Feb. 1, 2006 – Controversial congressional plans to erect a federally backed, privately funded trust for victims of asbestos exposure may, according to a prominent public interest group, undermine settlements recently reached by a handful of companies. Consumer advocate Public Citizen raised the concerns in reaction to news that the worldâ€™s largest wallboard manufacturer had brokered a multi-billion dollar deal to settle current and future asbestos-related personal-injury claims.
Monday, Illinois-based USG Corp. announced the creation of a $900 million trust fund to pay out asbestos-related claims. The company also said the trust holds more than $3 billion in "contingency notes," which are essentially corporate "IOUs."
USG, which is working to emerge from nearly five years of bankruptcy largely attributed to asbestos damage claims, noted that legislation set for full Senate consideration as early as next week could absolve the company of the second portion of the liability. The company backs the bill, called the Fairness in Asbestos Injury Resolution (FAIR) Act of 2005.
As previously reported by The NewStandard, FAIR would establish a $140 billion fund for asbestos-related damages and curtail virtually all lawsuits related to asbestos claims.
According to USG, the company will pay the $3 billion in two installments, the first, $1.9 billion would be paid into the fund 30 days after the close of the current congressional session, and the remaining $1.15 billion is due six months after Congress convenes.
But, the company noted, "if before the adjournment of the current session, Congress passes legislation establishing a national asbestos personal injury trust fund, such as the FAIR Act, the contingent note will be cancelled and no additional payments will be made, unless that legislation is later found unconstitutional."
Throughout last year, both consumer and business groups attacked FAIR, the former because of perceived pro-corporate bias engendered by caps on payments to asbestos victims, and the latter because the act could leave companies open to lawsuits should the trust become insolvent.
Pointing to USGâ€™s announcement that FAIR would cancel the larger portion of the companyâ€™s commitment, the watchdog group Public Citizen warned in a statement Monday that the agreement will likely serve as a roadmap for corporations seeking to lessen their asbestos-related burden.
USGâ€™s announcement follows closely a similar arrangement brokered by Babcock & Wilcox, a holding of McDermott International, over asbestos claims which drove the subsidiary into bankruptcy in 2000.
Calling the trust fund a "corporate bailout in sheepâ€™s clothing," Public Citizen President Joan Claybrook noted that USG has enjoyed tremendous protection from liability lawsuits since filing for bankruptcy, is showing strong financial growth and has now cobbled together a deal that will allow it to emerge from bankruptcy with few legal entanglements related to knowingly endangering thousands with asbestos-tainted products.
Even worse, Public Citizen said, is the proposed federal solution, under which USG would be responsible for only about 23 cents for every dollar it agreed to pay under the just-reached settlement.
While in bankruptcy, USG has seen its stock value rise even as it continues to post losses each quarter. The company reported a $1.78 billion fourth-quarter loss Monday.