dojW000704.xml

dojW000704.xml

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2001-11-26

Monday, November 26, 2001 6:04 PM
JPMorgan Comments on Victim Compensation Fund of 2001

Please find attached comments submitted by JPMorgan.

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November 26, 2001


VIA EMAIL AND OVERNIGHT MAIL
DELIVERY

September 11th Victim Compensation Fund of 2001
Notice of Inquiry and Advance Notice of Rulemaking
U.S. Department of Justice
950 Pennsylvania Avenue NW, Room 3140
Washington, DC 20530

Re: Comments to the Notice of Inquiry and advance notice of rulemaking for the September 11th Victim Compensation Fund of 2001 Dated November 5, 2001


To the Office of Management Programs:

Please accept our comments to the advance notice of rulemaking for the September 11th Victim Compensation Fund of 2001 offered for public review on November 5, 2001. We provide these comments as a leading global financial services firm headquartered in New York with over $42 billion in stockholder equity and over $799 billion in assets.

Our perspective on the Fund, and specifically its system for processing and compensating the victims of the September 11 attacks, comes from our extensive knowledge and operational experience in the administration of large and complex trusts and what is entailed in carrying out a massive compensation project. It is based on our 200 years of experience in providing trust and payment services to clients. Trust and fiduciary services are a core competency of the Firm and JPMorgan currently manages over $2.2 trillion in trust and custodial assets. We are administering the $5 billion National Tobacco Grower Settlement Trust, which makes annual payments to nearly one half million tobacco growers and quota holders. We regularly assist in numerous settlement payment requirements arising from complex litigation.

As an institution, JPMorgan is deeply committed to providing whatever assistance or resources we have toward the effort of serving victims of the September 11th terrorist attacks.

We believe this is an effort that must succeed for the sake of our community and the nation.

Our experience in these matters indicates that design of the system is the absolutely critical component to the successful administration of a large and public trust settlement. The key is simplicity in design of the system. To be successful, the system implemented here must rely on data management and data aggregation capacity, smart and professional victim assistance counselors, multi-faceted outreach, and the ability to transfer funds quickly and accurately.

Congress created the compensation fund as an alternative to litigation for victims of the September 11th terrorist attacks. As the November 5th notice states:


"Litigation to obtain damages, particularly in a massive tort context, can be a lengthy, uncertain, process, filled with substantial risk and expense. The purpose of this compensation program is to offer all potential claimants a more expeditious, predictable, and less complex alternative to that process."

We limit our comments to the fundamental operational decisions and practices that will enable the Fund to meet the intent of the legislation -- delivery of compensation payments to victims in an accurate, predictable and expedited manner.

The law requires a very rapid turnaround from the filing of claims to the payment of compensation to victims who have suffered deeply from the extraordinary events of September 11th. The legal deadlines can be met, but only if the guiding philosophy in the administration of the Fund remains that it be a less complex alternative to litigation. To the degree that decisions are made that move away from more standardized practices, the Fund will approach litigation in complexity. Operationally, the number of claim disputes will increase, limiting the Fund's ability to rapidly distribute payments.

At JP Morgan we appreciate the opportunity to contribute our experience in trust management to this process of determining how to rapidly distribute assistance to those who were harmed, to minimize the incidents of disputes, and to ensure that the Special Master is able to discharge his responsibilities in the time prescribed in the law and in a manner which will provide maximum benefit to the victims while minimizing the administrative costs.

Topics #1 and 2:
The Forms To Be Used in Submitting Claims Under This Program and the Information To Be Included on the Claims Form

Claims forms should be designed to elicit the necessary information without being complex and confusing. They need to support a transparent system based on careful cataloging and assimilation of documents, thereby allowing the Fund to make quick and accurate payments to eligible victims. Fundamental to the design of these forms must be compatibility with existing data management systems. Accurate determinations to the key questions of whether the claimant was physically present and whether the claimant suffered physical harm will require supporting third party documents. To meet the twin goals of speed and accuracy these documents must respond to precise questions designed to provide the essential data supporting the claim so as to require a minimum amount of document interpretation.

The unique and terrible nature of this tragedy means that many claims should be easily determined. This requires a form designed to expedite processing and permit speedy awards. Our recommendation is that forms be designed so the complexity of various claims can be easily differentiated, thereby allowing awards to be made more quickly in the simpler cases. It is essential the system be viewed as fairly and openly administered and that the basis for awards be easily understood.


CLAIM FILING PROCEDURE

For efficiency and to address the question of when the 120-day determination clock begins, the Special Master should not be part of the claim filing process. Rather, claim filing should be considered a two step process. The first step would be a review of claim forms for completeness and accuracy by a third party. The second step would be the forwarding of the claim forms by the third party, after they are deemed ready, to the Special Master. Only when received by the Special Master would they be considered officially filed and trigger the 120-day determination period.


DESIGN OF FORMS

The form's design and the information to be included should adhere to the following principles:


Good data

It is absolutely essential that the forms capture the needed data. This will require experience in system design and management based on the knowledge of what information is critical and the capability to confirm the accuracy of the information. Form design should avoid open-ended questions. Instead the forms' design must produce very specific and exact data. Secondly, each data field should request only one type of data to prevent multiple inputs of the same information within the form, thereby avoiding the potential of discrepancies.

Standardization

The form design should be simple to complete and standardized to ensure that the key data is captured for all claims. Instructions should be written in plain language, not legalese. The design should also make data entry simple. Additionally, the form should be divided into clear sections to again facilitate data entry and information research. This will help accelerate classification and preparation of claim reports. Lastly, there should be one common process with a common set of forms, so that every claim includes the same information and claimants are not confused by which form to file.


Machine readability

With such a tight timeframe and the need to keep consistent and accurate records, it is extremely desirable to create a system with forms that can be scanned into a computer system.

Transparency

A system design that focuses on simplicity and is easy to understand will stand up to public scrutiny, eliminate confusion, and minimize disputes.

Predictability

An application system based on transparency, simplicity, and uniformity of supplementary documentation will lend itself to fairness and predictability of outcome. The claims certification process should be so predictable that any person looking at an application would make the same judgment as to the validity of the application or the need for additional information.

Designed to expedite awards/Pre-awards

The application should incorporate a design that would gather the fundamental information up front so that you can provide qualifying victims a pre-award. In other words, it is possible to design a system where especially needy victims who have already suffered economic harm can receive interim relief. Supplementary data can then be assembled to complete the application and determine a final award.

Multi-lingual

The application design and information requirements should take into consideration the needs of non-English speaking claimants.


Topic #3:
Procedures for Hearing and the Presentation of Evidence


With the large number of potential claimants and only 120 days to make determinations, the system will need to have a reliable record system supported by documents requiring a minimal amount of interpretation and so that the system avoids becoming subjective.

A properly designed application and certification process will minimize the number of claims disputed as to qualification or amount of claim. Nevertheless, some number of cases will simply be disputed. A quick and informed process of claim presentation is necessary. The decisions should be quick and the relevant principles immediately recorded as consistent with the standards and precedents defined at the outset of the program. As an example of how a standardized, operationally sound program can expedite claim payment and limit challenges, JP Morgan consulted with the Commonwealth of Kentucky on a claim certification and dispute resolution program for tobacco farmer claims. There were more than 140,000 valid claimants, and disputes were heard in fewer than 150 cases, with funds being paid out for all claimants 90 days after the applications were received. A timetable, like what is envisioned for the September 11th Victim Funds is complex, but doable.

Simplicity,

The fewer the variables, the faster and more accurately the payments can be made to claimants.

Speed

Direct and immediate payments will make clear that the September 11th Fund has only one goal, rapidly providing assistance to victims. The process for submitting evidence should be designed to expedite claim management, reduce the need for third party assistance, and reduce the potential for fraud.

Access to Records

The compressed schedule will also put a premium on the need for accurate records which are both readily accessible and easy to interpret.

Responsive and Accurate

The records system must have the capability to track and respond to pre and post payment administrative issues. The Special Master needs to have confidence that the right funds get to the right person.


Topic #4:
Procedures to assist an Individual in Filing and Pursuing Claims Under This Title

Outreach to the victims who are eligible for compensation must be professional, comprehensive, and personal. Information about how to apply for compensation should be shared with victims using all forms of the media. Claim applications need to be straightforward. The staff who speak directly with the victims must be knowledgeable, professional, and sensitive. A well designed outreach and victim's assistance program should:


Keep forms simple and available

Forms should be easily obtained, understandable, and easy to complete.

Provide access to non-English speaking

The application process should be accessible to non-English speaking claimants.

Utilize a Website

A website should be designed and put up immediately to serve as an information source for victims and to enable electronic filing of applications.

Public outreach meetings

Highly trained individuals should hold a series of informational meetings in the metropolitan area to bring applications to victims and help them understand the process.

Frequently Asked Questions

A list of frequently asked questions should be prepared as quickly as possible and made widely available.

Media

The outreach campaign should make aggressive use of the media when the program is launched to convey information and to encourage immediate responses.

Disaster Relief Organizations

The Special Master should meet with the Disaster Relief Organizations who are already responding to the tragedy both for victim outreach but also as part of the design process for determining assistance from collateral sources.

Expertly staffed 800 number

Not everyone has internet access and an expertly staffed 800 number with professionals who are capable of leading a victim through the application process will be for many their primary interaction with the September 11th Victim Fund.



Computer tracking/Contact log

All interactions should be tracked and logged to keep clear and accurate files on victims.


Topic #5:
Claimant Eligibility

The Special Master needs to establish clear rules for determining claimant eligibility and have in place definitions of "personal representatives" and a process for how the identity is determined. This is especially important with a rolling claim award program where applications and awards will not all be made at the same time. With this Fund, there is the potential that a claim could be awarded to an individual claiming to be the personal representative before the official personal representative even applies.

These personal representative determination rules can be reflected in the design of the application and the record management system. One component of the system should be a design to flag duplicative claimants for eligible individuals. Accurate record keeping for these cases is at a premium. In cases where there is uncertainty or a dispute over who is the appropriate personal representative of the victim, we would advise making a claim determination and holding the award payment in escrow.

Topic #6:
Nature and Amount of Compensation

Based on our experience with the preferences of beneficiaries in other trusts, the Special Master may need to consider lump sum cash payments to the victims as their preferred award option. There are potential advantages to such a system, although an annuity plan may be the preferred course. In this special case, money gets to the victims immediately. It would also enable the Special Master to complete the program faster.


Economic Loss/Noneconomic Loss

In a program with such a large number of potential claimants, there is a strong need to err on the side of simple criteria, defining very finite standards which include a manageable number of variables in regard to situation and amount of claim. The system should asking open-ended questions calling for description as opposed to using very specific questions designed to elicit clear data. As an example a question which asks for a description of a victim's compensation will not yield as complete data as questions designed to ask specifically about the individual elements of a compensation plan. The goal should be to allow a nearly immediate determination of the claim with the proper documentation and information to minimize the need to exercise judgment or discretion as to individual cases.


Fraud Prevention Measures

There are three principles our experience has shown are effective tools in preventing fraud. First, create clear document standards in the application process. Second, make quick determinations and awards where possible; and third, offer financial advisory assistance to claimants after awards are made. A balance must be struck between sufficient supplementary document requirements and creating a process which is so onerous that potential claimants prefer the alternative of litigation.

Define acceptable documentation

It is absolutely critical to establish at the front end what information is required for an application and what will constitute acceptable documentation to support the claim. Uniformity and standardization will make it harder to manipulate the system.

Build compatible data exchange with collateral source

An experienced and sophisticated trust manager will have the capacity to develop data exchange capabilities with other record keepers in order to collaborate or fill in the information gaps in victim applications.

Establish third party sources for immediate verification

As part of the process for defining acceptable documentation, it is vital to establish acceptable third party sources to facilitate the verification of applications.

Cross check data

The data management system should automatically cross check the data entered on forms with related data contained in supplementary documents. For example, wages declared on the form should be cross-checked with income filed on a 1040 form. Supplementary documents should also be inspected for tampering.

Quick determinations to eligible victims with clear needs

Quick determinations will demonstrate a commitment to distributing payments to victims and will minimize the need for unnecessary intermediary fees.

Bring in team of investment advisors

Though not explicit in the proposed rulemaking, the government should consider the potential for post award fraud and how that can be minimized. Victims who receive large compensation benefits may not be prepared to manage those funds and may be vulnerable to bad advice. As an operational issue, in addition to the data management and payment of awards, JP Morgan strongly recommends that a team of qualified investment advisors be offered as an additional victim's counseling resource to help beneficiaries think through how to manage those funds.

JP Morgan appreciates the opportunity to submit comments for your review and urges the Department to consider how these fundamental operational decisions will effect the ability of the Fund to be a viable alternative to litigation by enabling it to expedite the fair and accurate delivery of compensation to the victims of this horrible tragedy.

Sincerely,








Comment By:
JP Morgan Chase Bank
New York, NY

2001-11-26