Thursday, October 13, 2005

CEO Cheney Vindicated by Clinton Judge

One supposed blunder by Dick Cheney when he was running Haliburton was its acquisition of Dresser Industries. Which corporation ended up with billions of dollars in liabilities from asbestos litigation. But, thanks to a Federal judge in Texas--appointed by Bill Clinton--it appears that Dresser-Haliburton may have been victimized by fraudulent medical diagnoses on a massive scale (thanks to Scrivener for the link).

It turns out that many people who were paid for asbestosis claims have also filed claims for silicosis. With the same Doctor often making both diagnoses:

With roughly 10,000 silica claims in one courtroom in Corpus Christi by the end of 2003, the next step was to persuade Judge [Janis Graham] Jack to let the defendants gather information on the basis of each claim. On Feb. 5, 2004, she did exactly that, giving each plaintiff two months to fill out a form indicating his or her employment history, illness and the names of doctors seen. The claimants were also asked to provide their Social Security numbers on the forms. This information turned out to be crucial.

[The Law firm] Forman Perry kept a database of people who had filed asbestos claims; the database was built over years of representing companies battling asbestos litigation. And as they loaded the information from the silica claimants' forms, lawyers found that some of these claimants had also filed asbestos claims.

"They would show up in our internal information system as asbestos victims," recalled Daniel J. Mulholland, a lawyer at Forman Perry....

The question was: Could these people have had both diseases? That would be possible....

Mr. Mulholland pulled the medical records from the asbestos claims and noticed something else: in hundreds of cases, the same doctor who had diagnosed asbestosis in a claimant went on to diagnose silicosis in the same person a few years later. Although not impossible, it is highly unlikely that someone developed signs of a second disease in the period between diagnoses, and it would be reasonable to expect a doctor reviewing the X-rays to note signs of both diseases if they were present. The doctors did not do that; Mr. Mulholland concluded that they were "flip flops."

"I was able to document 400 examples of that just based on our firm's files," Mr. Mulholland said, but he needed more data to find out whether more silica claimants had previously filed asbestos claims. "The next question was: How do I get more of the asbestos reference points?"

There is one institution that may have more data on asbestos claims than any other, and that is the Manville Personal Injury Settlement Trust. It was set up in 1988 to pay people who brought asbestos claims against Johns Manville, the building materials company now owned by Berkshire Hathaway. Since it was created, the Manville Trust has paid out $3.3 billion to resolve 655,096 claims. Perhaps, Mr. Mulholland thought, the trust could provide a list of the Social Security numbers of claimants it had paid, and then Forman Perry could compare them with the Social Security numbers of silica claimants.

....Armed with the evidence of multiple claims by the same person, first seeking compensation for an asbestos-related injury and then for a silica-related injury, Mr. Krutz and Mr. Mulholland asked Judge Jack if they could question one of the doctors, George H. Martindale....

Under the questioning, Dr. Martindale said he never talked to any of the claimants whose X-rays he read, either to learn their work histories or to notify them if he determined that they suffered from silicosis. Pushing further, Mr. Mulholland asked Dr. Martindale whether he stood by the diagnoses. Dr. Martindale responded, "If another physician hadn't established a diagnosis of silicosis/asbestosis, I would withdraw that. I would - I would say that I am personally not making a diagnosis of asbestosis or silicosis."

....The deposition opened the door to questioning the other doctors whose diagnoses supported nearly all of the silica claims in the federal proceeding in Corpus Christi. It also appeared to irritate Judge Jack. ....

In January, the claimant information from the Manville Trust started to arrive, prompting a frenzy to load the data into Forman Perry's database. Mr. Mulholland remembered sitting in his office on the last Sunday of the month, working with the data and coming to realize that more than half of the claimants in the silica litigation had previously filed asbestos claims with the trust. "I was just blown away," Mr. Mulholland said. He had the critical evidence to challenge the diagnosing doctors.

The hearing was a watershed. Several doctors on the witness stand withdrew their diagnoses and said they had never interviewed the people whose X-rays, or in some cases just reports on their X-rays, they had analyzed. ....

....Aftershocks from the February hearing are still spreading. The Manville Trust has barred payment of claims based on diagnoses by any of nine doctors involved in the silica litigation. One of those doctors, Dr. Harron, was responsible for 53,724 asbestos claims, more than any other doctor and nearly 8 percent of the 691,910 asbestos claims that the trust has received, according to the trust. Many of those were paid long ago.

FEDERAL prosecutors in New York have opened an investigation into the claims and have issued subpoenas for documents to the Manville Trust, to a screening company that took X-rays of silica claimants and to others whose identities are still unknown. (A spokeswoman for the United States attorney's office declined to comment on the investigation.)

And in asbestos lawsuits that are still being heard, defense lawyers for companies or their insurers are using the Corpus Christi revelations to attack settlement agreements to compensate claimants. Last month, lawyers for W. R. Grace & Company, a building materials maker that is in Chapter 11 bankruptcy proceedings because of asbestos claims against it, asked a Delaware bankruptcy court to let them investigate the lawyers involved in filing those claims. Grace's lawyers cited Judge Jack's decision.

At some level, the outcome of the silica litigation raises the question of why defense lawyers were not more successful in challenging the validity of claims in the past. While lawyers point to the cost of investigating and challenging claims, it is also true that defense and bankruptcy lawyers have earned a lot of money handling claims the way they have been handled, paying off plaintiffs through years of Chapter 11 proceedings.

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