dojN001767.xml

dojN001767.xml

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2002-01-15

Tuesday, January 15, 2002 3:16 PM
The September 11th Victim Compensation Fund of 2001

January 15, 2002

Kenneth L. Zwick, Director
Office of Management Programs, Civil Division
U.S. Department of Justice
Main Building, Room 3140
950 Pennsylvania Avenue NW
Washington, DC 20530

Re: The September 11th Victim Compensation Fund of 2001 /
The Estate of

Dear Mr. Zwick:

My brother-in-law, &nbsp&nbsp&nbsp&nbsp , was lost in the World Trade Center atrocity on September 11th. He is survived by his wife (my sister), &nbsp&nbsp&nbsp&nbsp , and their four children &nbsp&nbsp&nbsp&nbsp and &nbsp&nbsp&nbsp&nbsp was a resident of New Canaan, Connecticut, and worked for &nbsp&nbsp&nbsp&nbsp on the &nbsp&nbsp&nbsp&nbsp Floor of One World Trade Center. I have been appointed as the executor of &nbsp&nbsp&nbsp&nbsp .

With the hope of realizing a measure of financial security for the &nbsp&nbsp&nbsp&nbsp family, I have been paying close attention to developments concerning the "September 11 Victims Compensation Fund" (Title IV of Public Law 107-42). I have reviewed the regulations for the Fund (28 CFR Part 104) published in the Federal Register on December 21, 2001, as an Interim Final Rule (CIV 104P; AG Order No. 2541-2001; RIN 1105-AA79). We are considering filing a claim under the Fund but, in light of the Interim Final Rule, we hold considerable reservations. I understand that the Department of Justice is seeking further comment on the regulations and I would accordingly like point out certain aspects of the Rule that are inconsistent with intent of the legislation and that are otherwise inequitable to victims' families.

The Statute and the Interim Final Rule clearly provide that as a condition to filing a claim under the Fund, a victim's estate and family must waive all rights to sue any parties except the terrorists. Paraphrasing the Interim Final Rule, the Fund is intended to be an alternative to litigation. At the same time (further paraphrasing the Interim Final Rule), the purpose of the Fund is to provide compensation to a victim's spouse and children that is just and appropriate in light of the victim's individual circumstances. If that is true, if the Fund is truly intended to provide just and appropriate compensation in lieu of litigation, it is incumbent upon Special Master Kenneth Feinberg to develop a methodology within the parameters of the Statute that establishes awards under the Fund that are roughly equal to awards that would otherwise be available to victims by way of the litigation process. In order to ensure that any award from the Fund is in fact an equitable alternative to litigation, none of the recoveries to which a victim's estate and family would normally be entitled should be reduced through a restrictive interpretation of the wording or intent of the legislation. To that end, a number of critical issues still need to be resolved and/or clarified in favor of WTC victims in order to convince family members that the September 11 Victims Compensation Fund is indeed an equitable alternative to bringing suit against American or United Airlines, the Port Authority of NY/NJ, the City of New York, Silverstein Properties (the WTC landlord) and/or the other parties protected under Public Law 107-42.

One such issue is the "collateral source" deduction set forth in the Interim Final Rule. Traditional tort recoveries to victims are typically "free" from federal income tax. In an attempt to follow suit, the Interim Final Rule seems to indicate that awards issued under the Fund will be "tax-free". That, however, will not necessarily be the case if the current Interim Final Rule requirement that certain collateral sources be deducted from all such awards is applied. For example, the Interim Final Rule provides that the Special Master shall reduce the amount of an award under the Fund by any "pension" that a victim "has received or is entitled to receive". The term "pension" is not clearly defined in either Public Law 107-42 or the Interim Final Rule. All the same, it would appear under Section 104.47 thereof that the Interim Final Rule adopts an all inclusive interpretation of term "pension". Even traditional individual retirement accounts (IRA) would arguably constitute collateral source compensation to be deducted from awards. Unlike traditional tort recoveries, IRA distributions will not be "tax-free" to a victim's family. The new law exempting most victims from federal income and estate taxes does not change that fact. Under that law, individual retirement accounts remain taxable for purposes of federal income taxation (see the Technical Explanation of the "Victims of Terrorism Tax Relief Act" prepared by the Staff of the Joint Committee on Taxation). As a result, for the families of many victims, it cannot be said that an award under the Fund will be equal to a like award under the traditional tort process. An IRA is not a "pension" and should not be considered a "collateral source" under Public Law 107-42.

In addition to individual retirement accounts, the collateral source provisions of the Fund should not include any insurance that was paid to a trust that does not grant a power of appointment to any family member, permit a victim's family to independently invade any principal of the trust or otherwise permit a family member to independently direct the disposition of any trust principal or income. Moreover, collateral sources (however defined) should be deducted against economic losses only, not the entire award.

As a whole, the Interim Final Rule succeeds in certain respects but substantially fails in others. In the final analysis, unless the above changes are made to the Interim Final Rule, as well as other changes needed to ensure that claims for losses will be handled in an equitable way, victim's families will be unwilling to give up what is, for all intents and purposes, their most important right (i.e., the right to sue any responsible party).

We sincerely appreciate the extraordinary and difficult work undertaken by the Department of Justice and Special Master Feinberg on behalf of WTC Victims. If I can be of any further assistance with respect to the September 11 Victims Compensation Fund, I will be honored to help and can be reached day or night. Thank you in advance for your attention and courtesy.

Very truly yours,

Individual Comment
Syracuse, New York

2002-01-15