United States: Sackler family abuse bankruptcy process

NEW YORK (AP) – A federal judge is expected to reject a sweeping settlement to thousands of lawsuits against OxyContin maker Purdue Pharma, a group of states said at a hearing on Tuesday, arguing that the protections it extends to members of the Sackler family who own the business are inappropriate.

States have credible claims that family members took more than $ 10 billion from the business, ran it into Alabama bankruptcy laws, then used a settlement reached in bankruptcy court to gain legal protections for themselves, Washington State Attorney General Noah Purcell told U.S. District Judge Colleen McMahon.

“If this is not an abuse of the bankruptcy process,” Purcell said, “it is not clear what it would be.”

The plan, developed largely by those with claims against Purdue and approved in September by a federal bankruptcy judge, calls on members of the Sackler family to contribute more than $ 4 billion in cash, plus the company itself , to fight the opioid epidemic, which has been linked to more than 500,000 deaths in the United States over the past two decades, including deaths linked to both prescription and illicit drugs.

In return, family members must be protected from legal action accusing them of spurring the crisis. The lawsuits accuse the company and family members of helping spark the overdose crisis by aggressively marketing OxyContin, a potent opioid pain reliever.

They would not be protected against criminal charges. They face none now, although an activist group has pushed federal authorities to lay charges against some family members, which include people who were leaders and board members. company and others with no other implication than receiving money. From this. Much of their wealth is held in offshore trusts which may be difficult to access in the context of lawsuits in the United States.

Most state and local governments and thousands of individual victims of the epidemic accepted the deal, although many reluctantly did so. These groups now join with family members Purdue and Sackler in defending the plan against appeals from a US Department of Justice office, eight states, the District of Columbia, some Canadian local governments and Native American tribal groups. , as well as a few individual victims.

At Tuesday’s hearing in a New York City courtroom, McMahon focused on the $ 10.4 billion in transfers from Purdue coffers to family trusts from 2008 to 2018. Near the half of that was used to pay income taxes.

The judge said that by taking larger distributions in the decade leading up to the company’s bankruptcy, members of the Sackler family “have made themselves necessary” to negotiations over the amount of money available to them. applicants.

Lawyers for the family said the distributions were larger because the company was making more money and there was no evidence that either of them was trying to manipulate the bankruptcy system.

Those who appealed the plan have argued that the protections the Sacklers enjoy are more generous than they might have received had they themselves filed for bankruptcy. Bankruptcy would also protect the company from legal action.

They also said allowing the deal would usurp states’ ability to prosecute members of the Sackler family to hold them accountable.

“What the confirmation of this plan does in this case is deprive the states of police powers,” Maryland Assistant Attorney General Brian Edmunds said “to protect the public from harm.”

Marshall Huebner, an attorney for Purdue, based in Stamford, Connecticut, said states inaccurate certain details of settlement plans, including how U.S. bankruptcy judge Robert Drain insisted members of the Sackler family be protected from lawsuits involving purdue’s only opioids.

He also noted that the overwhelming majority of governments have agreed to the plan, which would funnel money to individual victims of the opioid crisis and to anti-crisis efforts.

McMahon cut it. “My questions focus on aspects of the legality of the releases,” she said. “I don’t want to hear about the wonderful things he’s going to do. I know it was approved by qualified majority.

Yet, Huebner noted, there would be a lot less money to work on the crisis without the money from the Sackler family members. He said if they could be sued and succeed, they might not pay the settlement. And if they lose any other lawsuits – they now face around 860 – they might not be able to afford it.

Kenneth Eckstein, an attorney for a group of government entities supporting the settlement, said they also wanted the Sackler family members released.

If some states could sue the family, he said, others would not agree to a nine-year payment plan due to the risk that the Sacklers’ money would run dry before all payments could. be paid.

Mitchell Hurley, an attorney for unsecured creditors who sought chunks of Purdue’s assets, said that if most of these groups had not joined together to agree a settlement, “Purdue’s value was going to be wasted and go to lawyers “rather than address the opioid crisis.

He noted that the government and private creditors – with the exception of individual victims – have agreed to use all the money they receive to fight opioids, which kill 200 people a day in the United States. authorized.

“If it fails, if it explodes,” Hurley told McMahon, “it will be the creditors who will suffer the consequences.”

But Maria Ecke, who lost her son Jonathan in 2015 to an addiction that began 17 years earlier when she was prescribed opioids after being injured in a car crash, said the regulations hurt .

The Connecticut resident showed McMahon a poster of photos of his son on Tuesday and pleaded that the settlement not be allowed.

“The complainants have suffered and continue to suffer physical and mental injuries,” she said.

McMahon said she hopes to rule by next week, although a decision could take longer. His will certainly not be the last word; whatever decision it makes, it is likely to be appealed to a higher court.