Washington, DC, January 31, 2006--USG Corp., which in 2001 filed for bankruptcy protection in the face of claims from victims of asbestos exposure, today announced that it has reached an agreement with claimants and others to resolve all asbestos-related personal injury claims against the company.
In vivid terms, the agreement shows how the creation of a federal asbestos compensation fund is really a backdoor attempt to erase billions of dollars in corporate liability for asbestos exposure.
Under terms of the plan, the Chicago-based building materials company will pay $900 million into a victim compensation fund, followed by another $3.05 billion by next year if a federal fund is not approved. Legislation to create a privately funded, government-run fund is now pending in Congress, with Senate floor consideration expected to begin Feb. 6.
But if Congress passes that legislation, S.852, this session, the company said, its liability would be limited to the initial $900 million. That’s about 23 cents on the dollar compared to full liability under its own fund.
“The USG plan makes plain that the federal trust fund is a corporate bailout in sheep’s clothing,” said Public Citizen President Joan Claybrook. “Under the guise of compensating victims for terrible diseases, like asbestosis and mesothelioma, corporate America’s real aim is to run away from billions in liability for knowingly exposing workers to a lethal toxin.”
The agreement is a key step toward a bankruptcy reorganization plan. With today’s agreement, USG is the second big company in recent weeks to unveil a bankruptcy plan that underscores how companies hit by asbestos claims will benefit under the federal fund. On Jan. 17, McDermott International Inc. announced approval of a reorganization plan for its Babcock & Wilcox unit, which filed for bankruptcy in February 2000. Terms of that plan call for McDermott, a Louisiana energy services company, to pay $350 million to a trust fund. Then, if the federal plan does not win approval by Nov. 30, the company will fund an additional $600 million. But if the federal plan passes, McDermott will pay only an additional $25 million.
Supporters of the federal trust fund cite bankruptcies like those of USG and Babcock & Wilcox as an urgent demonstration of why the fund is needed. The bankruptcies, they claim, are robbing the economy of billions of dollars and causing tens of thousands of job losses.
But USG also spotlights the flaws in that alarmist rhetoric. Operating under court protection, USG has produced results that would be the envy of any business. “Trust fund supporters have tried to exploit the stigma of ‘bankruptcy’ to muster support for the flawed federal plan,” said Frank Clemente, director of Public Citizen’s Congress Watch division. “But ‘bankruptcy’ typically doesn’t mean ‘out of business.’ USG and other firms show that, far from being a disaster, bankruptcy can be a pretty savvy business move.”
In USG’s case, a Public Citizen examination shows:
Sales have hit record levels, growing 56 percent since 2001 when the company filed for bankruptcy, to reach $5.14 billion in 2005.
Profits have soared by nearly 3,100 percent, from $16 million in 2001 to $510 million last year (excluding asbestos charges). That’s a growth rate 45 times higher than overall U.S. corporate profits during the same period, according to federal data.
The company’s stock price has risen more than 2,400 percent, from $3.88 before the filing to $97.82 earlier today after announcement of the plan. In the past three days alone, the value of the company in the stock market has grown by $800 million.
As USG Chairman and Chief Executive Officer William C. Foote commented recently: “We are pleased with the solid results achieved by all our businesses.” Business is so strong, in fact, that the company recently announced plans for a new factory in Pennsylvania.
