ASBESTOS TRUSTS FIND “PATTERN” OF SUBMITTING UNRELIABLE EVIDENCE TO SUPPORT TRUST CLAIMS

Audits of several asbestos bankruptcy trusts have revealed that a plaintiffs’ attorney “has submitted unreliable evidence to each of the Trusts and … has done so in a pattern.” Case 2:12-ap-02182-BB; Doc. 198 at pp.17-18. Through his counsel, attorney Michael Mandelbrot stipulated to sanctions including that he may file no new claims with any of the trusts, that he must cease activity on pending claims and must substitute out as attorney, and that he receive no “payments from any of these trusts for any reason.” He has since claimed that he stipulated under duress, including threat of criminal liability by (as well as incompetence of) his own counsel, and that he has discovered “evidence of criminal conduct” by other plaintiff counsel serving as trustees of asbestos bankruptcy trusts. 

This audit finding, the “it’s not just me it’s others” defense, and the possibility of sanctions comes fresh on the heels of the ruling in In re Garlock Sealing Technologies that found widespread differences between what several different asbestos plaintiffs’ counsel represented to bankruptcy trusts and what they represented in civil court proceedings. The Thorpe and Western Asbestos audits and anticipated ruling may, and should, spur further efforts for greater transparency in the asbestos bankruptcy trust process.

The audits covered some 5,900 claims. The specifics of the “pattern” of “unreliable evidence” are unclear, because the bulk of the trusts’ evidence was submitted under seal. In Garlock, exposure evidence relevant to claims against bankrupt entities with trusts was suppressed in each and every one of the 15 asbestos injury lawsuits in which post-verdict investigation was conducted. In Garlock too, much of the underlying evidence was filed under seal. The press and several defendants have moved to unseal the evidence in Garlock, and a similar move seems likely  in Thorpe.

These rulings contradict pronouncements by asbestos plaintiffs’ counsel that the system is working fine and does not need greater transparency, such as this statement recently presented by plaintiffs’ attorney Elihu Inselbuch (who represents many plaintiff committees in asbestos bankruptcies) to Congress: “[D]espite trying to find instances of widespread fraud and abuse, there is none. Defendants have no evidence to support their assertions of fraud by plaintiffs. The Kananian case, on which they so heavily rely, was an isolated incident, remedied by a state court.” Not so “isolated” as all that – as the Garlock and now Thorpe cases demonstrate.

Similarly, on the day Congress passed Federal legislation to mandate transparency in the trust claiming process, one plaintiffs’ attorney posted the following statement: “Multiple independent studies prove any fraud is negligible.”  No citations to these “independent studies” are provided.

It is no longer a question of whether there is fraud in the asbestos trust system, which is beset with other problems as well. Now the question is how widespread it is, and what to do about it, on both a case-by-case and systemic basis.