Federal-Mogul: Causing Anxiety and Raising False Hopes
Towards the end of August 2004, advertisements appeared in legal journals, newspapers and other media outlets in the UK, Brazil, India and elsewhere which caused consternation amongst a wide swath of the population. The ad was placed by the US multinational Federal-Mogul, a corporation now in Chapter 11 in the US and, as the owner of T&N Ltd. and its subsidiaries, in administration in the UK. The headline of the ad which appeared on August 15th in The Times of India read:
“If You Were Exposed to ASBESTOS or ASBESTOS-CONTAINING Products Made, Distributed, Sold or Possessed by FEDERAL-MOGUL CORPORATION, T&N LIMITED, or Their Subsidiaries or Affiliated Companies,”
A similar ad in The (Legal) Gazette in the UK was headlined:
“Notice to Persons Exposed to Asbestos of Voting Rights, and Hearing to Consider Plan of Reorganisation. To Persons Exposed to Asbestos or Asbestos Products Manufactured, Distributed, Sold or Possessed by the Following Companies… (list of 39 T&N UK subsidiaries).”
The text in The Times' ad states that people “may have the right to participate”1 in the legal reorganization proceedings of this company and could “receive a payment from the Trust in settlement of their claims.” The possibility of compensation has been seized upon by desperate victims who have been misled by the wording and believe that by registering their claims, money will be received. In a country like Brazil where a legal case for asbestos compensation can take more than ten years, such a possibility is a lifeline. ABREA, the Brazilian association representing asbestos victims, will be holding meetings with its members to discuss this development.
There is no doubt that T&N has asbestos liabilities in Brazil, India and Africa. Sprayed asbestos fireproofing, produced by a T&N subsidiary, was used on railway carriages and buildings in Brazil. At Hindustan Ferodo Ltd., a T&N subsidiary in Bombay, the workforce was still being exposed to hazardous levels of asbestos in the 1990s, according to a BBC radio program which detailed a catalogue of corporate malfeasance.2 Dr. James Allardice, Turner & Newall's group medical officer, visited T&N's asbestos mine in Havelock, Swaziland in the 1970s and found that 50% of the mill workers had asbestosis. Notwithstanding a promise made in 1976 to ensure safe working conditions for T&N's global workforce, dust levels at the T&N mill in Swaziland were up to 25 times as high as those permitted in Britain at that time. When Allerdice was interviewed by the BBC, he said that the company could have done more to protect its overseas employees. He regretted that workers in Africa and India have died from asbestos-related diseases when knowledge and techniques were available which could have prevented these fatalities.
It is significant to note that while the Gazette ad (UK) includes more explanation about the reorganization process it does not hold out any promise that claimants will “receive a payment from the Trust in settlement.” It states:
“The Plan proposes the creation of a Trust to pay asbestos personal injury claims that relate to exposure to asbestos or asbestos-containing products manufactured, distributed, sold or possessed by any of the above companies. Court injunctions, applicable to all people and entities, will permanently channel all asbestos personal injury claims against all of the above companies and certain other parties to the Trust. These injunctions will generally give the Debtors and such other parties full releases from liability for asbestos-related claims. Persons and entities with asbestos-related claims will be forever barred from asserting their claims directly against any of the above companies.”
In an attempt to clarify the meaning of these advertisements, the opinion of Simon Freakley, head of the court-appointed team of T&N's UK Administrators, was sought. In a discussion on August 22, 2004, he said:
the advertisements are part of the Chapter 11 process and have been placed directly by Federal-Mogul's US lawyers;
as part of the reorganization process, Federal-Mogul is required to assess its global asbestos-related liabilities;3
US proponents of the Plan are required to obtain the support of a majority in number of Federal-Mogul's creditors and two-thirds in value for the US Bankruptcy Court to validate the Plan in December 2004.
In a Press Release issued on August 16, 2004, MP John Battle advised UK asbestos victims to “ignore a direct appeal to them from asbestos company Federal Mogul” as the proposed plan is weighted in favor of US claims. He remarked:
“Even the administrators, Kroll Buchler Philips, have expressed surprise at this direct appeal that bypasses them and their attempts to salvage compensation for the British victims… My advice is that it's a waste of time responding to the American plan … Anyone who receives the voluminous documents sent with the plan should not respond.”
Battle and Michael Clapham MP will be meeting with Simon Freakley in September to discuss the situation; representatives from the Treasury and Department of Trade and Industry have been asked to attend.
The lack of clarity and differences in the Indian and UK ads reinforce the suspicion that non-US asbestos claimants are being deliberately misled. Having sacrificed their health as T&N employees or customers, now they are being asked to have faith in a Plan which will, in all likelihood, remove the last vestige of hope they have of equitable compensation. Judging by experience in other Chapter 11 asbestos reorganizations, the settling of claims brought by foreign victims will be bottom of Federal-Mogul's list of priorities; if compensation is ever paid to “foreign” claimants, it is likely to be virtually worthless.
August 23, 2004
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1 The Gazette ad wording was slightly different: “You may have the right to vote to accept or reject the (Reorganization) Plan.”
2 The program was broadcast on Radio 4 on October 14, 1993.
3 During the late 1950s, sales at T&N overtook those at Johns-Manville, the largest American asbestos manufacturer; while Johns-Manville had sales of $304.1 million in 1959, T&N had sales of $450 million the previous year. T&N was a vertically integrated aggressive company for over seventy years; it owned asbestos mines in Southern Rhodesia, South Africa, Swaziland and Canada, asbestos factories in India, subsidiaries in North America and Europe and was involved in all stages of asbestos processing in the UK and abroad. It had licensing agreements and franchising arrangements all over the world.
