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(Reuters) — Industrial conglomerate Koch Industries received nearly $2.5 billion in dividend payments last year from its Georgia-Pacific unit, which had spun off a subsidiary that took on its liability from asbestos litigation and then filed bankruptcy to limit lawsuit payouts, according to documents filed in a U.S. bankruptcy court in North Carolina.
Koch unit Georgia-Pacific used a corporate bankruptcy maneuver known as the Texas two-step, forming a new Texas subsidiary, Bestwall, that took on the company's asbestos liability. Bestwall declared bankruptcy about three months after its founding. The latest court documents, filed Wednesday, provide new detail about how Koch has benefited from the case.
Georgia-Pacific faced thousands of lawsuits over the years accusing executives of concealing knowledge about the dangers of asbestos in its building products. In 2017, Georgia-Pacific became the first company to execute a Texas two-step.
Several major companies, including Johnson & Johnson and 3M Co., have turned to the bankruptcy courts in an attempt to manage their mass tort liabilities. Plaintiffs attorneys have called the cases an improper manipulation of the bankruptcy system, while the companies say the Chapter 11 filings are aimed at compensating claimants fairly and equitably. All the bankruptcies are pending.