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After more than a year of high-stakes negotiations with billions of dollars on the line, the bankruptcy plan of Purdue Pharma, maker of Oxycontin, removed a major hurdle late Wednesday.
Federal Judge Robert Drain of White Plains, NY, has launched a controversial deal despite objections from dozens of state attorneys, laying the groundwork for the company’s final vote of creditors expected this summer.
The drugmaker filed a claim for protection of Chapter 11 in 2019 faced with an avalanche of lawsuits related to its aggressive opioid sales practice.
Public health experts and many government officials say the introduction of Oxycontin has fueled a national deadly opioid epidemic.
This development brings members of the Sackler family, some of whom own Purdue Pharma and who were members of the company’s board of directors, one step closer to winning immunity from future opioid litigation.
According to legal documents filed as part of the case, that immunity would be extended to dozens of family members, more than 160 financial funds and at least 170 companies, advisors and other entities associated with the Sacklers.
“The Sacklers are paying $ 4.275 billion and are planning heavily and expect to be done with this chapter,” Marshall Huebner, a lawyer representing Purdue Pharma, said during a hearing last week.
One of the firms that would provide protection from future opioid lawsuits under the agreement is Luther Strange & Associates, founded by former U.S. Senator Luther Strange (R-Alabama) who helped Purdue Pharma place Republican attorneys with a bankruptcy plan.
While Purdue Pharma has he twice pleaded guilty to federal crimes regarding his opioid marketing schemes, no member of the Sackler family has faced criminal charges.
Appearing before the congressional council last December, members of the Sackler family said they had done nothing wrong. “Family and board behaved legally and ethically,” David Sackler testified, who was on the board of Purdue Pharma for six years.
In addition to contributing money from their personal happiness, the Sacklers agreed to relinquish control of Purdue Pharma. They will, however, retain ownership of other companies, will not admit injustice and will remain one of the richest families in America.
Two dozen states continue to oppose the bankruptcy, which is being negotiated mostly behind closed doors. They claim that they would be improperly deprived of the authority to sue family members for alleged wrongdoing.
“I don’t believe … at this point the plan is affirmative,” Andrew Troop, a lawyer representing the “disagreeing” coalition, said during a hearing last week.
But Judge Drain said this phase of the bankruptcy proceedings did not focus on the final approval of the plan.
Instead, the court assessed whether Purdue Pharma and Sacklers provided sufficient information and transparency to allow creditors to make an informed decision on the financial basis of the deal.
Despite the significant veil of secrecy surrounding the proceedings – which it encompassed an extensive Sacklers investigation it will probably never be made public – Drain has hinted that a so-called “disclosure statement” is appropriate.
“I have found that the disclosure statement contains adequate information,” he said on Wednesday.
Lawyers representing Purdue Pharma and other parties in the bankruptcy proceedings said negotiations were continuing.
“We mediate as we talk to states that disagree,” Huebner said Wednesday. “We are still open and listening as much as we can to all other remaining objections from now until confirmation.”
Voting and final approval is expected in August
In the coming weeks, more than 600,000 individuals, companies and governmentsThose who have claims against Purdue Pharma will vote on the package, which lawyers involved in the process have described as one of the most complex and controversial bankruptcies ever.
The final confirmation hearing is scheduled for August 9. Judge Drain said he believes the plan offers the best chance of financial relief to those affected by Purdue Pharma Oxycontin’s business.
Proponents of the bankruptcy agreement say the alternative would be a chaotic argument of risky and costly litigation. “Billions would be spent on legal fees,” Huebner said last week. “It would be years before the applicants can recover.”
The reorganization plan also includes a detailed formula that would be used to allocate hundreds of millions of dollars each year to help opioid-affected communities and individuals.
An increasing number of government officials have signaled that they expect to vote for the agreement.
But critics, including more than 20 generally state-owned Democratic attorneys, say Sacklers improperly subverts the bankruptcy of their company without filing for bankruptcy themselves.
“The bankruptcy system should not be allowed to protect billions that have not gone bankrupt,” Massachusetts Attorney General Maura Healey said in an interview with NPR last month.
Some lawyers have also questioned whether a bankruptcy court is the right place for a case involving an addiction crisis that has killed hundreds of thousands of Americans.
“[T]the most important Chapter 11 case in history will be determined by a procedure that does not coincide with the basic concepts of appropriate procedure, ”wrote Adam Levitin, who teaches law at Georgetown University, in an article published last month in the Texas Law Review.
In a lawsuit filed in bankruptcy court on Tuesday, Jonathan Lipson, a legal expert at Temple University, who also represents a client with a lawsuit against Purdue Pharma, noted that this case was complicated by allegations of criminal conduct against the Sacklers Ministry of Justice last October.
“These cases are overshadowed by one, critical question: for whom is he responsible [Purdue Pharma’s] confessed to the crimes and damage they inflicted? ” Lipson wrote in his proposal.
Lipson requested the appointment of an independent examiner to verify that the Chapter 11 procedure was properly performed.
Again, the Sacklers denied any illegality and were never charged with crimes. As part their alignment with the DOJ, members of the Sackler family paid $ 225 million denying the allegations.
Sackler family pushes against “false accusations”
During last week’s hearing, a lawyer representing the Raymond Sackler family branch said they were created a website designed to offer a rebuttal to Sacklers critics.
“Members of the Raymond Sackler family have repeatedly expressed regret that OxyContin, which continues to help patients suffering from chronic pain, has unexpectedly become part of the opioid crisis,” the family said in a statement.
In civil lawsuits already filed against the Sacklers, government officials claim that some family members had direct knowledge about the highly dependent nature of Oxycontin, but continued to push Purdue Pharma’s sales team to maximize profits.
The DOJ’s deal with Sacklers also included allegations that some family members were engaged in a “fraudulent” wealth transfer and approved a marketing plan that focused on pushing Oxycontin sales to “extreme receptors”.
According to Statement of the Ministry of Justice, the program led “health care providers to prescribe opioids for use that was unsafe, ineffective, and medically unnecessary, and which often led to abuse and diversion.”
The Sacklers claim they did nothing wrong and behaved ethically. If this bankruptcy plan is approved and upheld on appeal, it is unlikely that the allegations will ever be tested in court.
More more than 400 civil cases already filed against members of the Sackler family for alleged violation of the law would be stopped.