By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.
Last week, fifteen states, including Massachusetts and New York, dropped opposition to the bankruptcy exit plan of Purdue Pharma, making it likely the plan will be approved when it comes before federal bankruptcy Judge Robert Drain on August 9, according to NPR, 15 States Drop Opposition To Controversial Purdue Pharma OxyContin Bankruptcy.
Faced with thousands of lawsuits over Its sales of OxyContin, Purdue filed for bankruptcy in September 2019 (as I discussed in Purdue Files for Bankruptcy, Agrees to Settle Some Pending Opioids Litigation: Sacklers on Hook for Billions?)
Recall at the time:
But 24 other state attorney’s-general – including California, Massachusetts, New York, North Carolina, and Pennsylvania – as well as the District of Columbia, oppose …the efforts of Purdue’s lawyers to wield the bankruptcy shield to protect the personal assets of the Sacklers – none of whom has sought to declare personal bankruptcy.
That earlier post discussed the shenanigans in which various Sacklers had engaged to preserve personal assets – including a New York Times report of $1 billion in family wire transfers – as well as other avenues the state AGs might pursue to reach personal Sackler assets, despite the Purdue bankruptcy filing.
These state efforts have now apparently come to naught and this exit plan vindicates Purdue’s lawyers, who have succeeded in sheltering the bulk of Sackler family assets from Purdue-related claims, without any need to declare personal bankruptcy.
As part of the exit plan, Purdue has agreed to release tens of millions of documents and pay approximately $4.2 – $4.5 billion over nine years. The Sackler family would cede ownership of Purdue and would be shielded from future opioid lawsuits.
Purdue has on two occasions, in 2007 and 2020, pleaded guilty to federal criminal charges related to its opioid marketing practices. According to a report local CBS television affiliate, KKTV 11, Opioid giant Purdue Pharma’s bankruptcy exit plan gains steam with OK from more states :
Last year, the company pleaded guilty to federal criminal charges and agreed to pay $225 million to the federal government.
In a separate civil settlement announced at the same time, Sackler family members agreed to pay the federal government $225 million, while admitting no wrongdoing.
Yet as part of this bankruptcy exit plan, no member of the Sackler family will have to apologize or admit responsibility for fueling the opioids epidemic, let alone face criminal liability, although they will have to forgo naming rights for buildings they might endow until the all payments under the plan are made. That’ll show ‘em!
So, no Sackler will go to jail. And the Sackler family will retain much of its current fortune, which the Wall Street Journal reported in April is worth roughly $11 billion, according to Purdue’s Sackler Family Owners Worth $11 Billion, Documents Show. This $4 billion and change Purdue payout will not even knock the family out of the billionaire class. (Note that $11 billion is only for the Sackler branches with current Purdue holdings; it thus excludes another branch of the family.)
According to the WSJ:
Members of the Sackler family who own bankrupt OxyContin-maker Purdue Pharma LP are worth approximately $11 billion, documents released Tuesday by a congressional committee show.
Summaries of the family wealth, turned over to Rep. Carolyn Maloney (D., N.Y.), also were seen by Purdue’s creditors during settlement talks, according to representatives for the two branches of the company’s family owners.
A third branch of the family is no longer involved in Purdue Pharma and wasn’t included in Tuesday’s release by Rep. Maloney, who chairs the House Committee on Oversight and Reform.
A spokesman for the descendants of the late Mortimer Sackler said no party in the bankruptcy has challenged the accuracy or completeness of the wealth disclosure and that “we hope the focus will now be on concluding a resolution that will deliver timely resources to individuals, families and communities in need.”
Jerri-Lynn here. I wondered if they did make such a challenge, what might they find?
Back to the WSJ:
A lawyer for the late Raymond Sackler side of the family said the amount of the family’s settlement offer exceeds the profits they retained from OxyContin sales. He added that the family supports the release of company documents that demonstrate Sackler family members behaved ethically and legally.
The terms of the settlement allow $175 million held in Sackler family charities to be repurposed towards the bankruptcy exit plan, according to CBS (Jerri-Lynn here: see item 6, July 7, 2021 Mediator’s Report.)
Nine other states, including Connecticut, where Purdue is headquartered, and California, Delaware, Maryland, New Hampshire, Oregon, Rhode Island, Vermont, and Washington, as well as Washington, D.C., still oppose the latest agreement.
Connecticut’s William Tong continues to seek too stymie this exit plan; Tong outlined his thinking in an interview with NPR, Connecticut Attorney General Discusses Opposing Purdue Pharma Bankruptcy Settlement:
TONG: It just doesn’t provide enough justice. We lose more than a thousand people every year in Connecticut. That’s more than a thousand Connecticut families wrecked by the opioid and addiction crisis in which the Sacklers and Purdue Pharma played a central role. And this causes more than $10 billion of economic damage to the state of Connecticut. And as far as I can tell, the Sacklers have stashed away their wealth. They’re not selling any cars or boats or art or houses. And they have to do more to pay for the harm that they caused people in Connecticut and across the country. And this isn’t enough.
Interviewer Mary Louise Kelly pressed Tong on why he wouldn’t accept the settlement:
KELLY: … Let me push you, though, because, you know, we all know perfect can be the enemy of the good. And I don’t hear anyone arguing this is a perfect settlement. But is it not better than no settlement?
TONG: Yeah, it’s never going to be enough, and I acknowledge that. But at the end of the day, this is not just a normal litigation. My job is to pursue justice for families and victims here in Connecticut. And frankly, it’s really important to note, this is an abuse of the bankruptcy process. The Sacklers are not bankrupt. They have tens of billions of dollars that they’ve pilfered from this company. And for them to use the bankruptcy process to shield themselves and protect themselves is an outrage. [Jerri-Lynn here: My emphasis.]
Tong has a key role to play, as Purdue is headquartered in Connecticut. Per the NPR interview:
KELLY: On a practical level, does this fight get harder for you, with Massachusetts and New York among the states dropping opposition?
TONG: It’s always been a hard fight. I knew that when I got into it. But the reason why Connecticut is so aggressive in playing a central role in this is, of course, because I’m the home state attorney general. Purdue Pharma is based in my home city of Stamford, Conn., and many of the Sacklers have in the past and still do call Connecticut their home. So to me, it means that I have a special obligation to be aggressive to hold them accountable.
KELLY: So what’s your next move?
TONG: I’m in constant communication with the eight other states and the District of Columbia who are a no on this settlement proposal, and we are considering and pursuing all of our viable options.
Vermont’s AG, T.J. Donovan, is also fighting on and was quoted as saying, “The idea that billionaires can use their wealth go to bankruptcy court and have their cases dismissed from a state—because they’re essentially putting money toward the deal in bankruptcy court—I find objectionable,” according to ABC affiliate News 10, Vermont won’t join states backing Purdue Pharma bankruptcy plan.
One of the holdouts, Washington Attorney General Bob Ferguson complained: “This settlement plan allows the Sacklers to walk away as billionaires with a legal shield for life.”
A 10th attorney general, West Virginia’s Patrick Morrisey, opposes the deal on separate grounds: That his state would get shorted when the money is allocated. He reiterated that position Thursday.
Alas, the consensus seems to be that despite the continued opposition from the AGs of ten states and Washington, D.C., Judge Drain will approve the exit plan in August.
Massachusetts and New York State AGs Have Decided to Throw in the Towel
Two prominent state AGs, Maura Healey of Massachusetts and Letitia James of New York, who had previously targeted Purdue and the Sacklers, have now capitulated. According to NPR:
Speaking with NPR in May, Massachusetts Attorney General Maura Healey blasted the plan, describing it as a dangerous precedent. “The bankruptcy system should not be allowed to shield non-bankrupt billionaires,” she said.
Healey also objected to a provision of the plan that will generate funds to pay Purdue Pharma’s creditors in part through the future sale of opioids.
Healey has now changed her tune:
In a statement sent to NPR early Thursday morning, Healey said the modified deal brought significant accountability.
“While I know this resolution does not bring back loved ones or undo the evil of what the Sacklers did, forcing them to turn over their secrets by providing all the documents, forcing them to repay billions … will help stop anything like this from ever happening again,” Healey said.
According to NPR, NY state AG James issued a statement Thursday:
… saying the settlement is “not perfect,” but describing it as an important step for communities harmed by the opioid epidemic.
“We’ll be able to more quickly invest these funds in prevention, education, and treatment programs, and put an end to the delays and legal maneuvering that could possibly continue for years and across multiple continents,” James said in a statement emailed to NPR.
At the end of June, James had announced another significant opioid settlement, in which Johnson a& Johnson a greed to settle a New York lawsuit on the eve of trial, as I wrote in Johnson J & J Agrees to Pay New York $230 Million to Settle Opioids Lawsuit; Global Settlement Soon?
The rationale for capitulating on the Purdue exit plan now appears to be that signing onto a settlement now will speed up states getting access to funds to address the ongoing opioids criss. According to CBS:
In a joint online news conference Thursday, some of the attorneys general who signed on noted that their states are in line to get more money faster to fund drug treatment and prevention.
But they continued to express ire with the company and especially members of the wealthy Sackler family who own the company and have not accepted any blame. “No one is happy with the settlement,” New York Attorney General Letitia James said. “Can the Sacklers do more? Hell yeah, they can do a lot better, but it should first begin with an apology.”
Jerri-Lynn here. Is she serious? An apology? Ohh, that demand must have had them quaking in their boots. Say sorry and we’ll all be happy. According to NPR.
While I understand the the appeal of getting access quickly to funds to address the opioids crisis, this proposed exit plan is just the latest in a sad and sorry litany of erosion of the principle of accountability for corporate misdeeds. I reiterate: no Sackler will go to jail. The family won’t even drop out of the billionaire class, and instead, will hang onto the bulk of its fortune.
This doesn’t look like justice to me. Nor, I imagine, to the many people who’ve lost family, friends, and loved ones to opioids.