Greed may be catching up with asbestos 'prepack' players

Ann Knef Apr. 20, 2006, 2:55pm

Judge Janis Jack

For decades asbestos litigation has clogged the nation's courts, bankrupted American companies and lined the pockets of plaintiff's attorneys.

And as the investigation of fraudulent asbestos and dubious silicosis claims continues, a national media organization has exposed another perversion of the nation's civil justice system.

This time, the Wall Street Journal takes aim at "prepackaged" bankruptcies and uncovers a profound conflict of interest between asbestos defendants and their enemies.

"The facts are rolling out, and nowhere more so than in the case of
Congoleum, a leading floor manufacturer that declared bankruptcy in
late 2003," the WSJ reports April 11 in "The Great Asbestos Scam."

The report describes how Congoleum -- a "tangential, second tier" asbestos target -- entered into a comfortable "prepackaged" bankruptcy arrangement crafted by asbestos lawyers. The plan proved to be a "cash cow" for the lawyers and a "silver bullet" for Congoleum, the report states.

"That one of a 'payoff,' double-dealing and bogus claims by dodgy doctors. More broadly, it is a primer in how a defendant company teamed up with its former enemies in the trial bar in an ingenious plan to enrich both sides -- leaving Congoleum's insurers holding the bag," the WSJ report states.

Congoleum emerged quickly from bankruptcy with its stock price intact, but left its insurer to foot the bill from a special trust fund set up for claimants, the report states.

"Under the Congoleum plan, the lawyers would shift their asbestos claims into a special trust that had first dibs on any money," the report states. "Congoleum and its parent, ABI, would contribute $250,000 in cash and a $2.7 million promissory note -- payable 10 years down the line. Congoleum would then breeze in and out of bankruptcy in record time, its shareholders emerging with all of their equity and the company with a clean bill of health."

The era of asbestos plaintiff's rule began to crumble last year when federal Judge Janis Graham Jack from Texas hammered attorneys and their cohorts for "manufacturing" claims "for money," and ever since the emboldened insurance industry has begun to fight back.

"The insurance community, whose deep pockets paid the asbestos bar's ransom, has mounted an aggressive legal campaign to expose fraud," the report states.

Asbestos capitol

Deluged by plaintiffs from all over the country, Madison County at one time was the busiest asbestos court anywhere. The asbestos lawsuit industry was built here on claimants taking aim at an alphabet soup list of major and sometimes not-so-major U.S. corporations.

In September 2005, the Beaumont, Texas firm, Brent Coon & Associates--with offices in St. Louis, Ohio, Mississippi, Louisiana and California--targeted 87 defendants in each of the 139 asbestos suits and 49 defendants in each of the 33 silicosis suits filed in Madison County. The lawsuits were filed over a two-day period, Sept. 27-28, 2005.

Twelve of the 33 silicosis plaintiffs also filed asbestos lawsuits.

A renowned pulmonologist who specializes in a variety of end stage lung diseases asserts there is no medical explanation for the thousands of new silicosis lawsuits that are being filed in state and federal courts across the country, nor is it at all likely that these claimants also can suffer from asbestos-related diseases.

"For the last 10-20-30 years the disease has been decreasing," said David Weill, M.D., a practitioner in a large medical office and at the time of the interview was an associate professor at the University of Colorado Health Sciences Center in Denver. Workplace safety standards are responsible for the reduction in exposure, he says.

Weill, who testified before a Senate Judiciary Committee on the subject last year, said that from a clinical perspective the numbers of silicosis cases has declined to the point where "you can go a pretty long time period of time without ever seeing a new case."

The Record interviewed eight of the Brent Coon plaintiffs who stated they participated in a screening in a mobile X-ray van at a union hall near Chicago in 2003. The plaintiffs, retired locomotive makers, did not know lawsuits had been filed on their behalf until a reporter told them. Some of them had never heard of Madison County. All of them live far from the venue.

A hearing on defendants' motions to dismiss several of the Brent Coon cases is set April 26 before Madison County Circuit Judge Daniel Stack.


As for Congoleum's "prepack," greed may be catching up with the players.

According to the WSJ article, judges, who have to sign off on the prepackaged bankruptcies are increasingly discovering that "most are simply self-enrichment plans."

"Meanwhile, the insurers are arguing that the process has been rigged
all along, and needs to start from scratch," the report states. "Judges have been presented with evidence of highly unethical conduct. The next step would be for a few of these judges to start delving into the crux of the matter: the legitimacy of the claims.

"That truly would be the beginning of the end of the great asbestos scam."

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