Tuesday, December 5, 2006

WSJ on Double-Dipping in Asbestos Trusts

Interesting commentary in the Wall Street Journal detailing alleged fraudulent double-dipping in multiple absestos trusts -- Trusts Busted: The seamy underside of asbestos litigation, by Kimberly A. Strassel.  Here's an excerpt:

Harry Kananian died in the year 2000 of mesothelioma--a cancer almost always caused by asbestos. But the legacy that may survive him is the role he is posthumously playing in exposing evidence of asbestos litigation fraud.

In early 2000, the Ohio resident met with the law firm of Early, Ludwick, Sweeney & Strauss to see about collecting compensation from special trusts set up by companies to deal with asbestos liabilities. So the law firm filed a claim to one trust, saying Kananian had worked in a World War II shipyard and was exposed to insulation containing asbestos. It also filed a claim to another trust saying he had been a shipyard welder. A third claim, to another trust, said he'd unloaded asbestos off ships in Japan. And a fourth claim said that he'd worked with "tools of asbestos" before the war. Meanwhile, a second law firm, Brayton Purcell, submitted two more claims to two further trusts, with still different stories. The two firms swept up as much as $700,000 for Kananian and his estate from trusts and settlements.

In the legal trade, this is known as "double dipping"--the process by which lawyers file claims at many different bankruptcy trusts on behalf of a single plaintiff. Each trust is told a different story about how the client got sick, and the plaintiff collects from all of them. Of course, the lawyers collect too. This practice may well have remained unexposed had not Brayton Purcell decided to cash in on Kananian one more time. It sued Lorillard Tobacco, this time claiming its client had become sick from smoking Kent cigarettes, whose filters contained asbestos for several years in the 1950s. That suit has now exploded on Brayton, exposing one of the asbestos bar's more lucrative cash cows.

In Cleveland, Judge Harry Hanna of the Cuyahoga County Court of Common Pleas has been asked to rule on a motion to disqualify Brayton from the suit and bar it from practicing in Ohio. The firm stands accused by Lorillard of lying to the court, defrauding asbestos trust funds and obstructing discovery. Those accusations come via a raft of internal emails and documents, most if which are referred to in the court record, that tell a story of two law firms using contradictory stories to rake in money from bankruptcy trusts, then potentially trying to cover it up. All parties are under a gag order from the judge. Last week, Brayton Purcell, amazingly, requested to withdraw itself from the case.



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