The U.S. Justice Department has gone to court against W.R. Grace & Co. to try to ensure help for millions of Americans who have asbestos-contaminated insulation in their homes and others who have been sickened by cancer-causing material that was used throughout the country.

In court documents filed last week, the Justice Department contends that Grace fraudulently concealed its assets in new companies it set up before filing for Chapter 11 bankruptcy protection in April 2001.

The government asked the court to let it intervene in the bankruptcy proceeding because "Grace allegedly removed billions of dollars of assets against which parties who were injured or damaged by Grace's asbestos-containing materials had claims."


Attempts to contact Grace officials were unsuccessful.

Grace, a worldwide construction material and chemical organization, has been the target of tens of thousands of asbestos-related suits. More litigation was anticipated after news stories circulated nationwide on hundreds of miners and their families being killed or sickened by asbestos-contaminated vermiculite in a Grace-owned mine in Libby, Mont. Tainted insulation from that vermiculite is estimated to be in millions of homes.

The minute Grace filed for bankruptcy protection, all claims were frozen and new ones disallowed.

"If the intervention is successful and the money is returned to the bankruptcy pool, the families of thousands of people sickened or killed by exposure to Grace's Zonolite insulation and Monocote fireproofing may get some help," said lawyer Andrew O'Brien of St. Louis.

O'Brien handles only people with the most serious types of asbestos-caused diseases -- lung cancer and mesothelioma, which can kill in months.

"My files are filled with cases like these," O'Brien said.

"Grown men who worked their whole lives to provide security for their families find they're dying because they worked with Grace products and must spend tens of thousands of dollars to fight the disease."

He added: "Most empty their savings accounts. Some sell their homes. All live in fear of how their wives and children will survive. This government action can give them hope."

Grace owes the government millions of dollars for proven and alleged environmental violations.

In a statement filed in 1998 with the U.S. Securities and Exchange Commission, Grace submitted a 99-page list of sites where the government already had told the company that it was or might be in violation of environmental laws. The company reported that its liability for these hundreds of sites could be more than $230 million.

But the government said Grace's environmental liabilities "were substantially greater." Some in the U.S. Environmental Protection Agency estimated that the bill to clean the Grace sites was close to $1 billion.

Ed Westbrook is a lawyer in South Carolina who heads the asbestos property damage committee for the bankruptcy action. He says thousands of people with Zonolite insulation in their homes who joined class action suits against Grace before the bankruptcy may get help.

"If the class action suit goes forward," Grace may have to inform millions of other Americans that they have cancer-causing insulation in their homes, he said.

Action surprised lawyers

The Justice Department's decision to get involved in Grace's bankruptcy surprised many.

A handful of EPA and Justice Department lawyers in Denver and Washington began gathering evidence of Grace's actions long before the c ompany's bankruptcy filing. The lawyers teamed with government forensic accountants, who specialize in tracking convoluted money transfers and company acquisitions.

The lawyers, who asked not to be identified, said they had anticipated Grace moving its assets to the new companies before the bankruptcy filing. It happened, some of the government lawyers said, just as if Grace was following a script.

But some members of the legal team said they had doubted they would actually be allowed to file the unique intervention because the administration of President George W. Bush has been working with Republicans in Congress on legislation that would restrict the ability of asbestos victims to file lawsuits.

In Libby, where Grace's latest legal problems were spawned, 200 freshly painted white wooden crosses stood in neat rows in a corner of the town's cemetery Monday. On each cross was the name of a miner, or a spouse or a sibling or a child, each killed by the tremolite asbestos fibers that contaminated the vermiculite ore pulled from nearby Zonolite Mountain for 80 years. It was the same tainted ore shipped to St. Louis and 300 other plants and distribution points throughout the country.

Many of those drawn to the tribute in Libby had the disease that killed the others.

Word spread quickly about the Justice Department's action against Grace. Some were excited, some skeptical. Most said they have more urgent concerns about Grace. On Wednesday, the same day the government filed its suit, pharmacists in Libby were telling many of their customers that the insurance program that Grace established for Libby families with much fanfare two years ago was now refusing to pay for their medication and oxygen.

"The list is long. Painkiller, blood pressure medicine, about 15 to 20 different drugs are suddenly being kicked back by Grace's insurer," said pharmacist Wendy Dodson. "Many of my customers can't afford the large amount of medication that is needed to live with these asbestos-caused diseases. If they stop taking it, the medical consequences could be dire.

"But nothing Grace does surprises anyone in Libby any more."