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[Eric] Oftentimes, the most audacious scandal — [News Anchor] Johnson and Johnson. [News Anchor] Baby powder and other talc products cause cancer. [Eric] — involves the most routine paperwork. In August 2024, Johnson and Johnson created a subsidiary in Texas. They called it Red River Talc. The managers all based at J&J headquarters in New Jersey. In Texas? No employees, no products, no real business at all. Just paperwork. Red River is registered here. We found the phone number. But when we called — [Secretary] You’re speaking to CT Corporation. So we're not Johnson and Johnson. We're CT Corporation. And that's really all I'm going to say. A month later, it all made sense. A Johnson and Johnson subsidiary filing for bankruptcy protection for the third time. Johnson and Johnson is one of the most profitable companies in America. It's worth more than $350 billion. Why would one of the most profitable companies in the world create a subsidiary only to declare it bankrupt not once, but three times since 2021? So I started to dig into it. The allegations, the documents hidden from the public and the legal maneuvering. Something bigger emerged. Legal experts believe it's the end game of a decades-long strategy that could help J&J escape responsibility for thousands of cancer cases while thousands of women are left fighting battles on two fronts: against the disease, and against a justice system that is failing them. The question is will J&J’s strategy work? If a company can get by with these types of tactics, then the American people are in serious danger. Most likely, my mother used the powder. That was the big thing back then, in the 40s and 50s. [J&J Ad] What's that stuff? Johnson's baby powder. [Mary Ann] I have two girls, and I've also used it on them. And then in turn, they used it on their sons, their children too. Woman like Mary Ann trusted Johnson and Johnson's baby powder for generations. It wasn't just a product. It was a ritual passed down from mother to child. The marketing worked so well that by the late 1960s, an internal memo crowned baby powder the cornerstone of Johnson and Johnson's entire baby business. The product itself was simple. Talc, a mineral mined from the earth. But in 1966, academics published a troubling discovery: Talc had no medicinal value. Worse, it was linked to three deaths. The warning made its way through Johnson and Johnson's executive offices. There was a concern starting in the 1970s about asbestos being in talc, because of testing done by the FDA. That's Jessica Dean. She's a plaintiff's attorney. For over a decade, she's been fighting Johnson and Johnson in court over the deadly discovery of asbestos in talc, the mineral used in baby powder. The problem is, is that talc and asbestos often grow together it has been known for decades to be a common impurity in talc. Asbestos causes mesothelioma, a cancer that destroys organ linings from within. It's also linked to ovarian cancer. No amount of processing can make it safe. You're mixing a carcinogen into a powder product designed to be used on children and designed to be used in our homes. And that's the problem at the core of what Johnson and Johnson did. The government had concerns pretty early. In 1972, they called a meeting to review an FDA study that found asbestos in a huge chunk of products on store shelves. Five members of J&J went along with some other industry groups. And this is where the paper trail picks up. ing to the meeting summary, an industry lobbyist pushed to keep the FDA study secret, saying it could cause great economic hardship for the companies. J&J said that the government's positive asbestos tests were faulty and that their own tests came back negative. That's more or less the company's position on testing to this day. [Jessica] They will boast, “Look at how many tests we've done that don't show asbestos,” and they use tests that were underpowered. A simple example I can think of is if you are trying to weigh a feather, you don't use a bathroom scale. It's not going to show up. You need to have something that is more sensitive. Coming out of that meeting, the government agreed to let companies self-test, and Johnson and Johnson promised to share their own records, swearing they found nothing concerning. When they made that promise, they had already done testing revealing asbestos in the actual samples from Dr. Lewin at the FDA. In fact, a third of the fibers in baby powder powder were tremolite asbestos. There were over 400 samples evidencing asbestos in talc that J&J knew about after they promised our government, “We'll give you everything,” and we now know they didn't give them any of it. Jessica isn't the only one alleging this. At this point, it's more or less common knowledge. Real people paid the price. [Mary Ann] Never thought that I would have cancer. It was, you know, it was a shock. First time, the tumor was the size of a cantaloupe. [Eric] Mary Ann beat ovarian cancer in 2008, only to see it return four years later. [Mary Ann] One of the hardest things was — I couldn't see my grandchildren. Because they were both in school, and I couldn't be around people that might have germs. I didn't see friends. [Eric] If you had a chance to speak directly with Johnson and Johnson executives, what would you ask them? [Mary Ann] Why? Why did you lie? Why did you keep it hidden for so long? The answer may lie in J&J's own documents. So there's a series of documents, and we even found a videotape of something called “Baby Camp.” [Eric] One of the documents outlines trust. [Jessica] They said the way you get that emotional trust is the mother baby bond, is making people, when they think of Johnson and Johnson, think about the care a mother has for their brand new infant and that if you can tap into that, you're going to make bags of money. And that's not something I came up with. That's their visual depiction of a bag of money with the words “mother-infant bond” on it. And look, if they had a safe product, go for it. But once you know concretely 60 years ago that there is an impurity in that powder you're crushing and putting in a bottle to be put on babies, and that that impurity has been known to kill people, this becomes horrific. And they built this as the backbone of a company that we all rely on. For decades, the whole thing went like clockwork. Concerns about talc would surface, and J&J would perfect the art of making them disappear. They would hire experts that they believe they could control. And that's the word they used in their own documents. They would go after anyone who tried to show the truth and say, “Let's compromise them,” again, that is the word they used over and over and over again. But by the late 2010’s, the strategy fell apart. Cancer victims started winning lawsuits against Johnson and Johnson. And then in 2018, the dam broke. A Saint Louis jury yesterday awarded $4.1 billion in punitive damages and $550 million in compensatory damages to 22 women and their families, who claimed that asbestos in the product had caused their ovarian cancer. [Eric] But that lawsuit was just the start. Right now, 50,000 women are suing Johnson and Johnson over ovarian cancer from their baby powder. The potential liability? Tens, if not hundreds of billions of dollars. It could be existential, even for a giant like J&J. Which is why Johnson and Johnson is desperately trying to build an escape route through that Texas company, Red River Talc. [Andy Birchfield] It’s frightening. If Johnson and Johnson succeeds with this, then this will become the strategy of every company that is facing major liability. This is Andy Birchfield. He’s helping lead the major class action lawsuit against Johnson and Johnson on behalf of ovarian cancer victims, including Mary Ann. What is Red River Talc? It's just a made-for-bankruptcy subsidiary. The subsidiary at the start? It's part of something called the “Texas Two-Step.” Here, a super rich and profitable company like J&J creates a subsidiary. They take that subsidiary, and they register it in Texas. The subsidiary holds everything related to the baby powder. The good stuff: the sales and profits. And the bad: the lawsuits. Then, using a quirk in Texas law, they split it in two. And instead of calling it a division, they call that a merger. It’s called a divisive merger. [Eric] One company gets all the money and assets. Let’s call it “good company.” The other gets the lawsuits. Let’s call that “bad company.” And then, they take that good company and move it back to New Jersey. And the bad company? That’s Red River Talc. That number in Texas I called? They basically recieve their mail. And Johnson and Johnson takes that bad company and declares bankruptcy in Texas. [Andy] That's what's at stake here, is will bankruptcy prove to be an escape hatch for corporate misconduct? Bankruptcy doesn't mean failure. It's a time out. Everything pauses while you fix what's broken. The catch? Courts watch your every move. Real companies move fast in bankruptcy. They don't want a court telling them how to run their business. But Red River Talc? It's just paper. There's no factories. There's no business to watch over. But when it declares bankruptcy, those cancer lawsuits freeze. And that's exactly what J&J wants. They can hold the victims hostage. They just use it as a weapon. When we're talking about people who have had some sort of asbestos exposure or similar allegations, the claimants are dying. [Eric] That's Melissa Jacoby. She's a law professor and expert on America's bankruptcy system. [Melissa] In the meantime, all those jury trials are being canceled. J&J claims this is about fairness, that the bankruptcy creates an orderly process for victims. And if you want to see how fair it really is, just look at what happened at the paper giant Georgia-Pacific. In 2017, Georgia-Pacific dumped all of their asbestos cases into a subsidiary and declared bankruptcy in North Carolina. Those cancer victims have not received a dime. That case, it's just been held hostage since 2017. Here's the kicker: While the victims waited, many died. Meanwhile, Georgia-Pacific has paid their parent company, Koch Industries, $3 billion in dividends, triple what they offered victims. [Andy] They're using this time as a lever to just force women and their families into accepting pennies- on-the-dollar settlement offers. [Eric] J&J is offering $9 billion. it sounds like a lot until you divide it between the tens of thousands of victims, their lawyers and anyone who gets sick in the future. Many of our clients are having to turn to bankruptcy, legitimate bankruptcy because of the mounting cost in medical bills. What's more, the $9 billion pool of money or bankruptcy trust would be administered by someone on J&J's payroll. [Andy] She's been paid $1.8 million over the course of these past three years for work for J&J. It is troubling. And crucially, the settlement would cap the company's future liability. Which is the end game of this whole scheme. There may be women who are long-term users who do not develop ovarian cancer until 2030 or 2040. If the Texas Two-Step works, future victims lose their constitutional right to a jury trial. Instead of a court, they'd face a bankruptcy trust. If corporate America can resort to a bankruptcy and strip victims of a right to a civil trial, we've just taken the U.S. Constitution and we’ve ripped out the seventh amendment. The good news? So far, the bankruptcies have been rejected. First, North Carolina. J&J picked it for easy bankruptcies. The judge said, “No. You’re a New Jersey company.” Round two: New Jersey. Where they couldn't explain how they're suddenly broke. Two tries, two fails. And now they're trying in Texas. And the thing is, there's more fishy stuff in this story. We can't cover it all. We asked J&J about talc safety and bankruptcy. If you want to read their full response, go ahead and press pause now. But it's basically 270 words defending their talc and blaming greedy lawyers and a gullible media. But on bankruptcy? Complete silence. And now they're claiming 80 percent of victims want the $9 billion settlement deal. But there are credible reports that J&J recruited women with cancers that can't be linked to baby powder. In other words, women who wouldn't get a payout from J&J unless they joined in support of this $9 billion settlement. What seems to be happening, at least in the Johnson and Johnson example and perhaps others, is a recruitment of claims that are far less rigorously evaluated. We call it “stuffing the ballot box.” That's what they’re doing. These are not the ways we would ordinarily treat commercial creditors in bankruptcy. While J&J continues to push their scheme, There's actually a bipartisan bill that would stop them sitting in Congress right now. I testified at a Senate hearing in 2023 about these cases, and there was bipartisan frustration with corporate use of bankruptcy when the companies were very profitable and their only problem they were trying to solve is having liability for mass tort. I am hopeful that Congress will intervene here. I'm also deeply concerned because I know that J&J has tremendous lobbying power and they are lobbying for legislation that would go the other way. Meanwhile, women like Mary Ann are left waiting. [Mary Ann] Johnson and Johnson has to be held accountable for what they've done. They're not going bankrupt. And, again, that'll set a precedent for other companies to try to get away with all this. And it's not right. It's not morally right, what they're doing.