Sackler Family May Have ‘Abused’ Bankruptcy Process, Purdue Pharma Judge Says

(Bloomberg) -- The members of the billionaire Sackler family that own Purdue Pharma LP may have abused the bankruptcy system by removing billions of dollars from the drugmaker in recent years, a federal judge said in a court Tuesday. 

Near the end of a lengthy hearing on an appeal of Purdue's opioid settlement, U.S. District Judge Colleen McMahon said she is considering sending the deal back to bankruptcy court for additional findings on whether members of the family took advantage of the bankruptcy process by removing more than $10 billion from Purdue between 2008 and 2018. The withdrawals left Purdue with less money to fight the opioid lawsuits that drove it to insolvency, she said.

“There is an extremely difficult issue about whether there has been abuse, and whether there has been abuse of a bankruptcy process,” McMahon said. “I'm not saying I'm there. I'm saying this is to me a serious issue,” she later added. 

Maura Monaghan, a lawyer for descendants of Mortimer Sackler, repeatedly said in response that there is not a “shred of evidence” to support the idea that Purdue's owners abused the bankruptcy system. She said Purdue acted independently when it chose to file for bankruptcy in 2019. No member of the family has been involved in the oversight of Purdue since 2018. 

U.S. Bankruptcy Judge Robert Drain in September approved Purdue's proposed opioid settlement, which would see members of the Sackler family contribute more than $4 billion to opioid abatement programs and hand all of the assets of the company over the to the cities, states and counties suing it over its role in the crisis. As part of the deal, members of the family would be insulated from future civil opioid lawsuits, including ones from state governments.

A handful of state attorneys general as well as an arm of the Justice Department are seeking to have Judge Drain's approval of the plan overturned, arguing that the legal protections granted to Purdue's owners under the settlement are illegal.

Purdue itself could have paid for the Sackler family's more-than $4 billion contribution to the deal if the family hadn't removed so much money from the company in the years preceding the bankruptcy, McMahon said in court Tuesday. 

“Abuse was at least one interpretation -- one gloss -- that can be put on the 10 years prior to the bankruptcy,” McMahon said. “So I need to know more.”

She encouraged parties to submit pleadings in writing about the issue. 

The appeal is In Re: Purdue Pharma L.P., 21-cv-07532, U.S. District Court, Southern District of New York (Manhattan).

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