March 28, 2019; New York Times
Yesterday, New York State, led by state attorney general Letitia Jones, amended its legal complaint, explicitly adding as defendants eight members of the Sackler family who had served on the board of Purdue Pharma, the family-owned firm that developed, produced and marketed OxyContin. The suit also names as defendants a wide range of drug manufacturing and distribution companies.
New York’s action comes after a dizzying set of events involving the Sacklers and the family-owned company Purdue Pharma. In the last two weeks alone, three museums—the National Portrait Gallery in London, London’s Tate Modern, and New York’s Guggenheim Museum—refused Sackler donations; Tufts University opened an investigation into a Sackler-financed medical program alleged to have promoted prescription opioids; a $270-million settlement was announced in Oklahoma; and more than “600 cities, counties and Native American tribes from 28 states” filed a joint suit in federal court naming the Sacklers as defendants.
Roni Caryn Rabin in the New York Times reports this key allegation in the New York state attorney general’s office claim: “As investigators closed in on Purdue Pharma, the maker of the opioid painkiller OxyContin, more than a decade ago, members of the family that owns the company began shifting hundreds of millions of dollars from the business to themselves through offshore entities.”
Rabin adds that, “The suit, filed in New York State Supreme Court in Suffolk County, names eight Sacklers: Richard, Jonathan, Mortimer, Kathe, David, Beverly and Theresa Sackler, as well as Ilene Sackler Lefcourt. It seeks to claw back funds that it alleges were transferred from Purdue Pharma to private or offshore accounts held by family members in an effort to shield the assets from litigation; to order the Sacklers to return any transferred assets; and to restrain them from disposing of any property.”
Specifically, the 269-page amended complaint alleges that:
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Purdue and the Sackler defendants distributed hundreds of millions of Purdue’s opioid profits to the Sackler Families each year. Purdue has been involved in two decades of litigation for its misconduct vis-à-vis the sale and marketing of OxyContin. Purdue and the Sacklers thus always understood and were aware of the catastrophic effect of investigations and lawsuits relating to the opioids litigation… Purdue, at the direction of the Sacklers, fraudulently conveyed hundreds of millions of dollars of Purdue’s profits from opioids to the Sackler Families.
The lawsuit further alleges that in 2007, while Purdue was being investigated by federal prosecutors, the family created a new company to sell opioids, called Rhodes, which, Rabin explains, was “set up as a ‘landing pad’ for the Sacklers because of the crisis surrounding OxyContin, according to the lawsuit.” As Jared Hopkins and Sara Randazzo remark in the Wall Street Journal, “The billionaire Sackler family allegedly transferred funds from Purdue and an affiliated generic drugmaker called Rhodes Pharmaceuticals LP into various entities that family members control through trusts, according to the amended lawsuit.”
“Rhodes,” Rabin adds, “is owned by trusts benefiting the Sacklers and,” according to the lawsuit, “is overseen by members of the family.” By 2016, Rhodes had a far greater share of the opioid market than did Purdue, according to a Financial Times article quoted by the lawsuit. “Whereas the Sacklers have reduced Purdue’s operations and size, Rhodes continues to grow and sell opioids for the benefit of the Sackler families,” the legal complaint adds.
A key thread in the New York suit is its emphasis on shifting funds from Purdue Pharma to the Sacklers and other Sackler-controlled entities such as Rhodes. Obviously, the less money Purdue has, the less able it is to pay court judgments. In Oklahoma, fear that Purdue Pharma might go bankrupt help motivate the state to settle with Purdue out of court.
The New York suit contends that, “Despite knowing that Purdue faces certain liabilities to the states, including New York State, Purdue—at the Sackler Defendants’ direction—continued to pay the Sackler Families hundreds of millions of dollars each year in distributions during the relevant time period for no consideration and in bad faith. As a result of Defendants’ unlawful distributions to the Sackler Families, assets are no longer available to satisfy Purdue’s future creditor, the State of New York.” If the lawsuit succeeds, then the state may be able to get a court to compel the Sackler family to make good on covering judgment claims.—Steve Dubb
