AIG Seeks to Investigate Possible Fraud in Asbestos Trust

AIG Seeks to Investigate Possible Fraud in Asbestos Trust Photo: AIG Corporate via Wikimedia Commons. AIG headquarters in New York City.

Several of the same plaintiffs law firms are involved in a bankruptcy case in which a judge found evidence of “misrepresentation” by plaintiffs and a separate dispute over whether insurers have the right to audit payments made by an asbestos trust.

Several insurance companies that are members of American International Group, Inc., and Resolute Management, Inc., are trying to audit the payments made by an asbestos trust. They asked on Monday for access to the trial record in the proceeding in which U.S. Bankruptcy Judge George Hodges estimated the liabilities a gasketmaker faces for asbestos claimants. In that proceeding, Hodges found that asbestos cases were “’infected by the manipulation of exposure evidence by plaintiffs and their lawyers,’” according to court papers.

The AIG companies are in a dispute with Phillips Electronics North American Corporation, T H Agriculture & Nutrition, LLC, and the T H Agriculture & Nutrition, LLC, Asbestos PI Trust about their right to audit payments made by the trust once a year. They also have increased audit rights if there is reason to believe that the trust has paid any fraudulent claims.

The AIG members say they have “reason to believe that fraudulent claims may have been submitted to and paid by the THAN Asbestos PI Trust,” Henry T. M. LeFevre-Snee and John S. Favate, of Hardin Kundla McKeon & Poletto, P.A., in Springfield, N.J., and Jodi D. Hildebran and R. Bradford Leggett, of Allman Spry Leggett & Crumpler, P.A. In Winston-Salem, N.C., wrote in court papers.

“Disclosure of the estimation trial record will assist the AIG member companies in exercising their audit rights under the settlement agreement, and their rights pertaining to potentially fraudulent claims that may have been submitted to and paid by … the THAN Asbestos PI Trust.”

The first outside company to seek access to the case before Hodges was Ford Motor Co. Hodges denied that access in order to have Ford’s motion considered on appeal along with online news outlet Legal Newsline’s motion for public access to the estimation trial.

The parties are trying to keep part of the case before Hodges.

Resolute, the AIG companies and Ford asked for the District Court to withdraw the “reference” to the part of Ford’s motion dealing with unsealing the record of the estimation trial. Under federal law, district courts may withdraw any proceeding “for cause shown” if a proceeding involves both the Bankruptcy Code and other federal law “regulating organizations or activities affecting interstate commerce.”

Separately, Hodges granted Ford and other parties access to Federal Rule of Bankruptcy 2019 statements, which must be filed by anyone participating in bankruptcy cases.

The AIG members include AIU Insurance Company, American Home Assurance Company, Birmingham Fire Insurance Company of Pennsylvania, Granite State Insurance Company, Lexington Insurance Company and National Union Fire Insurance Company of Pittsburgh, Pa.

Asbestos trusts are created after companies go into bankruptcy.

The case In re: Garlock Sealing Technologies, LLC is pending in bankruptcy court in the Western District of North Carolina.

Amaris Elliott-Engel contributes to law.com.

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