The Washington Post - 19.09.2019

A20 EZ SU THE WASHINGTON POST.THURSDAY, SEPTEMBER 19 , 2019

ties, including the Sacklers.

The Sacklers are “inextricably

intertwined” with the lawsuits

against Purdue, the company said

in Wednesday’s court filing. And

“there would be no” settlement

agreement without them, the

complaint says.

“If forced to bear the risk of

adverse money judgments, the

[Sackler family] may be unwilling

— or unable — to make the

billions of dollars of contribu-

tions contemplated by the Settle-

ment Structure,” the complaint

says. Allowing the cases against

“existing shareholders and their

affiliates risks toppling” t he deal.

The complaint lists at least 19

members of the Sackler family or

their trusts and estates. Te mpo-

rarily halting lawsuits against

them would “facilitate an equita-

ble resolution” of the bankruptcy

that is “to the benefit of all

stakeholders,” the complaint

says.

But if the court were to halt

lawsuits against the Sacklers it

would be an unusual step, bank-

ruptcy experts say. Protection

from lawsuits is usually reserved

for the parties that have filed for

bankruptcy, not third parties re-

lated to the case. These types of

arrangements have become more

common over the last 20 years,

especially in bankruptcy courts in

New York and Delaware, but re-

main controversial, they say.

The judge could decide to

grant the Sacklers a stay, halting

lawsuits while Purdue is in bank-

ruptcy and permanently release

them from liability, if a reorgani-

zation plan for Purdue is ap-

proved, said Jonathan Lipson, a

professor at Temple University’s

Beasley School of Law.

The third parties seeking court

protection from lawsuits do not

usually undergo the same level of

scrutiny as the entity that filed for

bankruptcy, he said.

“Often, the people that most

want a release are those that may

have harmed the company,” Lip-

son said.

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[email protected]

opioid epidemic in the late 1990s

and early 2000s.

The drug generated $790 mil-

lion last year, according to docu-

ments reviewed by The Washing-

ton Post. But as patents for the

tamper-resistant version of Oxy-

Contin expire, its value will de-

cline steeply over the next

10 years.

Steve Miller, chairman of the

company’s board, has estimated

Purdue’s assets at about $3.5 bil-

lion.

About $4.5 billion of the settle-

ment deal is based on the as-

sumption that the Food and Drug

Administration will approve a

trio of “rescue drugs” that Purdue

has in the works.

The Sackler family, which has

several branches and are descen-

dants of brothers who started the

company in the 1950s, has agreed

to put $3 billion in cash into the

deal over seven years. That could

come from their own funds, or

from the sale of Mundipharma,

their international drug compa-

ny, or a combination of both. If

Mundipharma’s sale generates an

unexpected windfall, creditors

would get more.

The attorneys general who op-

pose the deal say that $3 billion is

not enough. The deal’s value de-

pends on Purdue assets that may

be smaller than current esti-

mates, some have said.

Forbes has estimated the Sack-

ler family’s net worth at $13.5 bil-

lion, which the magazine said

makes the Sacklers one of the

wealthiest families in the United

States.

Ty pically, a bankruptcy filing

halts pending and future lawsuits

against a company. Purdue said

in its complaint Wednesday that

it is spending $2 million a week

on legal and other costs associat-

ed with the lawsuits. The “tidal

wave of litigation” will “drown”

the company, the complaint says,

adding that it would “most cer-

tainly frustrate their successful

reorganization.”

But in this case, Purdue also

asked the court to extend that

special protection to third par-

family — unearned funds these

individuals reaped as Connecti-

cut families suffered.” Purdue’s

headquarters is in Stamford,

Conn.

Huebner told the court that a

special committee of Purdue’s

board of directors has taken “very

seriously” such allegations and

that a forensic investigation of

transactions between the Sack-

lers and Purdue over the past

decade is underway.

“I remain hopeful that parties

may be more willing to come on

board with the settlement frame-

work as they learn more about

certain facts and numbers,”

Huebner said.

Purdue comes to bankruptcy

court with little debt and a few

valuable assets, chief among

them is OxyContin, the extended

release painkiller that is still un-

der patent and is widely blamed

for triggering the prescription

doses of opioid overdose rescue

drugs at no or low cost.”

But about half the attorneys

general who have sued the com-

pany and the family are refusing

to go along with the deal. Some

contend that the Sacklers knew

litigants would be coming after

that money and transfers into

their personal holdings and

trusts amounts to “fraudulent

conveyance” — an illegal attempt

to hang on to it.

Last week, Letitia James, New

York’s attorney general, said in a

court filing that her office had

found wire transfers of nearly

$1 billion by the Sackler family

that suggested attempts to shield

their money from litigation.

Connecticut Attorney General

William To ng said in April: “We

will not allow Purdue Pharma to

cry poverty after illegally trans-

ferring hundreds of millions of

dollars to members of the Sackler

court they should be forced to

give a detailed accounting of their

wealth, said North Carolina’s at-

torney general, Josh Stein, who

sued eight members of the family

individually Tuesday.

The Sacklers want protection

from lawsuits “so they can get on

with their lives. I am fine with

that as long as they meaningfully

address the problem” caused by

the opioid epidemic, Stein said in

an interview. “They have billions

and billions and billions of dol-

lars that they have sucked out of

Purdue Pharma.”

Stein said those funds should

be used “to right the wrongs that

they have done.”

A spokesman for the Sackler

family, who spoke on the condi-

tion of anonymity, denied the

allegations in the North Carolina

lawsuit as well as more than two

dozen other cases filed across the

country. T he spokesman declined

to comment on the details of

Purdue’s ongoing bankruptcy

and denied that the Sackler fam-

ily improperly took money from

Purdue.

Purdue’s tentative settlement

with more than 2,000 plaintiffs in

a mammoth federal lawsuit and

about half the attorneys general

in the United States demands

protection from all litigation for

the company. In return, the Sack-

lers would relinquish control of

the firm, declare it and related

corporate entities bankrupt, turn

over assets they claim are worth

$10 billion to $12 billion, and

resurrect the company as a “pub-

lic benefit trust” whose primary

mission would be to produce

addiction treatment and anti-

overdose drugs.

The settlement was the result

of “months of intense, arduous,

careful, and complex negotia-

tions with dozens of relevant

stakeholders,” Marshall Huebner,

lead restructuring counsel for

Purdue, told the bankruptcy

court Tuesday. “Very much is at

stake here, dare I say, for our

country and for states, counties,

cities and towns. Billions of dol-

lars of value, and millions of

BY RENAE MERLE

AND LENNY BERNSTEIN

In 2008, as Purdue Pharma
was searching for a new chief
executive, Richard Sackler re-
ceived a memo from an adviser.
“In the event that a favorable
[recapitalization] deal cannot be
structured during 2008, the most
certain way for the owners to
diversify their risk is to distribute
more free cash flow to them-
selves,” F. Peter Boer, a member of
Purdue’s board of directors, told
Sackler, a prominent member of
the wealthy family that owns the
company.
That, authorities allege, is ex-
actly what the Sackler family did.
A lawsuit filed by the state of
Massachusetts claims the Sack-
lers transferred more than $4 bil-
lion from the company to person-
al accounts between 2008 and

2016. Oregon asserts the family
      may have taken as much as $
      billion out of the company.
      Now, as the maker of OxyCon-
      tin heads to bankruptcy court,
      those billions represent a central
      sticking point in the company’s
      plan to resolve thousands of law-
      suits against it.
      Purdue asked the bankruptcy
      judge, Robert D. Drain, on
      Wednesday to take the unusual
      step of temporarily halting law-
      suits against the Sackler family.
      Without that protection, the
      Sackler family may back out of
      contributing to a settlement
      agreement Purdue reached with
      multiple states, which “risks top-
      pling” t he deal, according to the
      drugmaker’s complaint.
      That proposal has angered
      state attorneys general who say
      the wealthy family should be do-
      ing more to address the opioid
      crisis. If the Sacklers want special
      protection from the bankruptcy

Economy & Business

PHARMACEUTICALS

Novartis halts generic

Zantac distribution

Novartis AG’s S andoz unit said
Wednesday i t was halting
distribution of its versions o f the
drug Zantac in all markets,
including the United States and
Canada, after contaminants w ere
found in the heartburn d rug.
The Swiss drugmaker’s s teps
follow an investigation by U.S.
and European regulators into the
presence o f the impurity, N -
nitrosodimethylamine (NDMA),
in the drug, ranitidine, and a
distribution halt in Canada
announced late Tuesday.
Health Canada said it had
requested makers of the drug to
stop distribution as it gathers
more information a nd consults
with world health regulators.
Neither the U.S. Food and Drug
Administration nor the European
Medicines Agency had asked
patients to stop taking the drug
when the regulators said last
week they were reviewing the
safety o f ranitidine.
Novartis said in a statement
that its action was precautionary
and that adequate measures “will
be implemented i n alignment

with relevant health authorities

as required.”

— Reuters

HOUSING

Apartment and condo

construction surges

The pace of U.S. home building

jumped 12.3 percent last month

to a 12-year h igh on a surge in

apartment construction.

The Commerce Department

said Wednesday that housing

starts came in at a seasonally

adjusted annual rate of

1.36 million, the most since June

2007 and up from a revised

1.22 million, as builders

overcame a shortage of skilled

workers and available l and.

Construction of single-family

homes rose 4.4 percent to

919,000. Building of apartments

and condominiums surged

30.9 percent — the biggest

monthly gain since D ecember

2016 — to 424,000.

In a nother g ood sign for the

housing market, permits, a signal

of future building, rose

7.7 percent to 1.42 million, the

highest since May 2007.

— Associated Press

ALSO IN B USINESS

California Gov. Gavin Newsom

(D) on Wednesday signed broad

labor legislation t hat aims to give

wage and benefit protections to

drivers at r ide-hailing companies

such as Uber and Lyft a nd to

workers across other industries.

The closely w atched proposal

could have national implications

as lawmakers, businesses and

unions confront the changing

nature of work and the rise of the

gig economy. T he legislation

makes it harder for companies to

classify workers as independent

contractors instead of employees,

who are entitled to minimum

wage and benefits such as

workers’ compensation.

Southwest Airlines won the

dismissal of a proposed c lass-

action lawsuit seeking damages

for stranded passengers on

hundreds of winter flights it was

forced to cancel because it ran

out of de-icer fluid. U.S. District

Judge Sara Ellis in Chicago ruled

on Tuesday that Southwest’s

ticketing terms did not imply that

the Dallas-based carrier had a

legal duty to always stock enough

fluid. She also said the terms

explicitly excused Southwest

from liability, b ecause passenger

safety c ould be jeopardized if

planes that had not been de-iced

took off in winter weather.

The top U.S. consumer

watchdog will keep consumer

complaints against financial

firms public d espite pressure

from the companies, but the

agency said Wednesday it will

make changes to the way those

complaints are filed. The decision

to retain the Consumer Financial

Protection Bureau’s p ublic

complaints database follows a

review initiated l ast year. The

CFPB complaints database,

which went public in 2012 to

boost transparency of consumer

issues, is a key source of

investigations by the agency.

Pennsylvania is joining more

than a dozen states that have

filed a lawsuit aimed at s topping

T-Mobile’s $ 26 billion purchase

of Sprint, New York Attorney

General Letitia James said

Wednesday. Attorneys general

from 17 s tates and the District of

Columbia h ave signed on to stop

the merger, which they say will

lead to higher prices for

consumers. The lawsuit is being

led by New York and California.

The U.S. District Court in

Manhattan has ordered that the

trial be delayed to Dec. 9.

— From n ews services

COMING TODAY

8:30 a.m.: Commerce

Department releases current

account trade deficit for the

second quarter.

10 a.m.: National Association of

Realtors r eleases existing-home

sales for August; Freddie Mac

releases w eekly m ortgage rates.

DIGEST

JONAS NOLDEN/EPA-EFE/SHUTTERSTOCK

A worker at the EMO Hannover metalworking fair in Germany

demonstrates one of the tools on display. The trade exhibition draws

suppliers and customers from countries all over the world and

includes an additive manufacturing circle and a job board. The event

started Monday and runs through Saturday.



DOW 27,147.

UP 36.28, 0.1 % 

NASDAQ 8,177.

DOWN 8.62, 0.1% 

S&P 500 3,006.

UP 1.03, 0.03% 

GOLD $1,515.

UP $2.40, 0.2% 

CRUDE OIL $58.

DOWN $1.23, 2.1% 

10-YEAR TREASURY

UP $0.50 PER $1,000; 1.80% YIELD

CURRENCIES

$1=108.47 YEN; EURO=$1.

Drugmaker aims to protect family fortune in bankruptcy

BY TONY ROMM

AND DREW HARWELL

Congressional lawmakers are
drafting a bill t o create a “national
commission” a t the D epartment of
Homeland Security to study the
ways that social media can be
weaponized — and the effective-
ness of tech giants’ efforts to pro-
tect users from harmful content
online.
The draft House bill, obtained
by The Washington Post, is slated
to be introduced and considered
next week. If passed, the commis-
sion would be empowered — with

the a uthority t o hold hearings and

issue subpoenas — to study the

way social media companies po-

lice the Web and to recommend

potential legislation. It a lso w ould

create a federal social media task

force to coordinate the govern-

ment’s r esponse to security issues.

The effort reflects a growing

push by members of Congress to

combat online hate speech, disin-

formation and other harmful con-

tent online, including a hearing

held Wednesday where Senate

lawmakers questioned Facebook,

Google and Twitter executives to

probe whether their platforms

have become conduits for real-

world violence.

All three tech giants told law-

makers at the hearing that they

have made progress in combating

dangerous posts, photos and vid-

eos — improvements they attrib-

uted largely to advancements in

their artificial-intelligence tools.

But s ome Democrats and R epubli-

cans in Congress still contend the

companies haven’t acted aggres-

sively enough.

“I would suggest even more

needs to be done, and i t needs t o be

better, and you have the resources

and technological capability to do

more and better,” Sen. Richard

Blumenthal (D-Conn.) said at the

hearing.

Lawmakers have grown in-

creasingly concerned about the

use of social media sites as con-

duits for violence and extremism,

pointing to recent attacks includ-

ing the mass shooting in

Christchurch, New Zealand. Users

uploaded videos of the deadly inci-

dents at two mosques earlier this

year, evading tech giants’ censors

and then proving difficult to

scrub.

But the most vile content has

appeared on sites such as Gab, a

haven f or the alt-right, a nd 8chan,

an anonymous message board.

The latter site has been taken

down in the aftermath of a shoot-

ing in El Paso this year that left 22

people dead. The suspect there is

believed to have p osted a manifes-

to to 8chan before carrying out his

attack.

Lawmakers led by Rep. Bennie

Thompson (D-Miss.), chairman of

the House Homeland Security

Committee, grilled the owner of

8chan at a private session this

year. Thompson later said he had

plans for a bill that would create

the s ocial media commission.

“One thing’s f or sure — the chal-

lenge of preventing online terror-

ism content is one of the greatest

post-9/11 homeland security chal-

lenges,” he said in a statement

Wednesday.

In the Senate, the tech giants

faced similar concerns from law-

makers. “In today’s Internet-

connected society, misinforma-

tion, fake news, deep fakes and

viral online conspiracy theories

have become the norm,” Sen. Rog-

er Wicker (R-Miss.), chairman of

the S enate Commerce Committee,

said at the start of Wednesday’s

hearing.

In response, Facebook, Google

and Twitter s aid d uring their testi-

mony that they have had success

in deploying automated tools to

police for hate, violence and ter-

rorist propaganda.

YouTube said nearly 90 percent

of the 9 million videos it removed

in the second quarter of the year

were flagged by automated tools.

Those played a major role in re-

moving videos, comments and

channels flagged for hate speech,

which the company said had

spiked in recent months.

Facebook said this week it

would begin using police training

videos to help its automated tools

better detect first-person s hooting

videos like the one recorded in

Christchurch. The company said

its detection system, which was

designed t o automatically flag and

remove videos showing violence,

sex or objectionable content, now

finds a rule violation on its live-

streaming system, on average, ev-

ery 12 s econds.

Twitter said its systems for

monitoring abusive content now

flag half of the content that is

ultimately removed, compared

with 20 percent a year ago. The

site also said it was piloting a

program in which it would alert

outside websites when it appears

they are hosting videos or other

files p romoting t errorist content.

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Facebook, Google and Twitter face fresh heat over harmful online content

Congress may create

commission to probe issue

— and Big Tech’s response

Plaintiffs say Sackler

family has drained

billions from company

VICTOR J. BLUE/BLOOMBERG NEWS

Plaintiffs allege that the Sackler family may have taken as much as

$10 billion out of the company to protect the money in a lawsuit.

“They have billions and billions and billions

of dollars that they have sucked out of

Purdue Pharma.”

Josh Stein, North Carolina’s attorney general

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