USG Corp. Bankruptcy Agreement Shows the Flaws in Proposed Asbestos Legislation, Consumer Group Says

Asbestos Victims Would Not Have Access to the Courts If S. 852 Passes

WASHINGTON, DC — February 3, 2006 — A building products manufacturer undergoing bankruptcy, USG Corp., has reached a settlement with asbestos victims to resolve theirasbestos disease claims. Under the agreement, the company would create its own trust fund for those injured by its asbestos products. The trust plan must be approved by the bankruptcy court.

A proposed asbestos bill, S. 852, would establish a national asbestos trust fund financed by asbestos companies. Analysts say that this federal trust fund is inadequate to compensate all asbestos victims. According to the consumer group, Public Citizen, the USG settlement provides a good example of why S. 852 is bad legislation. Under the USG settlement, the company would pay $900 million into a private trust fund, plus another $3.05 billion if S. 852 is not approved. If S. 852 is approved, however, the USG's liability is limited to the initial $900 million.

"The USG plan makes plain that the federal trust fund is a corporate bailout in sheep's clothing," said Joan Claybrook, president of Public Citizen (Press Release, January 30, 2006). "Under the guise of compensating victims for terrible diseases, like asbestosis and mesothelioma, corporate America's real aim is to run away from billions in liability for knowingly exposing workers to a lethal toxin."

USG Business in Booming

Supporters of S. 852 point to bankruptcies of asbestos–related companies to show that the federal fund is needed. However, companies can go through bankruptcy and survive with a very viable business. "USG and other firms show that, far from being a disaster, bankruptcy can be a pretty savvy business move," commented Frank Clemente, director of Public Citizen's Congress Watch section.

USG has been in bankruptcy proceedings for almost five years. The company achieved a record $5.1 billion in sales in 2005, an increase of about 56% since it filed for bankruptcy in 2001, according to Public Citizen. Fourth quarter 2005 net sales were $1.3 billion, an increase of $166 million, or 14 percent, compared with the fourth quarter of 2004 (Press Release, USG. January 30, 2006). Profits have increased, and as of this writing, the company's stock price rose dramatically after the announcement of the settlement agreement.

S. 852 is Flawed Asbestos Legislation

Besides being a bailout for companies who made asbestos–containing products, S. 852 harms asbestos victims by denying them their day in court. Instead, they would be forced to go through an unwieldy bureaucracy to satisfy their asbestos claims. Evenasbestos cases that are about to go to trial would be thrown out in favor of the new process. In addition, the bill's requirements for classifying disease types are unfair, inaccurate, and not in tune with modern medical standards.

S. 852 cleared the Senate Judiciary Committee last May by a narrow margin. It is expected to go before the Senate as early as next week. We oppose S. 852 because it harms asbestos victims while promoting the well–being of corporate wrongdoers.