<DOC> [109 Senate Hearings] [From the U.S. Government Printing Office via GPO Access] [DOCID: f:33400.wais] S. Hrg. 109-817 THE FAIRNESS IN ASBESTOS INJURY RESOLUTION ACT ======================================================================= HEARING before the COMMITTEE ON THE JUDICIARY UNITED STATES SENATE ONE HUNDRED NINTH CONGRESS FIRST SESSION __________ JANUARY 11, 2005 __________ Serial No. J-109-2A __________ Printed for the use of the Committee on the Judiciary U.S. GOVERNMENT PRINTING OFFICE 33-400 PDF WASHINGTON : 2007 ------------------------------------------------------------------ For sale by Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2250. Mail: Stop SSOP, Washington, DC 20402-0001 COMMITTEE ON THE JUDICIARY ARLEN SPECTER, Pennsylvania, Chairman ORRIN G. HATCH, Utah PATRICK J. LEAHY, Vermont CHARLES E. GRASSLEY, Iowa EDWARD M. KENNEDY, Massachusetts JON KYL, Arizona JOSEPH R. BIDEN, Jr., Delaware MIKE DeWINE, Ohio HERBERT KOHL, Wisconsin JEFF SESSIONS, Alabama DIANNE FEINSTEIN, California LINDSEY O. GRAHAM, South Carolina RUSSELL D. FEINGOLD, Wisconsin JOHN CORNYN, Texas CHARLES E. SCHUMER, New York SAM BROWNBACK, Kansas RICHARD J. DURBIN, Illinois TOM COBURN, Oklahoma David Brog, Staff Director Michael O'Neill, Chief Counsel Bruce A. Cohen, Democratic Chief Counsel and Staff Director C O N T E N T S ---------- TUESDAY, JANUARY 11, 2005 STATEMENTS OF COMMITTEE MEMBERS Page Cornyn, Hon. John, a U.S. Senator from the State of Texas........ 5 prepared statement........................................... 93 Kennedy, Hon. Edward M., a U.S. Senator from the State of Massachusetts, prepared statement.............................. 117 Leahy, Hon. Patrick, a U.S. Senator from the State of Vermont.... 3 prepared statement........................................... 128 Specter, Hon. Arlen, a U.S. Senator from the State of Pennsylvania................................................... 1 WITNESSES Becker, Edward R., Judge, U.S. Court of Appeals for the Third Circuit, Philadelphia, Pennsylvania............................ 6 Berrington, Craig A., Senior Vice President and General Counsel, American Insurance Association, Washington, D.C................ 35 Engler, John M., President and Chief Executive Officer, National Association of Manufacturers, Washington, D.C.................. 29 Forscey, Michael, Partner, Forscey and Stinson, Washington, D.C.. 38 Keener, Mary Lou, McLean, Virginia............................... 41 Robinson, Jeffrey D., Baach Robinson & Lewis PLLC, Washington, D.C............................................................ 45 Seminario, Margaret, Director, Safety and Health Department, AFL- CIO, Washington, D.C........................................... 32 Speicher, Billie, Ontario, California............................ 43 QUESTIONS AND ANSWERS Responses of John M. Engler to questions submitted by Senator Leahy.......................................................... 56 Responses of Craig A. Berrington to questions submitted by Senator Leahy.................................................. 58 Responses of Jeffrey D. Robinson to questions submitted by Senator Leahy.................................................. 60 Questions submitted by Senator Leahy to Margaret Seminario (Note: Responses to questions were not received at the time of printing, March 13, 2007)...................................... 62 SUBMISSIONS FOR THE RECORD American Thoracic Society, New York, New York, statement......... 63 Berrington, Craig A., Senior Vice President and General Counsel, American Insurance Association, Washington, D.C., prepared statement...................................................... 88 Engler, John M., President and Chief Executive Officer, National Association of Manufacturers, Washington, D.C., prepared statement...................................................... 95 Forscey, Michael, Partner, Forscey and Stinson, Washington, D.C., prepared statement............................................. 107 Gelman, Jon L., Attorney at Law, Wayne, New Jersey, prepared statement...................................................... 113 Keener, Mary Lou, McLean, Virginia, prepared statement........... 122 Reinstein, Linda, Executive Director, Asbestos Disease Awareness Organization, prepared statement............................... 130 Robinson, Jeffrey D., Baach Robinson & Lewis PLLC, Washington, D.C., prepared statement....................................... 132 Seminario, Margaret, Director, Safety and Health Department, AFL- CIO, Washington, D.C., prepared statement...................... 141 Speicher, Billie, Ontario, California, prepared statement........ 152 Wallace, Mona Lisa, Attorney at Law, Wallace and Graham, P.A., Salisbury, North Carolina, letter and attachment............... 157 THE FAIRNESS IN ASBESTOS INJURY RESOLUTION ACT ---------- TUESDAY, JANUARY 11, 2005 United States Senate, Committee on the Judiciary, Washington, D.C. The Committee met, pursuant to notice, at 9:30 a.m., in room SH-216, Hart Senate Office Building, Hon. Arlen Specter, Chairman of the Committee, presiding. Present: Senators Specter, Cornyn, Leahy, and Carper (ex officio). OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM THE STATE OF PENNSYLVANIA Chairman Specter. The Senate Committee on the Judiciary will now proceed with a hearing on a discussion draft seeking to solve the asbestos crisis which confronts America at the present time. I first saw the asbestos issue back in 1984, more than 20 years ago, when then-Senator Gary Hart of Colorado brought in Johns-Manville. And this very tough issue has been very elusive for more than two decades, and it has mounted in problems, reaching a situation where we now have some 74 companies which have gone into bankruptcy, thousands of individuals who have been exposed to asbestos, with deadly diseases--mesothelioma and cancer--and who are not being compensated. And about two- thirds of the claims, oddly enough, are being filed by people who are unimpaired. The number of asbestos defendants has risen sharply from about 300 in the 1980s to more than 8,400 today, and most are users of the product. It spans some 85 percent of the U.S. economy. Some 60,000 workers have lost their jobs. Employees' retirement funds are said to have shrunken by some 25 percent. And beyond any question, the issue is one of catastrophic proportions. The concept of a trust fund was incorporated by Senator Hatch and Senator Leahy in legislation which was introduced in the last Congress. And after an extensive markup in July of 2003, the bill was passed out, largely along party lines, obviously filled with a great many problems. I supported it in the interest of moving the issue along. At that time I enlisted the aid of Circuit Judge Edward R. Becker, who had shortly before taken senior status, having been Chief Judge of the Court of Appeals for the Third Circuit and having written the landmark opinion on asbestos on class certification, which was upheld by the Supreme Court of the United States. And Judge Becker's aid was enlisted to assist on an analysis and efforts to find common ground. In August of 2003, for two days in Judge Becker's chambers in Philadelphia, meetings were held with what we call ``the stakeholders''--the manufacturers, labor, AFL-CIO, the insurers, the trial lawyers--to see what areas there might be for common ground. And we have since held some 35 meetings in my conference room, the most recent one of which was held just yesterday. A major effort was made to try to get legislation through at the end of last year. And, of course, if you want legislation passed in the last days of a Congress, it is something that has to be done by consensus, because any single Senator can block legislation at the very end of the term. And we were not successful. But we have continued, and there have been areas of pretty much agreement. I am reluctant to use the word ``agreement'' because there is always some strand, somebody who has concerns, but I think that is an accurate statement on quite a number of matters, like the streamlining of the administrative process and the early start-up and the definitive and exigent health claims and judicial review. The area of the amount of the trust fund has not been put in the discussion draft because it is very, very contentious, and it seemed to me that it was better to have this hearing, which is largely an educational hearing, so that we may explore the parameters of the bill and to see where are the areas of agreement and where are the areas of disagreement. It is very easy to criticize and find fault with any legislative proposal in this field. It is so vast and there are so many complex and competing interests. But it would be my hope that the critics would hold their fire until there has been an analysis of the bill, and to the extent that there are criticisms, that there are objections, bring them to the Committee, bring them to our working group, and we will address them. This may well be the last best chance to deal with this issue in the foreseeable future, and the effort has been really, really herculean. Judge Becker received the Devitt Award as the outstanding Federal judge of more than 1,000 judges in the Federal court system and has devoted himself very, very substantially. He still has some judicial duties as a senior judge, but very, very substantially. And we are looking for more than 60 votes to avoid cloture. I think if this bill is to be passed, it is going to have to be passed with big numbers. We passed the National Intelligence Director by 96-2 when we barely got it through conference. And in the last Congress, we had a Patient's Bill of Rights that passed both Houses, and it failed in the conference. So that it has to be worked through very, very carefully. Senator Feinstein had wanted to be here today, but I talked to her yesterday afternoon, and she is under the weather, so to speak. She has been a major contributor and has proposed legislation in the field. And there have been many contributors. Senator Frist and Senator Daschle last year worked on this issue very assiduously, and they came to a figure for the trust fund of $140 billion. And their consideration, especially the quasi-adversarial relationship, makes that figure entitled to weight. But that is one where it is my view that we need to confer. Senator Leahy and I, members of the Committee; Senator Cornyn, who has joined us here today, has been asked by Senator Frist to take a special look at the case. This is not the best day of all days to have a hearing when the Senate is not in session, but there really is no good day to have a hearing, and three Senators, not a bad showing for a hearing on any day. But if we did not proceed today, we would be on into late January, and once the Senate goes into session, it is going to be very difficult to find floor time. I have said that I would like to see a bill presented to the Majority Leader by early February, and that timetable has been labeled as unrealistic. Well, I believe in unrealistic timetables. If you have an unrealistic timetable, you are likely to get it done sooner. But there has been a full-court press on this issue because of the importance of it. And illustrative of that, one of the company representatives at a meeting a couple of weeks ago, talking about getting a bill done by July--which, candidly, through conference and on the President's desk, would be early on an expedited basis--said to me, ``July is too late for my company.'' Again, let me pay tribute to Senator Hatch, the Chairman last year, for the trust fund concept, and to Senator Leahy, who has been working at our side through this entire complex process. And I will yield to Senator Leahy for an opening statement. STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE STATE OF VERMONT Senator Leahy. Well, thank you, Mr. Chairman. I would mention to those who are here, I recall in grade school a nun who used to say, ``Many are called, few are chosen.'' She did add, however, that those who showed up late would be chosen to go to the principal's office, so the fact that it is a time we have some of our colleagues overseas and elsewhere, but there has been great interest in this. And I think that Chairman Specter deserves an enormous amount of praise from both Republicans and Democrats in the Senate for holding this hearing. My message is a simple one. We have to see our efforts through until we have a balanced and effective national trust fund that fairly compensates victims of asbestos-related disease. If you are going to reach that goal, you have got to work with the various stakeholders. You have to work with Senators, both Democratic and Republican Senators, until we settle the outstanding details on fair resolution for all those who are concerned. I remember back in September 2002 I chaired the first Senate Judiciary Committee hearing on asbestos litigation. I said at that time I was in for the long run, the long haul. I have got to admit candidly I did not know the long haul was going to be quite this long a haul. But I am still here, and I am here because we have made some real progress in finding common ground around a national trust fund, even there have been some fits and starts along the way. In the last Congress, we painstakingly built two of the four pillars of a successful trust fund: appropriate medical standards to determine who should receive quick compensation, and an efficient, expedited system for processing claims. With the unanimous adoption--unanimous adoption--of the Leahy-Hatch medical criteria amendment, this Committee reached consensus on the proper standards for determining legitimate victims. Meanwhile, Senator Specter and Judge Becker worked hand in hand with the stakeholders. They have achieved consensus for a no-fault administrative system to be housed at the Department of Labor. Now, let me just make a personal note. We have people of varying views of what should be done here. You ought to all be thankful that Arlen Specter and Judge Edward Becker worked so hard on this. I have been in some of those meetings. I know how hard they worked. Senator Specter and I met a number of times in December. He has kept me fully apprised and my staff has been fully apprised of what is going on. Our input has been sought. This has been acting as a Senator should, seeking a consensus on an enormously complex piece of legislation. And, Judge Becker, we owe you an enormous thanks because, you know, you are in a position in your life and career, one of the most distinguished of all appellate judges, where you could just say, Hey, guys, I have got other things to do, I do not have to take on something this complex. You have done it. You have done it with competence, skill, and dignity, and I applaud you for that. Now, we have not reached consensus on the other two pillars of a successful trust fund: fair award values for asbestos victims and adequate funding to pay for their claims. And we know that if the award values are too low or subject to liens or reduce or exhaust recovery for victims, the bill will not go through. There are about 600,000 legal cases currently pending in the system, so you have to have adequate funding at the inception. Direct contributions from defendants and insurers and borrowing authority are going to be necessary to accommodate the inevitable, that is, thousands of these pending claims coming in on the very first day of the trust fund. It is a good news/bad news sort of thing for those who want to clean this up. The negotiations between Senator Frist and Senator Daschle in the waning days of the last Congress narrowed the differences on many compensation funding provisions. We should build on that. Our undertaking is challenges. It is unprecedented. It will not be easy to hammer out the details necessary for enacting a bipartisan bill into law. But the stakes are so high, so much has already been accomplished, we fail if we leave the field before we try our utmost to complete this very difficult task. Creating a national trust fund to compensate the victims is one of the most complex legislative undertakings I have seen in now beginning my 31st year in the Senate. This national trust fund is kind of like a Rubik's Cube, and that is why you have to have consensus, because it would be very easy for those who oppose the legislation to stop it, where it is going to be very difficult for those of us who want legislation to move it forward. It cannot be a stacked trust fund approach, an attempt to shoot the moon for one side or the other. It has got to be balanced. You know, as I look at this, both of my grandfathers, my Irish grandfather and my Italian grandfather, were stone cutters in Vermont. One immigrated to this country unable to even speak the language. My paternal grandfather died in his mid-thirties from silicosis of the lungs. I never knew him. I visit his grave periodically in Barre, Vermont, where it says Patrick J. Leahy, which kind of sends a shiver. And my other grandfather eventually died of silicosis of the lungs. I think of them, I think of what they went through, and I think of the hundreds of thousands of present and future asbestos victims. I want to have a balanced bill, and I will work very much-- I commend all of you, all of the major stakeholders who have worked so hard on this. But I want to thank you, Mr. Chairman, Judge Becker, and the representatives from organized labor, the trial bar, and the industry who have worked so hard to do it. I think it can be done. As I said, I was in it for the long run. I would not still be in it if I did not think it could be done. So, Mr. Chairman, thank you for moving forward, even though you must feel a little bit like Sisyphus at times, but it is a rock worth rolling. Chairman Specter. Thank you very much, Senator Leahy. Sisyphus would be a good example for the total work of the Congress. I am a little more optimistic on this one. Senator Cornyn, we will turn to you for an opening statement. STATEMENT OF HON. JOHN CORNYN, A U.S. SENATOR FROM THE STATE OF TEXAS Senator Cornyn. Thank you, Mr. Chairman. I have a more extensive statement which I would like to make part of the record. Chairman Specter. Without objection, the full statement will be made part of the record. Senator Cornyn. Let me just say briefly, so as not to delay hearing from Judge Becker too long, how much I appreciate the good work that you have done and Ranking Member Leahy, but particularly the volunteer effort of Judge Becker. We get elected and paid to do what we do. He is a volunteer and someone who no doubt has carved out a special place in the hereafter as a result of his generous contributions towards solving this true problem. Some have said this is not so much tort reform as scandal reform, where unimpaired claimants get to the head of the line and leave bankrupt companies in their wake that can only pay pennies on the dollar to people who have certifiably genuine asbestos-related disease. And that is something that has caused all three branches of Government--the President as recently as the last couple of days, the United States Supreme Court in uncharacteristic fashion has called out numerous times for reform, legislative reform; and, of course, you have already cited the efforts made in the last Congress. So I congratulate you, Mr. Chairman, for taking this on so early in the 109th Congress. I do not think we have a minute to waste, and I look forward to being one of those Senators who helps contribute to the ultimate success of this bill. There is just too much at stake on the part of the victims, on the part of the companies that provide pension plans and employment to people who have been put out of work. And to a country that calls itself a nation of laws and believes in equal justice under the law, this situation cries out for reform and for a solution. And I look forward to working with you on that. Thank you. [The prepared statement of Senator Cornyn appears as a submission for the record.] Chairman Specter. Thank you very much, Senator Cornyn. We turn now to Judge Becker, whom I first met in the fall of 1950 on the Frankford Elevated going to the University of Pennsylvania. He was a freshman and I was a senior, and we have been close friends ever since, having gone to Penn together and Yale Law School together. Judge Becker was a very successful practicing lawyer. He became a United States district judge in 1970 at the age of 37. He was elevated to the court of appeals in 1982, became chief judge in 1998. He has a long resume of awards, having been asked by the Supreme Court to take on some of the most challenging jobs facing the Federal judiciary. Within the past week, he traveled to California for one job, and he is on his way to San Juan for another job, and he is a prodigious worker. When we were trying to get this bill finished before the last session of Congress ended, it was on a consensus basis. It is obvious that we are not going to have consensus on all the points, but we have eliminated many, many areas of contention, and now the decisions on the remaining issues will have to be made by the Congress. The Senate will have a markup, and we will proceed with the legislative process. This bill is 273 pages in duration. It is a discussion draft, and when it has legislative form and is introduced, I will formally at that point call it ``the Becker bill.'' We will have 10-minute rounds for all of the witnesses except for Judge Becker, who will speak at length to describe the bill, the areas of agreement, the remaining areas of disagreement. And I am glad we have the staffs here of all of the Judiciary Committee members. And we had alerted the other Senators who had been especially interested. And this I think will advance the knowledge of the bill and I hope will enable us to narrow the differences even further. And then on the remaining issues, we will be consulting, Senator Leahy and I, Senator Cornyn, Senator Feinstein, and those not on the Committee--Senator Carper has been especially interested in this legislation, as have been the Michigan Senators, Senator Levin and Senator Stabenow, and the Arkansas Senators. This is a matter where we have been besieged on all sides, from people who are suffering from mesothelioma, a deadly disease, and from companies which are on the verge of bankruptcy, to try to find some relief in the immediate future. Thank you again, Judge Becker, and the floor is yours. STATEMENT OF EDWARD R. BECKER, JUDGE, U.S. COURT OF APPEALS FOR THE THIRD CIRCUIT, PHILADELPHIA, PENNSYLVANIA Judge Becker. Thank you, Senator Specter, Senator Leahy, Senator Cornyn. I am very grateful for your very generous remarks. It has been a privilege for me to do what I have been doing here. Although, Senator Specter, you very kindly talk about this as the Becker bill or the Specter-Becker bill, it is really just as much the Hatch-Leahy bill because of the magnificent breakthrough in getting the medical criteria which came out of 1125, and the Frist-Daschle bill because of the major strides that the two leaders made during the last Congress. I think, as you suggest, that I can be most useful in describing the bill. You have described this as an educational section, and what I would like to do--it is an enormously complex bill. But what I would like to do is go through each important section of the bill and lay it out so that there is full understanding. While it may take some time because of the length and complexity of the bill, I think it will kind of tee it up for the other speakers and facilitate their presentation. Before I do, I do think it important to state on the record--and I will do so very briefly because it is so unusual for an Article III judge to be involved in the legislative process in this way--that I needed to and I did satisfy myself before embarking on this project as to the propriety of doing so. I sought advice and was advised certainly that were four factors that had to be satisfied: Number one, that the efforts had to be bipartisan, and that has been satisfied because Senator Hatch and Senator Leahy initially blessed my participation, and then for 6 days last spring I was a personal delegate of Senator Frist and Senator Daschle. So it certainly has been bipartisan. Secondly, inasmuch as I do not represent, cannot represent the Judicial Conference of the United States, I thought it important to note that I would not charge the Government for this. So I paid my way down here yesterday and paid my hotel bill, with the two exceptions of 2 days when I was otherwise here on Federal judicial business over the last--this has gone on 17 months. I have paid for all of these trips, I guess 33 trips, actually more than that, and my hotel bills, I paid them out of my own pocket, which I consider a privilege as a citizen if I can contribute to solving this crisis, which in my Georgine opinion, which Senator Specter pointed out, was affirmed by the Supreme Court in which I said it cried out for a legislative solution because it was beyond the competence of the courts. So, in a sense, not only is this a labor of labor for me, but it is my penance for having interred the class action solution to asbestos. Thirdly, I had to satisfy myself that I had no conflicts with any stock, and I did that. And even though, as Senator Specter pointed out, as a senior judge I am not obliged to perform extensive judicial duties, I do, and last year I did more opinions than anybody on my court and continue to do so. So it has not interfered with my judicial duties. Let me turn then to the Act and lay it out. Insofar as the statement of legislative findings and purpose, the members of the Committee have essentially set forth what is in the legislative findings and purpose, that the asbestos litigation system is broken in the tort system; the wrong people are getting paid; many of the people who were entitled to get paid, the really sick, are not getting paid because of the rash of bankruptcies. This has been in my experience the greatest litigation crisis in the history of the American court system. And, indeed, one additional factor which is mentioned in the proposed bill is that it has had an enormous toll on the Federal bankruptcy courts. The Federal bankruptcy courts have been overwhelmed and inundated, and the transaction costs in the bankruptcy courts have been huge. And the purpose, of course, is to find a fair and efficient means of dealing with the problem. The legislation is called ``Fairness in Asbestos Injury,'' that is where the ``fair'' comes from, reform legislation. Now, obviously as you pointed out, Senator Specter, and you as well, Senator Leahy, the big issue up front is the amount of the fund. The parties have not agreed, the stakeholders, on the amount of the fund. The business folks, as I understand it, think that the $140.25 billion figure which was negotiated by Senator Frist and Senator Daschle is adequate. The labor interests feel that it is not. And it is not yet in the bill. Ultimately, some figure will have to go in the bill, but I think it important, taking that as where we are now to describe where the funding comes from and how it works. The fund under the Frist proposal will be funded by three-- and in the previous incarnations of the bill will be funded by three principal sources. The defendants--that is, the manufacturers or those who have manufactured asbestos- containing products--I do not think we have had any asbestos manufacturers for a long time, but there are those--but, of course, as you pointed out, Senator Specter, the latency period is 30 to 40 years. Someone can have been exposed to asbestos 30, 35 years ago and 35 years later come up with lung cancer, mesothelioma, or asbestosis, or some asbestos-related disease. So the defendants are responsible for $90 billion under this formula, the insurers for $46.02 billion, and the existing trusts--that is, the Manville Trust, the Fuller-Austin Trust-- these are the companies which have gone into bankruptcy and have confirmed trusts under 524(g) of the Bankruptcy Act or the congressionally approved equivalent, which is the Manville Trust, to relieve them of asbestos liabilities. So the existing trusts are in for $4 billion. These defendants are companies named as defendants in asbestos lawsuits and which have incurred at least $1 million of cumulative asbestos liability. They are placed in seven different tiers. The Act is structured on the basis of tiers--t-i-e-r-s, tiers--based upon the amount that they have expended in asbestos liability, having in mind that small businesses, as defined under Section 3 of the Small Business Act, are exempt from the bill. And also included in the defendants' contribution is $1.4 billion from the Owens- Corning Fiber Board Trust, which is the functional equivalent of a 524(g), and that is due to be transferred within 60 days after enactment. Under the Frist proposal, and, of course, in the bill, when finally drafted, the formula for the different tiers will have to be set forth. The financial calculations that I have seen are to the effect that the amount set forth in 2290 will have to be increased by approximately 9.3 percent for each tier in order to reach the Frist $140.25 billion. Under the Frist proposal, the payout is over 30 years, minimum of $3 billion a year, net of hardship and inequity allowance. I do not want to spend too much time on that, but there are provisions that a company that can demonstrate extreme hardship or a demonstrated inequity based on a showing that the defendants' allocation is exceptionally inequitable when measured against its likely costs net of insurance of its future participation in the tort system. There are hardship and equity allowances for individual companies which are subject to judicial review, but the figure is net of those hardship and equity sums. Now the insurers, under the first proposal, would pay according to a 28-year schedule. The allocation would be determined by the Asbestos Insurance Commission, although with respect to the businesses, the respective contribution of the individual defendants is set forth on the basis of what tier they fit in. The responsibility of the insurers either has to be agreed to by the insurers or determined by an asbestos insurance commission, which I will describe a little bit later in my remarks. The RAND study has estimated that there are approximately 8,400 companies--that is a lot of companies--that have been named in asbestos lawsuits. There are two senses. John Mesher, General Counsel of Saint-Gobain, who is here, did a survey where he analyzed all of the companies that were sued I think in Mississippi or Louisiana. I think there were 2,000 companies that were sued. And then the RAND did others. So it is not possible to predict exactly where the companies will fall within the tiers, but the significant factor from the point of view of the solvency of the fund is that the big companies, 100 big companies, will be in one of the two highest non-debtor tiers. By non-debtor I mean the companies that are solvent and are not in bankruptcy. The formula is in the bill. Tier I is the Chapter 11 companies, the companies that are in bankruptcy. Tier II is the companies with 75 million or more, Tier III with 50 to 75 million, and so it goes. But the significant thing, even though in terms of transparency we cannot say for sure at this moment which companies are in which tiers, we do know that the big companies are all going to be in the top two tiers, and the big companies, the defendants as a whole, guarantee--the way the bill is drafted, if the payments from the defendant companies are less than the statutory minimum in any particular year and the defendant has guaranteed payment account, cannot make up the difference, the administrator has the right to seek payment on a pro rata basis from the defendant companies for the remaining liability. So it is not tier-by-tier guarantee, but it is a total guarantee. And the guarantee, which is enforced by a charge by the administrator, means that unless American industry goes down the drain--and the big companies are the giants of American industry; you have GE and Pfizer and Viacom and GM and Saint-Gobain--well, that is a French company but with a big American presence--all of the giant companies are in the top two tiers, so they have to guarantee these payments. So there is, I believe, the way the bill is drafted, a guarantee of solvency. There is an issue with respect to the existing trust, the $4 billion that I reference. There is an interesting debate. Senator Specter, you referenced our attendance at the Yale Law School. The Harvard Law School is in the middle of this because there is one Harvard professor who says that the provision for--well, it is Professor Tribe, has given an opinion to the Committee as I recall--that the provision to transfer the amount of the $4 billion in the Manville and other trusts is constitutional. And another Harvard professor, Professor Fallon, has said that it is unconstitutional. So we have the warring opinions of these two Harvard Law professors as to the constitutionality of the transfer of the $4 billion, but I think that is something we need not be concerned about because under the first proposal, the companies, the big companies guarantee the $4 billion in the event that that portion of the bill is declared unconstitutional. So there is at least 140.025 on the table. There is borrowing capacity. This is a big issue with respect to the up-front money. Under the first proposal there would be $40 billion up front in the first five years. Labor has expressed the view that that is inadequate, but the fact of the business is that with the borrowing capacity, at least as analyzed by the Goldman Sachs folks, there is $30 billion of borrowing capacity so that in the first five years the $40 billion necessary for the start up--and there is concern that the fund would be overwhelmed in the early years--does go up to $60 billion. So there is $60 billion. The borrowing would provide liquidity through the life of the fund, and it provides greater comfort in the early years when the claims are believed to be greater, and of course, when the fund might lose the existing trust to a constitutional challenge. Will monies be out there? By virtue of the authority given to the administrator any borrowing would be senior to senior unsecured claims in a bankruptcy. There is plenty of diversity with the 8,400 companies that have been named. The experts--and I am not one of them--say that the fund could achieve an investment grade rating on its borrowing. In terms of the liquidity in the first five years, to quantify that, the $40 billion would come $15 billion from the defendants, 20.6 billion from the insurers. The insurers do put up more up-front money because of the nature of the industry, and as I said, $4 billion from the existing trust. So as I have said there is, at least according to these folks, $60 billion of liquidity in the first five years. Will this funding be sufficient to pay the claims? Again, the stakeholders are not in entire agreement on that. Whether it is or is not is a function of two factors, claim values and the projections. The claim values are what are in the bill as to how much you get for each category. The projections, which the Lord only knows, is how many people are going to get sick, how many people are going to get asbestos-related disease. We do know, because of the latency period, that sometime in this decade a number of people suffering from asbestos-related disease will start going down, but we do not know by how much. In the last weeks I have had different projections as to whether it is going up, which labor says, and whether it is going down, which is what business says. It is acknowledged, there is no doubt the Manville Trust, which has the greatest experience, has reflected a significant decline in the number of claims, but the mere fact that the number of claims, that is undisputed, has gone down, that is not of course conclusive as to whether the incidence of asbestos-related disease after the long latency period has gone up. Now with respect to claim values, which are set forth in Section 131 of the bill, I think it is fair to say that there is agreement on most of the claim values. The most significant contribution of the bill--and again, Senator Hatch and Senator Leahy deserve so much credit for this--is that those who are, although they have pleural thickening, they have asbestosis, but are not functionally impaired, the ones who are not sick-- and these are the ones who Senator Cornyn has pointed out so graphically--have gotten huge awards in the tort system, accompanied by great transaction costs, these folks simply get medical monitoring. They do not get an award, but their condition is monitored. Every two years or every three years they get examinations and so forth to see if they get sick, and of course, if they do get sick, then they become eligible. But the lower levels, which are people Level II and Level III, there is basic agreement--and I am comparing here the first offer, the Daschle offer, Senator Feinstein's proposal, and Senator Specter's and my proposal--at Level II everybody is agreed on 35,000; at Level III everybody is agreed on 100,000; Level IV, severe asbestosis, everybody is agreed on 400,000; a disabling asbestos everybody is agreed on 850,000; and Level VI, other cancer--and I will talk about that in a few minutes-- everybody is agreed on 200,000. The disagreements are when you get to the lung cancers and the mesotheliomas. Working backward from the mesotheliomas, the bill provides--Senator Frist's offer was 1.050 million, Senator Daschle and Senator Feinstein said 1.1 million, Senator Specter and I cut the baby in half, and it is 1.075 million. Now, there are a lot of mesos, so the dollar figure is not insignificant, but the difference in terms of claim value is not that great. Working backwards, as I have said, lung cancer with asbestosis, there is essential agreement--well, I should point out that when you are dealing with the lung cancers, you have got three--and this is Level VII, VIII and IX--you have got three subgrades. The problem with the lung cancers is the complication of the impact of smoking. The companies have expressed a view that their concern is that this should not turn into a smoker's bill, and when smoking is in the picture, you have causation requirements. Now, administratively, the structure cannot work unless you have a schedule. You cannot have individual, you can only have a limited number of individual determinations. But, obviously, the folks who got lung cancer who were non-smokers, who never smoked, they need to get an awful lot more than the ones who remain smokers. Then you have the mid-level are the ones who are the ex-smokers. That is the ones who gave up smoking, in different incarnations it has been 12 or 15 years ago. In Level IX, as I said, working backward from the more serious ones, the lung cancer with asbestosis, there is virtually no difference in the claims values among the contending parties. They are virtually all at the 575 to 600 thousand range for the smokers, 950,000 to a million for the ex-smokers and 1.5 to 1.1 for non-smokers. Senator Specter and I put them in as the same as the mesos, and we shaded them a little for the others. On Level VIII, once again, they are almost the same, indeed for the non-smokers they are exactly the same. The big issue relates to the so-called Level VIIs which I will have more to say about later. The Level VIIs, it is important to note, are the individuals who have lung cancer but no markers. That is, even though they have lung cancer and they have the requisite 15 years of exposure, they have no asbestos- related symptoms, bringing the causation issue into play. Business has said, look, these fellows are smokers and we do not want to turn this into a smoker's bill. That is the one area where on the claims value there is a big disparity. Senator Frist's offer was 150,000. Senator Daschle's offer was 500,000. Senator Feinstein's proposal was 250,000. Senator Specter and I did put that in at 200,000, thinking the lower number was the better measure because of the causation problems with respect to smoking, individuals who have cancer who have been smokers, but who have no markers of asbestos. The claims values in sum, except with respect to the Level VII smokers, the stakeholders are not that far apart on claims values. They have a bigger disagreement on projections, which as I have said, is something that the Lord has not let us in on in terms of how many people are going to get asbestos-related disease. I spent two days back in May with all the experts, Tom Florence, Fran Rabinowitz, Andy Kaiser from Goldman Sachs, and we went round and round and round, and at that point I had thought that the 139 billion worst case scenario based on the projections that was set forth by Goldman Sachs was realistic, but since then labor has given us some figures that said, no, epidemiologically there is data which shows a wider distribution of not cancers, but asbestosis and disabling lung disease. They say there are more mesos. Business says no, mesos are going down. I think it is fair to say that we will never know, we will never solve the projection issue. The only way we will know it is in the long run, and the old saying is: in the long run, we will all be dead. We cannot wait 30 years to do this bill to see how many people get asbestos-related disease over the next 30 years. You just have to make some informed predictions on the projections, and having in mind that the linchpin of this bill is if the projections are wrong, there is a sunset. If the fund cannot pay the claims, then there is a sunset and it goes back to the tort system. So if business is wrong--and everybody wants, and I say this for labor--labor has made it very clear, they do not want this to fail. They are not interested in sunset. They want this fund to work. And none of us know for sure what the accurate projections are, but nonetheless, in due course if the projections are higher than we think that they are, then it goes back to tort system. In the event of insolvency, of course, there is borrowing. There are tough remedies. The bill provides a surcharge on the defendants to make up a shortfall, to require the insurers to put up security. There are liens, Section 222 to 224, but obviously there is a return to the tort system. And if it should turn out that there is overfunding, then there are step-downs and holidays which would give the business the benefit of that. In terms of the benefit categories, I mentioned the unimpaired. The unimpaired simply get medical monitoring, and the Hatch-Leahy Bill gives a very elaborate description of how you qualify for Level II, how you qualify, Levels III, IV and V simply are increasing levels of impairment. Level III, minimal abnormality; Level V, serious impairment; Level IV in between; and of course the higher level you are in, the more compensation you get. And Level VI, other cancer, there are some medical/legal problems. Level VI requires a diagnosis of primary colorectal, laryngeal, esophageal, pharyngeal or stomach cancer. With respect to some cancers, there is some doubt as to whether asbestos exposure causes these cancers. They do not fit in easily like the mesothelioma, the lung cancer and the asbestosis, and the bill provides for physician panels to deal with these things. And lung cancer I gave you a kind of description. Level VII is primary lung cancer, 15 years of exposure but no markers; Level VII where your symptoms are greater; and Level IX is with asbestosis; and Level X is mesothelioma, which is almost always caused by asbestosis, but there are cases of idiopathic mesothelioma which is not caused by asbestosis, and there are exceptional medical claims that can be evaluated. With respect to the mesothelioma benefits I should also mention--and Senator Specter has expressed a great interest in this--there is a proposal that the mesothelioma awards be gradated based--let me give you an example. That a 70-year-old mesothelioma victim with no dependents should not get as much as a 40-year-old mesothelioma with a bunch of young dependents. The problem there is to make it cause neutral and not to burden the administrative structure with an awful lot of individualized determinations. We are working on legislation in terms of, one of the things I was going to say at the end, where we go from here, good that this is a discussion bill. The stakeholders are here. Senator Specter and I met with them yesterday, and they are at work on a proposal, a drafting proposal, and they have been enormously helpful that we will perhaps solve that problem. We have administratively Senator Leahy mentioned about the administrative process. We have a streamlined administrative process in the bill. Section 113 sets forth the information required. The claimant has to set forth employment history, asbestos exposure history, smoking history, medical information, the medical records, and various affidavits will suffice, because have in mind that many of these folks were exposed 30 and 40 years ago. The companies have gone bankrupt, and the records are not all available. And so there will be heavy reliance on affidavits and affidavits of members of the family with respect to medical evidence. The bill also contains auditing requirements. There is an expedited requirement for a decision within 90 days, internal administrative review and appeals. There is, and I am not going to spend much time on it, but we have set forth an elaborate appellate structure to various courts, and indeed, in terms of the thing I mentioned earlier where there is a constitutional challenge, the bill even says that the Supreme Court has got to give it expedited consideration, which of course it did to the Campaign Finance Bill, and I would be confident the Supreme Court would do that. There is also a provision with respect to attorneys fees, claimant assistance. There are educational programs. The Labor Department has to put up a website. The claims forms would be on the website. There are provisions with respect to there are limitations on attorneys fees, but the administrator under the bill has the power to limit attorneys fees in certain classes of cases. The prime example would be if a mesothelioma victim gets a million dollars, 1.075 or whatever it turns out to be, a lawyer who does not have very much to do, because meso is virtually a slam dunk, should not get a $200,000 fee for doing that. Well, there is a 10 percent limitation, 20 percent limitation for appeals. But the administrator presumably would say, look, in a simple mesothelioma case, that class of cases, the fee would not be 10 percent, it would be lower. On the other hand, there are going to be cases where there are going to be causal issues, where they are really going to have to be litigated, and in that case, in order for attorneys to take these cases, which I think will be a different breed of attorneys than the ones that you, Senator Cornyn, were referring to, I think the asbestos plaintiff bar is going to be going on to other pastures. I think we are basically going to have a different bar handling these cases, and you do have to have some inducement for lawyers to handle these cases. But the short of it is that although it will be burdensome, the Department of Labor does have the expertise in crafting regulations and handling claims and developing websites. The original proposal to put it in the Court of Federal Claims, I have been in the court system long enough to know that this is not the kind of thing a court could handle. It is not the kind of thing that a court is suited to handle. The Labor Department would be it. There would be an administrator. The administrator is a presidential appointment. The administrator is required to appoint a deputy administrator for claims administration, and one for fund management. There would be an Asbestos Advisory Committee that the Congress will have input into, a Medical Advisory Committee. There will be physicians panels. The one thing that I would simply urge upon the Members of the Committee, if and when you pass this bill, is to urge upon the White House the importance of getting this thing up and running and targeting somebody, an administrator, who can get in place quickly, because as I will get to now, the transition and the sunset, become a very serious matter if this fund is not up and running, if the administration is not up and running and it has to go back to the tort system, the purpose will not have been achieved. So you have to target somebody, the White House has to target somebody. I do not think this is a political plum, this appointment. I do not know who is going to want it, but you are going to have to get the right person to get this thing up and running in a hurry, because otherwise the purpose of the legislation will not be affected. Now let me run quickly through the remaining issues, which are, I confess, some of the most controversial issues, because business's position is if we put up $140 billion, we do not want any leakage. We are putting that up to settle our asbestos liabilities. We do not want to have to be back in the tort system. Under start up, the money goes in. There is a transparency provision. It is kind of like the IRS, kind of like our taxes. We self-assess our taxes. These big companies know what they have spent. They know what their liabilities are. The insurers is another matter I will come to, and I can discuss that briefly. But within 60 days they have to set forth what they owe, what likely tier they are going to be in. The administrator has got to publish it in the Federal Register in case there is any issue. But once the fund goes up, there is a stay on all the claims. So the claims are stayed, the tort system is shut down. But what happens if the system does not get going? Obviously, you cannot keep people, I mean I think there is a basic understanding that if the system does not work or if it is overwhelmed, then folks who have lost their right to jury trial have a right to go back to the tort system. So what happens if the Labor Department is overwhelmed? This bill provides that within 180 days, if the administrator cannot certify that the exigent claims, that is, the mesotheliomas and the ones where the doctor says they will not live a year, are not being paid at a reasonable rate, they can go back to the tort system. We had a meeting with the stakeholders yesterday and I think that may have been a mistake. Maybe it ought to be 180 days from the time the administrator is appointed or it may be that if it goes back to the tort system it does not stay there, it can come back, or there is a credit. That has to be worked on some more. But there is a real concern, and this gets into the expedition point that I made, how critically important it is when this Act goes into effect, assuming that it does, that an administrator be appointed and an administrator be in place with the deputy administrators, and this thing has got to get up and running quickly. The regulations have to be promulgated, the claim forms have to be put out on the website, and the businesses who want this to work have to get their money in and up front quickly. I think they know that, because they want it to work, and I think that they will. There is also an escape valve for 360 days unless the administrator can certify that all claims or valid claims are being paid at a reasonable rate, and I think the same concerns apply there. Next hot button issue is pending cases, what cases should be grand-fathered, left in the tort system. The proposal, which I think cuts down the leakage, is that the only pending cases which remain in the tort system are those which are actual non- consolidated cases, that is, not where some trial judge someplace or other has consolidated 500 cases together, but a one-on-one typical, traditional two-party or three-party, whatever it may be, law case, an unconsolidated case which is actually on trial. Everything else gets shut down. Insofar as what about settlements, there has been a lively discussion about that. I will point, and Senator Specter has been aware of this, some of the meetings that I have had with the stakeholders have been four-hour drafting sessions. They have been a lot of fun. You know, you have a lot of good lawyers together, and we draft and we redraft and so forth. We have had a lot of discussion about the settlement issue. The way it is in the bill now is that a settlement is preserved only if it has been signed by the individual and the defendant before the enactment of the bill, but there is a 60-day period. Business is not happy with that, but nonetheless, I thought it was reasonable. There is a 60-day period. And the insurers are not happy with that either. There is a 60-day period where any necessary paperwork has to be completed, and we have got some more drafting to do as to identify those. Winding down on the insurance issues, there is, as I suggested, an Asbestosis Insurers Commission, which would be appointed by the President with the advice and consent of the Senate, and once again, if this bill goes through, I would hope that not only the President makes prompt appointments but the Senate makes early confirmations to get this thing up and running. One would hope that if this bill goes through, the insurers would all agree on the allocations. There has to be 100 percent agreement. There seems to be indication that if the bill is going to go through, the insurers are not going to want to subject themselves to the tender mercies of the Asbestos Insurers Commission, because they do not know who is going to be on it and what the Insurers Commission is going to do to them. One of the powers that is in this bill is a ground-up survey, because some of the insurers do not think that the other insurers have accurately reported what their asbestos exposure is. The Commission is entitled to do a ground-up survey to get records from the SEC. A lot of this is public stuff. But there are criteria of the historic premium lines, the recent loss, the amount of reserves, based upon which the Commission makes the determination. One would hope that they will not have to do so. Another hot-button issue is what I describe as the Equitas issue. Equitas is the name given to the Lloyd's of London--this is the offshore reinsurer. Senator Specter identified the stakeholders as the businesses and the insurers, but we have had the insurers and the reinsurers, and the insurers and the reinsurers do not always agree, and then the domestic and the foreign reinsurers do not always agree. That is why Senator Leahy said this ain't exactly a simple proposition. We have also had, not only labor, Senator Specter mentioned this, but we have had the trial lawyers. We have had a representative of ATLA at every single one of our meetings, but the London reinsurers, the Equitas Group, think that they need to get a certain concession, a hardship concession that the American reinsurers do not think they ought to get. I do not want to say any more about it now. You are going to hear testimony about that. Four remaining hot-button issues, and then sunset, and then a few other things. Workers Comp subrogation is an issue. Historically most folks with asbestos disease have not sought Workers Compensation. They have had access to the court system and the court system has given them by and large reasonably big awards and they never sought Workers Comp. But now they will not have access to the tort system, so the question is will they go and get Workers Comp. They may go get Workers Comp and the question is whether or not the Workers Comp carriers will be able to get subrogation, whether they will be able to go back against the claimant. A couple of issues, and we mentioned before about things we have agreed upon. One of the things that was agreed upon early on in our process is that Blue Cross and Blue Shield cannot come back and get subrogation. We also have, in terms of health insurance, nondiscrimination under the HIPA Act passed by the Congress. There may be no discrimination against an asbestos worker in giving that worker health insurance because of prior asbestos exposure. But with respect to subrogation, the business says, look, if you are going to get $800,000 out of the fund, you ought not also be able to get Workers Comp because that is double dipping. Labor says, that is a different carrier. Sometimes it is, sometimes it is not. A lot of times, many of these businesses, because of the regularity of Workers Comp, are self-insured. Senator Specter and I have proposed a compromise. What we have tried to do all throughout is propose principled compromises, and I think it is a principled compromise, and it is the way it works in most states. It is a so-called holiday. That is the Workers Comp carrier cannot come back and recover anything that they have paid from the worker or from anybody. But during the period of time that the worker gets compensation out of the fund, to the extent of that total amount that the worker gets out of the fund, then the comp carrier does not have to pay comp. It does have to pay comp if the State law in New York or Delaware or Texas or wherever provides for more comp than they get under the fund. If they do that, the comp carrier has to pay that, and they cannot recover anything. So that is the compromise proposal. I am not going to tell you everybody is happy with that proposal. We think it is a principled proposal, but there it is, it is in the bill. Another one is FELA. The rail workers want to preserve-- they do not want FELA preempted, they want their rights preserved under both FELA and the fund. Now, talk about stakeholders, we also had the railroads in. Another group we had in were the Association of American Railroads and not just labor but the rail workers. It turned out, upon our investigation, that 95 percent of the rail workers who had asbestos exposure are now retired, so the would not get Workers Comp. But the other 5 percent or 10 percent, whatever it is, would get less under this bill than the non-rail workers. What we have proposed in the bill is that the difference be made up. That is a compromise. The rail workers are worried about somebody tinkering with the FELA. Senator Specter came up with the idea of putting in the bill to make it clear that Congress does not intend to mess with--excuse my vernacular--say, ``Don't mess with Texas,'' ``Don't mess with the FELA,'' Senator Cornyn, so they say. That is in the bill. This is not intended to mess with the FELA. Once again, it is an improvement, and the railroads are satisfied with it. They do not like the language in the bill. The rail workers want to do something else. We are still talking about that, but we think it is a good compromise. Another issue that business does not like but which is a matter of enormous importance to labor as a health and safety issue is medical screening. We put in a provision for medical screening, that is, over the years to come--well, let me just start back. Business does not like medical screening because for years there was a history that the asbestos plaintiffs' lawyers had some B readers and others whom the businesses did not think were reputable, who they thought were mills of turning out plaintiffs. This provision is very different. It is for rigorous criteria, rigorous standards, run by NIOSH or run by a contractor selected by the administrator, who would for people in certain high-risk industry, give them examinations every few years to see if they get sick. If they do not get sick, they do not get anything. But if they do get sick, then they can come into the system. Business says, well, let their doctors, you know if they are sick they will go to the doctors, and this is a way of encouraging it, and most of the people with asbestosis do not get treated anyway. Be that as it may, this is a matter of it seemed reasonable to us to have this avenue available for people in high-risk industries, so long as it is subject to reasonable and rigorous requirements, and Senator Specter and I have put it in there. Labor feels very strongly about it. Business does not like it. This is one of the issues that the Senate is going to have to decide and markup someplace or other. One other issue where the folks are at odds is mixed dust, and Senator Leahy, you in effect introduced this subject. There are folks who have been exposed to asbestos and have also been exposed to silica, and they are sick. Business says, hey, look, I mean if what you have is really silica disease, sure, you can go in the tort system, but we are worried if this bill goes through that folks who have been exposed to asbestos, who have had some silica exposure, are going to repackage their asbestos claims as silica disease. I must say that Senator Specter and I have drafted a lot of things that one side or the other is not unhappy with. This is the only thing we drafted that nobody was happy with. So we did not put it in there. It is a problem that has to be solved. It can be solved in a number of ways. One way is, Senator Feinstein's proposal was, was your disease primarily from silica? Another way to deal with it is to set forth a credit, that if you have silica disease that the trial judge, if it goes into the state tort system, has to offset the proportion that is due to asbestos. That is a tough nut we have to deal with. Finally, sunset. Sunset is a big ticket issue. There are two levels of sunset. One is if the total program cannot be funded and the second is the Level VIIs. And that is the tradeoff, if the fund is inadequate, then folks can get back to the tort system where they have the right to jury trial, but there are a number of issues. Senator Biden was the one who introduced this first, but the Biden proposal has been refined. Everyone agrees that before there be any sunset, there has to be program review. The administrator has to do a shortfall analysis, projections, how is this fund going to do over the next period of time? There must be a plan for winding up. There is a provision that has to go to a special commission consisting of the Attorney General, the Secretary of Labor and other functionaries in the Government, and it would have to give Congress an opportunity to affix the system. But nonetheless there has to be program review. There is agreement on that. The question, however, is how long need we wait to sunset? Business's proposal, the 2290 proposal, was seven years. Senator Specter can speak for himself on this. Senator Specter felt that seven years was too long. And there is no provision in this current draft as to a timeframe, although, obviously it could not happen right away because there would have to be this very elaborate program review. But at all events, the question of the time of sunset is an issue. The second issue is the reversion. If it goes back to court, where does it go back to court? The provision that we have adopted is essentially a provision that Senator Feinstein proposed, that it could go back either to Federal Court or to state court, but only to a state court where the claimant lived or the claimant was exposed. In other words, you could not have 100 claimants who never had anything to do with Mississippi or some county someplace or other which was a favorable plaintiffs' county and bring all the cases there. It would have to be either where the plaintiff lived or where the plaintiff was exposed. And if you cannot fine the defendant then against that defendant only, it is wherever you can fine the defendant. Business would like it to go entirely to Federal Court, but this is the compromise which we fashioned. With respect to Level VII, the Level VIIs, the ones I described as the lung cancers, requisite exposure smokers but no markers, business has worried about whether the Level VIIs will overcome the system. Even though business concedes that most of these cases, when they go back to state courts, they win because there are the causation issues, nonetheless there are potentially huge volumes of them because of the level of smoking in this country, and the transaction costs are huge. The question then is what about a partial sunset? We have agreed basically there would be a partial sunset just for the Level VIIs. What Senator Specter and I put in the bill is 15 percent, 115 percent of the CBO figure. Labor wanted 150 percent. Business wanted the CBO figure. That is something the Senate is going to have to decide. The other issue relates to the reversion. There we have put in, because there are complex issues as to whether there is in fact a proper Level VII reversion, there we have put in that that would go to Federal Court and that that could not go to state court. That would be a Federal Court matter. Business is happier with that. Labor is not. With respect to the bankruptcy laws, we have taken a lot of care that we do not mess up the bankruptcy laws and bankruptcy liens. By and large, other than the confirmed bankruptcies, the others are all laying around, and the other bankruptcies are going to be folded into the system. Three wrap-up items. Senator Murray proposed a ban on asbestos-containing products. That is in the bill. And Labor was concerned about violations of environmental and occupational and safety and health requirements, and we put in a bunch of provisions for that. Other than some more technical provisions, that is my overview of the bill. Where we go from here is we have some more drafting sessions. I have identified a couple of issues that we are still working on drafting on. There are some issues that I do not think we are going to be able to get consensus on. I think I have identified each of them, and the Senate at its markup is going to have to deal with those. I appreciate your indulgence, but it is arguably a sprawling bill, one of the most complex bills. I have been a Federal Judge for 34 years. I do not think I have ever seen a more complex bill than this. So forgive me for taking so long, but I wanted, since Senator Specter said it was an educational process, to lay it all out and put it on the table. I will be glad to answer any questions that any of the Senators may have. Chairman Specter. Thank you very much, Judge Becker, for a very comprehensive statement of the draft discussion bill. Some insight into your level of enjoyment came when you smiled with the fun of drafting. Judge Becker is known for not only the number of his opinions but the length and the length of footnotes. Turn the lights on 10-minute rounds, because as Chairman I want to observe the time limits meticulously so we can move ahead. Since that is what you consider fun, that is some insight. Judge Becker has been known to write opinions that rhyme, and among his many talents he is the pianist for the Songfest of the Supreme Court of the United States, one of the little publicized and most interesting activities of the Supreme Court of the United States. Judge Becker, as you have outlined the provisions of the bill, you have demonstrated the considerations on public policy issues where we had positions identified at length by so-called stakeholders, and then an evaluation of what seemed fair and just, and on accommodation, we found on many cases the parties could be brought together, and it was a matter of articulating language which would bridge the gap, and that has been done in many, many lines. The essential question which we have dealt with on this bill has been the giving up of the right to jury trial, which is a very fundamental right in our judicial system. In exchange for that would be a trust fund which was calculated to be adequate to take care of the claims. I think it is very important, as you went through the categories of claims--and Senator Leahy did a great deal of work on this, Senator Feinstein, Senator Frist and Senator Daschle, Senator Hatch--that there was pretty much agreement as to those areas. The draft discussion bill has tried to provide for flexibility, on the illustration you gave of a 40-year-old man with children as opposed to a 70-year-old mesothelioma victim without children, so that it remains revenue neutral, so that we have tried to provide that flexibility. When we had the markup in July of 2003, the issue of the reversion was a very contentious point, and as you have noted, it was Senator Biden who came in with a provision that there be a reversion. You have accurately noted considerations really by the insurers of a 7\1/2\ limit, and that is not easy to deal with when you have the kind of money we are dealing with here and the schedule of payments, it seems to be a virtual certainty that it would last at least 7\1/2\ years. An original draft put it at 20 years, which would really freeze out claimants in the event the fund was insufficient over that kind of a protracted period of time. But this is a balance. When you have talked about reversion in the event that the exigent claims are not paid within 180 days and other claims within 360 days, just yesterday, the session brought to light a very important consideration that that timing, at least in my judgment, ought to start from the confirmation of the administrator because appointments take time, and confirmations sometimes take time. So that would be a reasonable parameter, bearing in mind that people who go into court are spending a lot more time in dire circumstances, the exigent claims on mesothelioma, but it is an effort to make a balance. Understandably, the manufacturers and the insurers were very insistent upon avoiding leakage to carry all the pending claims. That was a reasonable request on their part considering the amount of the money, as yet undetermined, but the substantial contributions and the reversion. So unless the case is to verdict, not a matter of having a trial date, those cases go into the fund. We have left a little time after for settlement on individualized cases where the plaintiffs' themselves sign the settlement papers, not one of these block settlements where a lawyer settles for thousands of people yet to be determined in a very indecisive way so that there would be a large opening on that. When it has come to the issue of medical screening, we have heard contentions by the insurers and the manufacturers, and just as we have tried to limit the 120 days with specification as to what will happen during that time, there has been I think a substantial and successful effort to have medical screening in a limited context so that it is not a wide open field. Well, your description I think was very comprehensive, Judge. It sets the framework so that we can hear from others and see what other people have to say. Judge Becker. I will be glad to remain at the table if you want me to. Chairman Specter. We are going to hear now from Senator Leahy, so you may be here for a while. Judge Becker. Okay. [Laughter.] Chairman Specter. Senator Leahy. Senator Leahy. Thank you, Mr. Chairman. Judge, as I said before, I really do commend you for doing this, your diligence in mediating the matters. I did not realize it had been that number of trips down here. You sort of commute back and forth the same way that Senator Specter does. Judge Becker. Right. Senator Leahy. But you have made significant progress on the all-important issues such as the fund's borrowing authority, the transparency of contributions to the fund, allowing for a sunset if the fund runs out of money, another significant area. I know that involves delicate balancing acts and a successful trust fund cannot shift all the risk to future or current victims, obviously. But then you have the possibility of fund insolvency, the risk of inadequate funding short of insolvency. All these things have to be addressed. I think it is your number, but one of the numbers is 600,000 asbestos cases pending in the tort system. I am worried about the crush of claims in that first day. What is the appropriate amount of up-front funding in the first three years of the fund's existence so that we might be able to pay out claims within the statutory deadline? What would you say? Judge Becker. The time period I have been focusing on is five years, and my sense is that the 60 billion, 40 billion plus 20 billion borrowing capacity, for five years is adequate. Insofar as three years as opposed to five, while I guess you are right that you would probably have more in the first three and then they would start to slow down, one of the issues is going to be how fast is the system going to get up and running and how many claims are they going to process? I mean that was a matter that I expressed concern about before in terms of the administrative capacity. I think there is no answer to your question. When I say this, there is certainly no empirical data. We have talked to the folks at the Manville Trust. Mr. Austern was in when we were talking about projections. But I think in response to your question is that we have not done a study--I do not know that we can and maybe we ought to focus on this in the next couple of weeks, and it is certainly consistent with my concern that I expressed earlier and that I expressed the other day about how quickly the administrator structure can get going--as to how many claims are going to be filed, how many we can process within the next year or two. I am inclined to think that there will be--if the businesses which have an interest in getting their money up front, the big companies, know what their asbestos exposure has been, they know what tier they are going to be in, and if they get their money in in 60 days or 90 days, there is going to be a ton of money in this fund from both the insurers and from businesses. Senator Leahy. If I could ask you about that, because we talked about the 40 plus 20, the 60 billion, discussed this with the Frist bill, the Daschle bill and the others. Do you have commitments or letters from the financial institutions regarding the availability of $20 billion in front-end funding for the bill's borrowing authority? Judge Becker. Well, I do not think anybody has those letters in hand. They would probably violate Sarbanes-Oxley or Leahy-Specter or something or other if they gave those now. [Laughter.] Judge Becker. But the predictions are that it would be available. Senator Leahy. But you see what I am getting at. And you are absolutely right when you say it is hard to do some kind of an empirical study. We are walking into something similar to what we did right after 9/11 with the victims and Ken Feinberg and the others who did that. We had some general idea where we were going. We did not know exactly where we were going, but we went. And Mr. Feinberg and others worked very well on that. Perfect solution? No, we are not in a perfect world, but it was a heck of a lot better than it had been, and that is probably where we are going to be here. We are not going to have a perfect bill from the manufacturers point of view, the insurance companies point of view, labor, lawyers, victims. It is not going to perfect for everybody. But we can get a lot better than the situation we now have. I would urge--because I know that there is representatives of all the groups I just mentioned in this room--do not look for perfection. Do not let the perfect be the enemy of the good, because we can do something. Senator Specter and I are committed to do something. I notice in your draft bill, Judge, a provision that will allow victims' awards to be vulnerable to liens by the insurance companies. I think the language was compensation holiday. I am worried though about a sick victim who finally gets an award. The next day the registered letter comes from the insurance company saying, hey, give me back the money, give me back all or part of what you got in the victim's award. I do not know whether this subrogation language would override states laws on the insurance companies' rights to sue victims for subrogation. Does this create trouble in your mind, because we are talking about a no-fault administrative system to fairly and quickly compensate victims? Is this a double-edged sword? Judge Becker. Senator, I do not think so. I mean I am not here in my usual capacity, but it strikes me that what the Congress does overrides state law here. I mean, plainly the Congress has the power under the Commerce Clause to do this. The language, as I understand it, would forbid the insurance company from trying to get money back from the claimant. If it does not say that clearly enough, it needs to be redrafted to say it more quickly. Senator Leahy. Is that what you want to do though, make sure they do not take back from the-- Judge Becker. No. They cannot recover anything back, they cannot. Senator Leahy. Okay. Judge Becker. To the extent that that is in conflict with state law, the Supremacy Clause, in my opinion preempts state law. Senator Leahy. I had the joys of doing two things over the weekend, recovering from bronchitis and trying to go through the draft bill. Both had a certain degree of enjoyment. And I know the draft bill has been modified last night. But one thing I should say, all joking aside, I am extraordinarily impressed by what you have done. I think it reflects good-faith efforts to make real progress and reach the consensus that we have to have. I cannot emphasize enough to the stakeholders here in the room, this is a bill that will go through with consensus and end up on the President's desk. Without consensus on both sides of the aisle, there is no way in God's green earth it is going to make it there. Do you have recommendations how we might continue to narrow differences with the stakeholders and with Senators? We have Senators across the spectrum who are working in good faith here, as the Chairman and I are. How do we get more consensus? Judge Becker. Senator Specter and I and the stakeholders keep talking, keep on trucking, we keep on talking. The more we talk the more consensus we get. But I do believe, Senator, there are going to be certain issues that there is not going to be consensus on. I do not want to kid you. I think we can narrow a few more issues. But there are going to be some of them they are simply not going to agree on. There are some folks who just feel by virtue of their institutional arrangements that they cannot say yes. And at some point I think you gentlemen and ladies are going to have to bite the bullet. I think that there are going to be-- but the important thing is I think it may be narrowed down to six or seven issues. Senator Leahy. Well, you know, we see this in international negotiations all the time. Sometimes people just do not know when to say yes. Will you do me a favor? When you are talking to stakeholders on all sides, stress to them the urgency. And it may be a grudging yes, but at some point there has to be a yes. I do not think if we let this go into next year, or even much into this year, that we have a chance. Right now I think we do have a chance. Please carry that message back. They are going to hear it from both Republicans and Democrats. You have done so much. Senator Specter has done so much work on this. It would be a shame to let this fall apart. Thank you, Mr. Chairman. Judge Becker. I will do so. Chairman Specter. Thank you very much, Senator Leahy. Senator Leahy. I know you will. Chairman Specter. Senator Cornyn? Senator Cornyn. Thank you, Mr. Chairman. Judge Becker, last year when we marked up S. 1125, I know there were discussions about the adequacy of the funding, and I realize that we do not have a bottom-line figure in this proposal. But I want to talk to you about how do we determine whether the trust fund concept will be adequate to satisfy the demands made on those funds, and some of the things you said here today and some of the things I have heard previously I think need to be explored so everybody understands. The amount of money that we are talking about being contributed into the trust fund is without regard really to our ability to know what the dollar demands are actually going to be. Would you agree with that? Judge Becker. Unfortunately, yes. Senator Cornyn. And I am not being critical. Judge Becker. No. Senator Cornyn. I just want to make sure we all understand. Judge Becker. It is in the nature of the situation. Senator Cornyn. So if we get into extensive debates about whether $140 billion is enough or $110 billion is enough or $150 billion is too much, the truth is we do not know what the demands are going to be on this trust fund. Judge Becker. I think that is right. I think you end up talking to yourself. Senator Cornyn. So it is certainly in everyone's interest who wants to see this approach work, this general approach work, to make sure we do whatever we can to make sure that the money that does go into the fund goes to victims. You would agree with that, wouldn't you? Judge Becker. Absolutely. Senator Cornyn. And I know there has been some discussion about the near-term funding requirement, and you talked about in the first 5 years the $40 billion plus the $60 billion-- Judge Becker. Plus the $2 billion. Senator Cornyn. --borrowing capacity, which I think is a good cash flow device, which obviously helps ensure the fund is more likely to be successful. But, actually, the $40 billion, if my calculations are correct, represents about a four-fold increase over the amount that is currently paid out in the tort system. If you look at the--it consumes in the neighborhood of $5 to $7 billion annually, with about 60 to 65 percent going to transaction costs. Not to quibble over the numbers, but the amount of money that goes into this trust fund the first 5 years is substantial, and it is a multiple over the amount of money that currently is paid out to victims under the current tort system. Judge Becker. I have seen those figures, and there is documentation that would support those figures. I think the other side, I think that labor would controvert that. But, plainly, that is what the RAND study shows, absolutely. Senator Cornyn. Let me ask you a little bit about-- Judge Becker. Like $6 to $8 billion a year times, you know, 5, 6, years, that is the 40. So that is right. Senator Cornyn. Let me ask you a little bit about the claims process. Is it the intent of the working group and your intention to make this claims process as simple as possible? Judge Becker. The answer is yes. Senator Cornyn. And here, again, if you look at the RAND study that you alluded to, about 60 cents on the dollar under the current system go to pay the plaintiff's lawyer or the defendant's lawyer or court costs or other costs. Our goal here is to try to boil down the claim to eliminate as many transaction costs as possible so the victims get the money. Judge Becker. Absolutely. Senator Cornyn. And is this something, a claim process that you think a reasonably intelligent individual could do on their own, or are they going to have to hire a lawyer? Judge Becker. I think for the most part, most of these can be done on their own. There are going to be some where they are going to need lawyers. Some are going to be complicated. Most of them they can do it on their own, and the Labor Department, by and large, they will hire contractors. I would say the way this is done is to hire contractors, and there are a lot of folks out there who have processed these claims for the bankruptcy trusts and so forth who should be available. But it is a claims evaluation process on the basis of the information that is--I do not think it is extraordinarily complex. It has got to be done carefully. But I think in most cases the claimant will be able to do it him--it is almost always going to be a himself. And you are not going to have to have a highly sophisticated claims examiner to evaluate the claim. Senator Cornyn. And if, in fact, an individual, a victim of asbestos disease, is able to file their own claim, will they then be able to keep the entire award? Judge Becker. Yes. Senator Cornyn. In other words, the amount of money that they would otherwise pay as attorney's fees would go into their pocket? Judge Becker. Absolutely. Senator Cornyn. Okay. And I note under the Becker draft that there is a 10-percent provision for attorneys' fees. Judge Becker. And 20 percent if there is an appeal. Senator Cornyn. And I want to ask you a little bit about that appeal, because, of course, this is just the amount of money that would be paid to the plaintiff's lawyer, the one who would be filing the claim. Judge Becker. Right. Senator Cornyn. And you would expect, the world being what it is, that there would be some money spent, other transaction costs in addition, I guess. Judge Becker. I suppose there would be some--in any--it is a kind of personal injury case. There may be some costs for reports. There is not going to be formal discovery, but I guess there would be, you know, xerox costs if there are voluminous records. I do not think they would be significant, but I think there would be some other costs, travel costs maybe. Senator Cornyn. Let me ask you about if there is a hearing--and I note there is a provision for a hearing under exceptional cases. Judge Becker. Right. Senator Cornyn. Will this be an adversarial hearing? Judge Becker. No, I do not think it is an adversarial hearing. Senator Cornyn. So it will just be the hearing officer, whoever that is. Judge Becker. The hearing officer, yes. Senator Cornyn. And the victim and their lawyer, if they have a lawyer. And you have a provision-- Judge Becker. But there is no defendant who has any interest. Senator Cornyn. Right. Well, in terms of transaction costs, that is a substantial benefit in terms of getting money to the victim, which is our goal. But there is a 20-percent provision for appeals. Is that correct? Judge Becker. That is correct. Senator Cornyn. And as I understand, there are, I guess, two kinds of appeals. One would be an administrative appeal and one would be judicial review, which would be based on substantial evidence review. But why is there a provision made to double the attorneys' fees for appeals because ordinarily--I mean, my experience is probably the same as yours, I hope it is, that appeals tend to be a little bit cheaper in the tort system than the trial preparation and the trial level itself. Judge Becker. Well, I think that generally is correct, but here you are talking about a relatively simple initial proceeding, and it is hard to picture at this point what the appeal issues are going to be. But my guess is that the appeal issues are going to be--it is a no-fault system and you do not have to deal with product identification and that kind of thing, which you deal with in the ordinary trial of an asbestos case. But it is probably going to be where there is some causation issue or, for example, the individual has got colorectal cancer, and was this colorectal cancer caused by asbestos. Senator Cornyn. Caused by inhalation of asbestos. Judge Becker. Yes, I mean, that is a tricky issue, and a lawyer may have to do a lot of work, you know, to figure that out and argue that case. Senator Cornyn. I would say a successful lawyer would have to do a whole lot of work to make that causal connection. Judge Becker. Well, that may be so. But that is why we have given to the administrator the authority to regulate the fees. These are simply presumptive maximums, and the administrator has the authority to cut them back--or to increase them if there is a fair case. Senator Cornyn. Well, I will just leave it at this: As you have explained it, and as I understand it, the desire is to maximize money to the victim, eliminate as many transaction costs as possible, create a simple system that can be done even without counsel, should an individual choose to do so. So I would like to continue to work with you and the Chairman on those attorneys' fees allocations. Judge Becker. Of course. Senator Cornyn. Because I think we ought to try to encourage and create a system that is, as a practical matter, something that could be done cheaply, efficiently, and with as few transaction costs as possible. Finally, let me just in this round of questioning, you have mentioned the problem with Category VII. These are the people that have lung cancer, with no markers indicating that they actually have asbestos-related disease. And you said these are the kinds of cases if they go to court that typically the defendant would win. Judge Becker. They tell me they do. I do not know. Senator Cornyn. Well, I would think that even if you are exposed to asbestos but you do not have any evidence of asbestos disease and you die or your diagnosis is lung cancer, that is, should be, a pretty tough case to win on the basis of an asbestos claim. Judge Becker. They do pretty well. They do not win them all, but they do pretty well in those cases, apparently. Senator Cornyn. And under the provisions of this bill, there is as much as $200,000 that could be allocated to former smokers who have lung cancer but no evidence of asbestos disease. Judge Becker. That is correct. It is a much lower sum, but, you know, I guess it is an evaluation of risk. You know, in the tort system they may win three out of four cases, but they lose the fourth, and the plaintiff lawyer rings the bell, as they used to say, you know, on the fourth case. But, by and large, business has acknowledged that if we are going to have a gradated system, there has got to be a dollar figure there. And the only thing I can say is that dollar figure, as business has proposed it, and as Senator Specter and I have proposed it, is much less--also as Senator Feinstein has proposed it, is much less than what labor and Senator Daschle have proposed. Senator Cornyn. I see my time is up, Mr. Chairman. Thank you. Chairman Specter. Thank you very much, Senator Cornyn. Judge Becker, before you terminate your testimony, you had said in the final question from Senator Leahy that there were some issues where we cannot have consensus, and you particularized six or seven. I think it would be useful if you could enumerate those. Judge Becker. Well, I do not think we are going to get labor and business to agree on the dollar amount for the up- front funding. I do not think business is going to agree to medical monitoring, but you and I met with a whole bunch of business folks the other day and said do not fall on your swords on this. You know, it takes two to tango or three to troika, or whatever it is. But I think business is--business, kicking and screaming, may agree. The rail unions were working on this FELA thing. Yesterday at our meeting, Mr. O'Bannon from the Association of Railroads and Mr. Griffin from the maintenance of way folks agreed to talk some more about a formula. I think there is some possibility we may work something out on that. I think that on the workers' comp subrogation, although I think what you and I have come up with is a principled solution, my guess is that labor is not going to--or the trial lawyers are not going to sign off on it. Mixed dust, I am hopeful that we can work something out. Let me look at my notes here. Equitas, the insurance issue, the offshore Lloyd's of London folks, I think you are going to have to resolve that. I think with respect to the sunset provisions in terms of the reversion, I think we have a principled solution there, but I do not think--I mean, I think these are relatively narrow issues. It is up or down. But I just think you are just going to--especially with respect to the Level VII reversions, as to whether it is 115 percent and as to whether it just goes to Federal court, I do not think they are going to come to a consensus on that. And the time of the sunset, both in terms of the initial stay, the terms of that, although I think your approach to that is a sensible one, but the time of the ultimate sunset I think may be--business had said seven and a half years, and insurers have taken a strong position on that. Labor has taken the opposite position. I think those are the main issues that you are going to have to resolve. Chairman Specter. Well, Judge Becker, I am frankly encouraged by your specification of the outstanding issues. I think as to the dollar amount there is no doubt that the Congress is going to have to decide that. You have 140; as opposed to labor, trial lawyers at 149. Then you have 140 endorsed by Senator Daschle when he was head of the Democratic Party. So we are within the realm of handling it. Medical monitoring, I understand the problems, but as we have delineated it, we may be able to limit it even further. The FELA, we are going to solve that one with language. Labor is concerned about this being the start of the slippery slope to eliminate Federal employers' liability, and that is not the intention, and we can guard against that. And the workers' comp subrogation, well, there is an issue where we may not come to terms, but it is not a gigantic matter. It is important. Mixed dust, I think we will be able to draft through on that. Equitas is for one group, and we will have to make that decision. We are prepared to do that. When you talk about sunset, the time of sunset, seven and a half years and the amount of the funding to carry through that period of time, I think ultimately that the stakeholders, when they decide what positions to take, will have to make a judgment as to whether a bill which they have some concerns, even significant concerns, is better than going on with the system as it is now. Judge Becker. I should add the claims values, the claims values on the Level VIIs. Chairman Specter. I should not have paused if you were going to add things. Judge Becker. The Level VII smokers, I do not think they are going to agree on that either. Chairman Specter. Okay. On the reversion on that, labor at 150 percent and business and CBO and this draft comes in at 115. That is subject to some modification. But considering where we started off--and we all know that the perfect is the enemy of the good, and we are going to have to face up to the catastrophic nature as to what is going on. And there may be some room for patriotism here. That perhaps is an inappropriate word where it is dollars and cents and shareholders, but the economy of the country is at risk. Anything further, Senator Leahy? Senator Leahy. No. I think you have said it all very well. I agree. Chairman Specter. Judge Becker, we would like you to remain at the witness table, if you would. Judge Becker. I would be pleased to. Chairman Specter. Because there may be some comments which come up as we have the balance of our panel: Senator Engler, Ms. Seminario-- Senator Leahy. Governor Engler. He does not want the demotion, Arlen. [Laughter.] Chairman Specter. Governor Engler. Pardon me. Mr. Forscey, Ms. Keener, Mr. Speicher, and Mr. Robinson. If you ladies and gentlemen will come forward, our lead witness is the former three-term Governor of Michigan, John M. Engler, who is now president of the National Association of Manufacturers, the largest industry trade group in America. Before becoming Governor, Governor Engler served 20 years in the State legislature, was the youngest person elected to the Michigan State House of Representatives. Seven of his 20 years in the legislature were as State Senate Majority Leader. Governor Engler has a law degree from the Cooley Law School and his bachelor's degree from Michigan State University. Governor Engler, it is a pleasure to see you. Senator Leahy. Mr. Chairman, before we start, could I just ask consent to put in the record a statement by Senator Kennedy and some expert testimony in the record on subrogation? Chairman Specter. Sure. Without objection, they will be made part of the record in full. Our timekeeper will set the time at 10 minutes, and we look forward to your testimony, Governor. STATEMENT OF JOHN M. ENGLER, PRESIDENT AND CHIEF EXECUTIVE OFFICER, NATIONAL ASSOCIATION OF MANUFACTURERS, WASHINGTON, D.C. Mr. Engler. Thank you, Mr. Chairman. Senator Specter, Senator Leahy, and members of the Judiciary Committee, thank you for the opportunity to testify about the need for asbestos liability reform, and I do want to say up front that I also have a written statement I would like to submit. Chairman Specter. Without objection, your full statement will be made a part of the record, as will all the statements. Mr. Engler. Thank you. I would also like to introduce our counsel for the Asbestos Alliance, Mr. Pat Hanlon, of Goodwin, Proctor, who is seated right behind me. So I have actually brought expert back-up as well. Chairman Specter. Mr. Hanlon has been an extraordinary contributor to our 35 sessions. An extraordinary contributor. So you are well backed up. Mr. Engler. I am indeed. Senator Specter, the draft legislation, also, we want very much to compliment you. It reflects your serious commitment to finally resolving the litigation crisis, and we are grateful to you for that. I certainly want to acknowledge also the efforts of Judge Becker for such dedicated labor on behalf of the public good. Today, as you have indicated, I am here speaking on behalf of the National Association of Manufacturers' Asbestos Alliance, a broad-based coalition of companies and associations committed to seeking a fair resolution of the asbestos litigation crisis. I am also very concerned about the plight of the victims, both medical victims and workers whose jobs and retirement savings have been affected. For their sake, Congress must build on last year's efforts and pass fair and reasonable legislation. Our alliance strongly supports the trust fund approach. Removing claims from the tort system is the only way to ensure that the compensation goes to the victims, not the lawyers. It is also the only way to ensure that victims receive fair and prompt compensation, that the bankruptcies stop, and that the fraud and the uncertainty are eliminated. I also want to note for the record that numerous veterans groups, including the Veterans of Foreign Wars, Non- Commissioned Officers Association, Paralyzed Veterans of America have also endorsed the trust fund approach. I think my seatmate, Ms. Keener, will be speaking to that a little bit later, but they do certainly because many veterans are also asbestos victims. I would ask that their endorsements be made part of the record as well. In addition, I read yesterday that AFL-CIO President John Sweeney again described a trust fund approach as the best way ``to show genuine compassion for the victims of asbestos disease.'' So, Mr. Chairman, I believe support for the trust fund concept is broad and it is bipartisan. And now I would like to move to the specifics of the draft bill. We have been continuing our review of that 250-page-plus draft that we received Friday evening, and the alliance is prepared to bring several general observations. First, as has been discussed, the draft does not address the central issue of funding. The maximum size of the fund must be no more than $140 billion, as finally agreed to last fall by Senators Frist and Daschle. And just so there is no fuzzy math on that point, that $140 billion total includes all sources: defendant companies, the asbestos trusts, and insurers. In addition, the funding schedule, especially in the first 5 years, must be reasonable. The approximately $40 billion in cash contributions in the first 5 years discussed last year, and certainly again this morning, meets that test. With the borrowing authority in the bill, the administrator could have as much as $60 billion or more to pay claims. Now, to put that in context, the entire amount paid in asbestos litigation from the beginning in the late 1960s through 2002 was only $70 billion, and 60 percent of that went to those transaction costs we have been discussing, to lawyers on both sides of the issue. The next requirement is that an asbestos solution must completely shut down the broken asbestos tort system. Provisions in the draft that call for a return to the tort system if certain deadlines are not met as the administrator sets up the fund are counterproductive. Worse, if we fail to get these cases out of the tort system, it could increase the costs to the program by tens of billions of dollars and result in asbestos victims and their families continuing to be victimized twice, first by the disease itself, second by a tort system broken beyond repair. Certainly the heart of the problem is that too many claims are filed on behalf of people who are not sick and may never become ill from asbestos. That problem was dramatically illustrated last year in an independent study by Johns Hopkins researchers. The study was reported in Academic Radiology, one of the top peer-reviewed radiology journals. And, Mr. Chairman, I brought a copy of that and I would ask that that article and the accompanying editorial entitled ``Is Something Rotten in the Courtroom?'' become part of the Committee's record. Chairman Specter. We will make it part of the record, without objection. Mr. Engler. In this study, the researchers obtained 492 X- rays that had been examined by doctors retained by plaintiffs' lawyers and used in asbestos lawsuits. The plaintiffs' X-ray readers found asbestos-related lung damage in 96 percent of the cases. The Hopkins researchers put together an independent panel to interpret the same X-rays. The six panelists that they assembled were not told that these X-rays had been used in asbestos cases. The independent radiologists found abnormalities in a mere 4.5 percent of cases. That is 4.5 percent versus 96 percent. This is an outrage, and, generally, all too common in many of these asbestos cases. The real tragedy is that thousands of these questionable claims are forcing victims, real victims, with serious illnesses in many cases, to wait longer and longer and longer for compensation. We cannot continue with a system that is hurting those who deserve help the most. So, Mr. Chairman, I ask this Committee also ensure, which is a point we have been discussing this morning, that the legislation not become a smokers' compensation bill. Payments for lung cancer claimants who are current or former smokers should reflect their smoking history. This principle is essential and will protect the fund against an avalanche of smokers' claims that have little or nothing to do with asbestos. The bill also must contain strong and effective provisions to lock the back door so creative trial lawyers just do not convert tens of thousands of unimpaired asbestos claims into silica claims and head to the courthouse once again. And I am encouraged by your comments on that today. Finally, I do want to express concerns, as Judge Becker noted, about the new medical screening program included in the discussion draft. People who may have been exposed to asbestos but have no indication of any asbestos disease would receive medical services that are similar but less frequent than those received by Level I claimants. These people would have no claim in court and no right to compensation under State or Federal law. My concern with this is that every dollar diverted to the screening program, this new screening program, is a dollar then that is not available to compensate the sick. Now, we are continuing our review and will continue to provide additional feedback through our able counsel, and the alliance remains committed, Senator, to working with you, Senator Leahy, Senator Cornyn, Senator Carper, who I was delighted stopped in this morning, because we recognize, as you have stated this morning, that this is a crisis that needs resolution. So your hard work and determination will be matched by our efforts. We do look forward to working with you and the members of the leadership and members of the Senate and ultimately the House and the White House to finally pass a bill that cares for victims and ends the current scandal-ridden system. Thank you for the opportunity, Mr. Chairman. [The prepared statement of Mr. Engler appears as a submission for the record.] Chairman Specter. Thank you very much, Governor Engler. Our next witness is Ms. Margaret Seminario, Director of Occupational Safety and Health, AFL-CIO. She has worked for AFL-CIO since 1977, and since 1990 has been responsible for directing the organization's activities on safety and health. She holds a master of science degree in industrial hygiene from the Harvard School of Public Health and a bachelor's degree in biological science from Wellesley. Ms. Seminario has been a regular attender at our marathon sessions and a major, major contributor, heading up a very distinguished team from the AFL- CIO. The floor is yours, Peg. STATEMENT OF MARGARET SEMINARIO, DIRECTOR, SAFETY AND HEALTH DEPARTMENT, AFL-CIO, WASHINGTON, D.C. Ms. Seminario. Thank you very much, Senator Specter, and we do appreciate the opportunity to testify on this legislation on asbestos compensation. As you have stated, we have been very, very involved in this most recent process. Just to note, the first asbestos compensation legislation that I was involved with was in 1978, so the AFL-CIO has been at this for a very, very long time, and we are pleased to see the progress that is being made with respect to addressing this issue. I want to thank you and Senator Leahy, both of you, for your commitment and your tireless efforts to craft and sound asbestos compensation bill. And I would also like to acknowledge and thank Judge Becker for all of his very hard work, his tireless hours and hours spent on this very, very difficult issue. We have welcomed the opportunity to participate in these efforts to craft a fair compensation bill for asbestos victims. For the last several decades we have seen the toll of workers and family members disabled and killed by asbestos disease mount to staggering levels, the result of willful practices of manufacturers and employers who withheld information about the hazards of asbestos and did little or nothing to control the exposures. And the result of these actions is an occupational and environmental disease crisis of unprecedented magnitude. And I think that we have to keep this in front of us, that while we talk about a litigation crisis--and there are indeed problems in the litigation system--the root of the problem is one of being an occupational health and environmental disease crisis of unprecedented proportions. Hundreds of thousands of victims have already suffered and died, and hundreds of thousands more will die or suffer in the coming years. As the disease crisis has grown, so has the litigation as victims have sought redress for their injuries. And as I have said, there are indeed problems in the current civil litigation system which we have recognized. And it is indeed for both of these reasons--the massive asbestos disease crisis and the serious problems with the current litigation system--that we have engaged so deeply in efforts to craft a fair bill. We have indeed supported in principle the establishment of a Federal asbestos trust fund to compensate victims for their personal injuries through a no-fault system to replace the inadequate civil litigation system. We have consistently made clear that establishing a national compensation fund must provide for fair compensation for victims who suffer disease. It must have adequate funding to pay claims and ensure the fund's solvency. It must deliver compensation in an efficient and timely manner to victims. And it must ensure that victims will not be left at risk if administrative or financial problems arise. We have also made clear we will not support and we will strongly oppose any legislation that does not meet these basic principles and any legislation that relieves defendants and insurers of responsibility and liability at victims' expense. In the last Congress, much progress was made on some key issues of asbestos trust fund legislation, including the medical criteria and the establishment of a no-fault administrative system. But, indeed, differences on key issues remain, and let me turn to some of those key issues of concern for the AFL-CIO. First and foremost is fair compensation for victims because ultimately asbestos compensation is about providing fair compensation to those who have developed a disease as a result of asbestos exposure. The compensation awarded should be commensurate with the level of disease and disability suffered. And, indeed, compensation values for diseases have moved closer to what represents in our view is fair compensation. However, the values proposed for some diseases in the last draft, 2290, and some of the latest business offers, particularly those proposed for the Level VII lung cancers in our view are too low. I think it is important to state that exposure to asbestos causes lung cancer and not only that, that indeed among victims who smoke, there is a synergistic effect with the resulting risk from both the exposure to asbestos and the smoking causing essentially a 50- to 90-fold increase in risk. And so the fact of the matter is the fact that people smoked may indeed increase risk, but the exposure to asbestos has increased it even more, and those people deserve to be fairly compensated. We also believe that with respect to the awards that are offered to victims under this bill, there should be no subrogation or liens against awards. And we do think that the proposals by insurers, which essentially call for a compensation holiday but still allow a total lien--a total lien against that award, is really unfair. And, indeed, it is worse than exists under many State laws where they do not allow a subrogation or lien against the entire award. And so we really do not think that those proposals are fair. There must be adequate funding to ensure the trust fund solvency, and essentially the major sources of concern for us have most immediately focused on the early years when the demands and the stresses on the system will be the greatest. Last year the Congressional Budget Office itself, in an estimate of 2290, estimated that in the first 6 years the cost of claims under that bill will be $56 billion. The awards values that we are talking about here are higher than that bill. So the estimates of CBO are essentially in the range of, you know, $56 billion in the first 6 years of the program. But we are concerned that those costs and claims projections are actually too low, and in one area alone, mesothelioma claims, the Government data, the most recent Government data show mesothelioma claims running essentially 30 to 50 percent higher than those estimates. And these are not my figures. These are the latest data from the National Center for Health Statistics released this November, and I would like to put those in the record of the hearing because I think-- Chairman Specter. Without objection, they will be made a part of the record. Ms. Seminario. I think it is very important that we base this on the best information we have. While there is a lot of uncertainty, let's use what we have. And related to that, last summer the Centers for Disease Control, again, put forward information on what is going on with deaths relates to asbestosis, and, again, I would like to put that in the record as well, so that we can base these decisions-- Chairman Specter. Without objection, that will be made a part of the record as well. Ms. Seminario. So what we think is very, very important, that we use the information that we have, and that information indicates that the stresses on the system immediately will be very great. We think that we should fund to what is expected. We do not think that we should be looking at using borrowing authority to pay for what is expected. Borrowing authority may be useful to deal with what is unexpected, just the same way as we had a contingent call on 1125. But if we know the cost of this bill is $60 billion in the first 6 years, there should be $60 billion paid and not, you know, turning to a pool of money, because if the point is reducing transaction costs, we do not need to be paying a lot of money in interest. We need to be paying that money to the victims of this fund. Another area of concern is the preemption of the definition of asbestos claim in the bill. That definition actually changed from 1125 as reported out of committee to what is in 2290 to be much broader. S. 1125 basically said this bill was about personal injury claims for asbestos-related diseases. S. 2290 now says that this is about any claim in the civil litigation system related directly, indirectly, derivative from, anything dealing with health effects of asbestos. We think that is far too broad and would have the unintended consequences of essentially preempting many actions that really should not be covered by this bill and for which there is no redress. So we do think that has to be looked at very carefully. Another issue of concern, transition to a new system. This is probably one of the most difficult and complex issues with respect to this fund. With the existing 600,000 pending claims, new claims being filed, new cases coming forward, there are many, many people that are involved, and we do not think the system should be set up so that people who are getting sick are essentially put in a new holding pen. They might have been in one already in the current system to wait while the system gets up and running. It is not fair to people who are sick to basically have to bear what essentially are the time costs in setting up a new system. We have to do better with respect to providing some redress for those people while the system is getting up and running. With respect to the sunset and reversion, I think with respect to the process that has been included in the draft in the bill, that is one that we have made progress on. But, again, we think if this does not work--and we hope it does work--that the system really has to go back to the status quo and not put in place a whole new set of rules because we do not see this as tort reform, we see this as-- Chairman Specter. Ms. Seminario, could you summarize please? The red light is on. Ms. Seminario. Yes. Let me just say that, in conclusion, we do support the establishment of a national asbestos trust fund, but it must meet the basic principles that we have set forth. We cannot and will not support legislation that does not provide fair compensation to victims, but we do stand ready to work with Senators and other stakeholders on the outstanding issues to see if an agreement on fair asbestos compensation legislation can be reached. Thank you very much. [The prepared statement of Ms. Seminario appears as a submission for the record.] Chairman Specter. Thank you very much, Ms. Seminario. We now turn to Mr. Craig A. Berrington, Senior Vice President and General Counsel of the American Insurance Association. Prior to joining the AIA in 1986, he held several key positions at the Department of Labor, including Deputy Assistant Secretary for Employment Standards. He received the Phillip Arnold Award, the Labor Department's highest honor for distinguished public service. He has his law degree from Northwestern and is a graduate of the School of International Service at American University and has been a contributor and attendee of our marathon sessions. Welcome, Mr. Berrington, and we look forward to your testimony. STATEMENT OF CRAIG A. BERRINGTON, SENIOR VICE PRESIDENT AND GENERAL COUNSEL, AMERICAN INSURANCE ASSOCIATION, WASHINGTON, D.C. Mr. Berrington. Thank you very much, Mr. Chairman. As noted, I am general counsel of the American Insurance Association, and my statement today is also on behalf of other insurance trade associations--the National Association of Mutual Insurance Companies, the Property Casualty Insurers Association of America, the Reinsurance Association of America, and the Independent Insurance Agents and Brokers of America. We very much appreciate this hearing, and it goes without saying we appreciate the extraordinary efforts that you and this Committee have made. In this connection, I echo what others have said, that we all owe a tremendous debt of gratitude to Judge Becker who has led his graduate seminar in asbestos litigation with equal measures of intellect, patience, and firmness, and whose masterful presentation this morning took everyone through the bill in an extraordinarily clear way. We have a written statement we would like to have submitted for the record, and I would like to make just a few conceptual comments. Chairman Specter. It will be made part of the record, without objection. Mr. Berrington. Thank you. As others have noted and as you, Mr. Chairman, stated with great force this morning, the current system of asbestos litigation has caused litigation chaos in the courts, massive economic dislocation to major sectors of the economy, great pressures on the insurance industry, and an extraordinarily expensive system of financial relief whose awards are often capricious, with a great majority of them going to people who are not sick. The United States Supreme Court has decried it but said that only Congress can fix it, as Judge Becker mentioned earlier. In the insurance industry, we are prepared to support any legislation that will work. We had initially focused on legislation like that introduced in the last Congress by Representative Cannon. The legislation would provide medical criteria for the courts to use in asbestos lawsuits and, in addition, would address a variety of other litigation abuses, including those caused by lawsuits being brought not in the usual manner, where the plaintiff resides or the defendant is located, but where a favorable court decision could be guaranteed. From the point that the Judiciary Committee decided to go the trust fund route, we have worked hard, along with all the other stakeholders, to make that approach work as well. At one point I think former Chairman Hatch referred to the effort--and it was referred to again this morning, I think perhaps by Senator Leahy--as this being the toughest litigation task that the Judiciary Committee had ever tackled. And I think we would all agree with that. As we have worked on the trust fund approach, we have tried to stress certain bright line tests that are critical to us. While any piece of trust fund legislation will be complex, that complexity is only exacerbated if these bright lines are not included. The essential bright line is that the amount of money that insurers put into the trust fund in the aggregate must be both certain and reasonable, and the money must pay for the system that is the exclusive place for resolving asbestos-related cases. Certainty comes in four ways: First, by having the amount specifically set forth in the bill to be paid pursuant to a reasonable schedule. I understand why it is not in the bill right now, but I want to emphasize that the $46 billion nominal in S. 2290 represents maximums, not floors, and does not reflect the payments, the very, very substantial payments that have been made through litigation in the bankruptcy system over the past 2 years. Second, the bill should make certain no litigation remains after the trust fund legislation is enacted. This is often referred to and has been this morning as ``the leakage problem.'' It may be leakage from the trust fund, but it could be a huge financial drain for insurers. In short, the trust fund, as I mentioned, must be the exclusive remedy for resolving asbestos claims from the day the President signs the bill, and all asbestos-related claims. Third, the bill should not include provisions that require some type of operational certification for the trust fund before the litigation can be fully shut down, and we very much appreciate the conversations that we have had about that over the last several days. We must all come to grips with this because while we clearly understand the desire, indeed the need to have the trust fund get organized and start operations quickly, the bill already has a full set of operational provisions to do that. If more authority is necessary, the bill should add it. But if the bill holds out the possibility that the litigation system can start up again if operational certification is not given to the trust fund, it will have perhaps inadvertently provided incentives for some to throw road blocks in the fund's path or to mount legal challenges even to any certification that is given. This will cause massive leakage problems and litigation over the certification itself. Fourth, if the bill is to include a litigation fail-safe system to kick in if the trust fund does run out of money, we believe there is no public policy justification, none whatsoever, for merely returning to the same litigation system that has been the vessel for all of the current problems. Thus, any such fail-safe system should, at the very least, place litigation in the Federal courts, not the State courts. Of course, a properly balanced law would be one where the possibility of the trust fund running out of money is very low because the fund's benefit payment system is well balanced with the fund's income. Beyond the bright line requirements, the bill presents numerous important policy choices, and I want to raise one red flag about one of them. And I was happy to hear that the issue again is being addressed, and that has to do with how we deal with smokers, if individuals have long smoking histories, in the trust fund. We want to make sure that the trust fund is not designed with failure built in, yet this is the implicit assumption that a return to the tort system is inevitable. The reason for that assumption is that many believe the Level VII cases will swamp the fund. In fact, that is why there is that separate carve-out to move them back to the tort system. And it is imperative to remember that, as Judge Becker mentioned earlier, the Level VII cases include those claimants who have smoked, have lung cancer, and while exposed to asbestos perhaps 40 years ago, have never developed any underlying asbestos disease. A return to the tort system for these claims or because of these claims would be a function of eligibility criteria that will place on the fund a huge financial burden of compensating lung cancer generally rather than focusing on the compensation of lung cancer that was caused by asbestos exposure. If the fund is to compensation those whose illness is much more likely to be the result of smoking, then at the very least we believe that the award level should be determined accordingly so those awards in the aggregate do not threaten the fund's existence. Mr. Chairman, the insurance industry is committed to remaining at the table and to continuing our joint work toward a true and much needed resolution of our Nation's asbestos litigation crisis, whether through a properly constructed trust fund, as we are discussing today, or a medical criteria bill that directly addresses problems in the litigation system. As we have heard this morning, the continued impact of this crisis on the victims, the business community, and the economy calls for a solution now. We want to help work with the Committee to get that solution. Thank you. [The prepared statement of Mr. Berrington appears as a submission for the record.] Chairman Specter. Thank you. Thank you very much, Mr. Berrington. We turn now to Mr. Michael Forscey, who has been involved in the asbestos issue since the 1970s, both as a congressional legislative assistant and private attorney. He appears here today representing the trial lawyers, the Association of Trial Lawyers of America, on the asbestos issue. He has had a distinguished career as a staff assistant for the Senate Labor Committee from 1977 to 1980 and as chief minority counsel on the Human Resources Committee under Senator Kennedy from 1981 to 1985 and worked as a legislative assistant to House Majority Whip John Brademas in the early 1980s. He has been a regular attender and a major contributor to our marathon sessions. Welcome today, Mr. Forscey, and we look forward to your testimony. STATEMENT OF MICHAEL FORSCEY, ON BEHALF OF THE ASSOCIATION OF TRIAL LAWYERS OF AMERICA, WASHINGTON, D.C. Mr. Forscey. Thank you, Mr. Chairman and members of the Committee. I am appearing here today on behalf of the Association of Trial Lawyers of America. I have represented ATLA in the discussions conducted by Judge Becker pertaining to the establishment of a trust fund to pay asbestos claims. ATLA members represent the vast majority of the 500,000 existing victims who would lose--in an unprecedented fashion-- their constitutional right to a jury trial under this Act. These victims have filed claims in good faith under the prevailing law for which they can expect to obtain substantial recovery in the courts. In our view, to radically change the rules governing the adjudication of these claims now is inherently unfair. We, therefore, deeply appreciate your willingness to listen to our views and to include us in the discussions that this Committee has sponsored and that Judge Becker has facilitated over the past several months. At the outset, let me say that I believe no organization or lawyer should oppose the theoretical possibility of a trust fund that would provide fair compensation, paid promptly, to the approximately million and a half of our fellow citizens who will develop asbestos disease in the future. ATLA has always said it could support a fully funded trust fund that would guarantee payment to future victims. We believe that Judge Becker's involvement in this negotiation has produced a number of improvements that have moved us closer to the goal of a fair resolution for victims. First and foremost, the current--and I emphasize ``the current''--draft brings us much closer to both the language and the intent of the Biden amendment than does S. 2290. The Biden amendment, as we see it, has always been a critical incentive to achieve guaranteed funding, not an excuse to avoid it. Second, Judge Becker's recognition that a 2-percent attorney fee is inadequate to ensure legal representation for claimants is also an improvement over earlier drafts, although we do not agree that we should retain the administrative discretion that is in the current draft. Third, Judge Becker's proposal to increase award values is another welcome development. Fourth, we believe that a medical screening and monitoring program is the least that Congress should provide to victims whose established right to compensation is being taken away. We believe this program should be fully funded. Finally, we appreciate the judge's decision to remove a confusing provision that would have moved claims stayed under the bill back and forth between the tort system and the trust with no prospect of quick resolution. However, many other improvements represent compromises which go only partway toward correcting the flaws of S. 2290. We remain convinced that the inflexibility shown by some of the other stakeholders on several key issues will need to change if a balanced package is to be produced through the negotiating process. It is important to remember that the public health crisis caused by asbestos is real and continues to grow. When asbestos legislation was first considered by the Judiciary Committee last year, many Senators had been led to believe that few workers were still getting sick from asbestos exposure. Recent evidence, as Ms. Seminario pointed out, proves otherwise. All told, over 300,000 U.S. workers have died because of exposure to asbestos, and approximately 10,000 people die each year from asbestos-related diseases. Epidemiologists, as Ms. Seminario pointed out, expect these trends to continue for decades, not decline. The money necessary to fairly compensate these victims for the harm caused by asbestos manufacturers is obviously daunting. We believe the cost of compensating victims is clearly greater than $140 billion and could approach $200 billion. In the first 5 years, if all pending claims are forced through the fund, at least $60 billion will be necessary. If borrowed funds are used to pay pending claims, as is currently envisioned, required interest payments on these funds will deplete the money available to pay benefits by as much a 25 percent. Unless legislative proposals include guarantees of funding at substantial levels, the proposed asbestos trust will fail. Thus, while the draft circulated by Judge Becker includes several proposed changes that we support, the central issue of financing--who pays and how much--is far from resolution. It seems unreasonable to move forward without a resolution to this issue that is grounded in sound claims estimates. We believe this issue has remained unresolved largely because the manufacturers and insurers have insisted on artificially low liability caps. Such caps render unreasonable a demand that all pending claims be forced into an administrative system that does not yet exist and that will likely not be operational for 18 months even under the best of circumstances. The demand that all pending claims be resolved by the trust fund is at the heart of many of the unresolved issues with which this Committee continues to struggle: up-front funding, administrative gridlock, and reversion to the tort system. Forcing the pending claims into the fund also produces a substantial cost shift, away from those with vast current liability to those with relatively few current claims, as this Committee is just beginning to learn. Manufacturers and insurers have objected to honoring many settlement agreements into which they have voluntarily entered--agreements to pay specific sums to specific victims which, if honored, would significantly reduce the front-end funding needed for the bill and would greatly improve the fairness of the draft. Finally, these same defendants and insurers have unfairly insisted on forcing into the fund even those cases that have produced a judgment and an award, forcing claimants to start anew if that judgment is appealable. And we are pleased to see that the draft that was released last night appears to correct that problem, and we thank Judge Becker for that. We are also concerned that the Department of Labor will not be able to process claims at the rate envisioned by the bill. We know from experience with other Government compensation programs that claims projections have historically been low. We also know that it is unrealistic to assume this program can be up and running in 90 days. Substantial delays have plagued both the black lung compensation program and the recent Energy Employees Compensation Act. These two programs are only a fraction of the size of this trust. The Committee must solicit the Department of Labor's views, in our view, on whether or not it can do what it is being asked to do. If the Department of Labor cannot get this program running in a matter of months, then Congress should not, as a matter of fundamental fairness, including the pending claims in the trust. I am going to skip over a couple things, and I want to say finally one thing about the mixed dust cases. We do not think there is any evidence that mixed dust cases burden the courts, are not fairly resolved, or require Federal intervention. We think the legislation should not address these cases with legislative language. Also, as to mesothelioma values, while the claims values in the latest draft are an improvement, we think that and we would propose that meso claims be compensated at a rate of $1.8 million, which is the average death benefit paid by the September 11th Fund. In the past, compensation programs have been designed to provide a benefit to victims of harm when the courts have failed to do so. We do not believe Congress has ever before adopted a compensation program that takes away from victims an established right to obtain compensation in the courts. As we move forward, we should not lose sight of the fact that in this case we are preserving not creating the right to compensation for asbestos victims. Thank you very much. [The prepared statement of Mr. Forscey appears as a submission for the record.] Chairman Specter. Thank you very much, Mr. Forscey. We now turn to Ms. Mary Lou Keener, the daughter of a mesothelioma victim who contracted this deadly illness while serving as a machinist mate in the United States Navy during World War II. Ms. Keener's father, who spent many hours in the engine rooms and boiler working on miles of pipes and fittings, ultimately succumbed to mesothelioma on Veterans Day 2001. And we will be hearing from two relatives of victims today, and I would underscore what Ms. Seminario had said, that when we talk about crises, we are talking about an occupational disease crisis. Thank you for joining us, Ms. Keener, and we look forward to your testimony. STATEMENT OF MARY LOU KEENER, MCLEAN, VIRGINIA Ms. Keener. Chairman Specter, Ranking Member Leahy, and members of the Committee, I am honored by this opportunity to appear before you here today and tell you about my dad's battle with asbestos-related disease and his untimely death from mesothelioma. Following my dad's death, my family's personal experience in dealing with the current asbestos litigation system has not been a positive one, and it is my hope that by sharing this experience with you, the importance of your efforts to establish an asbestos injury compensation fund will become apparent. My dad and I had a very special bond. We were both Navy veterans. I served as a Navy nurse in Vietnam, and he served as a machinist mate during World War II. During his service, he was on three different Navy ships, and two of those ships were literally blown up underneath him. And because, as you indicated, Mr. Chairman, he worked down in the engine room, there was really no doubt about the fact that he was exposed to significant amounts of asbestos. In addition to having those two ships literally hit and blown up underneath him, he rode one of those ships back to the West Coast and worked in the shipyard to help in repairing that ship for several months. Now, we all know, it is well documented that Navy ships then and even today still contain significant amounts of asbestos. It was literally almost more than 50 years after his service in the Navy--it was about April of 2001 that he first began to experience some pain under his shoulder on the right side. My dad and my mom came from Michigan to the D.C. area where they spent about 2 months with my husband and I, where he was seen and cared for at the National Cancer Institute at the National Institutes of Health in Bethesda. It was there that after two months of driving back and forth each day on the Beltway, day after day for test after test, that he was diagnosed with stage 3 mesothelioma. After that diagnosis, he decided he wanted to go back home, where he underwent six weeks, five days a week, of radiation therapy in northern Michigan. He was too weak to undergo chemotherapy, and as he probably would have wanted it if he could have chosen, it was, as you said, on November 11th, Veterans Day, of 2001, that he died a very painful death from mesothelioma. After my dad's death, because in my second life I was a lawyer, I was able to help my mother navigate all the regulatory and legal issues that she had to deal with. Of course, my dad's passing was so quick, six months from beginning to end, that we really never even thought about trying to pursue any type of compensation. All we wanted to do was make sure that he was cared for and had a good quality of life. After his death, as I said, I was able to help my mom because I am also a veteran and very familiar with Department of Veterans Affairs benefits. I was able to help her file a DIC, a Dependent Indemnity Compensation claim, to receive service-connected death benefits because of my dad's death from mesothelioma due to exposure while he was in the Navy. Then I helped my mom file a lawsuit with a plaintiffs law firm. That was in April of 2002. That was almost three years ago, and to this date her claim has not moved forward at all. Her claim is standing in line behind hundreds of claims of unimpaired victims. Nothing has happened, and that is just not fair. As was mentioned before, there are very few viable, solvent defendants left in these cases. The law firm tells us that there are possibly 60 defendants in her case. Of these 60 defendants, 7 of them may be solvent; the remainder are all bankrupt. To date, my mother has received about three settlement checks from bankrupt defendants to the tune of pennies on the dollar from bankrupt defendants. Unfortunately, my dad's story is just one of thousands like it in the veteran community. A Wall Street Journal article reported that claims from individuals exposed in military service and shipyard construction account for 26 percent of all mesothelioma claims, 16 percent of all lung cancer claims, and 13 percent of all asbestosis and other disabling lung disease cases. Very few of these men and women who served in the military and were unknowingly exposed to asbestos as part of their service are receiving the compensation that they so rightfully deserve under this current system. The courts are so logjammed that they simply cannot provide compensation to the truly sick in a fair and a timely manner. The true victims of asbestos- related disease need to be compensated now, not years from now, in the current system. For these and for many other reasons, I am so proud to join with my many friends in the veterans community in supporting this trust fund solution. Currently, there are 16 national veteran service organizations supporting a trust fund solution to the current asbestos litigation crisis. Some of these organizations are the Veterans of Foreign Wars, the Non- Commissioned Officers Association, the Military Order of the Purple Heart, the Jewish War Veterans, and many others, including numerous State-based veterans organizations. These groups comprise hundreds of thousands of veterans across this country that are supporting the trust fund solution. The names of all these veterans service organizations are included in my written statement, which I respectfully submit in its entirety for today's hearing record, and I look forward to answering any questions that you may have, Senator. [The prepared statement of Ms. Keener appears as a submission for the record.] Chairman Specter. Thank you very much, Ms. Keener. We now turn to Mr. Billie Speicher, a 67-year-old former Marine and pipefitter-steamfitter, who spent most of his career in Southern California oil refineries. He was exposed to asbestos as an aircraft mechanic in the Marine Corps in the 1950s and as a pipefitter. He suffers from mesothelioma and asbestosis and has a pending asbestos tort claim. Thank you for joining us, Mr. Speicher, and the floor is yours. STATEMENT OF BILLIE SPEICHER, ONTARIO, CALIFORNIA Mr. Speicher. Good morning. My name is Billie Speicher and I appreciate the chance to talk to you today about the asbestos bill you have been working on. I am here today for three reasons, to speak up for the men that used to work side by side with me who someday will have to live through what I am going through now. I want to speak for my family, and I would like to urge more research into the cancer that has changed my life. I have mesothelioma. I don't have to tell you what that means because you have been there long enough. It is a deadly cancer, and by all rights I should only have a few months left. I was exposed as an aircraft mechanic for the Marine Corps in 1950, and a pipefitter from 1965 until 1999. And looking back, I can't think of two more dangerous lines of work, although none of us knew it then. No one told my buddies and me that asbestos could kill you. Working on airplane brakes and insulation, and later in refineries and duster shops knocking off pipe insulation and installing and removing pipes and valves, cutting asbestos cement pipe, asbestos was everywhere. It was all over me and all over everybody who worked there. I got the bad news mailed first. At first, the doctor I was seeing for two years kept telling me I had asthma, even though I had a CAT scan that showed my lungs were scarred with asbestos. Finally, the fluid built up so much in my lungs that they realized that I had asbestosis, stage 3. Now, I am living with a lot of pain and I can barely get my breath sometimes. I can't hardly sleep at night. You know that mesothelioma is a death sentence--one year, 18 months, tops. That is all they give you and that is all they gave me. Well, I am still alive and kicking today because of one thing, an experimental drug called Veglin that was discovered by Dr. Gill. I started getting the Veglin shots about four months after my diagnosis, and so far it has stopped me from getting any new tumors. You can probably figure out that these new experimental medicines like Veglin are very expensive. They are the reason I want to talk to you about the bill you are thinking about here in the Senate. I filed a workman's comp claim in my home State of California to help cover my medical expenses. The lawyers who handled this case tell me that since I have meso, I will most likely receive the maximum level of benefits under State law for permanent total disability medical benefits because I have meso and a death benefit. I am not sure how much--somewhere between $200 and $300,000. I also have a court case coming up and the trial date is set for February 22 of this year. Now, I have followed this bill we are talking about since I got meso, and I have to say that I don't like the idea of it. I am no legal expert, but to me the jury system in our country is about as important as it gets, and I just don't think it is right to take those rights away from people, which I feel this proposal will do. I don't want to be rude because you invited me here today, so I am going to do something with this new trust fund. There are a couple of things I hope you keep in mind. For one thing, if you would put this thing into law today, that would wipe out my trial rights. Even if I go to court before that and win a settlement, you get this thing passed by summer and it all goes away and it would be like I never got my day in court. I would have to start all over again and go into this trust fund that is supposed to be set up in about a year that I don't have. I don't want to be disrespectful, but I was in the Marines. Except for war, I don't think the Government does anything very fast. The thing is I don't have a lot of time. And you may not know it, but I live in California where folks like me with meso get put at the head of the line in a court case. Now, I don't want anybody thinking I came up here with my hand out or saying ``show me the money,'' because that is not what I care about. I need help with my medical bills. Those Veglin shots are keeping me alive, and they are the only thing that is keeping me alive. Second, I want to make sure my family is taken care of--my wife and my kids and the most beautiful granddaughter you have ever seen. This costs a lot of money to keep me alive and it will cost a whole bunch more. I don't want my family stuck with a pile of debts after I am gone. I am telling you right now that causes me as much pain as the cancer that is eating inside of me, in my body. Finally, I want to say a word about research and the guys I used to work with. I am here to speak for them, not just the guys who busted pipe and asbestos with me, but the hundreds of thousands of guys all over the country who did it for years and may still be doing it today because, you know, asbestos is still out there in the construction trade and the buildings. The construction workers are exposed to asbestos whenever they do renovations. You also know that everyday another worker is diagnosed with meso or some other asbestos-related disease, and many more will keep on coming in the future. So whatever you do, you have to make it work for them, and you also have to do something to help with the research to find a cure for this disease. I don't know if you put any money in the bill to help that, but you ought to, and you ought to do even if the Federal Government has to pay for it. Now, I know that that doesn't go over too good, as we are in a war with a big deficit. But the plain truth is the Government had a lot to do with exposing guys like me to asbestos. I got my first taste of it working on airplanes in the Marine Corps. A whole lot of veterans got their first exposure to asbestos serving their country. So I would just like to close by saying I hope you do the right thing by us when you finish writing this bill, and I hope you are thinking about all the workers in the future like me who are going to hear the same thing I did last May that they only have about one year left to live. Let's find a cure for mesothelioma. We know it is going to still be killing people for years and years, so let's do something about it. Thank you. [The prepared statement of Mr. Speicher appears as a submission for the record.] Chairman Specter. Thank you very much, Mr. Speicher, for sharing with us your own situation, and we see the difficulty of your testimony. We very much appreciate your being here and presenting your views. Our final witness is Mr. Jeff Robinson, who is a partner with the law firm of Baach, Robinson and Lewis. He is a graduate of Lafayette College, summa cum laude, and Yale Law School; served as Deputy Assistant Attorney General for the Department of Justice and did extensive work on this Committee, working for me many years ago. He has been an adjunct professor of law at Georgetown. He has been an active participant in our marathon sessions. We welcome you here today as a witness, Mr. Robinson, and look forward to your testimony. STATEMENT OF JEFFREY D. ROBINSON, BAACH ROBINSON & LEWIS PLLC, WASHINGTON, D.C. Mr. Robinson. Thank you, Chairman Specter, Senator Leahy. I am here today on behalf of Equitas, which is an English company which is responsible for the pre-1993 liabilities of Lloyd's of London. Those include the asbestos liabilities. Although a foreign company and in the position to avoid this, Equitas is keenly aware and supportive of efforts to find a legislative solution to the asbestos issue. Some of the allocations which have been done suggest that Equitas could be one of, if not the single largest contributor to the asbestos compensation fund. I want to start by expressing our appreciation to you, Mr. Chairman, Senator Leahy, former Chairman Hatch and the other members of the Committee who have worked so hard during the past two Congresses to address the issue of asbestos litigation reform. Without that difficult and intense work, we would not be here today with the opportunity to enact historic legislation. Like everyone else, I would also like to thank Judge Becker for his work during the last two years. He has forced agreement which makes the possibility of legislation a reality. Many years ago, Equitas recognized that tremendous growth in claims from unimpaired individuals threatened to overwhelm the ability of the existing tort system to compensate those who were truly injured by exposure to asbestos. This flood of claims also threatened the financial viability of numerous defendant companies and their insurers. Equitas has done what it can as a single company to resist claims from the unimpaired and has had some success in this regard, but it has become obvious that no single company or group of companies can solve this problem through their own actions. A legislative solution is required. Equitas actively supports efforts to obtain comprehensive legislative reform of the asbestos litigation system. We are not wedded to a particular approach and do not insist upon particular provisions in legislation. What we have also asked is that any legislation be effective at addressing the abuses in the current system and fair to all the participants--the claimants, defendants and insurers. Unfortunately, various provisions in the current discussion draft render it ineffective and unfair in some respects. My comments today are focused on Title II, the subtitle related to the Asbestos Insurers Commission. Insurers are expected to provide upwards of $46 billion in funding for the proposed trust fund. It should be noted that that $46 billion figure was reached almost two years ago. Equitas, like others in the insurance industry, has spent considerable amounts resolving claims during that period, significantly reducing our future liabilities for asbestos claims. Despite repeated promises to do so, insurers have not presented a formula specifying how contributions would be calculated that could be set forth in the statute. As a result, the Asbestos Insurers Commission will be charged with the critical task for ensuring that the insurers' contribution is collected and allocated amongst the various insurers and reinsurers who will be participants. Despite that critical function, the current discussion draft handcuffs the commission, severely limiting its ability to obtain the required amounts through a fair process. First and foremost, the discussion draft does not ensure that the members of the commission will be free of actual or perceived conflicts of interest when they perform their sensitive task of allocating contributions amongst insurers. As currently designed, an officer or employee of an insurer participant could leave his or her job one day and the next be in charge of allocating billions of dollars amongst his or her former employer and its competitors. While it may be acceptable in some circumstances for a former employee or party to sit in judgment on matters of interest to that party, where the matter involves an allocation of enormous financial liabilities amongst the former employee's principal and its competitors, it is patently unacceptable, with or without disclosure. The commission members should be subject to no less of a test than are judges, who would clearly be required to recuse themselves from deciding a case of this magnitude involving their former employer. The appearance of impropriety would compel it. Imagine the consternation and mistrust you would feel if you learned that your company had been assessed $1 billion more than you anticipated by a commission led by the former CEO of your major competitor. No one would accept such a result from a court and it should not be accepted here. Second, the discussion draft contains a provision allowing groups of insurers and reinsurers to circumvent the work of the commission and shield themselves from the commission's review by concluding private agreements regarding allocation. Remarkably, the provision provides that all of the authority of the commission terminates with respect to insurers who are parties to such an agreement. This provision should be rejected. The provision undermines the entire role of the commission. If an independent commission applying a fair and transparent methodology to determining insurer shares is an appropriate and important exercise, it is appropriate for all participants. Second, the provision is discriminatory because it permits domestic and foreign insurers and reinsurers to form alliances to enter into such agreements, but inexplicably precludes companies such as Equitas from participating in such agreements. There has been much back-and-forth, as Judge Becker knows, concerning the shape of the asbestos commission. We are keenly concerned about it because under any version of the bill, our liability will be determined by the asbestos commission. Others who express interest in how the asbestos commission works go on to say that, in their desired world, they will never be subject to it because they will reach an agreement that terminates the commission's jurisdiction with respect to them. Finally, Equitas is particularly concerned about a provision targeted only at it that would deny the commission the ability to grant Equitas meaningful financial hardship or exceptional circumstances adjustments, adjustments that could be granted to all other insurers and reinsurers. Under the terms of the bill, insurers and reinsurers can obtain an adjustment that reduces their payment obligation to the fund if payment without such adjustment would threaten the solvency of the company, be exceptionally inequitable, or fail to account for other payments the insurer was required to make. This is very similar to the provision which are contained for defendant companies. To keep the fund whole in the event of such an adjustment, the amount of the adjustment must be paid into the fund by the remaining insurer contributors based upon their proportionate shares of payment to the fund, again as is the case with defendant companies. Although the bill allows Equitas to receive such an adjustment, it then discriminates against Equitas by applying to it and to no other insurance participant a provision that would nullify any such adjustment. The provision would require that the parties reinsured by Equitas make a payment to the fund in the amount of any adjustment granted to Equitas, thereby giving with one hand and taking way with the other. This provision could lead to the following absurd result. The commission determines that the formula it has adopted substantially overcharges Equitas because Equitas would be faced with fewer liabilities in the existing tort system. The commission then grants an adjustment to Equitas, but the parties whom Equitas reinsures would then be required to pay back to the commission the amount of the adjustment, even though it has been determined to be inequitable. That situation would arise with no other reinsurer, whether they could make their payments or whether--if they could not make their payments or if they got a hardship adjustment, the amounts are reallocated around the entire insurance community. But for Equitas, it is targeted back only on those people whom it reinsures. It is simply wrong to treat one identified participant differently from all others, and it is also foolhardy. This discriminatory principle may make it impossible for Equitas to make a substantial contribution to the fund. It engenders some concern from the UK government and others about whether or not we are treating all foreign companies in the same way that we are treating American companies. In conclusion, Mr. Chairman, we applaud you for taking up the critical but difficult issue of asbestos litigation reform. The discussion draft presented represents an important next step in the process, but it is a step hindered by some correctable errors. Absent steps to address these identified failings, this legislation will be neither effective nor fair. Taking these steps will go a long toward creating legislation that can resolve the asbestos litigation crisis facing the Nation. On behalf of Equitas, we pledge our continued cooperation with the Committee in formulating an effective and fair reform of the asbestos litigation crisis. Mr. Chairman, I have a statement which I ask, like the others, be included for the record, and I thank you for inviting us here today. Chairman Specter. Your statement, without objection, will be included for the record. Thank you very much, Mr. Robinson. [The prepared statement of Mr. Robinson appears as a submission for the record.] Chairman Specter. Mr. Speicher, your testimony was very compelling. When you talk about finding a cure for mesothelioma and cancer-related ailments, I serve on the subcommittee of Appropriations--actually, chair it--Labor, Health, Human Services and Education. We have allocated some $28 billion for National Institutes of Health research, and the cancer fund is right at the $5 billion level. So there are very, very substantial efforts being made, but I will take another look to see what the National Center Institute is handling on asbestosis and mesothelioma, and see if more could be done there. Ms. Keener, thank you for your testimony on your father, who was a victim, and we note the problem which you have identified where your mother's claim is not moving forward because so many people are getting compensation and are in court where they have no disabilities. Governor Engler mentioned that as well, and that is one thing this bill is going to change. The Supreme Court of the United States handed down that ruling. It was sort of inexplicable that they handed it down, but they do that from time to time. One of the things that the Judiciary Committee is going to be taking a close look at is more of the judgments which Congress can correct, and that is one which we can deal with. I was pleased to hear the level of support for the trust fund from Governor Engler and Ms. Seminario and Mr. Forscey, although Mr. Forscey has substantial reservations about many provisions. Mr. Berrington, you raise the issue of the medical criteria bill. Now, the medical criteria bill pops up from time to time. Would you like to see us put the trust fund in the back burner and pick up a medical criteria bill-- Mr. Berrington. We would like to work with-- Chairman Specter. --for the next 5, 10, 15 years? Mr. Berrington. I am glad you finished that sentence. Chairman Specter. Well, I didn't want there to be any doubt as to my view of the medical criteria bill, but it is out there in the nimbus; it is out there in the clouds. Even the eminence of Judge Becker cannot produce a perfect bill. He just can't do it, and it greatly disappoints me that he hasn't done it. But do you seriously think we ought to start looking for alternatives like the medical criteria bill? Mr. Berrington. We want to work with the Committee on what the Committee believes is the best way to proceed to get a resolution to this issue. And if we can do it through a good trust fund, let's do it. But if that turns out not to be possible, let's continue to work on the issue and find another approach. Chairman Specter. Well, this Senator thinks that the trust fund is the best idea and I would hate to see us go back to ground zero. After the kind of effort which the Congress has put into this, it would be very hard to contemplate the kind of drive being duplicated on this issue which has happened in the past several years, with Senator Hatch and Senator Leahy as Chairman and Ranking--Senator Leahy conducted hearings when he was Chairman--to go back there. I am pleased to have heard the comments about improvements, and Mr. Forscey has been a regular attender and has grave reservations about taking away the right to jury trials, frankly, as I do. But we have tried to provide the safeguards and the safety valves with the reversion, and we have heard the concerns about the reversion which Governor Engler has articulated. And then you have the Level VII on smokers and non-smokers, smokers, ex-smokers, non-smokers, and lung cancer I. Governor Engler doesn't want this to be a smokers' bill, and Ms. Seminario brought up the issue that the figure is too low and it is synergistic. I was glad to hear about synergism between-- or interested to hear--maybe not glad to hear about it, but interested to hear. But on this table, Judge Becker and I did precious little with it. It came to us pretty much in this form. Judge Becker has been very patient and has sat at the witness table for more than an hour. Judge Becker, on the individual evaluation as to number VII--and this sort of points up the problem that we have on different points of view--the smokers get $75,000, the ex- smokers $200,000, the non-smokers $625,000. Can you give us the genesis or origin of these amounts of money? Judge Becker. Well, the 625 for the non-smokers is Frist, Daschle and Feinstein. Everybody is agreed on that. I mean, those four parties agreed on 625 for the non-smokers, on the theory that if they had 15 years of weighted exposure, even though they had no absolute asbestos-related symptoms, the causality question would likely, if they were not non-smokers, be resolved in their favor. Hence, the $625,000. The smokers, although--well, with respect to the ex- smokers, which is the big difference-- Chairman Specter. Where did that figure come from, Judge Becker, if you know? Judge Becker. Well, basically, I mean, Senator, all of these are arbitrary. They are, I trust, reasonably arbitrary. Chairman Specter. Who put the arbitrary figure on them, if you know? Judge Becker. The answer is I don't know. Senator Frist put one figure on, Senator Daschle put one on, Senator Feinstein put one on, and we kind of compromised it and we kind of split the difference. But what we put on was much less than the Labor or the Daschle offer, and significantly less than the Feinstein offer. It was a little more than the Frist offer just with a view to sweetening it a little and maybe cutting the baby in half and seeing if everybody could be satisfied. With respect to the smokers, we were very close to the Frist offer and significantly below the Daschle offer, on the theory that the smokers, as appears to be the case in the tort system, are going to have a difficult time proving causation. So by and large, what we did was kind of a sweetener, by not by much, to see if we could get everybody's agreement. I don't know that we have. Chairman Specter. Governor Engler, you have talked about the medical screening and I would like you to take a look at that, and Pat Hanlon behind you, if there is any language that you would like to see us delineate more precisely to avoid opening the flood gates, which I understand is your concern. Ms. Seminario, you have raised the issue about the definition of asbestos being too broad. If you have an idea on that, we are glad to entertain it further. I was pleased to hear you say, Mr. Forscey, that the current draft is a big improvement on the reversion. And, again, we are open to further suggestions. We are working with Mr. Berrington on the avoidance of the leakage on the short amount of time afterwards. So we are still prepared. Mr. Robinson, your issue we have taken up with you individually. We have given you a lot of attention. That is one thing that Judge Becker and I have done. You wanted to be a witness and we are glad to have you in as a witness, although you have a very fine point. But I don't like the idea of conflict of interest and discrimination, and if you give us language, we will consider it. Senator Leahy, my yellow light is about to expire into red. Senator Leahy. Mr. Chairman, I appreciate the way the time goes. I have served on a lot of committees, as you have, and have Chaired a number, as you have. Sometimes, it is fault, sometimes it isn't. But there just being the two of us here, I would certainly have no objection if you need more time. Chairman Specter. Well, I do need more time, but we have done a rather thorough job here and I am going to observe my time limit. Senator Leahy. Thank you. Mr. Chairman, some of this I am going to have to submit for the record just because of time constraints and because I am also supposed to be somewhere else at the moment. Mr. Berrington, I was puzzled, actually concerned by your testimony. You know, everybody here is dealing in good faith. The manufacturers have. I think we have been fortunate in having Governor Engler here, a person who, in his former career as governor, had to balance certainly in his State some of the most unbelievable, conflicting groups, and balanced them very well. He had to deal with the legislature. He had to deal with all the problems of a major State, one with a huge industrial base as it transitions into an entirely different time. And I say this very honestly. I think, Governor, you did that in a way that very few people could have. But we are here now in the realities, Mr. Berrington. You speak of the criteria bill. With all of the discussions, the hours and hours of work on this, the huge amount of lobbying-- and I can almost hear the meters whirring in this room with those who are not here totally on their own nickel, as Judge Becker is. The idea of a criteria bill--you know, in the last Congress there was only one sponsor of the criteria bill and one cosponsor, and now the sponsor has retired from the Senate. Now, we are not going to get anything through that doesn't have both Republican and Democratic support. It is going to need that to get passed. I believe it can be done, but let's not waste time on something that could only get one cosponsor last time and one sponsor, especially when that sponsor has retired. Now, Mr. Speicher and Ms. Keener, I thank you for your military service. Ms. Keener, I hope you understand the gratitude of all of us for your father's service, and yours, and our condolences on his death. Mr. Speicher, my youngest son is a former Marine, and so there is always a special part in my heart for Marines. Ms. Keener, before you feel that somehow that leaves you out, my wife is a nurse. So we are covering all the bases. But in your cases--Ms. Keener, in your father's case, and, Mr. Speicher, in yours, the exposure to asbestos was in service to your country. Many veterans are now sick, as you have pointed out, Mr. Speicher and Ms. Keener, with asbestos disease as a result of their exposure during service. Would you think that the Federal Government should be providing contributions either directly or through tax incentives to provide more funding to a national trust fund because of the number of veterans who are going to be affected by this? Do either one of you want to answer? Mr. Speicher. The research for mesothelioma which I appreciate you addressing was addressed as a cancer grant, and the thing with mesothelioma is there weren't enough of us and it was kind of pushed over to the side and they tried everything else because all the chemos and everything that work for other cancers just don't do this. So this is the reason I say we need more research in mesothelioma. The research that was done there by Dr. Gill is the reason I am able to sit here today, and somebody had to fund it. It was the Mesothelioma Foundation there at Norris. Senator Leahy. Ms. Keener. Ms. Keener. No, sir, I am not advocating any Government expense, but I do have a question perhaps of Judge Becker. In the prior bill, there were several provisions in 1125 and 2290 that provided specific advantages for veterans in the bill. Also, Mr. Speicher, in that bill there was one provision that provided $1 million from the fund for each of the fiscal years 2004 through 2007 for up to ten mesothelioma disease, research and treatment centers. And I guess my question is I am hoping that those provisions are or will be included in this current draft. Judge Becker. If I may respond, Senator Leahy, Section 222(c)(1) of the bill, on page 79 of the new bill, entitled ``Mesothelioma Research and Treatment Centers,'' provides that the administrator shall provide $1 million from the fund for each of the fiscal years 2005 through 2009 for each of up to ten mesothelioma disease research and treatment centers. It provides that the centers shall be chosen by the Director of NIH, chosen through competitive review, et cetera. So that provision remains in the bill. Senator Leahy. Ms. Seminario, I know you watched this very carefully. I mean, at the AFL-CIO, there are thousands of your members who have been exposed to asbestos during the course of their occupations. You have been a strong advocate for victims, I know, from the work with Judge Becker. You are an expert on occupational safety and health. Let me ask you this question. Last October, Congress passed and the President signed into law legislation transferring the Energy Employees Occupational Injury Program from the Energy Department to the Labor Department. What kind of lessons can we learn from the Energy workers Federal comp program? Especially, I am thinking of difficulties approving claims, but also getting past bottlenecks, because we are talking about some time constraints for a lot of the people who are affected by this. Ms. Seminario. I think there are a number of lessons to be learned. The Energy workers program was one which was actually a relatively small program. It was to compensate those individuals who had worked in the DOE nuclear facilities. They are essentially the Cold War veterans, the people that built the atomic bombs in this country who were exposed to a variety of toxins, and as a result are suffering very significant illnesses and are dying. The Congress passed the law, I believe, originally in 1999- 2000. Part of it went to DOE, and what happened there is that the problems of trying to prove, first of all, exposure for individuals was very difficult. These were exposures that took place a long time ago. It became a huge, huge bottleneck. It turned out that after four or five years of trying to get this program up and running, I believe ten people had been compensated. There was $75 million spent and 10 people compensated. DOE was trying to assist people to be compensated through the State compensation programs. So what you had was with both these evidentiary requirements, as well as the way it was set up administratively, the hurdles were so high that nobody got compensated and a lot of money went to the administrative costs. So the Congress made a decision to essentially shift it to an agency that knew how to deal with compensation programs, but, as importantly, to basically put in place more simple criteria to be the guide posts for whether or not people would be compensated. The Department of Labor has just received that program and that program is dealing with 20,000 pending claims. They have been given 210 days to get that up and running. That compares to this program with, let's say, 600,000 pending claims, and there are proposals for 180 days. I think we have to be realistic about the time that is going to be needed, even with the best intentions and the smartest people. So we are very concerned that during this transition period, the defendants and insurers are concerned about leakage. But if you are basically going to shut down the existing system, that means that people will have nowhere to go and that is not fair. It is not fair that victims who are going to die within 6 months--in 180 days, people will be dead by the time this program gets up and running. And we think that that is unconscionable and that the Congress cannot and should not put in place legislation that leaves victims with no redress. Senator Leahy. Mr. Chairman, I will follow your good example. I will have, if I might, a number of questions for the record. Chairman Specter. Sure. Senator Leahy. On some, I will want to follow up on Governor Engler's testimony, which was excellent, as was everybody's. Mr. Berrington, I have a question, as you may gather, for you, and Mr. Forscey. I realize this goes beyond the time, but I just wanted to applaud the Chairman for doing this. Chairman Specter. You may go well beyond the time. [Laughter.] Senator Leahy. This is one of those things where there are all these glamorous things you could be doing in hearings. Certainly, everybody is going to be having hearings on tsunami aid, and we are going to have hearings on this, that and the other thing. In this Committee, you could hit all of the hot- button items. This is one of the hard work--this is not the show horse; this is a work horse kind of thing. It is extremely difficult. I applaud the Chairman for taking it on as one of the very first things he is doing as Chairman. I know the frustration I felt during the 17 months I was Chairman in dealing with it, but I also know the tremendous potential boost it can give to our economy if it is solved and the tremendous sense of closure and help it can give those who suffer. I mean, these are human cases. They are not just numbers; they are human cases. I have met many of these families. None of it is going to be perfect. Judge Becker would be the first one to say that, and the Chairman would, but we can do so much better than we did. So I applaud you for that, Mr. Chairman. Lead on. Chairman Specter. Well, thank you very much, Senator Leahy, for your cooperation, your joinder on this issue, and your hard work and your staff's participation. I think the testimony of Mr. Speicher and Ms. Keener was especially important today to put a focus on the victims. It is not easy for Mr. Billie Speicher to appear here and talk about the short time that he has because he suffers from mesothelioma, and Ms. Keener's comment about her mother not being able to get to court because so many people are head of her, where they don't have any injury. So taking care of America's victims is indispensable as we move ahead here. Senator Leahy has commented about the tremendous drain on the economy. I am pleased to have heard the broad support for the trust fund concept. Sure, there are lots of issues, but that broad support is very important. With respect to improvements, we are still open. What we are going to be doing is going back to work a week from tomorrow, on the 19th, at ten o'clock, where there will be more time to review the draft. I have invited a number of you to submit more language. My hope is to have other Senators take a look at this draft and the changes that we will incorporate, and to try to get a bill ready for introduction very, very early on, because once the Senate starts to function, it is a virtual impossibility to get floor time. That is why we have maintained this very, very heavy workload and full-court press over November and December and into January. I am encouraged by what I have heard today, although I am not unmindful of the criticisms, and we are going to try to meet them to the extent we can. It is my hope that where the criticisms or the questions or the concerns relate to the uncertainty as to what we can predict that that will not be a bar as to whether final sum that we put on is going to be enough, because we do have an active safety valve. Kim and I talked about yesterday the seven-and-a-half years. They would like there to be some assurances. It seems to me that there are a lot of practical assurances that will go well beyond seven-and-a-half years. But if the bottom falls out--and I don't think it is going to, but my point is not to let the uncertainties pull us down to look for greater certainties or greater protection. It is a question as to where we are. And I use the number VII, smokers/non-smokers sort of illustratively. Maybe $200,000 is too much for people who have quit smoking and maybe $75,000 is too much for the smokers. But in the grand scheme of things, that is not going to be a big factor in this bill. And I would suggest that some of the other concerns we have are not going to be gigantic factors either, compared to getting something done. And it is really now or never, so let us not let the perfect be the enemy of the good. Seema Singh, who has done yeoman work, sitting behind me, my staffer, will be receptive to any thoughts you may have, as will I and also Judge Becker. We will reconvene on the 19th, with a view to trying to put the bill in final form. In the interim, I will be talking to my colleagues in the Senate to see if we can find some agreement, and we will come up with a figure when we have the next bill. Thank you all very much. 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