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US states say Sackler family is abusing bankruptcy process in OxyContin case

Group of states urge judge to reject settlement for owners of Purdue Pharma, saying it grants improper protections after family took out more than $10 billion from company

In this photo from August 17, 2018, family and friends who have lost loved ones to OxyContin and opioid overdoses leave pill bottles in protest outside the headquarters of Purdue Pharma, which is owned by the Sackler family, in Stamford, Connecticut. (AP Photo/Jessica Hill, File)
In this photo from August 17, 2018, family and friends who have lost loved ones to OxyContin and opioid overdoses leave pill bottles in protest outside the headquarters of Purdue Pharma, which is owned by the Sackler family, in Stamford, Connecticut. (AP Photo/Jessica Hill, File)

NEW YORK (AP) — A federal judge should reject a sweeping settlement to thousands of lawsuits against OxyContin maker Purdue Pharma, a group of states said at a hearing Tuesday, arguing that the protections it extends to members of the Sackler family who own the firm are improper.

States have credible claims that family members took more than $10 billion from the company, steered it toward bankruptcy, and then used a settlement crafted in bankruptcy court to gain legal protections for themselves, Washington state Solicitor General Noah Purcell told US District Judge Colleen McMahon.

“If that is not an abuse of the bankruptcy process,” Purcell said, “it’s unclear what would be.”

The plan, crafted largely by those with claims against Purdue and approved in September by a federal bankruptcy judge, calls for members of the Sackler family to contribute more than $4 billion in cash, plus the company itself, to fight the opioid epidemic, which has been linked to more than 500,000 US deaths in the past two decades, including deaths linked both to prescription and illicit drugs.

In exchange, members of the family are to be protected from lawsuits accusing them of spurring the crisis. The suits accuse the company and family members of helping to spark the overdose crisis by aggressively marketing OxyContin, a powerful opioid painkiller.

They would not be protected from criminal charges. They’re not facing any now, though a group of activists has been pushing federal authorities to bring charges against some members of the family, which includes some people who were executives and board members at the company and others with no involvement other than receiving money from it. Much of their fortunes are held in offshore trusts that could be hard to access in US lawsuits.

In this image from House Television on Dec. 17, 2020, David Sackler, a member of the family that owns Purdue Pharma testifies via video to a House Oversight Committee hearing. (House Television via AP)

Most state and local governments and thousands of individual victims of the epidemic agreed to the deal, though many did so grudgingly. Those groups are now joining with Purdue and Sackler family members to defend the plan from appeals from an office of US Department of Justice, eight states, the District of Columbia, some Canadian local governments and Native American tribal groups, plus some individual victims.

In the hearing Tuesday in a New York City courtroom, McMahon focused on the $10.4 billion in transfers from Purdue coffers to family trusts from 2008 to 2018. Nearly half of that was used to pay taxes on the earnings.

The judge said that by taking bigger distributions over the decade leading to the company’s bankruptcy filings, Sackler family members “made themselves necessary” to the negotiations over how much money would be available for claimants.

An activist helps to set up cardboard gravestones with the names of victims of opioid abuse outside the courthouse where the Purdue Pharma bankruptcy is taking place in White Plains, N.Y., Aug. 9, 2021. (AP Photo/Seth Wenig)

Lawyers for the family said that distributions were bigger because the company was making more money and that there’s no evidence any of them were trying to manipulate the bankruptcy system.

Those appealing the plan contended that the protections the Sacklers got are more generous than what they could have received had they filed for bankruptcy themselves. Bankruptcy would also protect the company from lawsuits.

A screenshot of a 2015 deposition of Dr. Richard Sackler, conducted by the state of Kentucky, published by ProPublica via YouTube (Wikipedia)

They also said that allowing the deal would usurp states’ ability to sue Sackler family members to hold them accountable.

“What confirmation of this plan does in this case is strip the states of police powers,” Maryland Assistant Attorney General Brian Edmunds said, “to protect the public from harm.”

Marshall Huebner, a lawyer for Stamford, Connecticut-based Purdue, said the states were misstating some details of the settlement plans, including how US Bankruptcy Judge Robert Drain insisted that Sackler family members would receive protections from lawsuits involving only opioids made by Purdue.

He also noted that the overwhelming majority of governments agreed to the plan, which would funnel money to individual victims of the opioid crisis and to efforts to fight the crisis.

McMahon cut him off. “My questions focus on aspects of legality of the releases,” she said. “I don’t want to hear about the wonderful things it’s going to do. I know it was approved by a supermajority.”

Still, Huebner noted, there would be far less money to work on the crisis without money from Sackler family members. He said that if they could be sued and prevailed, they might not pay the settlement. And if they lost other lawsuits — they now face about 860 of them — they might not be able to afford to.

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