U.S. District Court Judge Robert R. Merhige Jr. held the A.H. Robins Co. in criminal contempt, not its president, E. Claiborne Robins Jr., as reported yesterday in the Business section. Merhige fined E. Claiborne Robins $10,000 because he held him personally responsible in the matter, involving failure to comply with an earlier order. (Published 10/14/87)
RICHMOND, OCT. 12 -- A federal judge held E. Claiborne Robins Jr. in criminal contempt and fined him $10,000 today because of the A.H. Robins Co.'s "deliberate defiance" of a court order to recover millions of dollars in improper payments that were made after the firm went bankrupt in August 1985.
U.S. District Judge Robert R. Merhige Jr., in punishing the 44-year-old president and chief executive officer of the pharmaceutical firm, said he had to remedy an attitude that produced "excuse after excuse after excuse."
The ruling, announced at the close of an all-day hearing, was the first imposition of a penalty against an officer of the company since it entered bankruptcy to cope with a wave of lawsuits over the Dalkon Shield intrauterine contraceptive device.
Robins, who heard the judge's announcement from a front bench, did not testify and made no comment afterward. He has 10 days in which to file a notice of appeal with the 4th U.S. Circuit Court of Appeals.
No evidence was introduced concerning any personal role of Robins in decisions by his subordinates not to comply with an Aug. 14, 1986, order in which Merhige required the company to file lawsuits, where necessary, to recover unauthorized payments by the bankrupt company.
Rather, the contempt citation grew out of a decision in June 1986, when the judge held the company in civil contempt for making the improper payments. At a subsequent hearing, Merhige designated Robins as the executive who would be personally responsible for future compliance with the bankruptcy law and his orders.
"I am not going to be hearing any more civil contempts," Merhige warned at the time. "I want anybody that does any wrong out there, I want them up here on criminal contempt where I can really issue sanctions."
Today, Merhige said of Robins, "He's got to suffer the consequences. That was the deal." He also warned Robins that if there should be "a next time," the penalty might be imprisonment.
James S. Crockett Jr., an outside lawyer for the company, told the court that while mistakes had been made, "nobody flouted the Aug. 14 order," and "we did what we thought was the court's intent."
A citation of Robins for both criminal and civil contempt had been sought in a motion filed last month by the Dalkon Shield Claimants' Committee, which represents thousands of women who say they were injured by the Dalkon Shield.
Committee counsel Mark C. Ellenberg argued that the company had unilaterally decided to terminate the program to recover improper payments although "they had no right to stop."
Merhige agreed, saying it was "insulting" to him that instead of asking him to modify or cancel the payment-recovery order, company counsel H. Arvid Johnson had spent months trying to persuade Ralph R. Mabey, the examiner in the case, to make the request to the court.
Ellenberg said the effect of the company's refusal to press recovery of improper payments was to pay suppliers and other trade creditors, although they had no more right to be paid before reorganization than did Dalkon Shield victims.
Ellenberg won strong support for the contempt motion from Assistant U.S. Attorney S. David Schiller, who represents the Internal Revenue Service, a major creditor.
Schiller portrayed the company's response as part of a pattern that has persisted throughout the Chapter 11 case. "These people see themselves as above the law," he argued. "They're daring this court to do something about it."
Schiller contended -- and Merhige later agreed -- that the major issue was what Schiller called a threat to the legal system posed by conduct showing a lack of "respect for the law and compliance with court orders."
Examiner Mabey said the latest company data indicate that the unauthorized payments totaled $8 million (including interest), and that $4.2 million (53 percent) had been recovered.
He agreed with the company that efforts to recover about two-thirds of the remaining $3.7 million should be ended.
But while opposing a contempt finding against Robins as unwarranted, Mabey told Merhige that the company needed to explain why it haDn't so much as demanded return of $674,000 in improper payments and that it should pursue recovery of about $600,000 more. Company attorney Crockett said Mabey's figures were overstated.
One of the payments made by the company from was "political contributions" of $4,617, of which all but $1,175 has been recovered. Under questioning by Ellenberg, company lawyer George P. Manson Jr. testified that the payment reimbursed four employes who do "public relations, lobbying" in state capitals. Whether the reimbursement was for political contributions or expenses was not made clear.