The A. H. Robins Co., barred from spending money without court permission, had a wholly owned subsidiary pay out at least $1 million after it filed for bankruptcy, a Robins executive testified today.
Vice President and Treasurer H. Carlton Townes testified at a bankruptcy court hearing that five separate payouts were made by Elkins-Sinn Inc., a Robins pharmaceutical unit in Cherry Hill, N.J., but called the number "an approximation."
Simultaneously, a few blocks away, Assistant U.S. Attorney S. David Schiller was continuing to take sworn statements from Robins executives about the approximately $7 million in previously disclosed improper payments that led him in March to ask U.S. District Judge Robert R. Merhige Jr. to hold the company in contempt and to name a trustee to run it. A hearing is set for June 5.
The largest payment -- $779,000 for capital improvements -- was to Lee Laboratories Inc. of Petersburg, Va. Lee is jointly owned by Robins and another pharmaceutical house, Boehringer-Ingelheim.
Townes said at a monthly status hearing on the Chapter 11 proceeding that Vice President William A. Forrest Jr., who was general counsel at the time, had orally authorized two of the payments.
Townes made the admissions under questioning by Sheldon Pine of Cadwalader, Wickersham & Taft, the Washington law firm representing women who had used the Dalkon Shield intrauterine contraceptive device and who had filed product liability lawsuits against Robins before the company filed for Chapter 11 protection last Aug. 21.
The other $7 million in payments involved in the ongoing depositions included about $1.7 million in bonuses to current and former Robins officers, including director and former president William L. Zimmer III.
At the status hearing, Executive Vice President Robert G. Watts told U.S. Trustee William C. White of four "belt-tightening measures" taken by Robins to assure its creditors of its determination to be frugal.
Robins has canceled the employes' annual picnic and postponed the annual dinner for employes with long service, Watts testified. He said the company also has abandoned the traditional gift to employes of Friday afternoons off from early May to late September, and is seeking to sublease the company "super box" at the Diamond, the local minor-league baseball park.
Watts further testified that the board of directors decided in February to pay no bonuses or merit raises to executives so long as Robins is in Chapter 11. Murray Drabkin of the Cadwalader firm had written a letter on Feb. 25 requesting just such a decision.
In February, Robins paid Zimmer, the chairman of its compensation committee, $336,000 in deferred "bonuses." He said the payment was for Zimmer's services as president before his retirement on Jan. 1, 1978. Townes testified on April 8 that Zimmer has repaid $265,000, his net after federal and state taxes.
Townes was unable to clarify how the $336,000 related to improper payments to Zimmer of about $217,999, which he has refunded. A pledge to get the facts was made by Michael L. Cook of Robins' special bankruptcy law firm, Skadden, Arps, Slate, Meagher & Flom, of New York.
At Robins' instruction, Cook said, he will file a lawsuit within a few days to try to recover the $779,000 paid between September and February to Lee Laboratories by Elkins-Sinn.