(Reuters) — Industrial conglomerate Koch Industries received nearly $2.5 billion in dividends last year from its Georgia-Pacific unit, which had distributed a subsidiary that assumed liability from asbestos litigation and then filed for bankruptcy to limit payouts lawsuits, according to documents. filed in a US Bankruptcy Court in North Carolina.
The Koch unit Georgia-Pacific used a corporate bankruptcy maneuver known as the Texas two-step, forming a new Texas subsidiary, Bestwall, which assumed the company’s asbestos liability. Bestwall was declared bankrupt about three months after its foundation. The latest court documents, filed Wednesday, provide new details about how Koch has benefited from the case.
Georgia-Pacific faced thousands of lawsuits over the years accusing executives of concealing knowledge of the dangers of asbestos in its building products. In 2017, Georgia-Pacific became the first company to implement a two-stage in Texas.
Several major companies, including Johnson & Johnson and 3M Co., have turned to bankruptcy courts in an effort to deal with their massive debts. Plaintiff attorneys have called the cases an improper manipulation of the bankruptcy system, while the companies say the Chapter 11 filings aim to compensate plaintiffs fairly and equitably. All bankruptcies are pending.