In a stunning decision, a federal judge in New York rejected a $4.5 billion bankruptcy settlement that consolidated lawsuits against OxyContin maker Purdue Pharma because it gave the company’s owners, the Sackler family, inappropriate financial protections.
The Associated Press describes the original deal:
Purdue sought bankruptcy protection in 2019 as it faced thousands of lawsuits claiming the company pushed doctors to prescribe OxyContin, helping spark an opioid crisis that has been linked to more than 500,000 deaths in the U.S. over the last two decades.
Through the bankruptcy court, it worked out a deal with its creditors. Members of the Sackler family would give up ownership of the company, which would transform into a different kind of entity that would still sell opioids — but with profits being used to fight the crisis. It would also develop new anti-addiction and anti-overdose drugs and provide them at little or no cost.
Sackler family members also would contribute $4.5 billion in cash and charitable assets as part of an overall deal that could be worth $10 billion, including the value of the new drugs, if they’re brought to market.
But U.S. District Judge Colleen McMahon rejected that arrangement on Thursday, ruling that the Sackler family should not be shielded from additional lawsuits.
She suggested that Purdue may have abused the bankruptcy system by transferring over $10 billion to the Sacklers before the drugmaker filed for Chapter 11.
The Wall Street Journal reports:
Judge McMahon said Thursday that about half of the distributions were either invested in offshore companies owned by members of the Sackler family or deposited in trusts “that could not be reached in bankruptcy.”
“When the family fortune was secure, the Sackler family members withdrew from Purdue’s board and management,” Judge McMahon said. “Bankruptcy discussions commenced the following year.”
“This is a seismic victory for justice and accountability that will re-open the deeply flawed Purdue bankruptcy and force the Sackler family to confront the pain and devastation they have caused,” Connecticut Attorney General William Tong said.
Tong was among several AGs who had opposed the bankruptcy settlement.
New York Attorney General Letitia James said her litigation against the Sacklers will continue in order to “hold them accountable for their unlawful behavior, one way or another.”
The Sacklers will likely appeal. They have denied all wrongdoing, even though Purdue pleaded guilty to three felonies last year, including the charge that they pushed OxyContin on doctors who they knew were illegally distributing it.