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The Judge Won't Call Asbestos-Lawyer Shenanigans Fraud, But It Sure Smells Like It

Jan 11 2014, 9:31am CST | by

The Judge Won't Call Asbestos-Lawyer Shenanigans Fraud, But It Sure Smells Like It
Photo Credit: Forbes
 
 
 

There’s an old journalistic turn of phrase that keeps us on the right side of the libel laws, while getting the point across: Sometimes it’s a crime what’s legal.

That is an apt description for the shenanigans plaintiff lawyers have engaged in for years as they sucked billions of dollars out of otherwise solvent companies in search of money they say their clients are owed for asbestos-related diseases.

Hold your comments about how asbestos companies engaged in subterfuge. That is true, but it doesn’t relieve lawyers of the responsibility to act like professionals.

There are a few thousand mesothelioma deaths a year in the U.S. that can definitely be attributed to asbestos, and lawyers fight like sharks over those golden tickets, each of which is worth a couple hundred thousand dollars in fees. One measure of this is the word “mesothelioma” is one of the most expensive keywords on Google AdWords.

A bankruptcy judge’s 65-page order released late yesterday in the case of gasket manufacturer Garlock Sealing Technologies illustrates, in unambiguous detail, the depths lawyers are willing to plumb to go after those golden tickets. They routinely engage in the type of behavior that would subject them to the fiercest sort of liability were they practicing any other profession. It may be legal — indeed, U.S. Bankruptcy Judge George Hodges was careful to note he made “no determination of the propriety” of the practices he described — but that doesn’t remove the stench.

The law is supposed to be a profession devoted to finding out the truth. In that regard, lawyers are a lot like journalists, only they are also officers of the court, given special powers to ferret out information their opponents would prefer to leave hidden from view. What the Garlock bankruptcy shows is lawyers in the asbestos trade abused these powers to hide information from defendants as well as judges and jurors, to the point that they made a mockery of their duties as officers of the court. If they were engineers, doctors, or corporate executives, these shenanigans would probably cross the line into civil fraud. They might even lose their licenses. But lawyers are particularly bad at disciplining themselves, so I’ll just throw these examples out there for readers to decide whether their activities are compatible with retaining the license to practice law.

As I noted yesterday, Judge Hodges granted Garlock permission to perform full discovery on 15 closed asbestos cases against the company. He conducted this inquiry in secrecy, even throwing reporters out of his courtroom in Charlotte, N.C. when lawyers were discussing what they found. That led reporters like me to think maybe the judge wanted to sweep the evidence under the rug. But his ruling yesterday slashing Garlock’s asbestos liability to a tenth of what plaintiff lawyers were seeking was devastating, and shows that companies can disrupt the asbestos racket if they are willing to fight.

Some background: The game in the Garlock case was to convince the judge that a company whose products almost certainly never injured anyone were responsible for more than $1 billion in asbestos-related liability. In a fierce statement yesterday, one Dallas law firm Garlock is suing for fraud accused the company of being complicit in “deaths of thousands of Navy veterans.” To gin up the numbers, lawyers pointed to a string of jury verdicts and settlements, at escalating amounts, as evidence that Garlock would have to pay at least a couple hundred thousand dollars for each and every one of the 2,500 or so mesothelioma deaths in America each year.

The problem is Garlock made a product where the asbestos was of a type believed to have 1/100 the risk of straight amphibole fibers that lodge in the lungs and pleural cavity and eventually cause cancer. Garlock’s fibers were encased in plastic. And to get to those supposedly deadly gaskets, workers would typically have to peel away flaky pipe insulation exposing themselves to far more dangerous amphibole dust.

To get around these inconvenient facts, asbestos lawyers coached their clients to “forget” having worked with any products but Garlock gaskets when they were suing Garlock, then change their stories when they were suing somebody else. They were helped in this subterfuge by the peculiar nature of bankruptcy trusts set up to pay claims of insolvent manufacturers. Plaintiff lawyers control these trusts, and they have successfully resisted most attempts to open up their records to uncover fraud and double-dipping. That makes it easy for the lawyers to sue the companies that want to fight in court first, with their well-coached clients displaying a highly selective memory of whose products they handled. Then they tap the trusts for money using completely different stories of how they got sick.

Here’s some examples of what Judge Hodges found in the 15 cases he allowed Garlock to examine. In every one of the 15, lawyers withheld evidence of conflicting stories. Bear in mind this company has settled more than 20,000 cases so far.

  • A former Navy machinist won a $9 million jury verdict in California, claiming that 100% of his work in a nuclear submarine was on gaskets. He denied any exposure to amphibole insulation, after Garlock tried to prove he’d been exposed to Pittsburgh Corning's Unibestos amphibole insulation. His lawyers even told the jury there was no Unibestos insulation on the ship. What they didn’t tell the jury was seven months earlier, they’d filed, under penalty of perjury, a claim with Pittsburgh Corning that their client had been exposed to Unibestos. Once the verdict was in, they filed 14 more claims including several against insulation manufacturers.
  • A former pipefitter in Philadelphia settled a case for $250,000 after claiming he had “no personal knowledge” of exposure to other companies’ products. Apparently his lawyers found that not incompatible with his claim six weeks earlier with the Owens Corning bankruptcy trust, in which he  “frequently, regularly and proximately breathed asbestos dust emitted from Owens Corning Fiberglas’s Kaylo asbestos-containing pipe covering.” This lawyer filed 20 different trust claims on his client’s behalf, 14 of them supported by sworn statements that contradicted what he said in the Garlock case.
  • A Texas plaintiff won a $1.35 million jury verdict by claiming his only exposure was to Garlock gaskets. He specifically denied even knowing the name “Babcock & Wilcox,” a boiler company that was driven into bankruptcy by asbestos claims. His lawyers told the jury there was no evidence of exposure to Owens Corning insulation. One day before the client denied knowing anything about Babcock & Wilcox, he’d filed a claim against that company’s trust. After the verdict, he filed a claim against Owens Corning. Both were paid, based on his sworn statements he’d handled raw asbestos on a regular basis.

These tales are old news by now, of course. And judging from the traffic on yesterday’s story, most readers just look at the headlines and yawn. But the behavior detailed above is exactly, precisely the sort of subterfuge that subjects companies to fraud lawsuits on a daily basis. Imagine what would happen if a corporate executive told shareholders her company was poised to record the best profits in its history at the same time as she was preparing a bankruptcy filing. Or a food executive who testified in a lawsuit that his products contained no toxins, at the same time as he was reviewing a consultant’s report detailing the exact amount of those toxins in his company’s products.

Lawyers can’t hide behind the claim of zealous representation here. They know what they’re doing is wrong. The shame is their profession lets them get away with it. Self-regulation is always a problem, and it is long since past the time when lawyers need the presence of non-lawyers on their disciplinary committees, as is the practice in the U.K. The asbestos racket shows what happens when lawyers are in charge of disciplining themselves.

Source: Forbes

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