Top executives of A. H. Robins Co. testified today that the company has continued making unallowed payments to a broadcasting subsidiary in the month since a federal judge ruled Robins was in contempt of court for paying out millions of dollars in violation of court orders.
Assistant U.S. Attorney S. David Schiller, who had sought the original contempt citation, said after the new payments were disclosed: "It is very disturbing that payments of the same character and quality as those in our investigation are continuing to be made despite the court having found the company in contempt for making similar payments."
Schiller declined to say if he would take any action against the company, which filed for voluntary bankruptcy last Aug. 21 because it faces huge claims from women who say they were injured by the Dalkon Shield contraceptive.
Murray Drabkin, counsel for the Dalkon Shield claimants committee, said he will take "appropriate action," but declined to say what it might be. Drabkin represents the thousands of women who attribute serious injuries to the birth control device.
U.S. District Judge Robert R. Merhige Jr. ruled June 14 that Robins was in contempt of court for violating orders that prohibited the firm from making any payments without approval of the bankruptcy court. Merhige made the decision after a three-day hearing in which the company said it had reformed.
The new violations of the court order were disclosed at a monthly hearing held by U.S. Trustee William C. White, a Justice Department official, to enable creditors to question company officials.
President and chief executive officer E. Claiborne Robins Jr., testifying publicly for the first time since the Chapter 11 filing, said the company paid $7.6 million for the broadcasting subsidiary, Robins Communications Inc., in April 1984. The broadcasting division operates one FM and one AM station in Greensboro, N.C.
White called the radio operation "a losing asset" for the bankrupt company, whose assets are supposed to be used to pay creditors -- including Dalkon Shield victims.
Robins testified that the stations were purchased because he had wanted to diversify as a hedge against the day "when a health epidemic comes along." He mentioned the possibility of flu abatement in the North.
Robins said he wanted to buy into broadcasting because the rate of return on investments in the media is approximately as high as in pharmaceuticals. He refused to speculate on when the company might recover the $7.6 million investment or recoup the net losses of $4.3 million incurred by the stations through May 31.
Robins himself and Vice President and Treasurer H. Carlton Townes said the parent company has advanced working capital of $710,000 to the subsidiary, including $293,000 since the bankruptcy.
Townes testified that A. H. Robins continues to pay the $8,500-a-month salary of the stations' general manager. Under questioning by Drabkin, the president, Executive Vice President Robert G. Watts, general counsel Robert P. Wolf and Townes all testified that the payments were made without court permission.
"That's not allowed," White said.
Drabkin also brought out that A. H. Robins pays insurance and, apparently, taxes for the subsidiary.
Another subsidiary, Elkins-Sinn Inc., of Cherry Hill, N.J., has put an additional $150,000 into Robins Communications. Townes told Drabkin that Elkins-Sinn, not being in bankruptcy, could make such an advance, while A. H. Robins could not. During the earlier court proceedings, similar use of subsidiaries repeatedly was condemned by Merhige as a "subterfuge" by which A. H. Robins circumvented court restrictions.
E. Claiborne Robins Jr. and the other company executives denied knowing who had authorized postbankruptcy insider bonus payments of $1.8 million to 18 present and former executives. Unable to find anyone to admit making the decision, Drabkin attributed the authorization to "a sinister force."
A $250,000 deferred-compensation payment went to former president William L. Zimmer III, chairman of the board's compensation committee. The Robins president testified that Zimmer talked to him once about the payment, telling him he was "concerned he'd have to return the money to the company." Robins said the conversation occurred in late 1985 although Zimmer got the money in February 1986.
Robins disclosed that Vice President William A. Forrest Jr., who resigned in March as general counsel amid mounting criticism of his role in improprieties in the bankruptcy, spends most of his time lobbying in Washington in connection with pending product-liability legislation.
Robins also testified that he did not know at the time of the Chapter 11 filing that the company's liabilities exceeded its assets. He also said he did not know last April, when he won an increase to $100,000 from $48,000 in the annual fee paid his father for serving as chairman, that the company had set up a $700 million reserve for Dalkon Shield claims.
Executive vice president Watts said that cost-cutting measures would save $3.26 million in 1986. Drabkin suggested the sum was trivial alongside estimated gross sales of $750 million.
Merhige, who has authority to punish A. H. Robins for violating the bankruptcy court order on payments, has neither set a date for imposing sanctions nor said what the sanctions will be.