By on December 18, 2018

AsbestosOver the last few months, the Department of Justice (DOJ) has signaled that fighting fraud, waste, and abuse in asbestos trusts is a priority. Our previous article on this subject highlighted DOJ’s September 13, 2018 Statement of Interest filed in the bankruptcy case of Kaiser Gypsum Company, which asserted that the proposed trust plans lack adequate safeguards and indicated that DOJ would object unless the final plan better ensures transparency and prevents fraud. Since that filing, DOJ has continued to intervene in asbestos trust proceedings.

1. Duro Dyne Corp.

DOJ’s press release on its Statement of Interest in Kaiser Gypsum indicated that “[t]his is just one action the Department will take to increase the transparency and accountability of asbestos trusts.” Since that filing, DOJ has also challenged the appointment of an attorney who would act as the Duro Dyne Corp. Trust claims representative, claiming the lawyer’s independence may be compromised due to close relationships with plaintiffs’ lawyers. Ultimately, the New Jersey bankruptcy judge overruled DOJ’s objection to the appointment. However, this intervention does appear to support the idea that DOJ may challenge future appointments that may appear to have conflicts in the eyes of the DOJ.

2. More Safeguards in Future Trust Plans

DOJ previously identified areas of concern in its focus on asbestos trusts: compliance with the Medicare Secondary Payer Statute; Medicare reimbursement; excessive administrative costs and legal fees; conflicts of interest; and improper payments to plaintiffs. We have already seen one of these areas of focus confirmed since that statement. A notice filed by the DII Industries trust on October 1st disclosed that the trust received an administrative subpoena from DOJ related to a Medicare reimbursement probe. DOJ asked the trust to identify a paid claimant, plus provide details of the individual’s asbestos-related injuries, claim history and settlement payment. It appears DOJ is attempting to determine whether any False Claims Act violations have occurred.

While it remains to be seen whether increased attention and oversight by the Justice Department related to asbestos trusts is a temporary trend or a long-term occurrence, it appears the federal government is making a point to prioritize fraud and mismanagement in this area. Please reach out to Mark Grider or Charles Fleischmann if we can be of assistance on matters related to Department of Justice investigations or enforcement priorities.