Bankruptcy judges and Congress must close the Sackler loophole – The Boston Globe

That cant be allowed to happen. Bankruptcy judges should heed the formal objections filed by Massachusetts Attorney General Maura Healey and dozens of other state officials seeking to stop the family, which is not party to the companys bankruptcy proceedings, from shielding the majority of their fortunes from it in exchange for a $4 billion payment and forfeiture of company control.

The move, using an obscure legal device called a nonconsensual third-party release, would essentially strip state and local officials from the policing power they ought to possess to hold those responsible for the crisis responsible and fail to adequately compensate all those who have been harmed, according to a brief filed last week by Healey and other officials.

And beyond that, Congress must act to close this virtual escape hatch for wrongdoers to use company bankruptcy proceedings to escape individual personal liability.

A bevy of lawsuits accuse the Sacklers, the family that founded and controlled Purdue, and in particular Dr. Richard Sackler, of aggressively promoting and marketing OxyContin for years to increase the drugs use and maximize profit while misleading doctors and patients about the drugs addictiveness. They did this while seeking to shield their own family name well known in the world of philanthropy from the taint of scandal. Since their actions came to light, in part due to the efforts of the Globes sister publication STAT, museums from the Louvre in Paris to the Smithsonian Institutions in Washington have dropped the Sackler name. Tufts University has also dropped the name from its programs and buildings, including the medical school.

The company has also been in the crosshairs of federal and state officials, who accuse it of accelerated payments to members of the Sackler family after it was fined for its role in the opioid crisis. Between 2007 and 2017, based on the companys own court filings, the family was paid nearly $11 billion, compared to just $1.3 billion from 1995 to 2007. Healey called that disclosure the very definition of ill-gotten gains.

Yet, despite their own admitted guilt, state officials claim in their brief, filed in a New York bankruptcy court Friday, the company and other debtors seek to cram down an unconfirmable plan that, among other things, would absolve [the Sacklers] in exchange for the stretched-out payment of only a tiny fraction of their independent liability, unlawful gains, and current wealth, over the objection of Attorneys General from 24 States and the District of Columbia, representing 53% of the U.S. population.

Bankruptcy judges have wide discretion in approving proposed settlements, but in this case, the interest of justice requires that there be the possibility of holding family members responsible if they misled those seeking relief from chronic pain, sending millions of them down a painful and dangerous path of addiction. Doing otherwise runs contrary to the principles of fairness and equity by which all judges are bound.

And Congress should act to ensure that state attorneys general never again have to rely on the individual judges to guard against this misuse of bankruptcy courts. Legislation introduced by Representative Carolyn Maloney, Democrat of New York, and whose cosponsors include Massachusetts Representatives Katherine Clark, Ayanna Pressley, Stephen Lynch, and Jim McGovern, called the Stop Shielding Assets from Corporate Known Liability by Eliminating Non-Debtor Releases (SACKLER) Act, would close the loophole the Sacklers seek to exploit.

If the Sacklers deal is finalized something that could happen as soon as this month if the states objection is dismissed it would set a dangerous precedent that protects the wealth of wrongdoers so long as their companies go bankrupt. Thats a legacy that the courts and Congress must avoid.

Correction: A previous version of this article misstated that Richard Sackler was the founder of Purdue Pharma, instead of a member of the family that founded and controlled the company. It also misidentified whom the state officials claimed admitted guilt; it was the company and its debtors, not the Sackler family.

Editorials represent the views of the Boston Globe Editorial Board. Follow us on Twitter at @GlobeOpinion.

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Bankruptcy judges and Congress must close the Sackler loophole - The Boston Globe