When faced with an opioid epidemic lawsuit and finally filed for bankruptcy, Purdue Pharma needed Sackler’s funds to settle billions of dollars in legal claims. In return, the Sacklers were able to demand protection from lawsuits.
Members of the Sackler family said on Monday that before the company filed for Chapter 11 in the United States, the billions of dollars they collected from Purdue Pharma were the result of additional cash and were not part of a “secret plan” that abused the bankruptcy system.
In court documents, the lawyers of members of the Sackler family that control Purdue Pharma dismissed the suggestion of U.S. District Judge Colleen McMahon that the company’s payment of more than $10 billion in the years prior to its bankruptcy in 2019 may constitute an abuse of the Chapter 11 process. According to court documents, about half of the money is used for taxation or business investment.
Allegedly, the Sacklers have run out of Purdue Pharmaceuticals’ cash for several years. When it finally filed for bankruptcy due to lawsuits over the opioid epidemic, the company needed the Sacklers’ money to settle billions of dollars in legal claims. In return, the Sacklers were able to demand protection from lawsuits.
The Sacklers rejected the view that there is any “plan” to “deliberately weaken Purdue so that it cannot be reorganized without” their financial contribution.
Sackler’s lawyers said there was no evidence that the payments were abusing the bankruptcy system “as part of a secret plan”. They call this idea “pure fiction.”
McMahon is considering whether to overturn a bankruptcy court ruling that saved the Sackler family from liability for the opioid epidemic. If she finds enough evidence of abuse, she can send the matter back to the bankruptcy court to reconsider the shield.
According to the US Centers for Disease Control and Prevention, more than 500,000 people have died of opioid overdose since 1999.
Sacklers argued that these payments were made as business grew, including the increase in revenue after Purdue Pharmaceuticals resumed OxyContin’s patents in 2008.
The Sacklers denied wrongdoing and did not file for bankruptcy. They have contributed approximately US$4.5 billion to the settlement of opioid-related lawsuits in exchange for protection in future litigation.
Purdue Pharma argued in a separate document on Monday that these protective measures are necessary because the company cannot withdraw from the bankruptcy process if it does not resolve its opioid-related claims against itself and Sackler.
The US Trustee, the US Department of Justice’s bankruptcy watchdog, has long opposed this type of litigation protection, and said in court documents on Monday that the law does not provide such protection for those who have not filed for bankruptcy.
The American trustee accused the Sacklers of “piggybacking” Purdue Pharmaceuticals to protect themselves from bankruptcy.
“If this is not an abuse of the bankruptcy system, it is unclear what it is,” said the American trustee.