‘The public is being denied the truth’: Legal expert blasts Purdue bankruptcy plan – STAT

Earlier this week, Purdue Pharma filed a bankruptcy plan that would have some members of the Sackler family, which owns the drug company, relinquish control and pay nearly $4.3 billion to reimburse states, cities, and tribes for the costs associated with the long-running opioid crisis in the U.S. The plan is designed to end nearly 3,000 lawsuits that blamed Purdue for helping to spark a wave of prescription abuse, addictions, and deaths over the past two decades.

As part of the proposal, a new private company with an independent board selected by state and local governments will focus on developing and distributing medicines to address opioid use disorder and overdoses. But approval by creditors is uncertain. Attorneys general from nearly two dozen states, who have fought the company in bankruptcy, criticized the deal.

We spoke with Charlotte Bismuth, a former Manhattan assistant district attorney who recently published a book called Bad Medicine (about a doctor she prosecuted for dealing drugs), calls the bankruptcy plan a heist. And as a member of an opioid advocacy group, she regularly studies court documents concerning Purdue and the Sacklers. This is an edited version of our conversation.

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So in a recent article you wrote about the Purdue bankruptcy plan, which is enormously complicated, you call it a heist. Why?

One of the things I think about is how legal advocacy and how the legal system is being used. What Im trying to say is that this is not a haphazard event. Its a long and strategic plan done for a purpose and these documents are not neutral blueprints. Theyre advocacy documents.

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What do you mean by that?

Theyre advancing an agenda and a set of interests.

Dont they all?

Absolutely, but the difference here is this particular bankruptcy connects to a social crisis in the U.S. that has been going on for two decades and is of massive public interest. And this bankruptcy is substituting for a judicial process that would otherwise provide victims of the opioid epidemic with the judicial relief they have been seeking.

How is it substituting?

I wrote a book about a doctor who sold controlled substances for cash. And as I wrote about the case, I tried to understand where in the legal system were there other cases about the opioid epidemic. And what I learned was rather than having the cases against Purdue remain in a federal court (where thousands of cases around the country were consolidated), Purdue went to bankruptcy court, but was not insolvent. Why? The company pursued a settlement that would result in full civil immunity for its owners, which is pretty extraordinary on a couple of levels, because the owners are believed to be the ones who masterminded the marketing campaign for OxyContin (Purdues opioid painkiller).

My fundamental question was if they go into bankruptcy, will the victims ever have an opportunity to learn the truth about the companys operations? And two, will the public itself have any transparency into the decisions that led to the opioid epidemic? Will victims have their day in court?

I consulted a number of bankruptcy professors and learned that there were mechanisms designed in cases like these with a question of social importance to provide answer to the public. Specifically, a bankruptcy examiner would be appointed, like in the Enron case, who can conduct an independent investigations and publish a public report.

And that hasnt happened here.

No, and we see the consequences. Not only would the victims never have their day in court, many did not have visibility into the bankruptcy proceedings and were not aware of the stakes for themselves and their families. The court docket is public but very complicated and its hard to make sense of the documents, the different motions and how it all fits together. And many people did not know they could file personal injury claims against Purdue and receive compensation for the harm they suffered.

There were many lawsuits filed and theyre among the more than 2,000 filed in federal court. But the result of the bankruptcy filing was to freeze all of those lawsuits and ultimately wrap them up in the bankruptcy settlement, which is part of the plan. The other part of the plan is to release members of the Sackler family and Purdue, so they would never have to answer to those lawsuits. The bankruptcy and personal injury claims process was their last chance, and many people were not aware of that.

How do you know that?

The number of personal injury claims filed was disproportionately low. From looking at the available statistics, there were far fewer claims than would we expect, given the number of people who sought recovery treatment or died of overdoses as a result of OxyContin and other prescription opioids. My effort to understand and write about this issue started as a public education campaign.

But why call it a heist?

I believe the public is being deceived in a number of ways. I want to challenge the perception this is business as usual and a victory when, in fact, not only is it a loss, but I believe its a misstep by the bankruptcy court. There was no examiner appointed, even though, according to an expert I consulted, that was the necessary mechanism in this case to better understand what occurred. The creditors are being asked to vote on the plan without disclosure of key elements. And there are fundamental conflicts of interest.

Which key elements? Can you give us a pertinent example?

The major gap in the disclosure statement (filed as part of the bankruptcy reorganization plan) is the release to be granted to the Sacklers. They will have immunity from civil lawsuits. Thats important to understand because the Sacklers are contributing an amount of money into the settlement ($4.275 billion) and in exchange, they are getting something of great value, which is never again will they have to face any lawsuits concerning any of the activities or decisions that are believed to have sparked the opioid epidemic.

But $4.275 billion is a lot of money.

What theyre giving up actually represents a fraction of their wealth and much less than what was withdrawn from the company before filing for bankruptcy. And its a fraction of the amount of money that was generated by selling OxyContin by a company that lied about the risks of addiction. Yes, its an absolutely significant amount of money and theres value to closure. However, the immunity theyre seeking is worth much more than what theyre giving. And the amount reserved for personal injury victims between $700 million and $750 million results in payouts that are absolutely inappropriate, given the extent of the harm suffered.

How so?

The money will be divided among 137,000 personal injury claims, but they will filter down to what are called allowed claims. People will be asked for proof they took (the medicine) and suffered harm. Then attorney fees to be taken out. The payout range set forth by the plan sets a maximum payout of $48,000, and that will be for cases where an individual was prescribed OxyContin and died as a direct result. In other cases, the payout is $3,500 to $31,000. If you think about those numbers relative to the cost of funerals, a lifetime worth of lost wages, emotional suffering, the disruption to families, its paltry.

Massachusetts Attorney General Maura Healey criticized the plan, in part, because the family payout will be spread out over nine years. Why does this matter?

I think shes right. Spreading it out over nine years makes no sense other than to minimize the hit to the Sacklers wealth and its more convenient for them because they have more time to pay. Theres also mention that they have seven years to continue operating other companies they own until they sell those companies, and so they may still also retain a portion of revenues generated. The Sacklers will be paying off part of the settlement from proceeds from the sale of OxyContin made through those other companies. And theyll continue to accumulate wealth from interest rather than pay in one go. I wholeheartedly agree that there doesnt seem to be any justification for it.

Youve mentioned transparency is another issue.

Yes, the public is being denied the truth to which there is infinite value in this case, because another element not clarified or disclosed is a document repository. This is supposed to be created as part of the (reorganization) plan. But theres a short sentence at the very end of the appendix that says the scope of the repository has not yet been determined.

You started to say there was a conflict of interest. Can you explain that?

There is some background here. In 2018, several parties members of the Sackler family and Purdue Pharma entered in a memorandum of understanding. The purpose was to recognize they had certain interests in common and could benefit by sharing documents and information. They wanted to be able to share documents to mount a defense without opening themselves up to public disclosure. But the agreement says they cant share without getting permission from the rest of the group. And if any material is requested by an outside party, all others have to be informed.

Purdue hired Davis Polk [a law firm] as its representative in the bankruptcy. And Purdue has a duty to make sure all of its assets are preserved for creditors. One of Davis Polks assignments in the bankruptcy was to make sure there is no fraud or mismanagement that diminished the estate for the creditors. So the firm had to conduct an investigation of some of the Sackler family members. [See page 75]. You would want Davis Polk to have unfettered access to company documents, but also be able to request documents from the Sacklers and be able to share documents with others in the bankruptcy. The problem created by the agreement was that information could be shared without everyones full agreement. So what is extremely hard to understand is how can attorneys for Purdue can represent to the public they were able to conduct a full and unbiased investigation of a party with whom their client has an agreement to restrict use of documents?

Thats part of the heist. Its a request to the public for unlimited confidence in this process and the plan that is not only incomplete in its disclosures, but works against public transparency and results in dramatically insufficient compensation for victims of Purdue Pharma.

So in other words, you think the deck is stacked.

Do I believe the deck is stacked? Yes. One branch of the Sackler family is represented by represented by Mary Jo White, a former U.S. Attorney who has extraordinary access to the Department of Justice. Theres no question the Sacklers benefited from more attention and consideration than any other players in the opioid epidemic. No one else has access to this level of advocacy, because its extremely expensive to spend all the hours necessary to generate the materials and information for the presentations before the federal prosecutors and the attorney for Purdue.

They also went forum shopping for a judge The company leased property in the jurisdiction where (U.S. Bankruptcy Court Judge Robert Drain) is located to make sure the case would end up in front of him. The issue is third party release. The Sacklers are not debtors in the bankruptcy case. Purdue is the debtor, but they will benefit from civil immunity. Within the network of bankruptcy courts across the U.S., there is no consensus on whether this is appropriate, but Drain is one of few judges who has considered and granted such releases. And that release is the single most valuable element the Sacklers are seeking. This release minimizes the impact on their wealth.

This is a process that preserves most of their wealth. It appears to be a system designed to protect the creditors, but its not. This is about bias in the system.

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'The public is being denied the truth': Legal expert blasts Purdue bankruptcy plan - STAT