Opening Statements

In his opening statement, Mr. Inselbuch noted that while there
are many other parties who are aware of the hearing, but have
chosen not to appear, including:

   * competing constituencies both in the United States and in
     the United Kingdom;

   * the Pension Creditors in England;

   * the Administrators in England,

   * the Debtors;

   * the Official Committee of Unsecured Creditors;

   * the Secured Creditors; and

   * the Official Committee of Equity Holders.

Mr. Inselbuch told the District Court that estimation is
imperative for the purpose of plan confirmation, to determine the
size of the claims so as to allocate the resources of the Debtors
among the various constituencies.

"There is no great mystery any longer about how we're supposed to
do this, a lot of courts have done it before.  And basically
Judge Fullam said recently in Owens Corning that the claims being
valued here arise under state law and, hence, state law
determines their validity and value.  They are valued as of the
petition date," Mr. Inselbuch said.

"This necessarily means that the claims ought to be appraised on
the basis of what would have been a fair resolution of the claims
in the absence of bankruptcy," Mr. Inselbuch quoted Judge Fullam.
"So, we're looking at the asbestos personal injury claims as of
the petition date, the claims on hand as of that time, what those
claims would have been worth in the tort system and the claims
that will arise in the future."

Mr. Inselbuch noted that Federal-Mogul is the parent of Turner &
Newall, an English subsidiary responsible for thousands of
pending asbestos claims, and mentioned of a cross border issue
and the need to understand how the claims against T&N would be
valued in the United Kingdom.  Mr. Inselbuch explained that
because there are constituents in U.K. that have claims against
T&N and because Federal-Mogul has a paralegal administration in
U.K., the court in England will ultimately have to decide how to
allocate the T&N assets that are in U.K. as among the various
constituencies.

Mr. Inselbuch recognized the importance of a proper foundation of
the English law so as to understand how the English Court would
go about estimating similar asbestos claims.

"[H]ow do we go about doing estimation?" Mr. Inselbuch asked. 
According to Mr. Inselbuch, estimation is a matter of logic by
comparing the thing with no value with something that has a value
that "looks a lot like it".  In the case of Federal-Mogul
Corporation, the estimation must look into the settlement history
of over 25 years that T&N went through and resolved. "What that
settlement history shows is how in the tort system willing
Plaintiffs and a willing Defendant resolved their controversies
in a fair environment over a long period."

Mr. Inselbuch added that the settlement history is complex. "[I]t
has many factors in it, there are moving parts to it, and as of
the moment we draw the curtain at the petition date, it had
trends moving things in various different directions.  And the
experts have to take account for those moving pieces and those
moving trends as they do their estimation because when you look
forward to estimate claims, you have to make reasonable
assumptions about what would occur had there not be a bankruptcy
for [T&N]."

Mr. Inselbuch said that evidence from a series of witnesses who
were involved would explain that T&N were able to resolve its
claims in a most favorable environment.

            PD Committee's Counsel's Opening Statement

Representing the Official Committee of Asbestos Property
Damage Claimants, Michael Kessler, Esq., at Weil, Gotshal &
Manges, pointed out the importance of distinguishing the "allowed
amount" from the "distribution amount".  The distribution amount
is the amount that will be paid in the bankruptcy case on the
allowed claim, Mr. Kessler explains.

Mr. Kessler reminded the District Court that it is being asked to
determine the aggregate allowed amount of the asbestos claims and
it is not asked to estimate the distribution amount on the
claims.  "The distribution amount will be determined at a later
Date after the bankruptcy is over in a trust that will be set up
under the bankruptcy."

Mr. Kessler noted that the Debtors have taken no position in the
estimation notwithstanding that they are a co-proponent of the
plan. 

"Why?" Mr. Kessler asked. "There's little in this fight for the
debtors because the debtors are insolvent and all the equity will
go to the creditors under the plan," Mr. Kessler answered his
question.  "The debtors are ambivalent if one creditor gets more
or less than another, they totally don't care. They just want to
get out of bankruptcy and have the equity distributed to the new
shareholders and reorganized into a new company."

Mr. Kessler explained that if the Court estimates the allowed
amount of all asbestos claims at $10 billion, which is close to
the Asbestos Claimants Committee's estimate, the trust will
receive billion dollars in equity and it will have against it an
estimated aggregate amount of claims of $10 billion.  "In a
perfect world, and if asbestos claims are later proved to the
trustee of that trust to aggregate claim by claim and add up 10
to exactly 10 billion dollars, everyone will get 10 cents on the
dollar or 1/10 of their claim as the distribution amount.  They
will have 1 billion in equity, they'll have 10 billion in claims,
they'll each get a distribution amount out of the trust of 1/10
or 10 percent."

If the Court estimates instead the aggregate amount of asbestos
claims at 2 billion, Mr. Kessler explained that the trust still
gets 1 billion dollars of equity.  "If all the claims are then
later proved to the trust and aggregate exactly as the Court
estimated, 2 billion dollars, each of the asbestos claimants will
get 50 percent on their claim, 1 billion of equity over 2 billion
in claims.  Now they're still getting to whack up the same
billion dollars of equity, it's just optics at this point as to
whether they're getting 10 cents on the dollar or 50 cents on the
dollar, they're still getting 1 billion dollars divided up among
all of them."

In sum, Mr. Kessler told the Court that if the total estimated
asbestos claimants is $10 billion dollars, the PD plaintiffs who
are not in the trust, and other unsecured creditors, will get 10
cents on the dollar or 1/10 of their claim as the distribution
amount.  If the estimation for asbestos claims is $2 billion, the
PD Plaintiffs will get 50 cents or 50 percent of their claim, and
the Asbestos Claimants will get $1 billion to divide up among
themselves, Mr. Kessler said.

Mr. Kessler pointed out that a correct estimate is vitally
important.  The asbestos trust, once funded, will distribute all
of its value to the present and future asbestos plaintiffs, Mr.
Kessler contended.  "There's no provision in the trust to give
anything back if [the Court] overestimates."

PD Committee's side will offer deposition testimony of Michael G.
Lynch, the Debtors' Chief Financial Officer and Dr. Hans Weill. 
The PD Committee retained Dr. Weill as expert but due to an
accident, he won't be able to come to trial to testify.

Adam Strochak, Esq., at Weil Gotshal & Manges LLP, told the Court
that the PD Committee will present Dr. Robin Cantor as its
expert.

Before the start of the testimony, Judge Rodriguez told the
parties that he will decide the case the same way that he would
instruct a jury to decide it, that it's to be based on the
evidence and solely on the evidence presented in court.  "I'm
fully aware of the emotional debates that take place nationally
with respect to the tort system and I know that on each side
they're infected with political motivation and I don't intend to
get caught up on either side of the motivation.  Whatever we do,
I would hope that it will be based strictly on the evidence
presented before me here in court."

                Asbestos Claimants' First Witness
                            Paul Hanly

Nathan Finch, Esq., at Caplin & Drysdale, introduced Paul Hanly
as the first witness. 

Mr. Hanly told the Court that T&N was first sued in United States
asbestos litigation in August 1977.  Mr. Hanly and a team were
responsible for all strategy decisions throughout the discovery
process, including which witnesses would be proffered, which
documents would be produced, how responses to requests for the
production would be handled.  Their responsibility extended to
preparation of briefs and memoranda of law, negotiation of
settlements and if the case were to proceed to trial.

Mr. Hanly related that he started and tried between 25 and 40
cases and oversaw 200,000 to 300,000 case resolutions over the
course of 20 years.

According to Mr. Hanly, a consortium of insurance, liability
insurance companies and 35 asbestos manufacturers came together
in June 1985, and formed what the Asbestos Claims Facility -- a
joint 'claims handling claims defense organization".  The
Asbestos Claims Facility engaged counsel around the United States
to deal with the underlying cases. But very few lawyers had any
experience defending T&N historically.  As a consequence, Mr.
Hanly and the team continued to participate on a daily basis.

Mr. Hanly related that the Asbestos Claims Facility died an in
1988 and a new organization rose called the Center for Claims
Resolution, or the CCR, which had a similar structure.  The
lawyers reporting for the CCR also had no experience with T&N, so
the team continued their services.

The Center for Claims Resolution was an organization of some 20
asbestos defendants who wanted to continue the initial purpose of
the Asbestos Claims Facility, which was to come together to
reduce costs and to try to find a way to resolve asbestos claims
on the most economical terms possible.

Mr. Hanly said that he became familiar with T&N's asbestos
products and operation by spending a considerable amount of time
in the U.K. in T&N's document repository.  He posed that he
reviewed all of its historical documents, and in many countless
days interviewed historical witnesses -- "folks who had worked
for the company in the [1930s, 1940s, 1950s and 1960s] . . ."

T&N's liability, Mr. Hanly said, is based on theories of
liability.  One of theories was its being a supplier of raw
asbestos fiber to companies in the United States, including
Johns-Manville, and another theory is its ownership of Keasby &
Mattison, a Pennsylvania asbestos manufacturing company created
in 1873.  T&N owned Keasby & Mattison from 1934 to 1962.

The third theory of liability was due to T&N's product, which was
distributed in the United States, called Limpet -- a spray-one
fireproofing acoustical treatment.  The last theory of liability,
according to Mr. Hanly, was "a kind of concert of action or
conspiracy theory of liability."  The theory relates to the facts
that T&N had been at the forefront of the development of
knowledge concerning the hazards of asbestos and had very close
connections and business relationship with Johns-Manville.  Mr.
Hanly noted that Johns-Manville was also a company that had very
early knowledge of the hazards but never during the relevant
years placed any warnings on its products.

Mr. Hanly told the Court that T&N did not pay a claim or
settlement of a claim based on a conspiracy theory allegation. 
"They could not be paid, in our judgment as counsel, because
theoretically we would then have to pay for every Manville
claim."

Mr. Hanly explained why T&N didn't try to allocate liability for
claims to U.K. subsidiaries.  Mr. Hanly described that the
relationship between the U.K. subsidiaries and the parent company
in the U.K. was legally an agency relationship whereby documents
were created to provide that subsidiaries acted as agents of T&N.
"And as a consequence of that, it was the position of [T&N] in
the United States litigation that effectively [T&N] as a
defendant included all of the [U.K.] subsidiaries . . ."

Mr. Hanly noted that T&N made an affidavit that it was appearing
on behalf of itself and all of its U.K. subsidiaries.

The basic elements of the cause of action against T&N, Mr. Hanly
said, was failure to warn based on either strict product
liability or a failure to warn basis, or negligence claims.

Mr. Hanly told the Court that in January 1993, a purported
settlement class action was filed in the Eastern District of
Pennsylvania under Rule 23 of the Federal Rules of Civil
Procedure.  The settlement was commonly called as the Georgine
Settlement.  Judge Becker reversed and vacated the class
certification of the Georgine Settlement.

Mr. Hanly enumerated some factors that the CCR takes into account
in negotiating settlement amounts with plaintiffs during the  --
CCR and the post-CCR time period:

   1. severity of the plaintiff's disease;

   2. strength of the evidence of exposure to a T&N product;

   3. jurisdiction; and

   4. history of appellate courts in a jurisdiction in remitting
      or otherwise modifying jury verdicts; and the he identity
      of the plaintiff's counsel.

Mr. Hanly noted that B-Reader reports were not material in a
large number of cases, including Mesothelioma cases.  But
identity of the plaintiff's doctor, expert witness or treating
physician would play some role, Mr. Hanly said.  "There [were]
several doctors who we were aware of who, where the
interpretation of X-rays was relevant, were known to have over-
read . . . It was all a part of the factors that we considered in
pricing cases."

According to Mr. Hanly there is no particular threshold score on
a pulmonary function test that T&N would require before it would
settle a nonmalignant asbestos claim.  PFTs, Mr. Hanly believed,
have never been required by any judge of any court anywhere in
the U.S. to enable a plaintiff to get to a jury on the issue of
whether their lungs have been damaged by exposure to asbestos.

Mr. Hanly related that going to trial in an asbestos personal
injury case is something that T&N tried to avoid.

Mr. Hanly identified some asbestos Defendants who adopted a more
aggressive strategy and would try cases more often.  Mr. Hanly
mentioned Johns-Manville, Union Carbide, United States Gypsum, 
and Armstrong World Industries.

"What were the categories of damages that were available to
asbestos personal injury plaintiffs in a trial against Turner &
Newell in the United States?" Mr. Finch asked.

"Well, the categories would be the same that would exist in any
kind of tort case, whether it was a car wreck case or an
asbestos case, so that would include so-called special or
economic damages such as medical expenses and lost wages and, in
the case of a decedent, funeral expenses and the like," Mr. Hanly
answered. "And then, of course, the general category of general
damages [like] pain and suffering and loss of consortium and
those sorts. . . ."

"Would it include the cost of past and future medical care, for
example?" Mr. Finch continued.

"Sure, that would be part of the economic damages." Mr. Hanly
said.

"Did [T&N] ever suffer a judgment for punitive damages in an
asbestos personal injury case?" Mr. Finch asked.

"Just once," Mr. Hanly answered.

"And when was that?"

"It was in the late winter of 2001."

"And do you know when that judgment was paid, if at all?"

"It was bonded and paid recently, I think in the last year."

"Do you know if that judgment is in any way referenced in the
databases that your firm compiled?"

"I believe it's not."

"Did the settlement amount that [T&N] was paying to resolve
asbestos personal injury claims contain a dollar component
allocable to punitive damages in your view?"

"No, never."

"Can you explain why not?"

"We didn't price cases on the basis of punitive damage exposure,
we priced cases -- priced case meaning, your Honor, analyzing
what the case should settle for -- based on the strength of the
product exposure evidence, the competence of the plaintiff's
lawyer and, most importantly, or equally importantly the
significance or severity of the asbestos-related disease."

"Did you come to a view by the end of 2001 when [T&N] filed for
bankruptcy as to the extent of its overall liability for asbestos
personal injury claims as a standalone defendant as compared to
when it was in the CCR?" Mr. Finch asked.

"Yes, it was our view that the liability would be greatly
enhanced if Turner & Newell continued as a standalone defendant."
Mr. Hanly said.

"What factors led you to come to this view?

"[Twenty years'] experience of observing what was happening to
members of the Asbestos Claims Facility and the CCR versus what
was happening to folks who were standalone defendants.  The CCR
members survived for a very long time and all the others,
including the examples I gave you . . . ended up in bankruptcy a
whole lot earlier."

Peter Friedman, Esq., at Weil Gotshal & Manges LLP, cross-
examined Mr. Hanly.

Mr. Friedman asked Mr. Hanly about his prepetition conversations
made with Mr. Lynch.

Mr. Hanly said that he was not consulted in connection with the
number that the Debtors put in their 10-Ks regarding their
anticipation of pending and future asbestos liability. "[O]ur
role was never to opine about specific gross aggregate numbers
with respect to asbestos liability."

Mr. Friedman brought up the "Hoskins case."

The "Hoskins case," according to Mr. Hanly, was an alleged
Mesothelioma case. "I recall that there were some issues as to
whether, indeed, it was a Mesothelioma case because the man had
out lived the usual survival period after his diagnosis, but
certainly it was an alleged Mesothelioma case."

"And was the plaintiff awarded punitive damages in that case?"
Mr. Friedman asked.

"Yes, sir." Mr. Hanly said.

"How much was the punitive damages award?"

"I think it was about $7 million of punitives and maybe $2
million in compensatory. I know the total award was about
$9 million."

Mr. Hanly told the Court that the punitive damages verdict in
Hoskins did not affect the pricing of those cases settled post-
Hoskins.

In the vast majority of cases, Mr. Hanly noted that except for
cases brought in the limited number of jurisdictions that
prohibited punitive damages in asbestos cases, that punitive
damages were sought in the complaint. 

"Did you actually see more cases go to Mississippi as the
jurisdiction got more and more difficult from a defense
perspective?" Mr. Friedman asked.

"For a period of time between 1998 and about 2000 that would be
true, yes." Mr. Hanly answered.

"And that was after the Cosey case was decided isn't that right?"

"Yes, sir."

"In the Cosey case there was a substantial punitive damages award
to non-malignant -- to plaintiffs claiming non-malignant
injuries, isn't that right?"

"No, sir, there were no punitive damages awarded in the Cosey
case, the case was settled on the compensatory."

"Was it settled for the full value of the compensatory award?"

"Yes, sir."

"To the extent you were involved in CCR meetings where you had
direct knowledge of that."

"Certainly the issues of punitive damages was discussed among
counsel who spent that month or so in Jefferson County,
Mississippi."

"Would you agree that after Cosey, there were a lot more cases
filed in Mississippi?"

"Oh, yeah."

Mr. Friedman brought up the issue on unimpaired claimant. "Was it
a problem for T&N when a claimant with 1 Mesothelioma or cancer
joined his or her claim with the claim of a person who was
unimpaired?"

"That was a problem that was certainly discussed at the CCR
level," Mr. Hanly told the Court. "Whether it ever was a
particular problem for T&N in any particular case, I frankly just
don't recall, sir."

"Well, do you agree that unimpaired claimants benefited because
of sympathy by association with claimants who are actually sick?"
Mr. Friedman asked.

"That certainly is a dynamic that could well happen at the trial
of a case. Sure. If you had a person who was dying of
Mesothelioma joined with a plaintiff who was not exhibiting any
signs of distress, certainly that presents a dynamic at a jury
trial that most defense lawyers would try to avoid."

Mr. Hanly noted that "mass screenings' fostered huge numbers of
claims by those who were are unimpaired.  But it generated huge
numbers of claims; many of those claims were impaired.  Mr. Hanly
also recalled of the some prolific B-readers with bad reputation.

On redirect examination, Mr. Finch asked Mr. Hanly of his
understanding of the word "unimpaired". 

"In the context of asbestos litigation," Mr. Hanly answered,
"unimpaired means a claimant who may exhibit signs of injury on
[x-ray] or at autopsy on pathology, but who in his or her
lifetime doesn't exhibit any decrease in lung function or the
like."

"Any decrease as measured by some kind of particularized lung
function test?" Mr. Finch inquired.

"Yes, what's called spirometry or pulmonary function test," Mr.
Hanly said.

Mr. Finch ended the redirect examination by instructing Mr. Hanly
to read a quote from a T&N document numbered as Exhibit 71.  Mr.
Hanly read the part:

     We have over the years been able to talk our way
     out of claims or compromise for comparatively small
     amounts, Lyman quoted the lawyer for the Defendant
     then known as T&N, but we have always recognized that
     at some stage solicitors of experience would recognize
     there is no real defense to these claims and take us to
     trial.

"Had that started to happen in 2001 when [T&N] reverted to being
a standalone defendant?" Mr. Finch asked.

"Yes," Mr. Hanley replied.

                Asbestos Claimants' Second Witness
                         Andrea Crichton

Rolin Bissell, Esq., at Young, Conaway, Stargatt & Taylor, LLP,
called Andrea Crichton, Q.C., to the witness stand.  Ms. Crichton
has served as the U.K. Asbestos Claims Manager for T&N since
1994.

Ms. Crichton told the Court that she started working for T&N in
January 1985 as legal assistant, reporting to the Group
Solicitor, John Atkinson.  Ms. Crichton assisted in some of the
more mundane aspects of the ever increasing U.S. asbestos
litigation, the writs coming in, insuring that they would be sent
out the appropriate people.  Ms. Crichton also carried out an
exercise to do with the U.K. asbestos litigation with respect to
some insurance litigation that they were involved in.

As more work and projects came along, Ms. Crichton said
assistants were hired to go through the claims filed for the
U.K. asbestos litigation.  Ms. Crichton oversaw the staff.

"[D]uring that period was asbestos litigation for T&N, Ltd.
growing at all?" Mr. Bissell asked.

Yes, Ms. Crichton replied.  "From being fairly steady it seemed
to just take-off," she described.

Ms. Crichton explained that when she first started there was no
database; they used index cards.

Her staff later established a database to keep track of the
claims.  Ms. Crichton said the database was used to keep data
regarding:

   * the claimant's name,

   * the date of birth,

   * the date of death if applicable,

   * the disease and underlying disease,

   * the date claims received,

   * the claimant's solicitor,

   * T&N's own solicitor,

   * which of the T&N companies would be in the most cases the
     employer,

   * the job description and the periods over which they worked,
     and

   * the jurisdiction.

"If it were a third-party claim, there would be a little bit of
extra information on that, the third-party plaintiff who was
bringing us in," she added.  "If was a product liability claim,
it would be the name of the product that was alleged the claimant
was exposed to."

Ms. Crichton disclosed that reserves against each of the claims
that were reviewed over time were also kept.  "We have a reserve
. . . for what we thought the claim would settle for and how much
the cost was likely to be.  There was also a field to capture
settlement information."  Ms. Crichton told the Court that her
staff submitted monthly reports on the number of claims received,
the number of claims that had settled, and how much the company
spent.

Aside from working on the claims database, Ms. Crichton said she
also worked on a document database.  The document database was
established around 1993 to address various discovery requests.

As Asbestos Claims Manager, Ms. Crichton admitted that she has
settlement authority for T&N.

Mr. Bissell asked her to describe the nature of that authority
and how she worked with outside solicitors.

Ms. Crichton explained that when an asbestos claim is received,
she would instruct an outside counsel to attempt to settle the
claim.  Ms. Crichton confirmed that she has authority to fix a
settlement offer for the claim.

Ms. Crichton also noted that she attended U.K. trials for T&N.

"About how many?"

"It's difficult to say, we don't go to trial that often," Ms.
Crichton replied.  "No more than 20."

Mr. Bissell asked why T&N went to trial rarely in the U.K.

"Because for the vast majority of the U. K. claims there is
really no defense," Ms. Crichton answered.

It's also cheaper.  "The quicker you settle a claim, the less you
are paying out to both your own counsel and to the claimant's
counsel," she said.

Ms. Crichton disclosed that at least 90% of the claims were from
employees or ex-employees.  T&N also received subrogation claims,
which arise out of specific activities of Newell's employees, or
from J. W. Roberts' employees, another subsidiary.

Ms. Crichton proceeded to describe the events -- and the steps
T&N would take -- if negotiations broke down.  Ms. Crichton,
however, emphasized that 90% to 95% of the claims get settled.

"What type of medical evidence did Turner & Newell require for
plaintiff to come forward with before it would settle with the
U. K. claimant?"

"We would always receive a report from a recognized consultant
who specialized in asbestos diseases."

"Did the plaintiff have to provide x-rays?"

"I think x-rays would be provided probably to the consultant,
they didn't provide x-rays to us.  But if there were any relevant
x-rays, they would be referred to in the consultant's report."

Ms. Crichton said the medical reports would always contain the
results of pulmonary function tests.

Ms. Crichton added that T&N used the Judicial Study Board
guidelines to determine how much it will pay in settlements.

Mr. Bissell recalled that T&N did not take many cases to trial. 
"How did Turner & Newell do at trial?" he asked.

"Not very well."

"Has T&N settled products liability claims?"

"Not very many, a handful."

Before turning Ms. Crichton over, Mr. Bissell asked how liability
was allocated between T&N and other defendants when a claimant
was exposed to asbestos from more than one source.

It was almost always on a time-exposed basis, Ms. Crichton
explained.  "If an employee worked for us for five years and
worked for someone else for five years and someone else for ten
years, then our share would be 25 percent and the others would be
25 and 50 percent respectively."

"So is it fair to say that T&N would pay an asbestos claim if the
consulting doctor rendered a diagnosis of asbestosis even if the
plaintiff did not have any particular decline on a PFT test?"

"Yes," Ms. Crichton replied.  "But clearly they would get
considerably less than if they were a high disability.  And in
the UK we have a system whereby claimants can opt to take
provisional damages."

Adam P. Strochak, Esq., at Weil, Gotshal & Manges LLP, cross-
examined Ms. Crichton.

Mr. Strochak sought clarifications about the claims database.  He
asked if the U.S. company that was hired to do the project
related to Dr. Mark Peterson, the testifying expert for the
Asbestos Claimants Committee.

"I don't think so." Ms. Crichton said.

Mr. Strochak asked if the documents in the electronic repository
were the same documents shown to Chase Manhattan in the property
damage litigation.

Ms. Crichton said many of the documents were the same, but not
all.  Ms. Crichton also disclosed that asbestos personal injury
lawyers representing U.S. claimants viewed the repository.

"About what percentage of claims are resolved with no payment in
the UK, if you have a sense?"

"You mean that we take to trial and don't pay or just we just
don't for whatever reason -- a number of them just go away.  A
number of them are abandoned."

"[W]e might start a case and the claimant just goes away.  There
are . . . a few instances where we have been released by
codefendants mainly because our share would prove to be so small
. . . less than 1 percent or something, it's really not worth it.

Mr. Strochak asked Ms. Crichton to clarify when she said that for
many of the claims there was no defense, if she was referring to
employer's liability claims.

"Yes."

"And the reason for that is there's a fairly well established
record of the presence of asbestos in mills and other factories
where Turner & Newell and subsidiaries actually made asbestos,
its asbestos products, right?"

"That's right," she confirmed.

"Now, is that comparable in the United States?" Mr. Strochak
prodded on.

"Objection!" Mr. Finch interjected.  "Lack of foundation," Mr.
Finch told the Court.

Ms. Crichton said she didn't understand the question.

"You have a general sense that the U.S. claims are largely
products liability type claims?" Mr. Strochak proceeded.

"Yes, to that extent I know they would be mostly product
liability claims."

Ms. Crichton explained that T&N did not receive many product
liability claims in the U.K.  The ones received, however, had
good evidence that the person has been exposed to one of T&N's
products.

Ms. Crichton also told the Court that Federal-Mogul took an
interest on a book written by Geoffrey Tweedale in 2000 about
T&N's corporate conduct with regard to asbestos.

Mr. Strochak reminded her that at their meeting in New York, Ms.
Crichton said she believed the Tweedale book had no effect on
litigation against T&N.

"In the UK I would say so," Ms. Crichton clarified.  She
confirmed that there was nothing new in the book with respect to
T&N's ability to defend itself against claims in the U.K.

           Asbestos Claimants Committee's Third Witness
                        Dr. Laura Welch

Mr. Finch called Laura Welch to the witness stand as the ACC's
medical expert to talk about asbestos-related disease and
disorders from a physician's perspective. 

Dr. Welch has a Bachelor's degree in biology from Swarthmore
College and a medical degree from the State University of New
York at Stony Brook.  She did a residency in internal medicine at
Montefiore Hospital in the Bronx, which is part of the Albert
Einstein School of Medicine.  And prior to that, she had faculty
positions at several medical schools.  Dr. Welch is board
certified both in internal medicine and occupational medicine,
and her clinical practice and work has included both.

Dr. Welch said she was involved with patients who suffer from
asbestos-related diseases since 1980.  She has also written
chapters for a book relating to asbestos disease.  Dr. Welch was
recognized a number of times by courts as an expert in the
diagnosis of asbestos-related diseases and in the epidemiology of
asbestos-related diseases.  She has also testified before
Congress on matters relating to diagnosis of asbestos-related
diseases.

Dr. Welch was retained by the Asbestos Claimants Committee to
give an opinion on certain aspects of asbestos-related disease. 

According to Dr. Welch, exposure to asbestos causes mesothelioma,
lung cancer, colon cancer, and laryngeal and pharyngeal cancer. 
Non-malignant diseases caused by asbestos exposure include
asbestosis, asbestos-related pleural plaques, and to some degree
of obstructive lung disease.

Dr. Welch opined that someone can have a decline even though
they're pulmonary function is within the population normal range.

"The normal range that we use for pulmonary function testing,
there are a set of different predictives, what we call
predictives, and they vary very little.  They're pretty much
based by testing people who are not known to have lung disease
and creating a range of normal and that range is fairly big. . .
Let's say my normal is 100 percent, the best estimate of what 100
percent would be for me ranges between 80 and 120 percent of that
normal.  So I could lose -- if I started at a high normal -- if
my normal was really higher than the average for the population,
I could lose easily 20 percent of my lung function before I
dropped below 80 percent of the population predictive, because
the population predictive is really an average across a whole
range of people.  And people are different, people have different
body types primarily, and so even though the predictives are
adjusted based on age, height, and sex, there's still a lot of
variation in the normal between people.  We know that from
circumstances where we're able to measure people periodically. 
Over a period of time, there is some information on loss of lungs
function, and that's how we know what happens with aging, and
people can lose, as I said 20 percent, maybe more, and still be
within the normal range on a population basis."

Dr. Welch told Judge Rodriguez that functional impairment is not
required to diagnose someone with an asbestos-related non-
malignant disease like asbestosis.  "The diagnosis is based on
history of exposure and appropriate changes in the lung measured
either with pathology or using more with radiology.  And the
American Thoracic Society has a statement about the diagnosis of
asbestosis and states clearly that functional impairment is not
necessary for that diagnosis."

Dr. Welch further opined that individuals can have asbestosis
with a normal chest film.  "It's been documented both using
pathology as the gold standard looking at people who have normal
chest film but substantial asbestos exposure and finding that a
good number of that people, like in one study about 20 percent
had pathological asbestosis with a normal chest x-ray, and then
there is also studies that have used CAT scanning as the, what we
might say the gold standard is, comparing the plain chest x-ray
to what you see on a CAT scan, and again you find 25, some
studies up to 40 percent of the people with substantial asbestos
exposure, but a normal chest x-ray have some findings of
asbestosis on a CAT scan.

A person who has asbestosis yet has a PFT score in the normal
range can have a significant loss of lung function, Dr. Welch
said.   It's very typical for individuals with asbestosis to have
shortness of breath, some chest discomfort, and fatigue related
to the increase work of breathing because of the scarring in the
lung, Dr. Welch explained.  In addition, they have a significant
increase risk of developing lung cancer and subsequent to that,
even if they haven't had the lung cancer yet, they're very
concerned about their future risk of lung cancer.

"If they have asbestosis," Dr. Welch said, "they're probably
about four times as likely as someone who is equivalent to them
in terms of smoking history who doesn't have asbestosis.  But if
you take that person with asbestosis who is a smoker and compare
them to a nonsmoker, non-asbestosis exposed person, it's probably
about 50 fold because the asbestos multiplies times the risk of
smoking."

According to Dr. Welch, 15% of people who contract lung cancer
live more than five years.

"What other adverse health consequences are suffered by people
who have nonmalignant asbestos disease even though they may have
normal pulmonary function tests?" Mr. Finch asked.

"The fear of cancer, shortness of breath even within the normal,
and then they have a likelihood of developing progressive decline
in lung function and eventually dropping below the normal range. 
Individuals have different rates of decline, but if they live
long enough they usually develop a significant impairment from
that declining lung function," Dr. Welch replied.

For people who suffer from nonmalignant asbestos disease, Dr.
Welch said she generally recommends that they have an annual
examination with a physician who knows about asbestos-related
disease, to make sure that they get their annual influenza
vaccination.  Dr. Welch noted that many of them do smoke, so she
asserts that they have to quit smoking.  Part of the annual exam
is finding out what other diseases have developed in men who are
getting to be 60 and 70, and sorting out what might be due to
their asbestos and what might be due to heart disease or other
lungs disease as well.

A complete test costs about $800 to $1,000 per year.

Mr. Finch also asked Dr. Welch to describe the adverse health
consequences suffered by someone who has pleural plaques.

"Pleural plaque, as of the most general statement, usually
doesn't have a loss of lung function with it, but you have --
those people have a higher likelihood of eventually developing
asbestosis.  Because of the asbestos exposure that they've had,
they're at a higher risk for lung cancer.  So it's very similar
to the people with asbestosis in terms of increased risk of lung
cancer, fear of lung cancer and progression of lung disease," Dr.
Welch said.

Dr. Welch also recommends annual physical examination and checkup
for people with pleural plaques.

According to Dr. Welch, it's not uncommon for people to have
asbestosis even with pulmonary function impairment and not have a
diagnosis because it comes on very slowly and the impairment
comes on slowly.  "People essentially learn to live with it,
attribute it to aging, and so it's very, very common for people
to have this disease."

Dr. Welch opined that asbestosis is not a necessary event in the
causal chain between asbestos exposure and lung cancer.

"We know that asbestos causes cancer because asbestos cause
mesothelioma directly and there is -- no postulates that you need
asbestosis to attribute mesothelioma to asbestos.  In addition,
in animal experiments and laboratory experiments asbestos causes
cancer.  There is no disagreement at all that asbestos causes
cancer without any intermediaries.  In a way, it's easier for me
to explain it by explaining why the asbestosis link is really a
false hypothesis because so much of the information just is that
asbestos causes cancer, there is a linear dose response between
asbestos exposure as the development of cancer.  As the dose goes
up, the rate in the population goes up.  If you needed
asbestosis, you should see no lung cancer attributable to
asbestos in populations exposed at levels lower than what we
think is a level for asbestosis, but there are a number of
population based studies that show a risk of lung cancer at
levels of exposure such as in the range of like seven or eight
fiber years, which is a way of calculating total asbestos
lifetime dose, when the number for asbestosis is generally quoted
as 25 fiber years.  So, if you needed asbestosis, the
relationship between asbestos exposure and lung cancer shouldn't
go linearly up, it should have a threshold.  So it would have a
very different shape, that dose response relationship."

Dr. Welch does not share the observation by some doctors that
asbestosis is a vanishing disease.  She pointed out that based on
the data compiled by the National Center for Health Statistics,
each year an increase in the number of deaths for which asbestos
is mentioned as a cause of death on the death certificate.

Mr. Finch asked Dr. Welch if she believed the proposition that a
significant percentage of asbestos claims are supported by
fraudulent or invalid reading of x-rays.

"No, I absolutely don't," Dr. Welch responded.  "What the study
did was they, Dr. [Joseph] Gitlin and his colleagues, collected
approximately 500 x-rays from plaintiffs who had filed a claim in
asbestos litigation.  It was never clear to me where they came
from.  And they came from some, I think, mass claims in West
Virginia but it wasn't clear to me how they were selected.  They
were selected by defense attorneys and provided to Dr. Gitlin and
his group.  And then Dr. Gitlin asked six different B Readers to
read those x-rays and give an interpretation.  And what he found
was that the readers who read it, he called them the consultant
readers and the initial readers, the consultant readers found a
lot less disease among those 500 films than the initial readers. 
Of course, the initial readers found disease because they were
selected to be deceased cases that they were going to be re-
reviewed."

Dr. Welch also related to the Court a study on B Readers who read
films for the United States Navy published in 1988 made by Dr.
Ducatman.

"That [study] included readings on 100,000 x-rays as opposed to
the 500 in the Gitlin study.  At that time, Dr. Ducatman was
working for the Navy and the Navy was doing regular screenings to
look for asbestos disease in their, the active duty personnel
that were exposed.  And what they did was they took batches of
the x-rays and sent them to, I think 23 different readers.  The
x-rays were distributed fairly randomly among the readers.  He
looked to be sure that one reader wasn't getting all the shipyard
films and another reader getting, you know, just technical
people.  And he took that, those 100,000 films and looked at
agreement among those 23 readers.  And between the reader who
found the least amount of disease and the reader who found the
most amount of disease, it was 300 fold, which was a little
surprising in that the hope was the B reading would have reduced
that variability.  Even among the readers who were considered the
gold standard who had helped set up the B Reader program, the
variability was almost 20 fold. . . . if they looked at the same
100 films, one person might have found one of them abnormal and
someone else would find 20 of them abnormal and everybody else
was in between.  With a very large group, it was one out of 300
or 300 out of 300."

Mr. Friedman, Esq., at Weil, Gotshal & Manges LLP, cross-examined
Dr. Welch.

Mr. Friedman noted that there are some cases of mesothelioma
where the diagnosis is idiopathic mesothelioma rather than
asbestos-related mesothelioma.  Idiopathic mesothelioma means the
cause is not known.

"That's correct," Dr. Welch said.  "There's probably some
background rate of mesothelioma, it's hard to -- it's hard to
say.  You'd have to go back before asbestos was commercially used
to really identify the number that represents the background but
it's generally agreed there's some background rate of
mesothelioma."

Mr. Friedman pointed out that if a person has a pleural change
but there was no abnormality in lung function and no disease from
ability to perform activities of daily living, an individual
would have an impairment rating of zero.

"Dypsnea is the most common symptom noted on initial examination
of individuals with any type of pulmonary impairment, is that
correct?" Mr. Friedman asked.

"Correct," Dr. Welch said.

"And dyspnea presents as fatigue or shortness of breath, is that
right?"

"Dyspnea is shortness of breath."

"And it can cause fatigue, difficulty climbing stairs?"

Dr. Welch noted that there can be a whole range of causes of
dyspnea, usually it's due to lung or heart disease.

"But it can also be called any hematological conditions, isn't
that right?" Mr. Friedman asserted.

According to Dr. Welch, anything that impairs oxygen delivery to
the tissues is lung disease.  And hematologic conditions can
cause shortness of breath.

At Mr. Friedman's prompting, Dr. Welch admitted that shortness of
breath can be caused by metabolic conditions and even anxiety.

Dr. Welch believes the overall disease burden from asbestos has
reached its peak.  "If we had a way of tracking it nationwide, it
could be going down.  But even though the prevalence can be going
down, claims could be going up because they're not necessarily
related to each other.  But I think if we were doing large scale
examination programs, we would be seeing a decline in the
prevalence of asbestosis, of the non-malignant diseases.  We are
not yet seeing a decline in the prevalence of the cancer, but in
non-malignant cancer, we're seeing a decline.  I believe there
would be a decline if we were doing a large screening program."

         Asbestos Claimants' Committee's Fourth Witness
                         Barbara Dohmann

Mr. Inselbuch called Barbara Dohmann, a barrister at the Bar of
England and Wales, to the witness stand.

Before proceeding with the examination, Mr. Inselbuch introduced
Judge Rodriguez to Rod Freeman from Lovells in London who are
solicitors on behalf of the Asbestos Claimants Committee and who
participated with them in working with Ms. Dohmann.

Ms. Dohmann explained the difference between solicitors and
barristers.  Solicitors are lawyers who have client contact while
barristers act as advocates and advisors.  Barristers must be
independent from even the client.  The first duty of the
barrister is to the court.  That duty, Ms. Dohmann explained,
means that a barrister must provide the court with all facts and
authority relevant in a particular matter event when that is not
in a client's interests. 

Ms. Dohmann has been a barrister for more than 30 years.  Ms.
Dohmann worked as a part-time judge for about nine years, until
2002.  She is now exclusively in independent private practice. 
According to Ms. Dohmann, she is familiar with asbestos
litigation in the English courts because she was retained in the
late 1990s for an important set of cases known as Lubbe and Cape,
Public Limited Company -- which involved South African asbestos
miners, their families and people living near the asbestos mines
which was owned in the past by Cape, PLC.

"I would say that a significant proportion of my work every year
will involve questions of non-English law and issues as to what
law should be applied," Ms. Dohmann told Mr. Inselbuch.

At that point, Mr. Inselbuch proferred Ms. Dohmann as an expert
on English law as it relates to choice of law analysis with
respect to claims of U.S. plaintiffs arising in the U.S. against
Turner & Newell brought in England.

Ms. Dohmann was retained by Mr. Freeman of Lovells, on behalf of
the Asbestos Claimants Committee and the Futures Representative.

Ms. Dohmann was asked to address the issue whether the claims
that were brought in the past and may be brought in the future
and are pending against T&N in the United States would be
recognized as a matter of English law as giving rise to cause of
action known to English law. 

"And the answer to that question is certainly yes," Ms. Dohmann
told the Court.

Ms. Dohmann was also asked to consider what law the English court
would apply to issues of liability and of damages.

"The bases of liability are entirely known to English law and
would be recognized.  That is the question of liability.  Now, of
course, questions of proof and procedure are different ones.  The
questions of damages falls in two parts, everything to do with
the heads of damage, what is the type of damage that can be
recovered by a plaintiff will be governed by U.S. law.  Any
questions of whether the damage is foreseeable or is remote will
be governed by U.S. law.  And I would say now that it seems to me
that there would be very little difference between U.S. law and
English law on those topics.  The question of quantification is
more complex because at the moment the law is in flux as to what
is really assessment of damages, what does it mean.  The safe
answer to give today is that English law tends to regard
everything to do with putting a value on a particular claim as a
matter for the court that decides the point and, therefore, as a
matter of English law.  However, this is beginning to change.  It
will certainly change in the near future," Ms. Dohmann said.

In preparing her report, Ms. Dohmann said she relied on her 34
years of experience.  She was also assisted by Professor Edwin
Briggs, a professor of international law at Oxford University.

Mr. Inselbuch asked Ms. Dohmann for her opinion on Mr. Hanly's
description of the facts.

Ms. Dohmann noted that the bases of liability that Mr. Hanly
described and of what was paid and not paid is consistent with
the assumptions upon which she relied. 

At Mr. Inselbuch's request, Ms. Dohmann stepped the Court through
the English law that governs liability.  At the English common
law, it must be determined where the cause of action arises.  If
the cause of action substantially arises in a county other than
England and Wales, then that law will govern as to whether
there's a cause of action.

"Next, the English court has to apply a rule, when I say has to
apply, that's at common law, has to apply a rule known as the
rule of double actionability.  This was established even before,
but certainly became the rule when the House of Lords so ruled in
the case called Chaplin and Boys in 1971.  Double actionability
means that the cause of action, and I'm talking about the law of
tort at common law, that the cause of action must be actionable
in England, in other words, it must be recognized by us as being
a civil wrong, a tort.  And you can bring a suit in England in
relation to it and it must be actionable in the country where it
arose as a civil wrong as well, both."

Mr. Inselbuch asked, "Do you have an opinion as to whether or not
the claims being asserted on behalf of asbestos personal injury
victims against Turner & Newell in the United States would
satisfy the double actionability rule?"

"Yes, I have no doubt that it would," Ms. Dohmann replied. 
"Plainly it's actionable in the U.S. and it's equally actionable
in the United Kingdom and England and Wales specifically."

Ms. Dohmann related that there is a general trend in the United
Kingdom, and specifically England and Wales, to the effect that
one moves away from that which in modern eyes appears too
parochial or too little England oriented and aligns oneself more
with what goes on internationally.  According to Ms. Dohmann, the
double actionability rule has been much criticized.  "It doesn't
exist anywhere else in Europe.  To the best of my knowledge, it
is pretty unknown generally in international law.  And English
lawyers, quite rightly, criticized it and it has been abolished
by statute as from the 1st of May 1996.  A law commission, which
is usually set up to consider particular points that are ripe for
reform, considered that particular problem of the law of torts
and made its recommendations in which it specifically said that
we must move away from parochial aspects of our law of torts. 
And, accordingly, there was an enacted in 1995 the Private
International Law (Miscellaneous Provisions) Act."

Ms. Dohmann stated that the effect of the 1995 Act is partly in
doubt insofar as acts or omissions have occurred before the 1st
of May 1996, which gives rise to a claim.

As to the issue of quantum of damages, Ms. Dohmann said, any
court will always apply its own procedures.  "And there is in
private international law, and always has been, a division
between substance and procedure.  Everything to do with substance
normally governed by the proper law of the issue, contract or
tort.  But anything to do with procedure will be a matter for
what is called the Lex Fori, the law of the Court where the case
takes place.  So everything to do with how you bring a claim, how
you present the claim to the court, how you prove the claim will
always be a matter for the Court where that claim is being
litigated."

Ms. Dohmann related that there was this recent case cited in the
Court of Appeal called Harding and Whealands.  It was under the
1995 Act, not at common law.  Majority of the Court of Appeal
having analyzed carefully the argument in relation to procedure
and substance has begun to shift away from making everything to
do with assessment of damages procedural.  The case is on its way
to the House of Lords and it may well be heard later this year. 
The House of Lords will consider the question of what is
procedure and what is substance in damages.  But it is not
obligated to address the general common law.

Ms. Dohmann also informed the Court that there is a very
important development in relation to tort and delicit in the
European Union.  Under the draft regulation, if in asbestos cases
the damage or harm appears later, it will come within it and
therefore it will apply to the assessment of damages.

On cross-examination, Kristin King Brown, Esq., at Weil, Gotshal
& Manges, noted that until the House of Lords overrules Boys vs.
Chaplin, lower courts determining choice of law issues are bound
by the decision in Boys vs. Chaplin, which says that on
procedural issues, including quantum of damages, the law of the
forum in the case applies.

"It is your opinion," Ms. Brown told Ms. Dohmann, "that although
Boys against Chaplin has not been overruled and requires the law
of the forum to apply, that rule has essentially outlived its
usefulness?"

"Yes, entirely," Ms. Dohmann responded.

"So your conclusion . . . that U.S. law would apply to quantity
of damages is not based on the law as it stands today, is it?"
Ms. Brown asked.

"Well," Ms. Dohmann said, "my conclusion is the whole of the
opinion, and as a matter of the whole of the opinion it is that
ultimately in this case it will be U. S. law."

Ms. Brown pointed out that if the House of Lords does not
overrule Boys and Chaplin, then U.K. law would apply to quantum
of damages.

Ms. Dohmann clarified that there is no such thing as U.K. law, it
would be the law of England and Wales.  "That would be the case
for, in my opinion, a short period of time, namely the next case
that goes up to the House of Lords after Harding against
Wealands, if they don't deal with the point then.  And in any
event, until the regulation comes into force, which is then
prescriptive."

But there's no certainty that will happen, Ms. Brown asserted.

"There is no certainty in life, but there is the possibility of
looking ahead with considerable confidence," Ms. Dohmann replied.
She believes the change will occur.

                Asbestos Claimants' Fifth Witness
                         Mark Peterson

Before the direct examination began, Adam P. Strochak, Esq., at
Weil, Gotshal & Manges LLP, representing the Official Committee
of Asbestos Property Damage Claimants, directed the Court's
attention to the PD Committee's pending limine motion. 

The parties agreed and the Court consented that argument on the
request to strike portions of Dr. Peterson's testimony will be
reserved until later in the trial.  This will avoid hearing Dr.
Peterson's testimony, determining its admissibility and then, if
ruled admissible, hearing it all a second time.

Dr. Peterson has an undergraduate degree in psychology and
mathematics from the University of Minnesota, a law degree from
Harvard University, and have Masters and Ph.D. in experimental
social psychology from the University of California, Los Angeles. 
He worked for Rand Corporation in San Monica for 25 years doing
quantitative empirical research with regard to the legal system. 
Since 1980, Dr. Peterson also has participated as a consultant
and an expert and a special master in series of mass tort
litigation, primarily asbestos.  He was also retained as an
expert for several federal court judges.  According to Dr.
Peterson, he has been engaged in more than 20 different
bankruptcies of asbestos debtors.  His role has been, to a great
extent, the estimation of liabilities as well as the construction
of trust distribution procedures that would be used by the
subsequently created asbestos trust to allow and pay claims. 
Most of his engagements have been with asbestos claimants
committees.  Dr. Peterson has also testified before the Congress
on issues that involve asbestos, recently on the Fair Act.  He is
also a consultant for a dozen asbestos trusts and he is a trustee
of asbestos trusts.

Mr. Inselbuch asked Dr. Peterson if he followed the progress of
the various asbestos cases in which he provided testimony in
order to determine how accurate his projections were.

Dr. Peterson said he does compare his forecast with the
subsequent experience of claimed filings and calculations of
liability.

"And in doing so, I've found that generally I'm wrong but to the
degree -- I'm sometimes very accurate but when I'm wrong, I've
always underestimated the liability.  So I'm consistent with
regard to my forecasts, is that they're either accurate or
they're less than what the liability turns out to be.  And that's
not only characteristic of me, but everyone who does the kind of
forecast that I do has always over -- they've always
underestimated -- they've underestimated what the subsequent
liability is.  That's the general pattern of research."

According to Dr. Peterson, he was engaged in the Federal-Mogul
bankruptcy in the spring of 2002, by the Asbestos Claimants
Committee.  Among the first things he did was participate in the
preparation of a survey of the Federal-Mogul streams of
liability.  He also came up with a report providing some
background information to the members of the Asbestos Claimants
Committee, describing:

   -- who these entities were that had asbestos liabilities,

   -- what was their insurance,

   -- what we understand to be the available insurance for each
      of those companies,

   -- what was the past data with regard to their claims, and

   -- what was the relative liability that one might see from
      them but without attempting to make any current estimate of
      what their liabilities were at the time.

As the collection of data grew, Dr. Peterson was asked to develop
matrix values for the trust distribution procedures that may be
incorporated into a proposed bankruptcy reorganization plan for
Turner & Newall.

"I tried to estimate what and provide the committee with my
estimate of what's the current value or average value of the
current claim in each of the diseases in each of the
subcategories of disease in a TDP.  So for Mesothelioma, there's
one category, but for lung cancer there are two categories.  For
non-malignant claims, which is asbestosis and pleural disease,
there are three categories depending upon the severity of the
claims.  So I provide the committee with estimates of what I
think is about the mean or average value of those claims, which,
if I hit it right, they tend to agree with and use as the
scheduled value."

Dr. Peterson said he also suggest to the Committee what's an
appropriate maximum value for each of these disease categories.

The Committee suggested to Dr. Peterson, and he agreed it's a
good approach, to take the Mesothelioma value and they will use
this historic experience for Turner & Newall or eight or nine
other companies in order to hang the value of a lung cancer and
another cancer and so on.  "I'd been given a range of what the
committee thought might be an appropriate value for Mesothelioma,
which was consistent with what I've been telling them, and I used
a number of $200,000 for Mesothelioma, which was somewhat less
than I had estimated the value.  I thought it was a conservative
estimate of the value of the Mesothelioma claim currently against
Turner & Newall, but I used that for purposes of construct the
TDP and pegged every other claimed category based on these
relative ratios that I had obtained previously."

Dr. Peterson was asked by the Committee to estimate the
liabilities of Turner & Newall for pending future asbestos claims
at the time of -- just at the time of its bankruptcy petition
dated October 1, 2001, and to prepare a report describing his
estimates and the bases for his estimates.

Using visual aids, Dr. Peterson explained to the Court the steps
he went through in doing the estimating process for both the
United States claims and the U.K. claims.

Dr. Peterson related that among the mesothelioma claims, about
91.4% of them turned out to be mesothelioma while 6.5% turned out
to be nonmalignant claims.  As for lung cancer claims, 9/10 of 1%
turn out to be mesothelioma.

He observed that the settlement averages for mesothelioma were
rising for all defendants in the 1990s.  Dr. Peterson estimates
that Turner & Newall averaged $138,939 as settlement for each
mesothelioma claim.  The settlement average in 2001 for
mesothelioma claims is $195,000. 

"There were more claims paid in 2001 than were settled.  Because
of the CCR's delay in payment, there were claims paid in 2001
that had been settled in the year 2000, year 1999, year 1998, so
forth.  Those claims got the values that were then the current
realm when they settled.  So, the 2000 claims settled in 1998 and
paid in 2001 had much lower values than the claims actually
settled in 2001.  So if you do a calculation of what's the
average payment in 2001, it would be lower than 138,000, it's
about $102,000.  But that doesn't represent the current values of
claims being settled in 2001, it obscures the settlement trends
and what is the then current values of the claims."

Dr. Peterson added that 12,000 of the 14,000 claims that Turner &
Newall settled in 2001 were this one block of Mississippi claims. 
"Turner & Newall had great success in getting out of the
Mississippi claims, they had summary judgments in a number of
mass cases because the claimants, plaintiffs, were unable to show
any exposure to a Turner & Newall product. So in Mississippi, the
claims had relatively low values."  About 12,000 claims were
resolved for $3,600,000.

Dr. Peterson noted that the average Mesothelioma settlement
increased from $44,000 in 1997 to $139,000 in 2001.  Between that
time period, the average Mesothelioma settlement increased by
318%.  "And this was a basis for estimating what would be the
current amount of money that this company would have to pay
today."

"I determined the values of all the other diseases by essentially
hanging it off this calculated value for Mesothelioma using
historic rates of the differences between the Mesothelioma and
lung cancer, Mesothelioma and non-malignant claims.  So I took
those historic rates of payment and derived average values for
all of the other diseases.  Then I compared this with a number of
different sources.  I did a variety of sensitivities to look at
if I calculated this differently, what would I get.  And I
compared it to the trust distribution procedures, the scheduled
value there, which I also calculated and provided to the
committee earlier.  And then from that I selected a conservative
value that was less than any of these numbers and used that as
the basis for forecasting liabilities."

Dr. Peterson believes that one of the factors that caused the
increase was that over the course of the 1990s, more and more was
coming out about the bad history of Turner & Newall.  Worse, when
the Center of Claims Resolution dissolved, Turner & Newall lost
the anonymity it had.  It lost all of the strategic advantages it
had in negotiating settlement. 

Dr. Peterson estimates the indemnity value of the pending claims
against Turner & Newall calculated in year 2001 at $1.402
billion.