Purdue Pharma to stay in business as bankruptcy unfolds
WHITE PLAINS, N.Y. (AP) — A judge cleared the way Tuesday for OxyContin maker Purdue Pharma to stay in business while it pursues bankruptcy protection and settlement of more than 2,600 lawsuits filed against it in a reckoning over the opioid crisis.
At the first court hearing since the Chapter 11 filing late Sunday, Purdue lawyers secured permission for the multibillion-dollar company based in Stamford, Connecticut, to maintain business as usual — paying employees and vendors, supplying pills to distributors, and keeping current on taxes and insurance.
The continued viability of Purdue is a key component of the company’s settlement offer, which could be worth up to $12 billion over time.
Under the proposal, backed by about half the states, the Sackler family, which owns Purdue, would turn the company, its assets and more than $1 billion in cash reserves over to a trust controlled by the very entities suing it.
The Sacklers have also agreed to pay a minimum of $3 billion of their own money to the settlement over seven years, as well as up to $1.5 billion more in proceeds from the planned sale of their non-U.S. pharmaceutical companies.
“This is a highly unusual case in that the debtors have pledged to turn over their business to the claimants,” U.S. Bankruptcy Judge Robert Drain said. “All of the claimants, in essence, have the same interest in maximizing the value of the business and avoiding immediate and irreparable harm.”
Joe Rice, a lawyer for some of the plaintiffs, estimated it could be more than a year before the bankruptcy and settlement are finalized.
“This is not a sprint. We’ve got a little bit of a marathon here,” he said after the three-hour hearing in New York City’s northern suburbs.
Purdue’s bankruptcy filing has effectively frozen all litigation against the company, which its lawyers said has been spending more than $250 million a year on legal and professional fees, but it has not stopped lawsuits against the Sacklers from moving forward.
New York Attorney General Letitia James, who is suing the Sacklers and opposes the proposed settlement, said last week that her office found that members of the family used Swiss and other accounts to transfer $1 billion to themselves.
Purdue lawyer Marshall Huebner said he hoped states that are opposed to the proposed settlement could be persuaded to change their positions.
“It is, in essence, America itself that stands to benefit or lose from the success or failure of these reorganization proceedings,” Huebner said.
None of the Sacklers attended the hearing, but the family name did come up several times as Purdue lawyers declared that they wouldn’t benefit from any steps taken Tuesday to keep the company in business.
As the bankruptcy unfolds, Purdue will continue to pay its approximately 700 employees under preexisting salary structures.
No member of the Sackler family is an employee and none will receive payments, Purdue lawyer Eli Vonnegut said.
Because of commitments Purdue made before the bankruptcy filing, the company will pay sign-on bonuses to five employees and retention bonuses to about 100 employees. The company agreed to hold off on seeking to continue other bonus plans, such as incentive bonuses.
Drain, the judge, also allowed the company to continue covering legal fees for current and former employees, which Vonnegut estimated wouldn’t exceed $1.5 million per month. The company stopped covering legal fees for members of the family on March 1, he said.
“We swear up and down that no payments will go to the Sacklers,” Vonnegut said.
Purdue lawyers argued that the sign-on and retention bonuses were vital to attracting and keeping top talent in a tumultuous time for the company. Covering employee legal fees is important to morale and sends a strong signal that the company backs the people who work for it, the lawyers said.
Bankruptcy trustee Paul Schwartzberg objected, saying the bonuses went “way beyond” normal compensation and were padding the pockets of employees who already make upward of $300,000 a year.
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