Asbestos victims, their families and attorneys are claiming a Koch Industries-owned company and its lawyers are using a controversial bankruptcy maneuver to avoid paying millions in compensation to its former employees.
Workers at Georgia-Pacific, a paper and building products company, have been locked in a years-long battle with a company over claims asbestos in its products caused fatal cancers.
The case has come as the Koch brothers’ political network has pushed for legislation to protect companies facing asbestos-related claims and limit payouts for victims.
Koch Industries bought Georgia-Pacific in 2005. The company faces over 60,000 asbestos lawsuits but has not paid out anything since 2017 when the company conducted a controversial maneuver known as the “Texas two-step”.
Under Texan bankruptcy law, a corporation can divide itself into two companies, loading any lawsuit liabilities into one company and its assets into another. In Georgia-Pacific’s case, a new firm, Bestwall LLC, was created for the asbestos liabilities. Bestwall filed for bankruptcy in 2017.
Georgia-Pacific, which also makes Brawny paper towels and Dixie cups, has continued with its normal operations. Koch Industries received $2.5bn in dividends from Georgia-Pacific in 2022 and has received over $5bn in dividends since the asbestos liabilities were moved to Bestwall. The lawsuits filed for and on behalf of asbestos victims have been in limbo.
Last year lawyers for the asbestos victims called the case “a roadmap for solvent corporations to abuse the bankruptcy system” in court documents, and said the issues in the case were “exceptionally important and likely to recur”.
The law firm Jones Day, Greg Gordon, has completed similar splits for four major corporations facing thousands of lawsuits since 2017: Johnson & Johnson, Saint-Gobain, Trane Technologies, and Georgia-Pacific, the first company to use the tactic. The law firm and the companies claim the separation is the best way to compensate victims fairly, but lawsuit plaintiffs have derided long delays in reaching agreements and claimed it’s an attempt to escape accountability.
Lori Knapp’s father, Ed Chapman, worked in construction through the 1970s in south Florida during a housing boom, often working with drywall containing asbestos.
“He didn’t know that he was being poisoned. None of his co-workers knew that they were being exposed to hazardous material. They worked hard every day. My dad worked seven days a week if there was a job to do. He did it. He didn’t stop until the job is done,” said Knapp. “They were killed by these products.”
Knapp said her father was semi-retired when his doctor found a spot on his lung during an annual check-up. It was biopsied and it came back as mesothelioma.
Mesothelioma is an aggressive type of incurable cancer that was first linked to asbestos exposure in 1960. When asbestos fibers are inhaled in the lungs, it sets off inflammatory responses and damages cells and tissue. Those who have been exposed to asbestos can be unaware of its effects for decades. Asbestos kills an estimated 12,000 to 15,000 Americans every year, with about 2,500 mesothelioma-related deaths annually.
Chapman started chemotherapy and radiation, but the cancer spread throughout his body. He was diagnosed with mesothelioma in 2018 and died within two years. His lawsuit against Georgia-Pacific has yet to be resolved.
“To watch an individual who has his faculties, to see and feel his body turning on him, shutting down, was very difficult. He struggled to breathe. He started not being able to eat. He couldn’t go to the bathroom,” said Knapp.
“Every day I saw my dad deteriorate. My dad went from 183lbs to 121lbs. So in addition to suffering this cancer, it’s almost like they’re starving to death because they can’t eat, they don’t want to eat … and then he passed, and we’re left here battling with a company that has far more money than needed.”
Knapp said there was a clear financial advantage in delaying compensation. “The longer the delay the more they don’t have to pay to the actual victim,” she said.
“They’re evil. They’re right up there with the Sackler family,” Knapp said of the bankruptcy and delay tactics by the Koch Industries-owned company.
Georgia-Pacific produced and manufactured asbestos-containing drywall products until the 1970s when its use was banned in drywall products. The company was accused of secretly funding research in 2005 to try to disprove that asbestos-containing products were carcinogens.
The billionaire Charles Koch and his late brother David have funded and supported legislative efforts to make it more difficult for asbestos victims and their families to collect compensation. The brothers had been long-time backers and donors to the American Legislative Exchange Council (Alec), which has championed these bills in at least six states. The Kochs have also lobbied against increased regulation of asbestos.
Clay Thompson, an attorney with MRHFM, the largest law firm in the US devoted to mesothelioma cases, said that Georgia-Pacific was defending and resolving asbestos claims without any financial distress or need for bankruptcy protections before initiating the Texas two-step maneuver.
“The only creditors by design are asbestos victims,” said Thompson. “They’ve stacked the deck on their side. And so they hope to accomplish one of two things. Either the victims will cave and take pennies on the dollar in a bogus fraudulent billionaire bankruptcy attempt, or they just delay and that’s what’s largely happened.”
He said none of the asbestos victims will receive anything until a final plan is confirmed and all appeals are exhausted as attorneys have sought to fight the Texas-Two step maneuver. Last January, a court ruled against Johnson & Johnson’s attempt to resolve cancer lawsuits related to its talcum powder products through the same bankruptcy proceeding.
An attempt to have the Bestwall bankruptcy overturned was filed in early 2023, but a western North Carolina bankruptcy court ruled the company can remain in chapter 11 bankruptcy in July last year as appeals over the bankruptcy are still awaiting an official court order on the motion before an appeal is filed.
In the meantime, attorneys and legal consultants are being paid millions of dollars to defend Georgia-Pacific and Bestwall, the offshoot firm, including a court approving over $24m in legal fees in December.
“It’s set up for delay and failure,” added Thompson. “As the lawyers who represent the sick people, we’re trying to do everything possible to protect their rights and give them the opportunity ultimately to decide for themselves what to do. You know, do you file a lawsuit? Do you settle? How much do you settle for? And none of that is happening and it’s all by design from billionaires ultimately, billionaires that have no need for bankruptcy protection.”
Koch Industries did not respond to multiple requests for comment.
