The battle over who will bear the costs of the destruction of the World Trade Center and who will control the reconstruction of Lower Manhattan -- already a full-blown brawl involving legions of lawyers and lobbyists -- is continuing to escalate.
On Thursday, lobbyists for Larry Silverstein, the developer who holds the lease of the World Trade Center, and for the Port Authority of New York and New Jersey, which owns the property, helped ensure that a bill passed by the House of Representatives on airplane security included broad language protecting them from claims by victims of the Sept. 11 attacks and their families.
That came as a group of investors led by Silverstein prepared to answer a lawsuit that Swiss Reinsurance Co filed against them last week in US District Court in Manhattan. In the suit, the insurer, known as Swiss Re, seeks to limit how much it will have to pay to cover the destruction of the twin towers. Lawyers representing the various parties involved agree that more lawsuits are likely to follow.
The issues are clear: No one wants to be left facing a mountain of claims from victims and their families; no insurer wants to be part of what could be a US$7.2 billion payment to cover the loss of the buildings; and no lender, investor or developer wants to miss out on a piece of what may be one of the biggest insurance payouts ever.
Resolving those issues is anything but clear. The effort to sort out who will pay and who will profit involves fragile alliances, conflicting interests, and charges and counter-charges of hypocrisy as Silverstein tries to limit his liability while maximizing the obligations of insurers, at least one of which -- Swiss Re -- is already fighting back.
Time is short. Silverstein paid about US$6 million on his mortgage last month; the next payment is due next week, according to GMAC Commercial Mortgage, the General Motors subsidiary that loaned him US$564 million. For now, he can cover that and other expenses -- including US$10 million a month in ground rent to the Port Authority -- out of a pool of lease payments and security deposits paid in advance by trade center tenants. But even with the fund he can probably afford to hold out for no more than four months without receiving insurance payments, others close to the matter said.
To plead his case in Washington, Silverstein -- who has the least to lose financially and the most to gain -- retained Jack Quinn, the former White House counsel who last January engineered an inauguration-day pardon issued by Bill Clinton for Marc Rich. He lobbied Congress and the Bush administration to limit how much money victims can obtain from Silverstein's real estate companies, which drew criticism from another powerful lobbying group, trial lawyers.
"This guy is trying to get US$7.2 billion in insurance and he wants to limit his liability to US$1 billion," said Carlton Carl, director of media relations for the Association of Trial Lawyers of America. "Why? If you start limiting everybody's liability, then nobody is accountable to anyone. It subverts our entire legal system, which calls for personal and corporate responsibility for harms that one causes."
Relying on law firm
In New York, Silverstein is relying on Herbert Wachtell and his partners at the law firm of Wachtell, Lipton, Rosen & Katz to force insurers to pay US$7.2 billion, twice the amount they contend they are obligated to pay for the destruction of the trade center. Silverstein says he is entitled to the larger sum, and needs all of it to finance reconstruction.
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