share it with the Congress which is 
considering this bill that the chairman of the committee had to 
subpoena the information from the company that created it for his bill 
which we are now considering.

  It is a strange process. On the one side, the chairman of the 
committee would rely on this private company to determine who will pay 
into the trust fund and how much they will pay, and then having relied 
on them to write this bill to close down our court system for millions 
of Americans exposed to asbestos, he couldn't get the information from 
them unless he sent them a subpoena demanding it under his power of the 
Judiciary Committee. At some moment in time, they produced it. Then 
when it came in, this information, essential to know whether this trust 
fund will work, it turns out it was marked ``committee confidential.''
  I have been around the Senate for a few years. I was on the 
Intelligence Committee. I know when things are marked classified and 
top secret and confidential, it is clear that they are secret. They are 
not to be shared with the public. But what is it about this bill and 
who is going to pay into it that is so classified and so confidential 
and so secret that the American people have no right to know? That is 
the question I asked yesterday. Because if we are going to say to 
millions of Americans and their families: Give up your day in court, 
what has been your constitutional and legal right for the 200-plus 
years America has been in existence; give it up, trust us, we will

[[Page S887]]

create a trust fund that is going to be more fair and more generous, 
shouldn't we share with the American people the basic information that 
was used to create this alternative to a day in court?
  No. The chairman comes before us today and tells us he thinks it is 
illegal, it may be illegal, it may even violate Senate rules to share 
this information.
  I struggle with it because I think this gets to the heart of the 
matter. If we cannot justify the cost of this trust fund over 50 years, 
if we cannot say to the American people: ``Here is how it will be paid 
for,'' then I am afraid we are asking too much. We are asking them to 
walk away from their American-given right for redress in our courts for 
a trust fund that cannot be explained, a trust fund that was created by 
some private company that did not even want to share the information 
that led to its creation. That is not a confidence builder.
  Despite my admiration for the chairman of the committee--and it is 
truly something I would say on this floor without reservation. He is a 
man I respect very much, in a variety of ways, for his service in the 
Senate. Despite that, this bill should not be passed. This bill, which 
will literally change the system of justice in America, should not be 
passed on such a flimsy foundation.
  A moment ago, the Senator from New Hampshire, the chairman of the 
Budget Committee, came to the floor and made an interesting statement. 
He said he will rely on the Congressional Budget Office to determine 
whether this trust fund will work. But if the Congressional Budget 
Office comes back and says: We don't know, we can't tell you--maybe it 
will and maybe it will not--I think I heard the Senator from New 
Hampshire say that is good enough. If they say it will not work, OK. 
But if they are not sure, that is good enough.
  Is it good enough? Is it good enough for the millions of Americans 
who are counting on us not to take away their rights as American 
citizens to go to court when a wage earner and his or her family have 
been exposed to asbestos, unwillingly, unknowingly exposed and now 
cannot breathe and has a limited amount of time left on this Earth and 
believes that the company that sold the asbestos product should be held 
responsible and accountable--is it good enough for us to say: No, we 
are not going to let you go to court any longer?
  Is it fair for us to say to the housewife who--and this is a real 
case; I am not making this up--who literally had a husband who worked 
in the asbestos industry, brought home his work clothes, piled them up 
in the laundry room, and before she stuck them in the washer she shook 
his clothes, not knowing that she was breathing in asbestos fibers, and 
she contracted mesothelioma, the deadly lung disease from asbestos, 
simply by being exposed that much--is it wrong for us to say she should 
not hold a company such as W.R. Grace and Company responsible for the 
fact that for more than 70 years they refused to disclose the danger of 
this asbestos fiber to their workers and people who used their 
products?
  I know how I feel about it. All we are asking is that that family 
have a chance to argue their point of view in a court and let a jury of 
that woman's neighbors and peers decide what is fair and what is just. 
That is what is at issue here; to close the courthouse door to her and 
her family and say, no, you can no longer go before the courts of 
America, the courts of your State, you have to go to a trust fund, a 
trust fund that may get around to considering your claim, may end up 
paying your claim--all of these possibilities.
  I am also troubled by the fact that when you take a hard look at this 
trust fund of $140 billion over 50 years, you realize what is going to 
happen as soon as this bill passes. Should it pass, there will be a 
rush of people filing under the trust fund, asbestos victims. Why? 
Because the instant this bill is signed into law, anyone who has a 
claim pending in American courts is stopped. They cannot move forward. 
They cannot take their case any further. If they are not arguing their 
case in trial before a jury or a judge, they are finished; closed down 
and stopped. They could have the trial scheduled that they have been 
working for years to start next week, and they are finished the day 
this bill is signed.
  What will they do--all that work, all that preparation, gathering all 
the medical records? They will start over. Sick people, dying people in 
America will start over, filing the paperwork for the new system. We 
expect a lot of them, if this bill passes, to rush in and say: Pay us, 
for goodness sakes. We have been working at this for years. Why 
wouldn't they do that?
  As they do, they will swamp the system. This trust fund is not 
designed to collect all this money from all these corporations and 
insurance companies in a hurry. It collects it over a 30-year period of 
time. So at the outset, if the trust fund is going to actually pay the 
victims, they have to borrow money to do it.
  We have had some calculations that if they borrow the money to pay 
the claims in a timely fashion, more than a third of the $140 billion 
trust fund will be spent on interest payments for borrowed money--more 
than a third: $52 billion will be spent over the life of this trust 
fund.

  When the Senator from Pennsylvania addressed this issue the other 
day, he was brutally frank and candid. What would we do if we ran out 
of money? What would happen if $140 billion did not compensate all the 
asbestos victims we know are out there? I have to say over the course 
of the history of asbestos that we have underestimated the potential 
claimants time and time again. What happens if $140 billion does not 
work? The Senator from Pennsylvania came to the floor and said: We will 
adjust the payments to the victims; the medical criteria for 
eligibility. In layman's language, we will cut the victims' 
compensation.
  When the Senator comes to the floor and suggests that an alternative 
from the Senator from Texas will leave some people in the lurch, it may 
not be as inclusive as the underlying bill, I hope he will recall his 
own words on the floor when he said if $140 billion is not enough, 
those same victims will be shortchanged and will receive less.
  I am going to close at this moment and say, as I said at the outset, 
the Senator from Pennsylvania accepted a Herculean assignment to try to 
replace the court system in America. If you are going to do that for 
hundreds of thousands and maybe millions of Americans, it is a task 
that many Senators would never accept. I salute him for trying. But I 
say in all honesty that, as we stand here today, this will not work. 
This trust fund will fail.
  It will not be the first time a legislative effort will fail. Many of 
our efforts do. We try our best, but we are human. Men and women try to 
create laws that will make America better. Sometimes they do and 
sometimes they don't. The Medicare prescription drug plan, Part D, is a 
good indication of something that doesn't work. It was passed 2 years 
ago by this Senate and the House, was signed by the President--2 years 
to get ready to get 40 million Medicare recipients into prescription 
drug coverage, which we all support, and we created a system which has 
been nothing short of a disaster, an unsalvageable fiasco. So our best 
efforts will leave some poor senior citizens without the drugs they 
need and many others completely confused and perplexed by this 
bureaucratic mess we created called the Medicare prescription drug 
plan, Part D.
  I think we will learn our lesson quickly, and I hope we change that 
law. But think about this law. What if we get this law wrong? What if 
we say to thousands of American families with someone deathly ill in 
their home: You are finished in court. Walk away from all of your 
efforts for compensation. Trust us that we will create a new system 
that will be as just and even more fair than the court system in 
America.
  If we are wrong on that one, if we make a mistake on that one, the 
human suffering and misery that will result goes far beyond what we 
have seen on the Medicare prescription drug plan, Part D.
  I don't think it is worth the risk. I think we ought to look at this 
in more modest terms and honest terms and realize that a trust fund 
whose total amount we cannot justify, from sources that are still on a 
secret list that cannot be seen by the American public, is not the best 
way to go.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Pennsylvania.

[[Page S888]]

  Mr. SPECTER. Mr. President, when the Senator from Illinois talks 
about doing it in an honest way--we have done that. We have been 
honest.
  When he talks about, if we make a mistake, there will be a lot of 
human suffering, there is a lot of human suffering right now. It would 
be hard to structure a substitute system which would have more human 
suffering than you have now. We are looking at a system which is 
totally debilitating and decimating, with the courts clogged and with 
thousands of people suffering from deadly diseases and not being 
compensated.
  When the Senator from Illinois makes a reference to saluting me for 
trying, I appreciate salutes of any kind, but I am looking to the 
possibility of a salute for succeeding. I don't know how this debate is 
going to turn out or what is going to happen in the final vote. But I 
do know that for more than 3 decades, nobody has been able to bring a 
bill to the floor and nobody has been able to move past a determined 
effort by the minority to block this bill with a filibuster.
  When that effort failed late in the afternoon on Tuesday, they wanted 
to withdraw the motion, and we defeated it very soundly.
  The Senator from Illinois says I have undertaken a Herculean 
assignment. It is a Herculean problem. I wish Hercules was around to 
handle it. I would be glad to defer to Hercules were he here.
  When the Senator from Illinois refers to cutting payments, that does 
not happen unless the Congress agrees. When the administrator evaluates 
the trust fund and finds that there may be insufficient funds to pay 
the claims, the administrator then reports to a committee of 20, 
selected by the leaders of the House and Senate, and then they make a 
recommendation to the Congress.
  So it isn't a cut without having congressional action. As wise as we 
may think we are today, there will be Senators here into the indefinite 
future; we hope forever. They will have the wisdom, they will make a 
judgment, and they will have the determination as to what payments are 
going to be made. So it is not an automatic or easy cut in payments.
  Bear in mind that the basic remedy is to go back to the tort system, 
to go back to court. So the claimants are no worse off under the tort 
system than they are today, if no plan is adopted.
  The Senator from Illinois has repeatedly challenged the establishment 
of the trust fund of $140 billion. Yesterday, he referenced a letter 
which he sent to me to which he has not gotten an answer. I checked 
about the letter and I checked about what we did about the questions 
raised in the letter, and the answer was we had a briefing 2 days 
later. We answered the questions, not by written letter but by a more 
detailed statement from a briefing.
  When the Senator talks about the $140 billion which was established, 
all the information was available in that briefing, and still is to the 
Senator from Illinois about projections based upon experience with 
asbestos.
  When we talk about the Bates White report, that has been thoroughly 
refuted. They took into account people such as manicurists and taxi 
drivers who did not have an occupational exposure to asbestos.
  The Congressional Budget Office came up with an analysis of Bates 
White, and left the Bates White report in ruins. We had a detailed 
hearing on that as we have had every time an issue has arisen.
  The Congressional Budget Office then issued a supplemental report 
showing that Bates White was wrong and their initial figures were 
correct. On page 8 of the report submitted by the Congressional Budget 
Office, dated August 25, 2005, they have a chart where it supplements 
their analysis that there could be costs in the range of $120 billion 
to $150 billion, and then they come to a net conclusion of the 
projection at $132 billion. These are projections; they are not 
guesses; they are not speculations; but they are not mathematics, 
either. They are based upon the best information available and they are 
judgment calls.
  In the letter from the Congressional Budget Office dated December 19, 
they included this statement after analyzing a great number of factors:

       The final outcome cannot be predicted with great certainty.

  I don't know what can be predicted with great certainty. I know for 
many years I was a district attorney prosecuting criminal cases and 
handled first-degree murder cases. The death penalty is imposed in 
America is if it is proved beyond a reasonable doubt. But on a level of 
great certainty, that is not an attainable level, and I would say 
almost in any field of human endeavor. I don't want to be too expansive 
in that assertion, but great certainty is not something you come by in 
the ordinary affairs of men and government.
  Mr. DURBIN. Mr. President, will the Senator yield for a question?
  Mr. SPECTER. Yes.
  Mr. DURBIN. Through the Chair, I wish to ask the Senator if he would 
agree with the following: If we can't say beyond a reasonable doubt or 
great certainty, if we reach the point where $140 billion is 
inadequate, and it cannot compensate as we called for in this bill, is 
it not true at that point there are only three options? One option is 
to go back to the businesses that contributed to the trust fund and ask 
for more; the second is for the Government to assume the liability; and 
the third is to reduce the payments to the victims as called for in the 
existing legislation.
  Is there another option I am missing?
  Mr. SPECTER. Mr. President, the answer to the first question is no. 
The answer to the second question is yes. OK?
  Mr. DURBIN. Would the senator be kind enough to give me a few more 
words? I know he has a lot.
  Mr. SPECTER. I do not know if it is possible for this Senator to give 
a few words. I will try.
  The answer is no, those are not the only options. The answer is yes, 
there is another option. The ``yes'' answer is to go back to the tort 
system. Senator Biden offered that amendment in July of 2003. I am on 
it because it seemed to me that claimants should not bear the risk of 
the failure of the trust fund, and in this bill you go back to the tort 
system. So the claimants are no worse off than they are now.
  Mr. President, these letters may be part of the Record, but I want to 
be sure they are.
  I ask unanimous consent that the letters from the Congressional 
Budget Office, dated August 25, 2005 and December 19, 2005, be printed 
in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                  Washington, DC, August 25, 2005.
     Hon. Arlen Specter,
     Chairman, Committee on the Judiciary,
     U.S. Senate, Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office has 
     prepared the enclosed cost estimate for S. 852, the Fairness 
     in Asbestos Injury Resolution Act of 2005.
       If you wish further details on this estimate, we will be 
     pleased to provide them. The CBO staff contacts are Mike 
     Waters (for federal costs), Barbara Edwards (for revenues), 
     and Paige Piper/Bach (for the private-sector impact).
           Sincerely,
                                              Douglas Holtz-Eakin,
                                                         Director.
     S. 852--Fairness in Asbestos Injury Resolution Act of 2005
       Summary: S. 852 would establish the Asbestos Injury Claims 
     Resolution Fund (the Asbestos Fund) to provide compensation 
     to individuals whose health has been impaired by exposure to 
     asbestos. Under the bill, the Administrator of a new Office 
     of Asbestos Injury Claims Resolution (the Office) within the 
     Department of Labor would administer the Asbestos Fund and 
     manage the collection of federal assessments on certain 
     companies that have made expenditures for asbestos injury 
     litigation prior to enactment of this legislation. A separate 
     Asbestos Insurers Commission would allocate other payment 
     obligations among insurers with asbestos-related obligations 
     in the United States. The Asbestos Fund also would absorb all 
     private asbestos trust funds already existing at enactment. 
     Under the bill, individuals affected by exposure to asbestos 
     could no longer pursue awards for damages in any federal or 
     state court and would submit claims to the Administrator, who 
     would then evaluate such claims and award compensation 
     according to criteria and amounts specified in the 
     legislation.
       CBO estimates that net receipts and expenditures of the 
     Asbestos Fund would increase projected budget deficits over 
     the 2006-2015 period by about $6.5 billion (excluding debt 
     service costs).
       We expect that sums paid into the fund would be treated in 
     the budget as federal revenues and that amounts expended to 
     pay claims and administer the fund would be considered new 
     federal direct spending. During periods when surplus amounts 
     would be collected by the fund, CBO assumes that

[[Page S889]]

     most of its assets would be invested in nongovernmental 
     securities. The net cash flows associated with such 
     investments would also be direct spending.
       Over the 2006-2015 period, we estimate that payments to 
     eligible claimants, start-up costs, investment transactions, 
     and administrative expenses would total nearly $70 billion. 
     Over the same 10-year period, we estimate that the fund would 
     collect about $63 billion from firms and insurance companies 
     with past asbestos liability and certain private asbestos 
     trust funds.
       Consequently, we expect the Administrator of the fund would 
     need to exercise the borrowing authority authorized under the 
     bill to meet the fund's obligations during this period. 
     Assuming enactment of S. 852 by the end of calendar year 
     2005, CBO estimates that almost $8 billion would be borrowed 
     during the first 10 years.
       To evaluate the long-term financial viability of the fund, 
     CBO projected cash flows over the life of the fund--assumed 
     to be about 50 years--using a variety of assumptions about 
     the number, type, and timing of future claims likely to be 
     submitted to the fund, and alternative assumptions about 
     future inflation and interest rates. The legislation is 
     designed to produce collections totaling about $140 billion 
     over the first 30 years. CBO expects that the value of valid 
     claims likely to be submitted to the fund over the next 50 
     years could be between $120 billion and $150 billion, not 
     including possible financing (debt-service) costs and 
     administrative expenses. The maximum actual revenues 
     collected under the bill would be around $140 billion, but 
     could be significantly less. Consequently, the fund may have 
     sufficient resources to pay all asbestos claims over the next 
     50 years, but depending on claim rates, borrowing, and other 
     factors, its resources may be insufficient to pay all such 
     claims.
       A more precise forecast of the fund's performance over the 
     next five decades is not possible because there is little 
     basis for predicting the volume of claims, the number that 
     would be approved, or the pace of such approvals. 
     Epidemiological studies of the incidence of future asbestos-
     related disease and the claims approval experience of private 
     trust funds set up by bankrupt firms can be used to indicate 
     the range of experience of the federal asbestos trust fund 
     might face, but those sources cannot reliably indicate the 
     financial status of the fund over such a long time period.
       CBO estimates that the fund would face more than half of 
     all anticipated claims expenses in its first 10 years, while 
     it would receive roughly constant collections from insurers 
     and defendant firms over its first 30 years. This conclusion 
     is consistent with other forecasts that we have reviewed. 
     Because expenses would exceed revenues in many of the early 
     years of the fund's operations, the Administrator would need 
     to borrow funds to make up the shortfall. The interest cost 
     of this borrowing would add significantly to the long-term 
     costs faced by the fund and contributes to the possibility 
     that the fund might become insolvent. Under the provisions of 
     section 405, the fund would have to stop accepting new claims 
     (a process known as ``sunset'') if its current and future 
     resources become inadequate to fulfill all existing and 
     anticipated obligations, including its debt obligations.
       Pursuant to section 407 of H. Con. Res. 95 (the Concurrent 
     Resolution on the Budget, Fiscal Year 2006), CBO estimates 
     that enacting S. 852 would cause an increase in direct 
     spending greater than $5 billion in at least one 10-year 
     period from 2016 to 2055.
       S. 852 contains two intergovernmental mandates as defined 
     in the Unfunded Mandates Reform Act (UMRA), but CBO estimates 
     that the cost of complying with those mandates would be 
     insignificant and well below the threshold established in 
     that act ($62 million in 2005, adjusted annually for 
     inflation).
       S. 852 would impose new private-sector mandates, as defined 
     in UMRA, on certain individuals filing claims for 
     compensation for injuries caused by exposure to asbestos; 
     certain companies with prior expenditures related to asbestos 
     personal injury claims; certain insurance companies; trusts 
     established to provide compensation for asbestos claims; 
     health insurers; and persons involved in manufacturing, 
     processing, or selling certain products containing asbestos. 
     Based on information from academic, industry, government, and 
     other sources, CBO concludes that the aggregate direct cost 
     to the private sector of complying with all of the mandates 
     in the bill would well exceed the annual threshold 
     established by UMRA ($123 million in 2005, adjusted annually 
     for inflation).
       Estimated Cost to the Federal Government: The estimated 
     budgetary impact of S. 852 over the 2006-2015 period is shown 
     in Table 1. The effects of this legislation fall within 
     budget functions 600 (income security) and 900 (interest). 
     CBO estimates that the bill would have little net effect on 
     the budget over the first five years but would add about $6.5 
     billion to deficits from 2011 through 2015. (The longterm 
     budgetary impact of the bill is discussed in the section 
     following the ``BASIS OF ESTIMATE'' section.)
       Basis of Estimate: For this estimate, CBO assumes that S. 
     852 will be enacted by the end of calendar year 2005. Based 
     on information from the Department of Labor, we expect that 
     the Asbestos Fund could become fully operational during 
     fiscal year 2007 and that certain pending exigent asbestos 
     claims would be paid by the fund in 2006.
       CBO expects that the fund's assessments on firms and 
     insurers would be treated in the budget as revenues and that 
     payments to satisfy claims would be considered direct federal 
     spending. In addition, because the Administrator would be 
     authorized to invest the fund's balances, certain cash flows 
     associated with investments in nongovernmental financial 
     instruments also would be reflected in the budget. 
     Specifically, under the Administration's current procedures 
     for budget presentation, government funds invested in 
     nongovernmental financial instruments are recorded as 
     expenses (outlays), and the redemption of such investments is 
     recorded as a receipt (negative outlay). Under the bill, any 
     noncash assets received from 4 existing private asbestos 
     bankruptcy trust funds (such as the Manville Trust) would 
     have no budgetary impact until they were liquidated by the 
     Administrator. At that point, both the assets and any gains 
     or dividends on those assets would be recorded on the budget 
     as revenues.

                                                     TABLE 1.--ESTIMATED BUDGETARY IMPACT OF S. 852
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          By fiscal year, in billions of dollars
                                 -----------------------------------------------------------------------------------------------------------------------
                                     2006        2007        2008        2009        2010        2011        2012        2013        2014        2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDING
 
Claims and Administrative
 Expenditures of the Asbestos
 Fund:
    Estimated Budget Authority..        8.7        21.9        11.1         5.3         5.3         5.3         5.0         4.9         4.7         4.6
    Estimated Outlays...........        8.7         5.6         8.4         9.5        10.8         6.7         5.2         5.1         5.0         4.8
Investment Transactions of the
 Asbestos Fund:
    Estimated Budget Authority..          0         1.1           0           0        -1.0        -0.2           0           0           0           0
    Estimated Outlays...........          0         1.1           0           0        -1.0        -0.2           0           0           0           0
Total Direct Spending:
    Estimated Budget Authority..        8.7        23.0        11.1         5.3         4.3         5.1         5.0         4.9         4.7         4.6
    Estimated Outlays...........        8.7         6.7         8.4         9.5         9.8         6.5         5.2         5.1         5.0         4.8
 
                                                                   CHANGES IN REVENUES
 
Collected from Defendant Firms..        2.9         2.9         2.9         2.9         2.9         2.9         2.9         2.9         2.9         2.9
Collected from Insurer                  1.3         4.1         5.0         5.0         5.0         1.1         1.1         1.1         1.1         1.1
 Participants...................
Collected from Bankruptcy               4.5           0         0.4         1.6         1.6           0           0           0           0           0
 Trusts\1\......................
    Total Estimated Revenues....        8.7         7.0         8.4         9.5         9.6         4.0         4.0         4.0         4.0         4.0
 
                                                                 CHANGES IN THE DEFICIT
 
Estimated Net Increase or                 0        -0.3           0           0         0.3         2.5         1.2         1.1         0.9        0.8
 Decrease (-) in the Deficit
 from Changes in Revenues and
 Direct Spending................
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ CBO estimates the total value of cash and financial assets of the asbestos bankruptcy trust funds would be $7.5 billion in 2006 and $8.1 billion
  when liquidated. The federal budget would record the cash value of those trust assets when they are liquidated by the Administrator to pay claims. CBO
  estimates that assets of asbestos bankruptcy trust funds would not be fully liquidated until 2010.
Note: Numbers in the table may not add up to totals because of rounding.

       To estimate the cost of processing claims, CBO reviewed 
     prior government experience with similar compensation funds 
     and operations of privately run asbestos funds. We also 
     discussed the potential costs of administering the fund with 
     the Department of Labor. To estimate the number and types of 
     claims the Asbestos Fund would receive and when they would be 
     received, CBO reviewed a number of projections of asbestos 
     injury claims that were prepared for different purposes by 
     several private groups and individuals, including those 
     developed by the Asbestos Study Group, Navigant Consulting, 
     the National Association of Manufacturers, and Legal Analysis 
     Systems during consideration of this bill and of similar 
     legislation considered by the 108th Congress. In addition, we 
     studied the history of claims paid and projections of those 
     anticipated to be paid by the Manville Trust and considered 
     the inaccuracy of past projections of future asbestos injury 
     claims. Finally, to determine whether the Asbestos Fund could 
     be expected to collect the amount of assessments from 
     defendant companies and insurance companies that are 
     anticipated in the legislation, CBO examined financial 
     information for some of the public companies that would 
     likely be contributors to the fund and the reserves held by 
     insurance companies for asbestos claims.
       Direct spending: To estimate the amount and timing of new 
     direct spending under S.

[[Page S890]]

     852, CBO considered the cost of administering the Asbestos 
     Fund and the length of time it would take following enactment 
     for the fund to be fully operational and processing claims. 
     We projected the number of claims that would be submitted to 
     the fund over the 2006-2015 period, including those claims 
     that have been filed or will be filed in federal or state 
     courts or with existing trusts but not settled by the time 
     the bill is enacted (these claims are known as pending 
     claims). To estimate the cost of paying valid claims 
     submitted to the fund, we considered the number of claims 
     likely to be submitted by persons with malignant and 
     nonmalignant medical conditions due to asbestos exposure. We 
     also estimated the net disbursements and receipts associated 
     with the fund's investment activity. Finally, we considered 
     the borrowing that might be required in each year in order 
     for the fund to pay claims.
       Administration and Start-up of the Asbestos Fund. Based on 
     the cost of operating existing government compensation funds, 
     the operation of privately run asbestos trusts, and 
     information from the Department of Labor, CBO estimates that 
     administration of the Asbestos Fund would require a staff of 
     over 700 employees for the 2006-2015 period, costing a total 
     of nearly $1 billion over 10 years. Such administrative costs 
     would be paid from the Asbestos Fund and would not require 
     further appropriation action. For this estimate, CBO expects 
     that the Office would start accepting claims in 2006, shortly 
     after enactment. During the first three years of operation, 
     CBO estimates that the Office would receive around 185,000 
     claims per year, but that this number would fall to an 
     average of around 60,000 for the next seven years, once all 
     currently pending claims are resolved by the fund.
       Individuals seeking compensation from the Asbestos Fund 
     would need to file a claim with the Office within the time 
     specified by the legislation (five years from the date of 
     enactment for pending claims or five years from the date of 
     diagnosis for future claims). The Administrator would then 
     have 90 days to present a proposed decision concerning the 
     appropriate award according to the medical criteria and 
     awards values specified in the legislation. If the claimant 
     chooses to accept the award, the Administrator would issue a 
     final decision, and the Asbestos Fund would pay the claimant 
     over the next one to four years. A claimant could appeal a 
     decision by the Administrator within 90 days of its issuance 
     by requesting either a hearing or a review of the written 
     record. In those cases, a decision on the appeal would be 
     required within either 180 days or 90 days, respectively.
       Under the bill, any claim pending on the date of enactment 
     would be stayed, unless it were already before a court. Of 
     the stayed claims, exigent claims (defined by S. 852 as those 
     claims brought by a living claimant with either mesothelioma 
     or less than one year to live, or by the spouse or child of a 
     claimant who died after either filing of his or her claim or 
     enactment of the bill) would receive the earliest attention 
     by the Administrator. Within 60 days of receipt, the 
     Administrator would be required to either approve or 
     disapprove such a claim as exigent. The bill would require 
     the Administrator to pay exigent claims within one year for 
     cases of mesothelioma, and in no more than two years for all 
     other exigent claims.
       CBO expects that the fund would not be fully operational 
     until at least a year following enactment of the legislation. 
     Even after appointing an Administrator and Insurers 
     Commission, this start-up period would be needed to 
     promulgate detailed operating rules and procedures and to 
     recruit, hire, and train personnel to process claims and 
     manage the fund's operations. (The Energy Employees 
     Occupational Illness Compensation Program--a similar federal 
     fund serving a much smaller population--took slightly more 
     than a year to become fully operational.) During this start-
     up period, the Administrator and the Insurers Commission 
     would also need to collect financial information from 
     thousands of firms and insurers that have made prior 
     expenditures for asbestos injury claims to set appropriate 
     assessment rates for those insurers and firms.
       Payments to Claimants. To estimate the cost of paying 
     compensation claims under the bill, CBO reviewed projections 
     of asbestos injury claims that were presented to the Senate 
     Committee on the Judiciary during its consideration of S. 852 
     and for similar legislation considered by the 108th Congress. 
     Such projections were based on a combination of 
     epidemiological data, projections of disease incidence for 
     the affected population, historical experience of bankruptcy 
     trusts, and projections of the number of injured that 
     would apply for compensation given the bill's medical 
     criteria and compensation award values.
       S. 852 defines nine levels of medical impairment that 
     persons exposed to asbestos have suffered and specifies a 
     dollar amount of compensation that the fund would pay to 
     individuals who demonstrate both adequate exposure to 
     asbestos and specified medical conditions. Over time, those 
     award values would be adjusted for inflation. For the lung 
     cancer levels, the bill stipulates different awards, 
     depending on whether a claimant, currently or in the past, 
     does or does not smoke tobacco. (For example, claimants 
     having lung cancer with asbestosis would qualify for 
     compensation under level VIII; awards at this level would 
     range from $600,000 to $1.1 million, depending on the 
     claimant's history of tobacco use.)
       To estimate the cost to the fund of compensating claimants, 
     CBO considered four categories--future claims that would be 
     made by individuals with malignant conditions, future claims 
     that would be made by those with nonmalignant conditions, and 
     claims pending on the date of enactment of the bill for both 
     malignant and nonmalignant conditions. As detailed below, CBO 
     used information from available projections and studies to 
     estimate the number of claims in each category that would 
     qualify for compensation under the medical conditions 
     specified in the bill. Individuals who are eligible for an 
     award would receive payments from the fund over a one- to 
     four-year period. For this estimate, we assumed that payments 
     for nonexigent claims would be spread equally over a four-
     year period. We assume that claims pending for mesothelioma 
     at the time the bill is enacted would represent the exigent 
     claims and would be paid in 2006.
       Table 2 summarizes the number of claims and total award 
     value for those claims that CBO projects for each category of 
     claims under the legislation.
       Pending claims. Individuals who have an outstanding claim 
     with any firm filed in a court on the date of enactment of S. 
     852 would have five years to submit a claim for compensation 
     from the fund. CBO estimates that, over the first five years 
     that the fund is operational, more than 320,000 pending 
     claims would receive an award from the fund.
       There is no comprehensive information regarding the numbers 
     and types of asbestos injury claims that individuals have 
     filed in federal and state courts or with existing trusts 
     under current law. Nor is there reliable information on the 
     numbers and award values of such claims that are settled each 
     year. In 2003, Navigant Consulting prepared an estimate of 
     the number and type of asbestos injury claims then pending in 
     federal and state courts. That information was collected to 
     inform the consideration of legislation similar to S. 852 in 
     the 108th Congress.

                         TABLE 2.--SUMMARY OF ESTIMATED ASBESTOS CLAIMS AND AWARD VALUES
----------------------------------------------------------------------------------------------------------------
                                                      Initial 10-year period               Life of fund
                                                 ---------------------------------------------------------------
                                                                  Award Value of                  Award Value of
                                                     Number of      claims (in       Number of      claims (in
                                                      claims        billions of       claims        billions of
                                                                     dollars)                        dollars)
----------------------------------------------------------------------------------------------------------------
Pending Claims for:
    Malignant Conditions........................          21,000              14          21,000              14
    Nonmalignant Conditions.....................         301,000              11         301,000              11
                                                 ---------------------------------------------------------------
        Total Pending Claims....................         322,000              25         322,000              25
Future Claims for:
    Malignant Conditions........................          42,000              34          78,000              74
    Nonmalignant Conditions.....................         620,000              16       1,184,000              32
                                                 ---------------------------------------------------------------
    Total Future Claims.........................         662,000              51       1,262,000             106
    Total for All Claims........................         984,000              76       1,585,000             132
----------------------------------------------------------------------------------------------------------------

       For this estimate, CBO used the information collected by 
     Navigant in 2003 and adjusted the data to reflect 
     developments since then. Using projections about the number 
     of claims expected to be filed in 2004 and 2005 and 
     assumptions about the pace of settlements for asbestos injury 
     cases, we concluded that the number of pending cases in 2006 
     is likely to be larger than estimated in 2003--about 7 
     percent larger.
       For this estimate, CBO did not take into account the number 
     of claims that are still technically pending with at least 
     one company but have been inactive for several years. If the 
     claimants' lawyers actively seek out those individuals to 
     file a claim against the fund, the number of claimants 
     seeking compensation from the fund in the first four years 
     could be significantly higher. An award from the Asbestos 
     Fund for such individuals would be reduced by the value of 
     any other awards received for a given claim. CBO estimates 
     that the average award from the fund over the 2006-2015 
     period for pending malignant claims would be about $650,000 
     and

[[Page S891]]

     that awards for such claims would total $14 billion. We 
     estimate that awards for pending nonmalignant claims would 
     average around $38,000; total awards for those claims would 
     be $11 billion over the next 10 years.
       Future claims for malignant conditions. CBO examined 
     several projections of malignancies associated with asbestos 
     exposure. While all of those projections included claimants 
     with asbestos exposure and lung cancer but with no evidence 
     of pleural disease or asbestosis, such claimants would 
     receive no compensation under S. 852. CBO assumes that the 
     total number of claims for malignant conditions that would be 
     compensated by the fund would be near the average of the 
     various projections we examined (excluding those lung cancer 
     claimants who would not be eligible for compensation). 
     Adjusting for the time that has elapsed since the performance 
     of the studies that we examined, those studies varied from 
     65,000 to 100,000 claims for malignant diseases that would be 
     compensated by the Asbestos Fund. This estimate assumes that 
     there would be about 78,000 such claimants. We distributed 
     those cases across the categories of malignant diseases 
     specified in the bill based on the various projections and on 
     the historical distributions of such claims received by the 
     Manville Trust. On this basis, CBO estimates that the average 
     award for malignant conditions over the next 10 years would 
     be $800,000 and that the total value of awards for such 
     conditions over that period would reach $34 billion.
       Future claims for nonmalignant conditions. The different 
     projections available to CBO of the number of nonmalignant 
     cases and their distribution among the categories specified 
     in the bill vary greatly. CBO expects that the ratio of 
     nonmalignant claims to malignancies under the bill would be 
     similar to the historical ratio of claims compensated by 
     existing bankruptcy trusts. For example, since 1995, the 
     Manville Trust has received an average of eight claims for 
     nonmalignant conditions for every claim for a malignant 
     condition. Based on those historical data and because 
     nonmalignant claimants could receive larger awards under S. 
     852 than those provided by existing trust funds, CBO 
     estimates that during the first 10 years after enactment, the 
     fund would compensate, on average, 10 new claims for 
     nonmalignant conditions for every new malignancy (including 
     claimants exposed to asbestos with lung cancer who would not 
     be eligible for compensation under the bill). CBO expects 
     that this ratio would decrease over time because of 
     reductions in the use of and exposure to asbestos. (Other 
     analysts have estimated the ratio of claims for nonmalignant 
     conditions to malignancies to be as low as 7:1 or as high as 
     17:1.) In total, CBO anticipates about 1.2 million future 
     claims for nonmalignant conditions.
       CBO estimates that around 85 percent of claims for 
     nonmalignant conditions filed with the Asbestos Fund would be 
     eligible for medical monitoring reimbursement (level I) from 
     the fund. Such reimbursement, roughly $1,000, is the lowest 
     rate of payment specified for nonmalignant conditions. This 
     claims estimate is based on available research involving a 
     sample of the exposed population with nonmalignant conditions 
     and the history of claims filed with the Manville Trust. To 
     evaluate the history of such claims, CBO reviewed the trust's 
     estimate of how claims received under its 1995 trust 
     distribution process (TDP) would have been compensated under 
     the 2002 TDP. (The later TDP contains categories for 
     nonmalignant conditions more similar to those under S. 852.) 
     Overall, CBO estimates that, over the next 10 years, the 
     average payment for nonmalignant conditions would be about 
     $26,000 and total awards for such conditions would amount to 
     $16 billion.
       Investments of the Asbestos Fund. Section 222 would 
     authorize the Administrator to invest amounts in the fund to 
     ensure that there are sufficient sums to make payments to 
     claimants. That section appears to imply that the fund's 
     Administrator could invest surplus amounts in private 
     securities. For this estimate, CBO assumes that the managers 
     of the fund would keep 20 percent of the investments in 
     Treasury securities and 80 percent in non-Treasury 
     securities. The current budgetary treatment of federal 
     investments in non-Treasury instruments is specified in the 
     Office of Management and Budget's (OMB's) Circular A-11, 
     which states that the purchases of such securities should be 
     displayed as outlays and the sales of such securities and 
     returns, such as dividends and interest payments, should be 
     treated as offsetting receipts or collections.
       CBO estimates that investing 80 percent of fund balances in 
     private securities would result in net receipts of $200 
     million over the 2006-2015 period. The fund would make net 
     investments in 2007, when its collections would exceed its 
     expenditures. In subsequent years when expenditures would 
     exceed collections, the difference would be made up by 
     drawing down assets from the fund, starting with any assets 
     received from other asbestos trust funds. Liquidated assets 
     and earnings from private trust funds would be considered 
     revenue in the federal budget, while the value of assets 
     privately invested by the Administrator would be recorded as 
     offsetting receipts upon liquidation.
       For this estimate, CBO used its projections of the return 
     on Treasury securities to predict investment earnings of the 
     fund for both private securities and government securities. 
     Although private securities may well yield higher gains over 
     the long term, such investments carry much greater risk than 
     government securities. The difference between projected 
     returns on private securities and government bonds can be 
     seen as the cost investors must be paid to bear the 
     additional risk of holding private securities instead of 
     government bonds. Thus, adjusted for the additional cost of 
     risk associated with private securities, the net expected 
     returns on private securities are the same as those on 
     government securities.
       Revenues. Receipts to the fund would come from three 
     sources: defendant companies that have spent more than $1 
     million on asbestos injury litigation, insurance companies 
     that have made more than $1 million in such payments, and 
     existing private trust funds formed to settle asbestos 
     claims. Over the life of the fund, defendant companies would 
     be expected to contribute $90 billion, less any credits 
     granted for the establishment of private bankruptcy trust 
     funds set up after July 31, 2004 (known as bankruptcy trust 
     credits); insurance companies would be called upon to 
     contribute just over $46 billion, less bankruptcy trust 
     credits. CBO is aware of one bankruptcy trust that would be 
     eligible for such credits--the Halliburton Bankruptcy Trust. 
     CBO estimates that the bankruptcy trust credits of defendant 
     companies would total $2.4 billion over the 30-year period, 
     or $80 million per year, with the credits being apportioned 
     to all defendant companies based on their share of the total 
     amounts of payments for the year. Insurers would have an 
     estimated $1.5 billion in bankruptcy trust credits; those 
     credits would go to the insurers who paid into trusts set up 
     after July 31, 2004. All assets of existing asbestos trusts 
     (about $7.5 billion) would be transferred to the fund.
       Defendant companies. Section 202 would specify $90 billion, 
     less any bankruptcy trust credits under section 222, as the 
     amount to be collected from defendant companies. The minimum 
     aggregate annual payment would be $3 billion, less any 
     bankruptcy credits. CBO estimates that annual payments would 
     total $2.9 billion over 30 years. For the purpose of 
     determining each firm's contribution, each one is assigned to 
     a tier based on its prior asbestos expenditures and whether 
     it is in bankruptcy proceedings.
       The actual amounts paid by firms might differ from that 
     implied by their tier assignments because the bill would 
     allow certain exemptions for small businesses and 
     modifications of assessments, based on financial distress or 
     inequity or based on whether a firm meets the criteria for 
     being classified as a distributor. The bill also would allow 
     the Administrator to increase the amount that defendants 
     would pay if the total payments fall short of the minimum 
     aggregate annual payment amount.
       The defendants' contributions could decline over the 30-
     year period for two reasons. First, if more defendant 
     companies exist and make payments than CBO estimates, the 
     payments in the earlier years would exceed the minimum 
     required payment. Because the aggregate payments cannot 
     exceed $90 billion less bankruptcy credits (or a net of $87.6 
     billion), any excess amounts paid in earlier years would 
     reduce the amounts needed to be paid in the future years. 
     Second, the required total payments could decline in later 
     years if the Administrator determines that full payment is 
     not required, and each company's assessment would decline 
     proportionately.
       The amount the fund would collect from defendant companies 
     depends on a number of unknown factors:
       The number of subject companies and the tiers into which 
     they would fall;
       Which of those companies would be subject to exemption or 
     modification of their contributions and whether some 
     affiliated entities would elect to be treated separately or 
     jointly;
       The size and nature of the assets of firms in liquidation;
       The number and characteristics of subject firms that may go 
     into bankruptcy during the assessment period; and
       How much funding is needed to satisfy claims and other 
     expenses of the fund.
       Some sources have indicated that as many as 8,400 firms may 
     have paid sufficient prior asbestos claims to be covered by 
     the legislation. CBO could not verify this figure. Based on 
     information that CBO could obtain about firms that have 
     incurred asbestos litigation expenses, we estimate that about 
     1,700 defendant firms would be required to make contributions 
     to the fund under the bill. It was possible to determine the 
     likely tiers for about 500 of those firms. The remaining 
     firms were assigned equally to the two lowest tiers, based on 
     the assumption that firms with unknown tier assignments were 
     those with lower asbestos claims payments. No reduction in 
     the number of firms was made for those exempt due to size. 
     Similarly, CBO made no upward adjustment to account for 
     defendant firms not identified.
       Tier I firms are firms that have filed for bankruptcy. 
     Revenues for tier I firms expected to emerge from bankruptcy 
     were obtained, where possible, from public sources. No 
     reliable information could be obtained about the possible 
     contributions of tier I firms that are likely to liquidate. 
     Firms that securities analysts expect to earn revenues in 
     2006 were assumed to make the required payments, and no 
     reduction in contribution was made for firms that would 
     receive hardship or inequity adjustments in their 
     contributions or for consolidated payments made by affiliated 
     groups.
       Insurers. Section 212 would specify just over $46 billion, 
     less any bankruptcy trust

[[Page S892]]

     credits, as the amount to be collected from insurers over a 
     28-year period. In the case of insurers, no allocation or 
     formula for payments is specified in the legislation, 
     although the legislation does specify how much in aggregate 
     would be collected for each of the 28 years. The bill would 
     create an Asbestos Insurers Commission to determine an 
     allocation among the insurance companies. The bankruptcy 
     trust credit would represent a dollar-for-dollar reduction in 
     the amount of liability an insurer would pay under the bill 
     for any contributions to bankruptcy trusts established after 
     July 31, 2004. CBO estimates that the value of the bankruptcy 
     trust credits would be $1.5 billion. Either the allocation 
     determined by the Asbestos Insurers Commission or one agreed 
     upon by the subject companies would determine how much each 
     insurer would pay of the $46 billion total.
       S. 852 would direct insurers to contribute an aggregate 
     initial payment of no more than 50 percent of the first 
     year's required $2.7 billion within 90 days after enactment. 
     The bill would authorize the Administrator to calculate the 
     initial payment obligations of insurers and handle other 
     matters related to the collection of the funds. However, the 
     initial payment amounts would not be considered final until 
     the Insurers Commission has been formed, promulgated its 
     allocation methodology, and issued its final determination of 
     liability of the insurers. Based on the procedural steps 
     specified in the bill, CBO expects that such determination 
     would be made in fiscal year 2007.
       The participating insurers would pay interest on any 
     difference between their ultimate liability and the amount of 
     the interim payment. Any insurers who paid more than their 
     ultimate liability would receive interest on the excess 
     amount. The bill specifies that the interest rate on any 
     overpayments or underpayments would be the same rate. CBO 
     estimates that the fund would be able to collect the initial 
     payment from insurers by the end of fiscal year 2006 and that 
     the demands on the fund for payments would prompt the 
     Administrator to seek to collect the maximum allowed for the 
     initial payment--50 percent of the first year obligation. CBO 
     further assumes that the remaining 50 percent of the first 
     year's payment would be collected in the second year with the 
     associated interest and the second year's contribution.
       Existing asbestos trust funds. Based on publicly available 
     information, CBO determined that the existing private trust 
     funds set up to compensate claimants currently contain about 
     $7.5 billion in assets. Under the bill, those assets would be 
     transferred to the new Asbestos Fund in the first year 
     following enactment. Until that transfer occurs, we assume 
     that claims paid by these funds would roughly equal 
     investment income. The assets of existing trusts are invested 
     in a variety of financial instruments, and only the cash and 
     U.S. obligations in these trusts would be recorded in the 
     federal budget as revenues of the government when 
     transferred. The private securities in the trusts (together 
     with any earnings) would be recorded as revenues only when 
     converted to cash or U.S. obligations.
       Based on the financial reports of the Manville Trust, CBO 
     estimates that 56 percent of transferred trust assets (about 
     $4.5 billion) would be recorded as revenues in 2006. For this 
     estimate, we assume that the remainder of the assets would 
     only be sold as needed to finance spending in later years. 
     The proceeds of those sales would be recorded as revenues to 
     the fund at that time.
       Offsets and guaranteed payment surcharge. The bill would 
     allow firms and insurers to reduce their individual 
     assessments by the value of any asbestos claims paid after 
     the enactment date of S. 852 and before 2007, when CBO 
     expects the fund's full operations would start. It also would 
     authorize certain payments by subject companies to guarantee 
     collection of the mandated amounts. For the purpose of this 
     estimate, CBO assumes that these provisions would have no net 
     effect on annual payments by firms and insurers.
       Offsets for exigent claims paid during start-up of the 
     Fund. In the interim between enactment of S. 852 and the time 
     when the fund would begin full operations, defendants and 
     insurers may settle or face judgments on exigent asbestos 
     claims that the fund is unable to process or pay. Firms and 
     insurers could use those settlement amounts as a dollar-for-
     dollar offset against their assessments, reducing the 
     payments required to be made to the fund.
       Guaranteed payment surcharge and guaranteed payment 
     account. The Administrator of the fund could impose on each 
     defendant participant a surcharge to offset any shortfalls in 
     the annual aggregate payment amounts. If the payments by 
     defendant participants exceed the minimum aggregate annual 
     payment of $3 billion, less bankruptcy trust credits, the 
     excess amount, up to $300 million, would be set aside in the 
     guaranteed payment account as a form of self-insurance by the 
     fund, with any excess funds being carried forward to the next 
     year. For this estimate, CBO assumed that the Administrator 
     would assess a surcharge on all firms when necessary. If the 
     funds in the guaranteed payment account are insufficient to 
     ensure that the minimum annual payment is raised in any year, 
     the Administrator of the fund would be able to levy a 
     guaranteed payment surcharge on the defendant participants on 
     a pro rata basis.
       Secondary effects on other revenue sources. The payments 
     made by defendants and insurers and the sums received by 
     claimants could affect taxable income under the federal 
     corporate and individual income tax systems. This cost 
     estimate includes no effects of those transactions on federal 
     income taxes paid by claimants or businesses. Those secondary 
     effects are likely to be insignificant in any event.
       Payments made into the fund would be tax-deductible and 
     would thus reduce the corporate income tax liability of 
     participating firms. But in the absence of this legislation, 
     firms would have to pay asbestos damages set in the courts, 
     which would also be tax-deductible. It is impossible to say 
     with any confidence whether the amounts that would be paid 
     out by defendant firms and insurers under this legislation 
     would be higher or lower than what they would expend in its 
     absence through the tort system. The best assumption under 
     the circumstances is that the bill would have no significant 
     effect on corporate taxable income or on the government's 
     receipts from corporate income taxes.
       Similarly, the tax treatment of payments received by 
     claimants would be unchanged from what it is now--effectively 
     excluded from taxable income and therefore having no effect 
     on taxes paid by individuals. There might be some reduction 
     in income tax receipts if a significantly larger proportion 
     of payments goes to claimants rather than to their attorneys, 
     who would pay tax on the income. But this would depend on 
     whether more claimants think they can navigate the new system 
     set up under the legislation without legal assistance than is 
     the case under the existing one--a circumstance that cannot 
     be known. CBO expects that any change in the allocation of 
     awards between attorneys and claimants would be too small to 
     significantly affect income tax receipts.
       Budgetary impact of the Asbestos Fund after 2015: To assess 
     the long-term financial viability of the Asbestos Fund, CBO 
     considered several possible projections of the fund's cash 
     flows beyond the normal 10-year estimate of the legislation's 
     budgetary impact. When estimating such cash flows, the 
     provisions of section 405 are critical. That section of the 
     bill would sunset the fund's operations by directing the 
     Administrator to reject new claims if the fund's resources 
     (including borrowing authority) prove inadequate to pay 
     additional obligations. Under S. 852, claimants could seek 
     compensation in federal courts if the fund were to sunset. In 
     determining whether or not to sunset, the Administrator would 
     consider the unpaid costs of any approved claims and previous 
     borrowing against future revenues. Section 405 also would 
     require the Administrator to return remaining assets to 
     certain nongovernmental trust funds--but only in the event of 
     a sunset.
       CBO estimates that total receipts to the Asbestos Trust 
     Fund over its lifetime would amount to about $140 billion, 
     including a small amount of interest earnings on its 
     balances. We estimate that the fund would be presented with 
     valid claims worth between $120 billion and $150 billion in 
     addition to any financing (debt-service) costs and 
     administrative expenses. Under the legislation, receipts to 
     the fund would be fairly evenly distributed over its first 30 
     years. However, even if receipts exceed claims, CBO estimates 
     that more than half of the fund's expenditures for claims 
     would be paid in the first 10 years of its life. Such an 
     imbalance between when the fund's anticipated claims payments 
     would be made and when receipts would be collected would 
     require the Administrator to borrow to pay claims. Under the 
     bill, the borrowed amounts (including interest costs) would 
     have to be repaid from the fund's own budgetary resources.
       Depending upon the precise timing and value of claims 
     presented to the fund as well as the exact revenue collected, 
     investment returns, and interest rates, the fund might or 
     might not have adequate resources to pay all valid claims. 
     For example, if the value of valid claims totaled $130 
     billion, interest costs on the fund's borrowing might amount 
     to $10 billion, and interest earned on investments could 
     approach $2 billion, while administrative costs would add 
     another $1 billion to $2 billion. If the value of such claims 
     were significantly more than $130 billion, the fund's 
     revenues might be inadequate to pay all claims.
       Because of the uncertainty and sensitivity of the variables 
     that affect the fund's balances, any long-term projection 
     over five decades must be viewed with considerable caution. 
     Operating the Asbestos Fund would be an entirely new 
     governmental task, and CBO and other analysts have little 
     basis for judging how the Administrator would implement 
     the legislation. The discretion available to the 
     Administrator and insurance commission with respect to the 
     allocation of costs, provision of adjustments, and levying 
     of surcharges makes the flows into and out of the fund 
     hard to predict with much reliability. Furthermore, the 
     projections that have been made in recent decades of the 
     number of asbestos claims likely to be filed were, in 
     hindsight, much too low, suggesting that there might be a 
     significant risk of underestimating the number of future 
     asbestos claims. In addition, receipts to the Asbestos 
     Fund would depend on the continued viability of the firms 
     required to pay into it, which is also uncertain.
       The Asbestos Fund's operations are uncertain: Contributing 
     to the uncertainty of the cost to resolve claims under the 
     bill are some significant features of the claims process that 
     would only be defined after enactment of the legislation. For 
     instance, the bill

[[Page S893]]

     would require the Institute of Medicine of the National 
     Academy of Sciences to conduct a study to examine the causal 
     link between asbestos exposure and cancers other than lung 
     cancer or mesothelioma. If that study were to determine no 
     causal link between asbestos exposure and any of those 
     cancers, the number of claims for such conditions (level VI 
     under the bill) could decline significantly. The bill would 
     also require the Agency for Toxic Substances and Disease 
     Registry (ATSDR) to conduct a study to determine if any other 
     contaminated sites pose dangers similar to those observed in 
     Libby, Montana. Because claimants from Libby would receive 
     higher minimum awards than other claimants and because the 
     bill would mandate similar treatment for any sites so 
     identified, the costs could rise depending upon which sites 
     might be judged similar to Libby and on how many claimants 
     would be affected. Also, this estimate does not take into 
     account the impact of approving any exceptional medical 
     claims, which are claims that do not fit into the defined 
     criteria but which might still receive compensation depending 
     upon the findings of specific panels of physicians. It is 
     difficult to assess how many such claims might be filed and 
     how liberally those panels might rule on the claims.
       Past estimates of the number and value of Asbestos claims 
     have been inaccurate: Forecasts of asbestos claims made over 
     the past decade have failed to accurately predict the 
     magnitude, scope, and evolution of asbestos claims. According 
     to one witness that testified on similar legislation 
     previously before the committee, ``in every instance where 
     companies or trusts have attempted to project future asbestos 
     claims, they have always seriously underestimated.'' Most 
     estimates of future claims rely on a combination of 
     epidemiological information and statistical estimation 
     techniques using historical data. Such models contain a 
     number of potential sources of error in forecasting.
       In 1988, experts estimated that the number of future claims 
     against the Manville Trust would range from 50,000 to 
     200,000. By January of 1991, the trust had already received 
     more than 171,000 claims. Through the summer of 2005, the 
     Manville Trust had received 690,000 claims. The most recent 
     claims forecast performed for the trust estimated that the 
     trust may receive up to 1.4 million additional claims.
       CBO's estimates of the number and distribution of claims 
     that would be compensated by the Asbestos Fund under S. 852 
     are based on forecasts similar to those that have been 
     prepared for the Manville Trust. Therefore, it is possible 
     that the number of claims that would be compensated under S. 
     852 could deviate in significant respects from our estimates 
     in terms of cost, timing, or both.
       Revenue collections are uncertain: The revenue stream that 
     would be generated by the legislation is highly uncertain. 
     Although the aggregate amount of the levy on defendant firms 
     and insurers is fixed over the first 30 years, a number of 
     factors described earlier make it difficult to project the 
     annual receipts with much reliability.
       First, identifying the defendant participants and where 
     they would fall in the different payment tiers is difficult, 
     if not impossible, without legislation requiring the 
     information to be disclosed. (Tier placement directly affects 
     the amount a defendant company would pay into the fund.) Many 
     of the prior asbestos settlements were made outside of the 
     court system and, as such, are not public record. This lack 
     of information means that the number of defendant companies 
     in each tier and the resulting payments could be either 
     higher or lower than the numbers used in preparing this 
     estimate.
       If the number of defendants is significantly higher than 
     assumed in this estimate and if claims remain at or about the 
     level estimated, the likelihood of insufficient funding 
     available to settle claims would be reduced. At the end of 
     the first 10 years, if excess monies existed, the 
     Administrator could decrease the payments required by the 
     defendants by up to 10 percent.
       Similar stepdowns in payments could also occur after 15, 
     20, and 25 years should funding exceed claims levels 
     sufficiently to warrant such a reduction.
       To determine the impact of a significantly higher number of 
     defendant companies making payments, CBO estimated the 
     revenues and the resulting effects on cash flow if there were 
     an additional 650 companies in each of the two lowest tiers. 
     This scenario would result in approximately 3,000 defendant 
     companies paying into the fund and, assuming that the number 
     of claims projected by CBO is correct, the fund would be able 
     to pay all claims projected by CBO and there would be no 
     early sunset due to lack of funds to pay claims.
       Conversely, significantly fewer defendant participants who 
     meet the criteria for payments under this bill would result 
     in higher levies on the existing defendant participants to 
     ensure the minimum aggregate annual payment of $3 billion 
     less bankruptcy trust credits. This continuing drain on 
     firms' resources could lead to more bankruptcies and even 
     higher levies on the remaining firms.
       Thirty years is a long time-span for a business. Even under 
     ordinary conditions, economic circumstances lead many firms 
     to liquidate over time. Normal attrition will be exacerbated 
     by the costs of dealing with asbestos liability--either under 
     the current system of litigation or under the legislation 
     itself. The legislation's provisions for adjustments based on 
     inequity or financial distress might mitigate business 
     bankruptcies, but at the cost of even greater uncertainty in 
     the value of the fund's future revenue stream. The 
     legislation also would allow the Administrator to impose a 
     surcharge to guarantee payment of amounts that some firms 
     would be unable to pay. The success of this surcharge 
     depends, in turn, on estimating the attrition among firms.
       The bill proposes no absolute deadlines concerning the 
     establishment of the Asbestos Insurers Commission. Some of 
     the tasks involved in promulgating a methodology and 
     producing final billings to the insurers are well defined and 
     have specific time frames, while time frames for other 
     activities are not clearly specified. CBO expects that 
     appointing and confirming the five members and establishing 
     the final allocation methodology for participating insurers 
     would take at least 12 months. If the process were to take 
     longer, it could delay the payments from insurers and 
     possibly necessitate more borrowing than CBO has projected.
       Federal liability if the trust fund's resources are 
     inadequate to pay claims: So long as the fund's Administrator 
     does not borrow from the U.S. Treasury beyond the means of 
     the fund to repay such borrowing, the government's general 
     funds would not be used to pay claims. Furthermore, section 
     406 states that the legislation would not obligate the 
     federal government to pay any part of an award under the bill 
     if amounts in the Asbestos Fund are inadequate.
       Estimated long-term direct spending effects: Pursuant to 
     section 407 of H. Con. Res. 95 (the Concurrent Resolution on 
     the Budget, Fiscal Year 2006), CBO estimates that enacting S. 
     852 would cause an increase in direct spending greater than 
     $5 billion in at least one 10-year period from 2016 to 2055.
       Estimated impact on state, local, and tribal governments: 
     S. 852 contains two intergovernmental mandates as defined in 
     UMRA. First, it would preempt state laws relating to asbestos 
     claims and prevent state courts from ruling on those cases. 
     Second, the bill would require state governments to comply 
     with requests for information from the Asbestos Insurers 
     Commission. CBO estimates that any cost associated with this 
     mandate would be insignificant and well below the threshold 
     established in that act ($62 million in 2005, adjusted 
     annually for inflation).
       The bill would authorize $15 million from the Asbestos 
     Trust Fund for state, local, and tribal governments to 
     monitor and remedy naturally occurring asbestos. Any related 
     costs to those governments would be incurred voluntarily as a 
     condition of receiving federal aid.
       Estimated impact on the private sector: S. 852 would impose 
     new private-sector mandates, as defined in UMRA, on:
       Certain individuals filing claims for compensation for 
     injuries caused by exposure to asbestos;
       Certain companies with prior expenditures related to 
     asbestos personal injury claims;
       Certain insurance companies; Trusts established to provide 
     compensation for asbestos claims;
       Health insurers; and
       Persons involved in manufacturing, processing, or selling 
     certain products containing asbestos.
       Based on information from academic, industry, government, 
     and other sources, CBO concludes that the aggregate direct 
     cost to the private sector of complying with all of the 
     mandates in the bill would well exceed the annual threshold 
     established in UMRA ($123 million in 2005, adjusted annually 
     for inflation) during the first five years those mandates 
     would be in effect. CBO cannot determine the direction or 
     magnitude of the net impact of the bill's mandates on 
     claimants, defendant companies, or insurance companies over 
     the long term.
       Asbestos injury claims: The bill would prohibit an 
     individual from bringing or maintaining a civil action 
     alleging injury due to asbestos exposure. Currently, 
     individuals can file asbestos injury claims against any 
     number of defendants in state or federal court. Under S. 852, 
     individuals would only be able to receive compensation for 
     asbestos-related injury by filing a claim with the federal 
     Asbestos Fund established by the bill. A claimant would be 
     able to recover from the fund if that person could meet the 
     bill's medical criteria, which are based on the severity of 
     the asbestos-related disease. Claims pending as of the date 
     of enactment would be stayed, except for certain pending 
     civil actions.
       Some individuals who would receive compensation under 
     current law would not be qualified to receive compensation 
     under the bill. Further, some individuals would receive more 
     compensation for their asbestos injury claims under current 
     law, while others would receive more if S. 852 is enacted. 
     The direct cost of the mandate to claimants would be the 
     difference between the total settlements and judgments that 
     would be obtained under current law and the compensation that 
     would be obtained by claimants under S. 852.
       Based on information from academic, industry, and other 
     sources, CBO assumes that claimants who would be deemed 
     ineligible for compensation under the bill would be 
     predominantly from the ``unimpaired'' category. Because 
     comprehensive data relating to asbestos exposure, litigation, 
     and compensation are not available, it is difficult to 
     predict the number of claimants who would receive 
     compensation and the amount of the settlements they would 
     receive under current law. Unimpaired claimants historically 
     receive multiple settlements of a few thousand dollars each 
     from as many as half-a-

[[Page S894]]

     dozen defendants. According to several expert sources, 
     settlements for unimpaired claimants may range in value from 
     $3,000 to $50,000 per claimant. Also, according to several 
     sources, a large proportion of claims currently pending could 
     have their settlements precluded or delayed under the bill.
       Further, experts predict that many individuals would 
     probably receive less compensation in the first five years 
     under S. 852 than under current law. Consequently, CBO 
     expects that the direct cost to claimants of complying with 
     this mandate could amount to hundreds of millions of dollars 
     over the 2006-2010 period.
       Assessments on defendant companies: Section 202 would 
     impose a new mandate on defendant participant companies, 
     defined in the bill as certain companies with prior 
     expenditures related to asbestos personal injury claims. Such 
     defendant companies would be required to pay an annual 
     assessment to the Asbestos Fund totaling a minimum of $3 
     billion in each of the first five years, less any bankruptcy 
     trust credits. Defendant participants would be required to 
     pay over the life of the fund a total of not more than $90 
     billion, less any credits.
       Section 204 would require the Administrator of the Asbestos 
     Fund to impose a surcharge on each participant required to 
     pay contributions into the fund to make up for any shortfalls 
     in a given year due to nonpayment by some participants. The 
     amount of surcharge to be paid would be determined by the 
     Administrator. CBO expects that the Administrator would 
     assess a surcharge on all firms sufficient to compensate for 
     this loss and that the surcharge would be imposed 
     differentially on defendant companies to reflect their 
     different risks and to maintain their roughly equivalent 
     contributions. However, CBO expects that there would be no 
     surcharge on defendant companies during the first five years 
     of the mandate.
       The amount the fund would receive from defendant companies 
     would depend on a number of factors, including the number of 
     subject companies and the tiers into which they would fall. 
     Based on data from industry and other sources, CBO estimates 
     that the defendant companies would pay $2.9 billion per year 
     into the fund over the 2006-2010 period. According to 
     industry and academic sources, defendant companies in 
     aggregate currently pay asbestos litigation and settlement 
     costs on an annual basis close to the amounts that would be 
     required by the bill in the next five years. Thus, CBO 
     estimates that the incremental costs, if any, for those 
     companies to comply with those mandates would not be 
     significant over the first five years the mandates would be 
     in effect.
       Assessments on insurance companies: Section 212 would 
     impose a mandate on insurers with asbestos-related 
     obligations. The bill would require those insurance companies 
     to contribute to the fund, and specifies that their 
     contribution would satisfy their contractual obligation with 
     the defendant companies to compensate claimants for injuries 
     caused by asbestos. The bill does not, however, specify any 
     allocation or formula for such payments to the fund. The 
     amount of the contribution to the fund for individual 
     insurance participants would be determined by the Asbestos 
     Insurers Commission established under the bill.
       The aggregate contributions to the fund of all 
     participating insurers would average $2.7 billion in the 
     first and second year and $5 billion in years three through 
     five. Participating insurers would be required to pay over 
     the life of the fund a total of $46 billion, less any 
     bankruptcy trust credits. Based on information from industry 
     sources, CBO estimates that insurers would pay a total of 
     about $20.4 billion into the fund during fiscal years 2006 
     through 2010. According to industry information on asbestos 
     liability costs, insurance companies in aggregate would have 
     expected costs for asbestos claims under current law close to 
     the amounts that would be required by the bill over the next 
     five years. Thus, CBO estimates that the incremental costs 
     for those insurance companies to comply with the mandates 
     would not be significant over the 2006-2010 period.
       Asbestos settlement trusts: Section 402 would require 
     asbestos settlement trusts, established to provide 
     compensation for asbestos claims, to transfer their assets to 
     the Asbestos Fund no later than 90 days after the enactment 
     of the bill. Such a requirement is an enforceable duty, and 
     therefore, a mandate under UMRA. Based on information from 
     the trusts and industry sources, CBO expects that such trusts 
     would transfer approximately $7.5 billion in assets to the 
     fund in 2006. The cost to the trusts of the mandate for the 
     trusts in that year would be the value of the assets net of 
     amounts that the trusts would otherwise pay for compensation 
     and administrative costs in that year.
       Health insurance: Section 409 would impose a private-sector 
     mandate by prohibiting health insurers that offer a health 
     plan from denying, terminating, or altering coverage of any 
     claimant or beneficiary on account of participation in a 
     medical monitoring program under this bill or as a result of 
     any information discovered as a result of such monitoring. 
     This mandate would have no direct cost because such a medical 
     monitoring program does not exist under current law.
       Ban on products containing asbestos: Section 501 would 
     prohibit persons from manufacturing, processing, or 
     distributing in commerce certain products containing 
     asbestos. The bill would require the Administrator of the 
     Environmental Protection Agency, not later than two years 
     after the enactment of the bill, to promulgate final 
     regulations prohibiting commerce in such products (with some 
     exceptions). In addition, the bill would require persons who 
     possess a product for the purpose of commerce that is subject 
     to the prohibition, not later than three years after the 
     enactment of the bill, to dispose of that product by means 
     that meet federal, state, and local requirements. A number of 
     products and processes still use asbestos, including brake 
     pads and linings, roofing materials, ceiling tiles, garden 
     materials containing vermiculite, and cement products. 
     According to industry and government sources, products are 
     readily available to replace products containing asbestos, 
     and the disposal of such asbestos products would not be 
     difficult. Therefore, CBO expects that the direct cost of 
     complying with this mandate would not be large.
       Estimate prepared by: Federal Spending: Mike Waters and Kim 
     Cawley. Federal Revenues: Barbara Edwards. Impact on State, 
     Local, and Tribal Governments: Melissa Merrell. Impact on the 
     Private Sector: Paige Piper/Bach.
       Estimate approved by: Robert A. Sunshine, Assistant 
     Director for Budget Analysis. G. Thomas Woodward, Assistant 
     Director for Tax Analysis.
                                                    U.S. Congress,


                                  Congressional Budget Office,

                                Washington, DC, December 19, 2005.
     Hon. Arlen Specter,
     Chairman, Committee on the Judiciary,
     U.S. Senate, Washington, DC.
       Dear Mr. Chairman: As you requested, the Congressional 
     Budget Office (CBO) has studied the report prepared by Bates 
     White, LLC, concerning S. 852, the Fairness in Asbestos 
     Injury Resolution Act of 2005. In particular, you asked CBO 
     to evaluate the Bates White projection of the claims against 
     the proposed asbestos trust fund from individuals with lung 
     and other cancers (identified in the legislation as disease 
     levels VII and VI). In light of that evaluation, you also 
     asked whether CBO would modify the conclusions reached in its 
     August 25, 2005, cost estimate for S. 852.
       CBO has discussed the Bates White report with its authors 
     and officials of that firm. It has also met or spoken with a 
     number of other experts with varying views on the asbestos 
     legislation, including Judge Edward Becker, trial lawyers 
     with extensive experience in asbestos litigation, and 
     representatives of NERA Economic Consulting, the Asbestos 
     Study Group, the AFL-CIO, and Legal Analysis Systems. As a 
     result of that review and assessment process, CBO has reached 
     the following conclusions:
       The Bates White report contains no new information that 
     would cause CBO to revise its cost estimate.
       The Bates White report is not a cost estimate; its results 
     are therefore not directly comparable with those of the CBO 
     cost estimate. Bates White estimated the value of claims that 
     could be eligible for compensation; CBO estimated the value 
     of claims that would receive compensation. This distinction 
     is important because many potential claimants would probably 
     not file claims and not all of the claims filed would be 
     approved.
       Two elements of the Bates White analysis are particularly 
     important, and contribute significantly to its estimate of 
     potential costs. Bates White assumes that one eligibility 
     requirement in the legislation (weighted work-years of 
     occupational exposure) would not constrain potential claims; 
     Bates White also estimates a prevalence of pleural 
     abnormalities (an eligibility requirement for claimants with 
     lung and other cancers) that is higher than other researchers 
     believe is likely.
       The Bates White report highlights some factors that pose 
     potential risks to the financial viability of the asbestos 
     trust fund that S. 852 would establish--including the 
     possibility that the financial incentives created by the bill 
     could lead to a substantial number of claimants with disease 
     levels VII and VI. Those risks are real, but CBO believes 
     that claims of the magnitude suggested by Bates White are 
     unlikely to occur.
       After further reviewing S. 852, studying the Bates White 
     report, and consulting with a wide range of experts on 
     asbestos legislation, CBO reaffirms the findings presented in 
     its August cost estimate:
       The proposed trust fund might or might not have adequate 
     resources to pay all valid claims. There is a significant 
     likelihood that the fund's revenues would fall short of the 
     amount needed to pay valid claims, debt service, and 
     administrative costs. There is also some likelihood that the 
     fund's revenues would be sufficient to meet those needs. The 
     final outcome cannot be predicted with great certainty.
       CBO projects that the proposed fund would be presented with 
     valid claims worth between $120 billion and $150 billion, 
     excluding certain potential costs or savings that CBO could 
     not estimate; total costs would be higher because the fund 
     must also cover administrative expenses and any financing 
     costs. The revenues collected under the bill would be, at 
     most, about $140 billion, but could be significantly less. If 
     the value of valid claims was significantly more than $130 
     billion, the fund's revenues would probably be inadequate to 
     pay all claims.
       CBO could not estimate any costs or savings that might 
     result from several features or consequences of the 
     legislation. A number of those features could add to the cost 
     of the legislation. In particular, CBO's estimate does not 
     include potential claims by individuals with older, so-called 
     dormant, asbestos

[[Page S895]]

     claims pending in the court system, who might seek additional 
     compensation from the fund. It also does not encompass: 
     possible claims by family members of workers who were exposed 
     to asbestos; the costs of any exceptional medical claims that 
     could be made under the bill; the potential costs for 
     residents of other areas of the country who might be deemed 
     eligible to receive the same special treatment given to the 
     residents of Libby, Montana, under the legislation; and the 
     impact on costs of allowing CT scans to serve as 
     documentation of pleural abnormalities. On the other hand, 
     CBO's estimate does not reflect the possibility that medical 
     studies required by the legislation might preclude 
     individuals with certain diseases from obtaining compensation 
     from the fund.
       A more detailed discussion of CBO's review of the Bates 
     White report is enclosed. I hope this information is helpful 
     to you.
       If you wish further details on this analysis, we would be 
     happy to provide them. The CBO staff contact is Mike Waters.
       Sincerely,
                                              Douglas Holtz-Eakin,
                                                         Director.

  Analysis of Potential Claims Under S. 852, the Fairness in Asbestos 
                     Injury Resolution Act of 2005

       As requested by Senators Specter, Leahy, and Feinstein, the 
     Congressional Budget Office (CBO) has analyzed the report 
     prepared by Bates White, LLC, concerning S. 852, the Fairness 
     in Asbestos Injury Resolution Act of 2005, regarding the 
     potential cost of claims against the asbestos trust fund that 
     would be established by that act. In its cost estimate for 
     that legislation, dated August 25, 2005, CBO estimated that 
     the value of valid claims against the fund would total 
     between $120 billion and $150 billion. The Bates White 
     report, which was issued on September 19, 2005, suggested 
     that the cost of claims could be much greater.
       CBO has discussed the Bates White report with its authors 
     and officials of that firm. It has also met or spoken with a 
     number of other experts with varying views on the asbestos 
     legislation, including Judge Edward Becker, trial lawyers 
     with extensive experience in asbestos litigation, and 
     representatives of NERA Economic Consulting, the Asbestos 
     Study Group, the AFL-CIO, and Legal Analysis Systems. As a 
     result of that review and assessment process, CBO has reached 
     the following conclusions:
       The Bates White report contains no new information that 
     would cause CBO to revise its cost estimate.
       The Bates White report is not a cost estimate; its results 
     are therefore not directly comparable with those of CBO's 
     cost estimate. Bates White estimated the value of claims that 
     could be eligible for compensation; CBO estimated the value 
     of claims that would receive compensation. This distinction 
     is important because many potential claimants would probably 
     not file claims and not all of the claims filed would be 
     approved.
       Two elements of the Bates White analysis are particularly 
     important, and contribute significantly to its estimate of 
     potential costs. Bates White assumes that one eligibility 
     requirement in the legislation (weighted work-years of 
     occupational exposure) would not constrain potential claims; 
     Bates White also estimates a prevalence of pleural 
     abnormalities (an eligibility requirement for claimants with 
     lung and other cancers) that is higher than other researchers 
     believe is likely.
       The Bates White report highlights some factors that pose 
     potential risks to the financial viability of the asbestos 
     trust fund that S. 852 would establish--including the 
     possibility that the financial incentives created by the bill 
     could lead to a substantial number of claimants with disease 
     levels VII and VI. Those risks are real, but CBO believes 
     that claims of the magnitude suggested by Bates White are 
     unlikely to occur.
       After a careful review of the Bates White report and 
     further analysis of the legislation, CBO reaffirms the 
     findings presented in its August cost estimate:
       The proposed trust fund might or might not have adequate 
     resources to pay all valid claims. There is a significant 
     likelihood that the fund's revenues would fall short of the 
     amount needed to pay valid claims, debt service, and 
     administrative costs. There is also some likelihood that the 
     fund's revenues would be sufficient to meet those needs. The 
     final outcome cannot be predicted with great certainty.
       CBO projects that the proposed fund would be presented with 
     valid claims worth between $120 billion and $150 billion, 
     excluding certain potential costs or savings that CBO could 
     not estimate; total costs would be higher because the fund 
     must also cover administrative expenses and any financing 
     costs. The revenues collected under the bill would be, at 
     most, about $140 billion, but could be significantly less. If 
     the value of valid claims was significantly more than $130 
     billion, the fund's revenues would probably be inadequate to 
     pay all claims.
       CBO could not estimate any costs or savings that might 
     result from several features or consequences of the 
     legislation. A number of those features could add to the cost 
     of the legislation. In particular, CBO's estimate does not 
     include potential claims by individuals with older, so-called 
     dormant, asbestos claims pending in the court system, who 
     might seek additional compensation from the fund. It also 
     does not encompass: possible claims by family members of 
     workers who were exposed to asbestos; the costs of any 
     exceptional medical claims that could be made under the bill; 
     the potential costs for residents of other areas of the 
     country who might be deemed eligible to receive the same 
     special treatment given to the residents of Libby, Montana, 
     under the legislation; and the impact on costs of allowing CT 
     scans to serve as documentation of pleural abnormalities. On 
     the other hand, CBO's estimate does not reflect the 
     possibility that medical studies required by the legislation 
     might preclude individuals with certain diseases from 
     obtaining compensation from the fund.


               The Methodology of the Bates White Report

       The Bates White analysis of S. 852 is based on an 
     epidemiological analysis of the population employed in 
     industries with some potential exposure to asbestos. To 
     estimate how many claims could be presented to the fund under 
     S. 852 by individuals with both malignant conditions and 
     asbestos exposure, Bates White first estimated the size of 
     the population working in industries and positions in which 
     asbestos exposure was probable. Using estimates of the 
     lifetime incidence for individuals of developing lung and 
     other cancers that could be compensated under S. 852, the 
     authors estimated how many people could make such claims 
     under the bill by further estimating how many of those 
     individuals would develop pleural abnormalities. Evidence of 
     such abnormalities is one of the qualifying requirements for 
     compensation for disease levels VII and VI under S. 852.
       For one of the cost scenarios in the Bates White analysis, 
     the authors reported that they estimated that the value of 
     claims from all individuals that could seek compensation from 
     the fund would sum to $300 billion over the next several 
     decades. That figure does not include any costs or savings 
     from most of the same features of the bill, mentioned above, 
     that CBO could not quantify. Bates White also presented an 
     alternative estimate that includes some of those costs, 
     bringing the total value of potential claims to nearly $700 
     billion. Because the Bates White estimate of the value of 
     claims that could be presented to the fund far exceeds the 
     resources likely to be available to the fund, the authors 
     concluded that the fund would have to be terminated without 
     paying all valid claims.
       The Bates White estimate includes a large number of 
     potential claims against the asbestos trust fund from 
     individuals suffering from lung and other cancers, many of 
     which would not have been caused by exposure to asbestos. The 
     report's authors believe that such claims are significantly 
     under-represented in the experience to date in the tort 
     system and existing asbestos trusts. Nevertheless, CBO 
     remains convinced that the number of such claims that would 
     be submitted to the trust fund and approved for payment under 
     S. 852 would be far fewer than suggested by Bates White. In 
     CBO's judgment, the historical experience of the Manville 
     Trust and that trust's current projection of future claims 
     against it are a more reliable basis for estimating the 
     number of future valid claims that would be filed with the 
     asbestos fund under S. 852.


Comparing the Bates White Report on S. 852 and CBO's Cost Estimate for 
                                the Bill

       The Bates White report and the CBO cost estimate cannot be 
     directly compared because the estimates address different 
     questions. CBO estimated the value of valid claims that would 
     be presented to the fund's administrator. Bates White 
     estimated the value of claims that could be presented to the 
     administrator; its figures are not adjusted to indicate how 
     many individuals actually would seek and receive compensation 
     from the fund. If such adjustments were made, the Bates White 
     cost analysis might be much more in line with other estimates 
     of the likely cost for compensating claims for malignant 
     conditions.
       In attempting to answer different questions, the two 
     analyses used different methodologies. CBO's estimate relies 
     on the projections of claims from other analyses prepared 
     with regard to S. 852 and similar legislation. Those 
     projections are grounded, in part, on the historical 
     experience of claims paid by the Manville Trust. That 
     approach reflects the observation that the Manville Trust 
     receives claims from nearly all of the individuals that have 
     brought asbestos tort claims, and the expectation that it 
     provides a reasonable model to use for projecting the number 
     and types of future valid claims likely to be filed with the 
     asbestos trust fund that would be established under S. 852--
     particularly claims for malignant conditions.
       The Bates White analysis of S. 852 rejects the notion of 
     using the experience of the Manville Trust to project the 
     number of claims that could be made against the proposed 
     fund, because the authors observe that not all individuals 
     with malignant conditions that could make asbestos tort 
     claims choose to do so. Bates White notes that engaging in 
     tort litigation can be costly and burdensome, and that many 
     individuals with potential asbestos tort claims choose not to 
     make such claims. The authors expect that replacing the 
     asbestos tort system with the administrative settlement 
     process specified in S. 852 would encourage many of those 
     individuals with malignant conditions and asbestos exposure 
     to make claims against the federal asbestos fund. (Bates 
     White also estimates fewer claims for nonmalignant conditions 
     than CBO projects, but the financial

[[Page S896]]

     impact of that decrease is much smaller than the impact of 
     its much larger estimate of the number of claims for 
     malignant conditions.)


                 Evaluation of the Bates White Approach

       During the Senate Judiciary Committee's November hearing on 
     S. 852, several witnesses voiced concerns about the Bates 
     White estimate of the number of individuals with lung and 
     other cancers that could make claims for compensation under 
     S. 852. CBO has discussed many of these issues with Bates 
     White and others who have studied the legislation, and shares 
     some of those concerns. They include:
       Bates White may have overestimated the incidence of pleural 
     abnormalities. Pleural abnormalities are one of the 
     conditions that claimants with lung or other cancers must 
     exhibit under S. 852 to qualify for compensation. Although 
     there is broad agreement about the incidence of lung and 
     other cancers in the asbestos exposed population, there does 
     not appear to be a consensus about the extent of pleural 
     abnormalities within that population. The Bates White report 
     cites several studies as the basis for its estimate that 
     about 10 percent of its exposed population of 27 million 
     people could be expected to have pleural abnormalities. Among 
     the more heavily exposed population of-about 9 million, 
     however, Bates White estimated that the incidence of 
     abnormalities would be higher--around 24 percent.
       NERA presented CBO with an evaluation of the studies cited 
     by Bates White for its estimate of the incidence of pleural 
     abnormalities. NERA concluded that the report overstated the 
     incidence of pleural abnormalities by at least half. The 
     incidence among the asbestos-exposed population appears to be 
     in dispute because the sample population used in some studies 
     that have measured it may not be representative of the 
     population in question. In addition, some of the studies 
     measured the incidence of pleural abnormalities based on 
     their presence in only one lung, whereas eligibility under 
     the bill would require the presence of such abnormalities in 
     both lungs. CBO has not attempted to independently estimate 
     the incidence of pleural abnormalities in the exposed 
     population, but a proportion that differed significantly from 
     that estimated by Bates White would change the results of 
     that study substantially.
       The Bates White study does not explicitly account for the 
     work-years of occupational exposure specified by the bill. 
     Under S. 852, claimants with lung or other cancers would be 
     required to demonstrate that they experienced asbestos 
     exposure for a specific number of years, weighted by the 
     intensity of exposure and when it occurred. By not accounting 
     for the bill's weighted work-year exposure criteria, Bates 
     White has overestimated the number of individuals that could 
     file a successful claim under S. 852. CBO believes that a 
     significant percentage of potential claimants might be unable 
     to demonstrate a sufficient number of work years of exposure 
     to asbestos to qualify for compensation under the bill.
       Meeting the bill's required weighted work-years of 
     occupational exposure to asbestos is one of the key 
     qualifying criteria--along with exhibiting pleural 
     abnormalities--for an award under the legislation. The Bates 
     White study did not directly account for this requirement. 
     The authors told CBO that most individuals in the exposed 
     population typically had long careers in the same occupation 
     or industry and that the presence of pleural abnormalities 
     was likely to indicate sufficient years of asbestos exposure 
     to meet the bill's criteria.
       However, pleural abnormalities can occur in individuals 
     with fewer years of exposure than are required to qualify for 
     disease levels VII and VI under the bill. Consequently, 
     applying the work-year criteria could eliminate a significant 
     number of claimants who might otherwise qualify.
       The Bates White report attempts to estimate the number of 
     individuals that could make successful claims under S. 852, 
     but does not attempt to estimate how many individuals would 
     seek to do so. There is general agreement that individuals 
     exposed to asbestos that have developed mesothelioma and 
     asbestosis have a high propensity (probably well above 70 
     percent) to file tort claims and apply to the Manville Trust 
     for compensation. There appears to be much less agreement on 
     the propensity of individuals that have been exposed to 
     asbestos and have developed lung or other cancers to take 
     such actions. That is, in part, because there is no consensus 
     on how many individuals with lung or other cancers could 
     demonstrate that asbestos exposure was a substantial 
     contributing factor to their disease (the basis for 
     estimating a claiming rate). Many researchers agree that 
     claiming rates for such individuals today are much lower--
     certainly less than half, perhaps much less--than for people 
     with mesothelioma or asbestosis. Applying a claiming rate of 
     much less than 100 percent for the Bates White estimates of 
     level VII and VI claims would substantially reduce the costs 
     presented in the Bates White analysis.
       Bates White estimates a much larger population exposed to 
     asbestos than most other analyses. Bates White reported that 
     its estimate considered a working population of about 27 
     million that was exposed to asbestos, a much larger number 
     than many other studies have assumed. However, the authors 
     noted that about 9 million of those people, who had medium-
     to-heavy exposure to asbestos, accounted for about 90 percent 
     ($270 billion) of the potential claims. An asbestos-exposed 
     population of around 9 million is similar to the estimates of 
     other researchers, and CBO does not consider the size of the 
     exposed population to be a significant issue with the report.
       How the key participants in the process--the fund's 
     administrator, claimants, and attorneys or others who assist 
     claimants--behave would have a significant impact on the 
     number of successful claims filed with the proposed asbestos 
     trust fund. The authors of the Bates White report have 
     suggested that the behavior of claimants and attorneys under 
     S. 852 would differ greatly from their behavior under the 
     current system. They expect that under the no-fault 
     administrative process outlined in the legislation, many more 
     claimants with asbestos exposure and lung or other cancers 
     would pursue claims than have done so or filed with the 
     Manville Trust. They anticipate this outcome because they 
     expect that the cost of seeking an administrative claim from 
     the fund would be much less than pursuing litigation, and 
     that the rewards for claimants would be much greater than 
     those obtained from the Manville Trust (though perhaps not as 
     large as awards obtained in some tort settlements).
       CBO reaches a different conclusion--that the system 
     specified in S. 852 bears sufficient similarity to the 
     operations of the Manville Trust that the latter's experience 
     is a sound basis for projecting the number of most types of 
     claims under the bill. CBO's estimate of the number of future 
     claims for malignant conditions expected under S. 852 is very 
     similar to the most recent claims projection prepared for the 
     Manville Trust.
       A number of factors make that analogy appropriate. For 
     example, whether pursuing an asbestos tort claim under 
     current law or an administrative settlement under the 
     legislation, a claimant would need to demonstrate that 
     asbestos exposure was a substantial contributing factor to 
     his or her cancer. Thus, just as under the current system, 
     claimants could not necessarily assume that the fund's 
     administrator under S. 852 would approve all claims. This is 
     particularly true for level VI claims, which would be 
     individually evaluated by a medical panel. The Manville Trust 
     also requires applicants to demonstrate a specific number of 
     work-years of exposure to asbestos to qualify for an award. 
     The number of work-years needed to qualify for an award from 
     the Manville Trust is generally less than would be required 
     under S. 852, so in that respect, the experience of the 
     Manville Trust could imply more claims than the federal fund 
     might actually face. Also, CBO believes that claimants to the 
     proposed federal asbestos fund would face costs and 
     procedural burdens similar to those that applicants to the 
     Manville Trust face.
       Although the financial incentives for some claimants might 
     be greater under the bill than under the current tort system, 
     the financial incentives for attorneys to assist claimants 
     would be weaker. Attorneys play a significant role in 
     identifying claimants and pursuing their claims under the 
     current system, and would probably do so under S. 852. Most 
     claimants would probably need help preparing a claim under S. 
     852, and the bill would cap attorneys' fees at 5 percent of 
     individual awards made by the fund. By contrast, under the 
     current tort system, attorneys typically receive fees of up 
     to 40 percent of the amount awarded. Because attorneys or 
     others who might assist claimants would play such a key role 
     in the claims process, the bill's cap on fees makes it less 
     likely that the legislation would lead to a substantial 
     influx of claims that are not represented in the current 
     system.
       Some of the attorneys whom CBO consulted suggested that 
     asbestos tort claims have recently shifted away from 
     relatively straightforward settlements, and that asbestos 
     cases today involve a significant time commitment and large 
     up-front costs to prepare for litigation, factors that may 
     deter some individuals from pursuing claims. If so, the 
     number of potential claimants to the fund proposed under S. 
     852 might be under-represented in the current tort 
     environment. But because asbestos litigation has been under 
     way for many years, CBO believes that the long historical 
     experience of the Manville Trust is the best available 
     indicator of claimants' behavior under the bill, even if the 
     current tort environment differs somewhat.
  Mr. SPECTER. Mr. President, before yielding the floor, let me say 
what a constructive role Senator Coburn has played in the Judiciary 
Committee. Senator Coburn has been in this body since 2004. He had been 
in the House of Representatives. He has brought his expertise as a 
medical doctor and he has made great contributions.
  We address some very tough medical procedures. I have said this to 
him privately, what a contribution he has made, and there is no reason 
I shouldn't say it publicly.
  The PRESIDING OFFICER. The Senator from Oklahoma.
  Mr. COBURN. Mr. President, I want to spend a few minutes talking 
about the bill.
  There is one thing that is an absolute certainty: There are a ton of 
people in this country who have bad diseases from asbestos who aren't 
getting treatment and aren't getting cared for. That is what certainty 
is. You can bet on

[[Page S897]]

that, that the problem is made worse because the trial bar is clogging 
the courts with cases of people who do not have diseases from asbestos, 
claiming they do. That is one of the reasons the courts want reform.
  Having been on the Judiciary Committee during the process of this and 
voting this bill out of committee, even though I have significant 
reservations about this bill. Let me talk a couple of minutes about 
that.
  It doesn't matter to me what the Congressional Budget Office says 
because their track record in estimating everything from the cost of 
Medicare to the benefits in capital gains taxes is usually 180 degrees 
off what actually happens. Having CBO's estimate about what is going to 
happen with this trust fund I don't think lends any credence or 
undermines it one way or the other. Because I think they do not know, 
and I don't think anybody can know.
  There is a second problem in this bill; that is, the problem we face 
today is this bill will allow people who do not have injury from 
asbestos to receive hundreds of thousands of dollars for an asbestos 
claim when they do not have it. That deals with the medical criteria. 
It will allow smokers who have some exposure to asbestos who develop 
lung cancer--smoking is the No. 1 cause of lung cancer--who have no 
evidence of significant disease caused by asbestos causing their lung 
cancer to be compensated for a disease that they themselves were 
responsible for by smoking tobacco products.
  The intended purpose of the FAIR Act is to compensate those who are 
truly sick from asbestos exposure, without destroying the companies and 
jobs and opportunities in the future. My worry with this bill is the 
defendants and the plaintiffs will end up back in the tort system in a 
very short period of time.
  I am rising today to support Senator Cornyn's alternative, the 
Asbestos and Silica Claims Priorities Act. I am doing that because I 
think it addresses the real problem.
  If you look at the abuse in the courts and if you look at what is 
wrong with this bill, it has to do with putting people in court who do 
not have disease from asbestos. The Cornyn Amendment has a very defined 
medical criteria which the courts will have to follow when making 
judgments about who is eligible to file a claim on this bill.
  A major reason the FAIR Act won't have enough money--and the major 
reason people can attack the FAIR Act in terms of the amount of the 
trust fund--is because the medical criteria is going allow too many 
people to be in the process who do not have disease related to 
asbestos. There have not been significant changes in the medical 
criteria associated with this bill.
  I tried to amend this in committee. I could not win. I have a 
significantly different level of knowledge on the committee than the 
rest of the members in terms of medical knowledge, having continued to 
be a practicing physician, and I know it is going to be very difficult 
to explain all those medical issues to Members of this body to try to 
get them changed. That is why I think Senator Cornyn's approach is a 
better alternative.
  We have to create a fair system in the courts for allowing those who 
are truly sick from asbestos exposure to seek compensation from those 
who are truly responsible, rather than creating another Federal 
bureaucracy that is likely to fail.
  More than 73 companies have already gone bankrupt, and many others 
have suffered a great deal of financial difficulty, not because many 
sick people have sought compensation for their injuries but because 
smart trial lawyers have learned to game the system and file phony 
claims. These aren't faceless companies with unlimited resources. And 
the people who are truly injured are not faceless people who didn't 
contribute something good to the companies they worked for. The 
businesses, by and large, are ready and willing to right the past 
wrongs. The question is, Should they be paying when nobody is injured? 
With the medical criteria in this bill today, a third of the claims, in 
my estimation, will be paid to people--$50 billion will be paid to 
people--who will file under the medical criteria, as written, who have 
no injury whatsoever from asbestos but yet these companies will be 
paying them for a perceived injury from asbestos.
  Ninety percent of the claimants out there in the courts today who 
have filed claims that allege to have impairment from asbestos have no 
impairment. If you read the press stories about how the game has been 
played, how the B-Readers have falsely read, for payments from trial 
lawyer organizations, the chest x-rays, and the pulmonary function 
tests have been manipulated illegally to claim benefits from some of 
these companies, you can see we cannot have loose medical criteria and 
ever expect to have this trust fund survive.
  The other thing to mention--it is not mentioned much--there is a 
background caseload in this country of mesothelioma, cancer of the 
lining of the lung, of about 800 people a year. If there had never been 
any asbestos, 800 people a year would develop mesothelioma.
  At my age, and for most people somewhat younger who went to any 
public school where the ceiling tiles had asbestos components, we can 
qualify under this bill not because asbestos truly caused it. There is 
no causal effect in that low an exposure. There is no particle load 
count at all in terms of measuring exposure, which is what we know is 
important. A small amount of asbestos exposure is harmless, a large 
amount of asbestos exposure is terribly disease causing. When we don't 
look at load factors, we are going to have medical criteria that make 
people eligible who are truly not diseased from asbestos.
  For example, there are 174,000 new cases each year in this country of 
lung cancer.
  This is kind of a wordy chart. I don't think it is going to project 
well. But the important thing about that is they may have no true, 
actual asbestos exposure but could claim under this system asbestos 
exposure from environmental background exposure. Most of these people 
have lung cancer because they are smokers, and they are going to have 
lung impairment, and they are going to meet some of the requirements 
under the medical criteria but have no true asbestos exposure.
  If you look at that, and take 10 percent of the cases based on lung 
cancers alone, you are talking $5 billion a year. Just lung cancer 
alone times 30 years, at $5 billion a year, is more than the trust fund 
has in it.
  I will guarantee we will see an approach for compensation by anybody 
who has ever had any exposure or been around asbestos, and they will 
qualify to a certain extent more or less under this bill. What if it is 
5 percent? You are still talking $78 billion. The numbers are massive.
  If you are going to have a trust fund, you are going to have to have 
adequate medical criteria that truly reward those people and compensate 
those people who are truly injured. If you have good medical criteria, 
the trust fund system will work. If you do not have good medical 
criteria, if you have very loose medical criteria, the trust fund will 
fail. We will not have solved the problem.

  Either we have to get away from a trust fund program and design 
medical criteria the courts will use, or we have to keep a trust fund 
program and tighten up the medical criteria in this bill.
  The bill as written today, I believe, will fail. It will fail because 
it will be overwhelmed with claims against this trust fund by people 
who do not have asbestos-related true disease.
  I will give a couple of examples. Nonmalignant level 2 under the fund 
allows individuals who have obstructive pulmonary disease--people with 
emphysema, people with chronic bronchitis--to receive compensation by 
the fund even when they do not have restrictive pulmonary diseases. 
That is what asbestos causes, a restrictive disease, not an obstructive 
disease. Under the criteria written in this bill, smokers who have had 
exposure to asbestos, who do not have a disease related to asbestos, 
will be compensated under this bill.
  Consequently this fund allows a smoker--the No. 1 cause of 
obstructive airway disease, not asbestos, but smoking--asbestos causes 
restrictive lung disease--to receive compensation. That cannot work 
with the fund as we see it today.
  This fund also will compensate people for cancers where there is no 
scientific evidence whatever that their cancers are caused by asbestos. 
For example, for colorectal cancer, there are 130,000 cases of colon 
cancer a year.

[[Page S898]]

There are tons of scientific studies that show there is no connection 
between that and asbestos, but we have this in the bill. It is 
dependent on an IOM study, but it should not be in the bill. If new 
science sometime later shows some connection between colorectal cancer, 
stomach cancer, or esophageal, laryngeal, and pharyngeal cancer, we can 
put it back. We are putting it in, when there is no science 
whatsoever--and the small studies on laryngeal and pharyngeal cancer 
that show some connection were not modified for smoking and alcohol 
use, the No. 1 and No. 2 causes. So it is not good science.
  Therefore, we have a large group. If you take lung cancers combined 
with all the other cancers and put them together and you say 10 percent 
of those who are coming through will try to go to the trust fund, you 
have $267 billion that will blow this thing wide open.
  This trust fund, with the medical criteria it has today, will not 
work. That is why having a bill that has specific medical criteria in 
it will work.
  Let me be clear why I support the Cornyn substitute. The Cornyn 
substitute does not shut anyone out of the courts. If you think you 
have asbestos exposure, and you want to sue, you can. But you will have 
to meet the medical criteria for it to be related to asbestos or 
silicosis. There is no unreasonable requirement; there is just upfront 
medical criteria that must be met to have application and that 
requirement must apply.
  It does not mean you cannot have your day in court. You can. You have 
to demonstrate your disease matches the medical criteria which are 
recognized medical criteria associated with asbestos disease.
  The other thing that is good about this bill is if you have had 
asbestos exposure and have no disease now, this does not cut you off 
from the future. If you develop disease that is truly related to 
asbestos, you will be able to have your day in court years--30, 40 
years--down the road if, in fact, you develop impairment related to 
asbestos within this medical criteria that the medical community and 
the scientific community recognize is accurate.
  Under this substitute, as compared to the present bill, physicians 
will have to comply with strict scientifically sound requirements. 
There is no room for doctors and x-ray B readers to fudge the data 
under the Cornyn substitute. The substitute makes sense. The trust fund 
concept will work if we have good medical criteria. We do not, so it is 
not going to work.
  The answer is to keep people in the court system but define the 
medical criteria where they can win when they truly have a disease that 
is caused by asbestos, and they lose when they do not have a disease 
caused by asbestos.
  The science is not that hard. But we cannot take care of the trial 
lawyers and take care of all the executives who want this problem 
solved the way they want it. They want an answer now. The answer is, 
use what this country has used in the past: the judgment of courts 
based on sound criteria that cannot be manipulated. Then we will get 
this problem solved and the people who are suffering today, who cannot 
get into court because of false claims--hundreds of thousands of them 
by people who do not have asbestos-related illness--the people who are 
injured will get compensated.
  I thank Senator Cornyn for, first, his courage to offer a substitute. 
He is on the Judiciary Committee. We have a great chairman. He has done 
a lot of hard work on this. He has brought a bipartisan bill to the 
Senate. The bill will fail. It takes a great deal of courage on Senator 
Cornyn's part to offer a commonsense alternative to this. It is my hope 
that the many Members in this Senate will look at the trust fund with 
the medical criteria as set out today, and reject it as it is written. 
Either modify this bill or take the Cornyn substitute and put it in its 
stead.
  This is an issue we will spend a lot of time on. I know people are 
considering points of order against the legislation. In fairness to the 
Senate and also the public, if that is going to happen, they ought to 
do it so we do not continue to spend time. Part of the process around 
here is to make things not happen so you can have a political 
advantage. If people are going to offer a point of order, they ought to 
offer it. Let's go on to the next thing on the agenda for the American 
people. If they are not going to offer it, let's have a real debate, 
file cloture, get a vote on this bill and move on.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Graham). The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. FRIST. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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