Feds File in W.R. Grace Bankruptcy

Tuesday, May 28th 2002, 12:00 am

By: News On 6

KALISPELL, Mont. (AP) _ Attorneys for the U.S. Department of Justice have filed a motion to intervene in bankruptcy litigation involving W.R. Grace and Co., according to published report.

The Justice Department, filing on behalf of the Environmental Protection Agency, contends in the motion that Grace may have fraudulently transferred funds to spin-off companies to avoid liability in asbestos-related damage claims that already have cost the company more than $2 billion, the Daily Inter Lake of Kalispell reported.

A spokesman for Grace did not respond Monday to a telephone message left at the company's headquarters in Columbia, Md.

The company filed to reorganize under Chapter 11 of the Bankruptcy Code in January 2001.

Attorneys representing property damage and personal injury claimants said the Justice Department filing last week gives credence to suits filed in an effort to hold Grace accountable for billions of dollars in damages.

``This was a sophisticated effort to spin off assets and find shelter in bankruptcy court,'' said Allan McGarvey, a Kalispell attorney representing many Libby, Mont., residents allegedly harmed by the operations of the now defunct Grace vermiculite mine near Libby.

``Its good that the federal government recognizes and continues to endorse the proposition that W.R. Grace should be accountable for damages and the havoc it wreaked in Libby,'' McGarvey said.

About 200 Libby residents have died due to asbestos exposure. Another 750 residents of the small northwest Montana town have been diagnosed with an asbestos-related condition.

As of April 2001, more than 325,000 asbestos personal-injury claims had been filed nationally against Grace, according to the company's president, Paul Norris.