A. H. Robins Co.'s special bankruptcy counsel told a creditors' meeting today that no actions by company officers "would require sanctions at this point."
The hearing also brought a disclosure that consultant's fees paid to Chairman E. Claiborne Robins increased from $48,000 in 1984 to $100,000 in 1985, the year in which the company filed for voluntary reorganization. Vice President and Treasurer H. Carlton Townes testified he did not know whether the increase occurred after the Aug. 21 filing.
In another development, Townes acknowledged the company did not seek court approval to spend a hitherto undisclosed $2.4 million in capital outlays between the filing of the bankruptcy petition and March 31.
The statement by Robins bankruptcy lawyer Michael L. Cook contrasted with the assertion by U.S. District Judge Robert R. Merhige Jr. last week that Robins "has done something wrong, and something has to be done about it." Townes and other officers used one or another "subterfuge" to make millions of dollars of improper payments from the bankrupt estate, Merhige concluded.
Merhige's remarks came at a hearing on a government motion to appoint a trustee to run Robins, to hold the company in contempt and to order unnamed individuals to show cause why they should not be held in contempt. He will hear closing arguments Saturday.
Today, Townes, accompanied by Cook, testified at the separate creditors' meeting, which is held monthly by U.S. Trustee William C. White, a Justice Department official.
Assistant U.S. Attorney S. David Schiller reminded Cook that he had told a creditors' meeting on April 8 that he had begun an investigation of improper payments and would have answers "within the next month."
Schiller then asked whether the investigation results suggested punishment to be in order for any of the officers or directors responsible for improper payments and transfers of Robins' funds to subsidiaries.
Cook, whose law firm is Skadden, Arps, Slate, Meagher & Flom, said he saw no justification for sanctions, but said his investigation is continuing and he has submitted a confidential report to the company.
One Robins director, former president William L. Zimmer III, heads the board committee that approved nearly $3 million in executive bonuses before and after the bankruptcy. At the April 8 meeting, it was reported that Zimmer had received $336,000 after the Chapter 11 filing, but some officials have used a lower figure, $250,000. Cook pledged a month ago to clarify the discrepancy, and asked for more time today.
Townes said he did not know who authorized an increase in Chairman Robins' fee from $48,000 to $100,000 in 1985. Sheldon L. Pine of Cadwalader, Wickersham & Taft, which represents the large numbers of women who claim to have been harmed by the Dalkon Shield, the Robins birth-control device, pointed out that the company proxy statement for the 1985 annual meeting listed the $48,000 as an "annual consulting fee." The court would have to approve continuing payments to a consultant.
The word "consulting" does not appear in a May 19 letter from Cook in which he responded to an inquiry by Shield claimants' committee counsel Murray Drabkin. Cook wrote that Robins, 75, now gets $8,334 a month for services as chairman and as a business adviser, for "community and employe relations activities." Also, "because of his stature in the company and in the community, he confers and corresponds with employes in matters ranging from outstanding performance to bereavement," Cook said.
Drabkin protested the $100,000 fee, telling Cook in a June 1 letter that it was "for services which are at best vague and clearly redundant with the responsibilities of the company's full-time officers and staff," and that it lacked court approval.
The $2.4 million in capital outlays consisted mainly of $1.4 million for construction, $597,000 for machinery and equipment, and $244,000 for furniture and fixtures. To the extent that he knew about the payments, Townes said, they were made in the ordinary course of business and therefore did not need court approval.
Pine also criticized transactions in February and March in which Robins subsidized the purchase of chemicals by foreign subsidiaries without obtaining court approval.