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Manufactured for Money
Dr. George Martindale blinked, shifted his body in his chair and kept his voice steady with frequent sips of water. It was an October afternoon two years ago, and Martindale sat across from attorney Daniel Mulholland in a Marriott hotel meeting room in Mobile, Alabama. The deposition seemed more like two friends discussing trends in medicine than a legal proceeding. But a whole lot was at stake.Martindale's name was on several thousand documents claiming people suffered from an incurable work-related respiratory disease. Mulholland asked Martindale if he had ever intended his work to be used as an official diagnosis in a lawsuit or for any other purpose.
"No, sir," he replied.
In a gentle Southern drawl, Martindale went on to explain his role in what a federal court concluded was a massive legal scam. He had expanded his radiology practice by becoming a certified "B-reader," which meant his evaluations of chest x-rays could be used in court. Martindale was providing his assessments to N&M, a screening company in Pascagoula, Mississippi, run by a junior college dropout that administered tests to diagnose silicosis or asbestosis, two unrelated diseases at the heart of a nationwide explosion of lawsuits.
Martindale was focused mainly on silicosis, which can result from workers breathing in tiny particles of sand dust (asbestosis -- and the related cancer, mesothelioma -- is caused by inhaling fine particles of asbestos, once widely used in products like textiles and insulation). He would read the x-rays, at a rate of 30 or more per hour, and then send the completed packets back to N&M. At $35 per reading, he was taking in over $1,000 an hour.
N&M took the forms and produced documents that appeared to be custom diagnoses but were actually just form letters with a few blanks filled in. The doctor never saw the finished reports and didn't even sign them -- N&M affixed his name with a rubber signature stamp.
"I had no medical relationship with the patient, and N&M owned the x-ray, owned the report," he explained.
"There Is Something Very Wrong Here"
When word of Martindale's testimony reached U.S. District Judge Janis Jack in her Corpus Christi, Texas, courtroom, she was livid. Judge Jack was in charge of the 3,617 Martindale cases and over 5,000 more. She scheduled additional hearings, set for February 2005, after opening an unprecedented cache of documents for Mulholland and his colleagues.
The hearings dragged on for three days. Seven doctors and two screening company owners testified, each damaging the victims' cases more than the one before.
"Your Honor, there is something very wrong here," Mulholland said about the testimony. "This is a real courtroom. You are a real federal judge. But these lawsuits are simply not real."
The judge, who is also a trained nurse, agreed. In a June 2005 order, Judge Jack wrote: "These diagnoses were driven by neither health nor justice; they were manufactured for money. The record is not clear who originally devised this scheme, but it is clear that the lawyers, doctors and screening companies were all willing participants."
With that, Judge Jack sent about 10,000 silicosis cases on their way to the dumpster.
The judge's ruling was sweet vindication to a small band of lawyers and academics who'd been claiming for years that asbestosis and silicosis litigation had morphed into a massive tort scam. The cases spurned by the judge, however, could only hint at the dimensions of the scandal. "Over the life of the asbestos and silica litigation, I believe bogus and invalid claims will total at least $40 billion," says Lester Brickman, a professor of law at the Cardozo School of Law at Yeshiva University in New York.
So far, at least 79 companies have filed for bankruptcy due to asbestos litigation alone, and 60,000 workers have lost their jobs. About 8,400 companies with facilities nationwide have faced lawsuits. Meanwhile, insurance companies are out $59 billion through 2005, with $34 billion paid out in cash and another $25 billion locked away in reserves. Those costs get passed along to consumers and companies as higher premiums and eventually higher prices for thousands of products and services.
And what about those plaintiff lawyers behind the flood of lawsuits? "I would estimate their fees are north of $20 billion," says Brickman, who has exhaustively researched the scandal over 16 years. "The bottom line is that in mass torts, fraud works."
Gold Mines and Bogus Claims
Before lawyers smelled big money, there were legitimate suits filed on behalf of workers made seriously ill by breathing in fibers or dust. Asbestos litigation hit the courts first, and the response from the asbestos industry was brazen and unconscionable. Before that, starting in the 1930s, it tried to control research and suppress alarming health findings.
Johns Manville, a large manufacturer of insulation, had a policy until the 1960s of keeping company medical diagnoses of asbestosis secret from sick employees. "There is a very definite possibility that [the worker] would become mentally and physically ill, simply through the knowledge that he has asbestosis," said medical director Kenneth W. Smith.
With ammunition like that, sick workers sued, and shell-shocked companies paid. Many opted for bankruptcy and special trusts to fund settlements.
In no time, some trial lawyers saw a gold mine and began bringing hundreds of thousands of cases, many with very weak underpinnings. Gun-shy defense attorneys kept settling claims with little noise -- and earning fees for themselves. Bogus claims soon overwhelmed the courts.
As lawmakers and courts tried to rein those claims in, silicosis litigation exploded. This new legal front centered on a disease that could involve everything from shortness of breath to cancer, TB and autoimmune diseases. As with asbestos, there was a history of cover-ups dating from the Great Depression era. Once again, nervous companies settled and the potential for bigger payouts grew. And a pack of lawyers, doctors and medical screeners swooped in.
The Money Machine
As the fraud has evolved, it's come to resemble an assembly line that Henry Ford might have envied. It begins with lawyers and screening outfits soliciting patients -- which they refer to as "inventory" -- using radio, TV, newspaper and direct-mail ads. Workers are lured to mass screenings at no charge, often by the promise of riches if they "pass."
It's no sleek, high-tech clinic that they visit; often, it's a trailer set up in the parking lot of a megastore or a nondescript building in a strip mall. Inside, there's typically an x-ray machine and clerical workers surrounded by tables piled with forms.
In some cases, "successful" visitors are steered to an on-site lawyer or paralegal. In June 2002, Royce Harmon, an investigator for the Texas Department of Health in Fort Worth, looked into a complaint that "a company was flagging people in off the street to take x-rays." Harmon arrived at a Staples store, where he found "two young women at the entrance to the parking lot holding up signs." Turns out, the women were lawyers hired by Heath Mason, the man behind N&M screening.
A work history is one of three critical steps in diagnosing asbestosis, along with an x-ray and a physical examination. No complete work history or physical exam? No problem for Mason. "To ask a doctor to take a work history would be like asking [a lawyer] to wash my car. It's very beneath him," says Mason. From 1996 until the firm shut down last year, he raked in $25.5 million from law firms for his now discredited services.
Mason and other screeners have their place on the assembly line. Their stacks of manufactured diagnoses are used by attorneys to file mammoth lawsuits that overwhelm both the courts and companies. A few really sick patients -- who would likely be awarded big bucks by a jury -- are included with the phony ones, ensuring that companies cave in and pay huge universal settlements.
No part of the process is more cynical than the way plaintiff lawyers market the inventory. One blast fax to defense attorneys offered a bargain price to settle the claims.
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