Sixteen retired A. H. Robins Co. executives have refunded or have promised to refund about $1.5 million in bonuses that Robins improperly paid them after it filed for voluntary bankruptcy last August, a company attorney disclosed today.
U.S. District Judge Robert R. Merhige Jr. had demanded the refunds and denounced the deferred compensation payments as a gross violation of an order to which Robins consented on Aug. 23.
Dennis J. Drebsky of Skadden, Arps, Slate, Meagher & Flom, the special bankruptcy counsel for Robins, said at a court hearing today and in documents that about half the total -- $759,689 -- is being recovered from three men who played prominent roles in the acquisition and marketing of the Dalkon Shield, the device that led to massive product-liability litigation that prompted the bankruptcy proceeding.
Robert S. Murphey, who was vice president and director of scientific development, has paid back the $375,163 he received under the Key Executive Compensation Plan (KECP), which the compensation committee of the board of directors set up to reward executive contributions to Robins' financial performance.
Board member William L. Zimmer III returned $194,021 in KECP payments. He was president and chief operating officer of Robins when it bought the Shield from another firm in 1970 and when it halted sales of the intrauterine device in 1974, after it had been used by more than two million American women. Dr. Frederick A. Clark Jr., who was vice president for medical affairs in the same period, agreed to refund his $190,505 in KECP payments by Thursday.
Lester Carlson, who received a KECP payment of $16,110, has refused to return the money. Robins has filed a complaint against him.
J. J. Heffner, who received a KECP payment of $144,176, is seriously ill and could not be contacted about a refund, Drebsky said.
Zimmer and Clark also are repaying a combined total of $34,240 that Robins paid them after the bankruptcy under a retirment-income supplement called Executive Salary Continuation Plan (ESCP). Payments totaling $38,164 have been refunded by three other recipients, including director and former vice president George E. Thomas.
Judge Merhige urged Assistant U.S. Attorney S. David Schiller on April 8 to take depositions from Robins' executives and employes to determine who authorized the improper payments, which totaled $1.67 million under the KECP and $72,404 under the ESCP.
Robins executives have claimed that payments were made on the advice of Penn Ayers Butler, whose San Francisco law firm was dismissed by Robins as its special bankruptcy counsel last month and replaced by Skadden, Arps.
These executives have cited a Nov. 18 memo in which William A. Forrest Jr., a vice president who resigned as general counsel in March, told G. E. R. Stiles, the senior financial officer, that KECP and ESCP payments could continue.
Forrest and Stiles have said they were relying on advice from Butler.
But Butler has said that his advice was to the contrary. Support for Butler has come from a Robins official, Steven D. Kirkham, who went to work for the company in July as director of employe benefits and who also is a nonpracticing lawyer.
Last week, in a deposition that he supported with notes, Kirkham said that senior Robins executives -- not Butler -- had approved the bonus payments, which were made monthly.
Kirkham testified that he persisted in objecting -- on a weekly and even daily basis -- to his boss, but was told only nine days after the bankruptcy that the payments would continue. Undeterred, he said he tried from September to March to block the payments.
Today, Schiller told Merhige that he has taken depositions for four full days and will put a dozen Robins employes and officers under oath Tuesday and Wednesday.
Schiller told the judge that he needs a few more weeks to prepare for a hearing on his motion to have the company held in contempt -- largely because of the improper payments -- and to have a trustee appointed to run it. Merhige set the hearing for June 5.