The U.S. Department of Justice (DOJ) has filed a statement of interest in a recent asbestos trust proposal, stating the United States may object to asbestos trust plans that lack transparency and do not contain safeguards against fraud. The statement says the United States has an interest in preserving funds for legitimate asbestos claimants and ensuring proper reimbursement to the federal government for claimants’ asbestos-related Medicare costs. Nineteen state attorneys general, including Wisconsin’s Attorney General Brad Schimel, had written to DOJ last year regarding potential abuse in asbestos trusts.

Reports and cases in recent years have found evidence of fraud and mismanagement in asbestos trusts established under 11 U.S.C. § 524(g). While the asbestos trusts process was created as a streamlined solution to problems with asbestos liability litigation, reports have found illegitimate plaintiffs and opportunistic attorneys withholding evidence of exposure and filing inconsistent claims against multiple defendants, among other fraudulent activity. Abuse has also been reported in the mismanagement of the trusts, whose “trust advisory committees” often consist of asbestos claimants’ plaintiff attorneys.

The DOJ statement of interest in In re Kaiser Gypsum Co. argues the asbestos trust plans in the case are missing safeguards to prevent abuse and to educate claimants about their obligation to reimburse Medicare for asbestos-related health care covered before the trust payment. The statement of interest says plans should also include transparency provisions allowing the United States to monitor claims, payments, and trust governance; protections against excessive administrative costs and attorney fees; and adequate defenses against non-meritorious claims.

U.S. Associate Attorney General Jesse Panuccio said the statement of interest is “just one action the Department will take to increase the transparency and accountability of asbestos trusts.”

Wisconsin has been a leader in combatting asbestos trust fraud and requiring transparency. In 2014, the Wisconsin Legislature enacted into law 2013 Wisconsin Act 154, which created various requirements for plaintiff attorneys to produce information regarding claims the plaintiff has made or anticipates making against an asbestos trust.