States: Sackler family members abuse bankruptcy process

NEW YORK — A federal judge is expected to dismiss a sweeping settlement of thousands of lawsuits against OxyContin maker Purdue Pharma, a group of states said in 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 allegations that family members took more than $10 billion from the company, steered it into bankruptcy, then used a settlement crafted by a bankruptcy court to gain legal protection for themselves, Washington State Solicitor General Noah Purcell told U.S. District Judge Colleen McMahon.

“If that wasn’t an abuse of the bankruptcy process,” Purcell said, “we don’t know what would be.”

The plan, drawn up 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. even, to combat 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 drugs and illicit drugs.

In exchange, family members must be protected from lawsuits accusing them of prodding the crisis. The lawsuits accuse the company and family members of helping to trigger the overdose crisis by aggressively marketing OxyContin, a powerful opioid painkiller.

They would not be immune from criminal charges. They don’t face any now, although an activist group has pushed federal authorities to bring charges against some family members, including some people who were executives and board members of the company. business and others with no involvement other than receiving money. From this. Much of their wealth is held in offshore trusts that could be difficult to access in US lawsuits.

Most state and local governments and thousands of individual victims of the epidemic accepted the agreement, although many did so reluctantly. These groups now join members of the Purdue and Sackler family in defending the plan against calls 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 some individual victims.

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

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

The family’s lawyers said the distributions were larger because the company was making more money and there was no evidence that any of them were trying to manipulate the bankruptcy system.

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

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

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

Marshall Huebner, a Stamford, Conn.-based Purdue attorney, said the states were misrepresenting some details of the settlement plans, including how U.S. bankruptcy judge Robert Drain insisted members of the Sackler family are protected from lawsuits involving only opioids manufactured by Purdue.

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 efforts to address the crisis.

McMahon cut it. “My questions relate to 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 a super majority.

Yet, Huebner noted, there would be far less money to work on the crisis without money from Sackler family members. He said if they could be sued and win, they might not pay the settlement. And if they lose any more 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 want the Sackler family members released.

While some states could sue the family, he said, others would not accept a payment plan that spans nine years because of the risk that the Sacklers’ money will dry up before the installments can be made. all get paid.

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

He noted that government and private creditors — except for individual victims — have agreed to use all the money they receive to fight opioids, which kill 200 people a day in the United States. And that money, he said, could start flowing soon if allowed.

“If it fails, if it blows up,” 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 he was prescribed opioids after he was injured in a car crash, said the settlement hurts .

On Tuesday, the Connecticut resident showed McMahon a poster of photos of her son and pleaded for the settlement not to be allowed.

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

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

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