States opposing the settlement strongly objected in a joint motion filed Friday in U.S. Bankruptcy Court in White Plains, N.Y.
“The Sacklers used the profits from their illegal scheme to become one of the richest families in the world — far wealthier than the company they ran,’’ the states said. “Now, the Sacklers seek to leverage Purdue’s corporate bankruptcy to avoid their own individual accountability.’’
Among other things, the states cite deposition testimony stating that the Sackler family took $12 billion to $13 billion in cash out of Purdue Pharma. In light of those sums, the states contend, the Sacklers’ proposed $3 billion contribution to the settlement is not enough.
“The Sacklers want the bankruptcy court to stop our lawsuits so they can keep the billions of dollars they pocketed from OxyContin and walk away without ever being held accountable. That’s unacceptable,’’ Maura Healey, the Massachusetts attorney general, said in a statement.
The claim that the Sacklers took up to $13 billion out of Purdue Pharma is contained in a transcript of a deposition that was taken late last month of one of Purdue’s business advisers, Jesse DelConte, a director at consulting firm AlixPartners. DelConte, who referred to financial information he had reviewed while doing work for Purdue, did not provide in his deposition a time frame for those withdrawals.
Massachusetts has previously said in court filings, based on its analysis of Purdue financial records, that the family took $4 billion out of Purdue from 2008 to 2016. Oregon, based on its own analysis of Purdue records, has said the number is up to $11 billion from 2008 to 2018.
“The Sackler family is trying to take advantage of the fact that they’ve extracted nearly all the money out of Purdue and pushed the carcass of the company into bankruptcy,’’ said North Carolina Attorney General Josh Stein. “That’s unacceptable. Multibillionaires are the opposite of bankrupt.’’
Twenty-four states have signed on to the tentative bankruptcy settlement. The family has argued in court filings that its withdrawals from Purdue were not intended to shield the money from litigation.
“The Sacklers have agreed to relinquish their equity in Purdue and to contribute at least an additional $3 billion to the fight against the opioid crisis,’’ Daniel S. Connolly, an attorney for the branch of the Sackler family that includes its former chairman and president, Richard Sackler, said in a statement released Friday in response to the states’ motion. “The stay, if granted, will allow parties to focus their efforts on this goal rather than on litigation that will waste resources and delay the deployment of solutions to communities in need.”
Addressing the family's cash withdrawals from Purdue Pharma, Connolly added, “The distribution numbers do not reflect the fact that many billions of dollars from that amount were paid in taxes and reinvested in businesses that will be sold as part of the proposed settlement.”
Purdue Pharma introduced OxyContin in 1996, and sales represented a small fraction of total prescription opioid sales. But numerous states and local governments contend the company’s aggressive marketing of the drug, combined with its highly addictive nature, fueled a U.S. opioid epidemic that spread from prescription opioids to illegal fentanyl and heroin and claimed 400,000 lives. Purdue and three of its executives pleaded guilty in 2007 to federal criminal charges of misleading doctors about its addictive properties. In 2010, Purdue introduced an abuse-deterrent pill that made it impossible for addicts to crush and snort or inject.
Plaintiffs who have filed a wave of lawsuits in the past two years claim Purdue Pharma, under the direction of the Sacklers, continued to mislead doctors and the public even after the guilty pleas.
Companies that file for bankruptcy typically are given an automatic stay of litigation. The attorneys general argued Friday that because they are exercising their state “police powers,’’ Purdue Pharma is not entitled to an automatic stay.
That question, as well as the request to allow litigation to proceed against the Sacklers, will be decided by U.S. Bankruptcy Judge Robert Drain.
Purdue Pharma has suggested in court filings that protecting the family from lawsuits is a vital component of the settlement.
“If forced to bear the risk of adverse money judgments, the related parties may be unwilling — or unable — to make the billions of dollars of contributions contemplated by the settlement structure,’’ Purdue said in a filing last month.
Purdue Pharma issued a statement Friday that did not mention the Sackler family. It said the company’s bankruptcy filing, and a halt to litigation, was necessary to allow the settlement to proceed.
In addition to contributing $3 billion over seven years, derived in part from an overseas drug company still owned by the Sacklers, the family has pledged to relinquish ownership of Purdue Pharma. As part of the deal, it would be set up as a public trust. Proceeds from continued opioid sales would be used to manufacture and distribute addiction and rescue antidote drugs.
“Purdue’s request for a stay cannot be construed as an effort by the company to use the bankruptcy to evade responsibility or oversight,’’ the company said. “To the contrary, the settlement structure already offers 100 percent of Purdue without the plaintiffs having to win a single court case. So, bankruptcy is being used to give Purdue to its claimants, not to shield the company from them.’’
It added the settlement was a much better outcome for plaintiffs than the expenditure of Purdue Pharma money on hundreds of millions of dollars in legal fees.
“The burden of proof should be on those who insist on litigation over real solutions,’’ the company said in its statement.