W000363

Thursday, November 15, 2001 11:26 AM

Attention Mr. Zwick:

Attached is a comment document. If you have any questions or would like clarification of any of the points, please contact me at this email address or call me at       .

We hope that these suggestions aid you and the Special Master in organizing and delivering this very important compensation program.

The Alliance FCI Inc.
Parsippany, NJ

Attachment 1:

To: Kenneth L. Zwick {victimcomp.comments@usdoj.gov}
Director, Office of Management Programs
Civil Division, U.S. Department of Justice
950 Pennsylvania Avenue, Washington, DC 20530

From: The Alliance of Fiduciary Consultants International, Inc.
Parsippany, NJ

COMMENT

Regarding Pubic Law 107-42, "Air Transportation Safety and System Stabilization Act," in particular: Title IV - September 11 th Victim Compensation Fund of 2001

The accompanying comments, based upon experience in the trust industry, offer suggestions for ways in which the Department of Justice can assure fairness to all claimants, speed in making meaningful aid available to them, and efficiency in expending the taxpayers' money. They recommend favoring assistance that empowers victims and survivors to attain self-sufficiency rather than building lasting dependency upon the government.

Of paramount importance is addressing victims' needs compassionately and expeditiously and providing equitable compensation as quickly as possible. Second is a goal that the maximum amount of appropriated funds be expended for the victims' benefit and that a minimum amount be used to create or expand bureaucracies or unjustly enrich other parties.

In pursuit of this mandate we therefore urge:

1. Emphasis on simplifying information gathering to reduce the burden on the claimants, while establishing an effective database for coordinating claim assessment and award determination.

2. The optimum collaboration with other governmental agencies to leverage their respective information sources rather than creating duplicative processes and records.

3. The optimum use of established, credible, private sector suppliers of services with the expertise and facilities required to meet present and future needs.

By its nature, this program may represent a departure from other government assistance programs. DOJ should bear in mind that approaches used in executing this charter may form precedents for future actions to aid victims of other, similar events. We urge caution in achieving balance and not extending beyond reasonable, appropriate limits of the government's responsibility.

Contents

I. Overall Philosophy 3

II. Precepts for Managing Victim Compensation 3

III. Substantive Responsibilities of the Special Master 4

IV. Suggested Procedural and Substantive Rules 4

V. Clarification of the intent of Congress 5

A. "To Provide" 5
B. "Compensation" 5
C. Panel to Review Calculation 6
D. Providing Medical Insurance 6
E. Higher Education Assistance 7
F. Non-monetary compensation 8
G. Offsets to Compensation 8
H. A Possible Distribution Alternative 8
I. Triage Based on Citizenship and Residence 9
J. Claims of Multiple Relatives of a Victim 9
K. Victim's Own Actions Determinative 10
L. "Physically injured" Defined 10
M. "Killed" Defined 10

VI. Organization 11

A. Functional Requirements of the Special Master's Office 11
B. External Resources 13

VII. Information About the Authors 14

I. Overall Philosophy

It is clear that, in passing Title IV, the Congress intended to benefit the actual victims of the September 11 attacks and it is, therefore, incumbent upon the Attorney General to insure that the government's own program should be efficient, effective and prompt. The news of the day is rife with complaints that victims of the September 11 attacks and their families are encountering delay and frustration in attempting to obtain the benefits of the hundreds of millions of dollars donated to various private charities and agencies. Bureaucracy is among the chief complaints.

For that reason, this complex mandate requires decisiveness on the part of the Special Master, rather than endless debate. Regulations should provide for expeditious review of input from the inevitable variety of interested parties to insure fairness to all classes of claimants. Reasonable consideration of diverse viewpoints is imperative, but not at the cost of paralysis while victims await the assistance that the Congress has promised.

II. Precepts for Managing Victim Compensation

We respectfully submit that the Attorney General should direct the Special Master and his designees to adopt the following precepts to guide all staff and independent persons in the exercise of their delegated responsibilities. A. Insure fairness in dealing with diverse claims and with people of all backgrounds, but do not expect to attain perfect equality in treatment of all claimants.

B. Deploy these resources with deliberate speed, where possible, but allow that some compensation decisions may have to be deferred until more is known.

C. Provide immediate help, but strive for lasting benefit for the living victims and the decedents' survivors, favoring the provision of opportunities for self-sufficiency, not dependency upon the government.

D. Use the maximum proportion of these resources for the victims, and a minimum to create bureaucracies or enlarge existing ones.

E. Outsource as much of the work as possible through an expedited bidding process, favoring those with the ability to put aid in motion quickly.

F. Provide for a sunset provision so that all segregated funds and organizational units do not survive past the needs they serve.

G. Vigorously prosecute, without plea bargaining, all those accused of fraud and deception so that the intended recipients are not victimized again.

III. Substantive Responsibilities of the Special Master

To afford the Special Master the ability to focus, it is suggested that his/her role be circumscribed to include these primary responsibilities:

A. Define the process and establish procedures for claimants to file, establish eligibility, and appeal decisions.

B. Establish a framework for triage of applicants in a manner that affords all as expeditious a process as their circumstances permit and for swiftly determining eligibility and level of need.

C. Establish a means of consolidating information from public and private sources to provide investigators and hearing officers as much relevant information as is feasible, as quickly as possible.

D. Identify sources of expertise and establish an accelerated bidding and award process to select providers of needed services.

E. Construct an organization and prepare the job descriptions for trustees/ examiners/case investigators and support staff.

F. Establish the requisite management, operating and fiscal controls.

G. Establish effective liaison with governmental and private bodies that also have a role in effecting the intent of Title IV.

IV. Suggested Procedural and Substantive Rules

A. Focus on the urgent needs of victims before the longer-term issues.

B. Do not attempt to involve the Department in providing material aid directly, but utilize the best available local programs, agencies and instrumentalities to insure delivery through established mechanisms for:

1. Sustenance, temporary shelter for the displaced
2. Housing for those relocating
3. Guardians for the orphaned and incapacitated
4. Medical and Psychological attention
5. Temporary Job Placement
6. Assistance in preparing and/or replacing vital documents
7. Legal assistance to establish bona fides and priority of claim

C. To establish claims, use information available from existing Federal sources and other proven methods such as those used in:

1. INS to document and validate status of aliens and visitors
2. SSI (and Green Card/Alien Registration) records and files
3. IRS records and welfare tracking mechanism to certify income, dependent status and spending levels and to identify insurance benefits, and other aid paid to claimants
4. Financial Aid Form (College Board) to determine education need

D. Use existing, accredited professionals wherever possible, rather than creating new bureaucracy and government positions.

E. Affirmatively accept the risk that quick action may result in some errors, and establish a tracking system that will facilitate remediation after the fact.

V. Clarification of the Intent of Congress

The express intention of Congress is to:

"...provide compensation to any individual (or relatives of a deceased individual) who was physically injured or killed as a result of the terrorist-related aircraft crashes of September 11, 2001."

Despite the apparent clarity of the foregoing language, and the definitions contained in Section 402 of the statute, there are ambiguities that should be clarified early on. The following are suggested:

A. "To Provide"

To provide does not necessarily mean that the Attorney General, Special Master or their staff must perform all, or any, of the activity, nor does it require that permanent staff be hired. (See Section VI below regarding Organization.)

B. "Compensation"

The single most daunting task before the Special Master is to decide how to achieve equity and fairness. How will the program compare the needs and entitlement of, for example, Person A who was a kitchen worker at minimum wage, supporting a family and sending money to his native country to support indigent parents, with those of Person B, the surviving spouse of a bond salesman who had a seven figure income, a six figure mortgage and no life insurance.

A set of guidelines must be established whereby the financial situation of claimants can be readily assessed, the other resources available to them can be taken into account (as provided by Title IV) and an equitable assessment can be made against absolute limits or maximums and relative standards of fairness.

The range of approaches is extremely wide. They range from giving only immediate cash to sustain a household for three months to establishing some means of life-long income replacement, to every variety in between. Some propose that everyone ought to be treated the same with a per capita amount paid, while others propose that aid should be proportionate to the loss suffered even if it means the poor remain poor and the well-to-do are assured their pre-event standard of living.

C. Panel to Review Calculation

Once the Special Master has developed an approach to calculate compensation entitlements, and a system for adjudicating disputes, we suggest that the Special Master promptly appoint a panel of independent experts to review them and make recommendations as to how to improve upon them. Such a panel might include representatives of the following specialties and interests to provide a balanced approach and broad input without being so large as to gridlock.

1. Psychologist experienced in post-trauma recovery to help assess the duration of the need for relief.
2. Experienced head of a major city's welfare program with a perspective on handling large numbers of claimants.
3. FEMA authority on household expenses in large-scale disaster recovery.
4. Executive director of a faith-based aid agency, such as the Salvation Army, that is experienced in providing both support and self-help programs.
5. College Board expert on financial aid for higher education.
6. Senior trust executive to advise on mechanisms available to administer payment programs over time, and provide financial management for minors.
7. Actuary who can help project long-term cost implications of alternatives.
8. One or more representative members of the class of claimants.
9. Plaintiffs' attorney to advise on compensation elements relating to state wrongful death statutes and conscious pain and suffering.

D. Providing Medical Insurance

To keep DOJ out of the business of providing medical care and attention, it is suggested that the fund purchase a group policy or policies in which claimants would be able to participate, if they wished. (No payment in lieu of this insurance would be offered.)

The intent would be to provide a temporary program to insure that no claimant would be denied medical care for at least the first few years until the household of the injured or deceased person has recovered its ability to be self-sufficient.

To insure both the assistance desired and an automatic sunset of the benefit, the following type of program could be instituted.
Sample Diminishing Medical Insurance Support Program

Year	Percentage of Premium Paid by the Title IV Fund	Individual Deductible Paid By Claimant	Amount of Claimant's Co-pay for Services
2001	100%	0	10%
2002	100%	$150	12.5%
2003	75%	$300	15%
2004	50%	$600	17.5%
2005	25%	$1200	20%

E. Higher Education Assistance

Under the spirit of Title IV, we suggest that some of the money be used to invest in the education of the victims and their children. The suggested approach is to treat all children in the same manner, regardless of the wealth of their families or the number of siblings in the family. Each child would be entitled to a subsidy for his or her post-high school education for up to four years. It could be used for college, technical school, or a program in arts.

The subsidy would be calculated using the standard Financial Aid Form utilized by virtually all colleges in the United States. It takes into account the household resources available and establishes a recommended level of need that can be filled by grant, work-study and/or student loan and specifies an amount that the household should be able to support.

Children of the victims covered by Title IV would be given sufficient aid to insure that they could attend the best US public college or university they could be accepted in, regardless of the tuition level. The subsidy could include tuition, room and board, fees and/or living expenses, as determined by the Special Master.

To fund this part of the compensation an educational trust would be funded, based on the actuarial projection of what would be needed to provide this benefit for the entire class of children from those now in senior year of college to those who will be twenty-two years of age in 2022. Unexpended funds in the trust in 2022 would revert to the US treasury.

Children wishing to attend private schools would be given the same level of aid, but no more than they would have been entitled to at the best state school admitting them. The purpose of this award is to provide an educational opportunity, not a windfall. Private colleges would directly invoice the trust. In the event of student withdrawal, any tuition refund would be returned to the trust.

Equivalent aid for Special Education, special needs private schools, and the like would be considered on case-by-case basis by a hearing officer.

It would apply to all dependents of the injured or deceased victims who were alive and actually dependents, or who were subsequently born to the household within nine months of September 11, 2001.

F. Non-monetary compensation

The Special Master may wish to explore another form of compensation besides money. For positions required to execute Title IV, a one-time preference could be extended to the victims and their dependents, such as has been done in the past for Veterans. For example:

1. Preferential consideration for jobs when a claimant is one of a group of otherwise equally qualified candidates.
2. Preferential placement for civil service appointment, advancement and promotion, where claimant is otherwise qualified, but may have less seniority than others eligible.

In addition, through cooperation with other Federal agencies and departments, consideration could be extended to those applying for Small Business or minority owned enterprise preferences for US government contracts and/or assistance, when the claimant is one of a group of otherwise equally qualified persons.

G. Offsets to Compensation

Title IV mandates that this compensation must be offset by other sources of aid and support. The Special Master must promulgate rules that prescribe how to assess and weight the impact of:

1. Other income producing assets
2. Life, accidental death and medical insurance proceeds
3. Trusts, annuities and segregated assets not under the claimants' control
5. State and Local grants in aid and interest free or low rate loans
6. Grants from private charities and special funds raised for the victims
7. Special scholarship programs established for victims and their children
8. Employee benefits

H. A Possible Distribution Alternative

The Special Master may consider that, when entitlements are determined, an account could be established at a financial institution convenient to the claimant's residence, through which a secure debit card would be issued in lieu of checks. This could expedite one-time and periodic transfers of money to the claimants, and would provide a ready record of expenditures to help thwart fraud and exploitation of the claimants by third parties. Clearly, there are privacy implications of such a design.

I. Triage Based on Citizenship and Residence

It may expedite the identification, verification of bona fides and certification of claimants to establish several paths for processing, such that each group can be handled most expeditiously without an individual or group of individuals being unnecessarily delayed in a queue of persons with different needs.

Due to the fact that different information must be gathered and validated in each of these cases, the program might handle claim submissions differently, based upon citizenship and immigration status. This would not be to discriminate in entitlement, but to afford appropriate screening and triage for claimants who are:

1. US citizens living in the United States
2. US citizens living abroad
3. Resident aliens, documented and not documented
4. Visitors, tourists and guests on visa or other entry permission
5. Non-resident aliens

J. Claims of Multiple Relatives of a Victim.

The Special Master may consider applying a single standard of preference to sort out competing claims in the timing for hearing claims, and possibly in determining relative awards and entitlements. The Master must acknowledge the laws of the states in which victims reside. Many protect the respective rights of those whose claims derive from less traditional households and extended families, such as those involving same-sex unions, group homes and other living arrangements involving parties not legally married or related by blood.

As an example, the statutes governing descent and distribution in many states confer preferences in intestacy based upon degree of kinship and a presumption about persons who would normally be the object of a deceased person's bounty.

Sample Priority in Intestacy

As an example, the Special Master might assign priority of claims:

First To persons named in the deceased victim's Will

Second To the surviving spouse Legal spouse Common law spouse/partner Prior spouse with alimony or support rights

Third To the deceased victim's issue Natural and adopted children under the age of majority Children of majority age Grandchildren and great grandchildren, per stirpes

Fourth To other related and non-related persons having a valid claim

K. Victim's Own Actions Determinative

Deciding "dependent" status may be simplified by a rule that gives a presumption of orthodoxy and supremacy to those persons whom the deceased or injured person claimed on his or her 2000 Federal Income Tax Return and/or his/her W-4 identification of dependents for 2001 tax purposes, or the nearest equivalent evidence for those who did not file such a return. There could be a refutable presumption established that, if decedent did not claim someone as a dependent, that person was not a dependent entitled to relief under this title.

L. "Physically injured" Defined

This should be defined to mean all persons who were in the buildings struck, or in and about neighboring buildings within the debris zones of the Trade Center and the Pentagon, or in the aircraft involved, or on the ground at Pennsylvania crash site. The Special Master should defer to local authorities who designated the impact and debris zones, including the Department of Defense, with respect to the Pentagon, rather than attempting to develop an independent standard.

M. "Killed" Defined

The Special Master should issue rules that classify victims as all those individuals who are or will be:

1. Proven dead by competent medical examining authorities
2. Dead of injuries sustained in the attacks within one year, i.e. before September 12, 2002
3. Presumptively dead and documented by a competent local authority
4. Missing and likely a victim (e.g. tourist not heard from) as certified by a competent authority local to the deceased person's residence.

Different processes should be applied to separate and expedite claims where there is, no doubt, or a higher degree of certainty, while others may simply take longer to validate.

VI. Organization

A. Functional Requirements of the Special Master's Office

Certainly, the Department of Justice has its requirements and preferences for organizational development and deployment of resources. The following is a checklist of functions that is suggested by the nature and scope of the Special Master's charter and the apparent complexity of the task.

1. Management and Administration
a. Administration
b. Budgets and Appropriations
c. Human Resources
d. Accounting, Oversight and Reporting

2. Investigators
a. Certification and Entitlement
b. Documenting Missing Persons
c. Fraud and Corruption

3. Hearing Officers and Administrative Support
a. NYC Metro Area
b. Pentagon Area
c. Circuit Rider to other US Locations Convenient to Claimants
d. Special Office for Foreign Nationals

4. Ombudsman to Cut Red Tape
a. Claimants' Inquiries and Appeals
b. Contractors, Suppliers and Others

5. Database Management and Tracking System
a. Claimants
b. Contractors
c. Payees on Behalf of Claimants
d. Medical Insurance Providers

6. Government Liaison to and Coordination with
a. The White House
b. Congress and OMB
c. Executive Departments Directly Concerned with the Fund
i. Health and Human Services
ii. Immigration and Naturalization Service
iii. Social Security Administration
iv. Internal Revenue Service
d. Department of State
i. Foreign Embassies and Consulates
ii. UN and International Organizations
e. Treasury
f. Federal Courts
i. Bankruptcy Court
ii. District Courts - Civil and Criminal
g. Within Justice: Criminal Division for Fraud
7. Extra-Governmental Liaison
a. State and Local Relief Coordinators
b. State and Local Welfare Agencies
c. Private Charities and Foundations
i. Central Database of Victims and Compensation
ii. Cooperation in Sharing Grant and Relief Information
8. Contracts Administration and Oversight
a. Banks and Trust Companies
i. Entitlement Accounts
ii. Trusts and Guardianships
iii. Educational Trust
b. Medical Insurance Providers
c. Consultants and Other Suppliers
9. Information Technology
a. Computer Systems Acquisition
b. Database Construction and Maintenance
c. Interfaces to Other Federal IT Systems

B. External Resources

1. Use of temporary staff: See USDOJ, Justice Management Division Memorandum for Bureau Personnel Officers, dated September 28, 2001, which cites the use of excepted authority under 5 CFR 213.3102(i)(2) and (3) to use temporary positions, even at Senior Levels.

2. Use of banks and trust companies: Especially in the case of minor claimants and those of diminished capacity, the Special Master should consider using banks and/or trust companies to receive and manage, in trust, the monies to which such claimants are entitled, where a trust arrangement is appropriate. This should be preferable to establishing any new trustee functions within or reporting to the Justice Department.

In addition to locations in metropolitan New York and Washington, DC, it may be appropriate to designate banks in other cities, such as Boston, where a sufficient number of claimants resided.

These institutions have established processes and professional staff in place. They can probably handle incremental responsibilities at a lower cost than a new bureau or independent, individual trustees. The professional fiduciaries have in place the expertise to handle personal trusts, decedents' estates, committeeships and guardianship of incompetents.

In addition, they have experience and infrastructure in the bond indenture trust and employee benefit trust administration businesses that may be useful to handling the lump sum and periodic payments ultimately provided. Many also handle class action suits and escrow arrangements that may be analogous to the requirements of the Special Master for handling thousands of claims. Finally, they are already bonded, insured and subject to oversight and examination.

As an alternative to letting bids, the Special Master may consider forming a pool or consortium of qualified banks to make more facilities available sooner, in more locations.

3. Consultants: The Special Master may wish to use consultants and firms with the expertise and domain knowledge not readily available in the Department of Justice. The types of tasks that are suited to using consultants in this context are:

a. Constructing detailed action plans to include organization, position descriptions, staffing, recruitment, screening, selection of permanent and temporary staff, and selection of outsourced resources
b. Proposing a structure for allocating the appropriation and for distribution of benefits, to include the following essential processes
i. Triage of claimants
ii. An identification scheme to positively identify claimants
iii. Settlement of conflicts among competing claimants
iv. Establishing liaison and communications with other agencies
v. Establishing a clearinghouse with charities and local aid agencies for claimant payments information
vi. Providing for immediate cash assistance through banks
vii. Developing the income replacement approach (if any)
viii. Establishing a group for medical insurance and treatment
ix. Managing the RFP and bid process for the same
x. Establishing a trust for higher education for children of victims
xi. Consortium to provide special education and counseling needs
xii. Exploring employment placement and career opportunities
xiii. Prototype trusts for minors and incompetents, and selecting trustees
xiv. Arranging for local, temporary stewardship for the incapacitated

VII. Information About the Authors

The authors are principals of The Alliance of Fiduciary Consultants International, Inc., of Parsippany, New Jersey. Collectively they possess over one hundred years of experience in managing trust businesses in money-center and regional banks and in consulting to leading financial institutions.

In addition, the firm maintains active, collaborative associations with other large and small firms specializing in many aspects of insurance and investment services and those with expertise in human resources, process design and information technology.

For more information, call       or refer to our website:     

Respectfully submitted,

The Alliance of Fiduciary Consultants International, Inc.
Parsippany, NJ

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