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Asbestos Lawsuits: Which Republican is Misleading?

Sen. Specter attacks former House Republican Leader Armey as "just another paid lobbyist spreading disinformation" about his asbestos bill. Neither is telling the real story.

May 18, 2005

Modified: May 19, 2005

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Summary

 

In ads run in several states, former House Republican Leader Dick Armey attacks a bipartisan bill sponsored by Sen. Arlen Specter (R-PA) and others to reform the mess created by asbestos litigation.

Armey calls the bill "a new threat to your pocketbook," which it isn't. And he suggests that the bill is a giveaway to trial lawyers, when the opposite is true. 

Specter counter-attacked with a New York Times opinion piece suggesting that he wasn't proposing a new tax, though in fact he is.

Specter was closer to the mark when he called Armey "just another paid lobbyist spreading disinformation." Armey's lobbying firm received $920,000 last year from a British insurance company that was opposing parts of Specter's bill. In the ads, Armey was speaking as the president of a nonprofit advocacy group, FreedomWorks, formed last year in a merger between the Republican-leaning, free-enterprise groups Citizens for a Sound Economy and Empower America.

Analysis

 

Armey's ads appeared for a week in seven state – Alabama, Arizona, Iowa, Kansas, Oklahoma, Tennessee, and Texas. Sen. Specter responded May 16 in an opinion piece in the New York Times.

 FreedomWorks Ad

Dick Armey: Hi. I’m Dick Armey, and I’m fighting for lower taxes as Chairman of the group FreedomWorks.

There’s a new threat to your pocketbook emerging in the United States Senate.

That’s where Arlen Specter wants to create an asbestos trust fund paid for by $140 billion in new taxes.

That’s right, $140 billion in new taxes.

What’s more, the asbestos trust fund would set aside billions of those tax dollars as payoffs to trial lawyers.

The asbestos trust fund is an outrageous idea. It’s time to help real asbestos victims, not trial lawyers.

"Your Pocketbook"?

In the radio spot, Armey says “there’s a new threat to your pocketbook emerging in the United States Senate ,” and that "Arlen Specter wants to create an asbestos trust fund paid for by $140 billion in new taxes."

Specter, in rebuttal, says manufacturers and their insurers have "offered" to create the $140 billion fund, and adds: "The bill is explicit that the federal government would pay nothing into the fund."

So which is it, a new $140-billion tax on "your pocketbook" or just a fund that business is setting up without any federal funding?

Neither side is telling the real story here. Armey misleads his listeners when he calls the asbestos fund a "threat to your pocketbook." In fact, the only pocketbooks affected would be those of employers with workers exposed to asbestos and the employers' insurance companies.

Specter, on the other hand, is ducking the question of whether he's proposing a new tax. His bill calls for "assessments" to provide the $140 billion, but the plain language of his bill, S. 852, makes clear that payments are compulsory. It gives the Department of Labor power to sue for collection, for one thing, and also provides penalties for non-payment. That qualifies as a "tax" in any ordinary sense of the word.

However, manufacturers and insurance companies are for the most part willing, if not eager, to pay these "assessments" for the simple reason that they will save money by doing so. The money would go to settle damage claims that could otherwise be much larger.

A report by Public Citizen's Congress Watch organization, for example, estimates that 10 large asbestos firms currently in bankruptcy proceedings stand to see their asbestos liability drop by nearly 79 percent – from $25.9 billion to $5.6 billion – should S. 852 become law. Public Citizen President Joan Claybrook called Specter's bill "a carnival of greed by some of America’s biggest corporate interests."

We can't vouch for the accuracy of Public Citizen's estimate, but there's no disputing that the essential aim of Specter's bill is to save business money by cutting out fees to lawyers and eliminating damage awards to workers who show no sign of illness while speeding payments to claimants who are actually ill.

So Specter’s plan would impose a new ”tax" – but not on everyday listeners of talk radio.

Helping Trial Lawyers?

Armey's ad also misleads listeners when it claims that the asbestos trust fund would "set aside billions of those tax dollars for trial lawyers." A companion print ad, which FreedomWorks ran in the same states as the radio spot, says that Specter’s legislation “guarantees a payoff of nearly $14 billion to asbestos attorneys.” To top it off, in the the radio spot, Armey declares that “it’s time to help real asbestos victims, not trial lawyers.”

If that's true, why are trial lawyers opposing Specter's bill? The fact is, the bill would mean much less money in legal fees, not more, as Armey invites his listeners to believe. Sen. Specter explains the reason quite simply: "In fact, the bill caps lawyers' fees at 5 percent, compared with current contingent fees of 33 percent." And Sen. Specter is absolutely correct.

Lawyers fees typically do amount to one-third of the total amount of any settlement. In addition, the lawyer's expenses for such things as expert witness testimony and preparation of transcripts can eat up even more, further reducing the amount of any award that is actually received by a claimant. Specter's proposal originally would have limited any legal fees to just 10 percent of the settlement -- which would have figured to $14 billion of the $140 billion trust. However, the bill as currently written would cap fees at just 5 percent, or half the amount stated in Armey's newspaper ad.

Furthermore,  this $7 billion is by no means "guaranteed" for the trial lawyers; it is simply an upper limit on how much lawyers would be able to be compensated by the fund.

"Another paid lobbyist spreading disinformation?"

In his New York Times article, Specter slams Armey for accepting money from an opponent of the asbestos legislation:

Specter: What Mr. Armey didn't tell his radio listeners was that . . . the lobbying firm that he works for has received nearly $1 million from Equitas, a British insurer that has fought to stop this legislation. Posing as a disinterested spokesman on behalf of the public interest, Mr. Armey is instead just another paid lobbyist spreading disinformation.

Specter is correct about Armey's employment. Armey was listed as a lobbyist last year for the firm of DLA Piper Rudnick Gray Carey, which disclosed that it received $920,000 from the British insurance firm Equitas during 2004. (See "supporting documents," at right). Armey is among several individuals whom Piper Rudnick listed as acting as lobbyists on asbestos legislation for Equitas. Although insurance companies generally favor Specter's legislation, Equitas has called some provisions of the bill "unaccpetable," complaining (among other things) that as a British firm it is treated differently from US insurors. Equitas won at least one concession in the legislation after Armey's ads began, according to the capital hill newspaper Roll Call.

FreedomWorks says Armey's lobbying income didn't influence the ad. Matt Kibbe, the organization's president and chief executive officer, wrote recently that Specter's bill "violates our organization's limited-government principles," and that it would "abrogate existing contracts" and be found unconstitutional.  

Clarification, May 19: A lobbyist for Equitas says the insurance firm didn't pay for any part of Armey's ad. Jeffrey D. Robinson wrote in a letter to the editor of Roll Call: "Equitas is not affiliated with the FreedomWorks efforts regarding asbestos legislation in any way, and has never made any contribution to FreedomWorks."   This article originally quoted Chris Kinnan, spokesman for FreedomWorks, as declining to say whether or not Equitas had contributed to  Armey's advertising campaign.

Sources

 

"Special Report: Verdicts in Asbestos Personal Injury Cases Reported in Mealey's Litigation Report: Asbestos in 2002." Mealey Publications & Conferences Group. 2002.

"Overview of Asbestos Issues and Trends ." Public Policy Monograph, American Academy of Actuaries. Dec 2001.

"Tort Trials and Verdicts in Large Counties, 2001 ." Bureau of Justice Statistics. Nov 2004.

"Federal Asbestos Legislation: The Winners Are …" Congress Watch. May 2005.

Arlen Specter, "Paying for Asbestos," New York Times , 16 May 2005.

Tory Newmyer, "Armey Has Two Irons in the Fire on Asbestos." Roll Call  4 May 2005: 1.

Matt Kibbe, "FreedomWorks Defends Role in Asbestos Debate." Letter to editor. Roll Call 9 May 2005: 4.