/Diane Francis: Gig is up for Purdue Pharma’s Sackler family — and it looks like they may finally get what’s coming to them

Diane Francis: Gig is up for Purdue Pharma’s Sackler family — and it looks like they may finally get what’s coming to them

Fraudulent conveyance is an attempt to avoid debt, or to make assets inaccessible, by transferring money or assets to another person or company.

This occurs sometimes in divorces or business partnerships in advance of a break up. One party transfers assets that belong to both parties ahead of time in order to reduce the assets to be divided. This is illegal and such transfers can be unwound in court.

Fraudulent conveyance is now at the centre of the biggest business story in the world — Purdue Pharma and the opioid catastrophe — and is likely to end up extending the liability of corporations to their underlying beneficial owners. This is because the members of the Sackler family, who own Purdue, are personally far richer than is the company, now in bankruptcy so its assets can be distributed to opioid victims.

An army of lawyers pursuing the Sacklers argue, justly, that the family began siphoning billions of dollars years ago out of the company as it became obvious that marketing methods, and the drug itself, were troublesome.

The first attempt to seize their personal assets was launched this week by North Carolina’s attorney general, Josh Stein, who sued eight members individually. He said: “They have billions and billions and billions of dollars that they have sucked out of Purdue Pharma” which should be used “to right the wrongs that they have done.”

In the world of business, there is rarely a “consumer” or “health-care” product that has so quickly created one of the world’s biggest fortunes … or so much misery. Estimates are that at least 200,000 have died of overdoses, and Forbes estimates that the Sackler family net worth is US$13.5 billion. Overwhelmed by 2,000 lawsuits, the family just bankrupted Purdue and is offering up to US$5 billion in compensation to victims — only if the family’s “private” assets are exempted from any settlement.

That’s telling in and of itself. The question is: when did the Sacklers know, or should have known?

In 2007, the Department of Justice reacted to large-scale deaths and charged Purdue with misbranding the drug’s abuse potential. Purdue pleaded guilty and paid over $600 million in fines. Three company executives also pleaded guilty to criminal charges of misbranding the drug’s risk of abuse and addiction.

The question is: when did the Sacklers know, or should have known?

In 2008, Richard Sackler received a memo from an advisor to “distribute their risk” by distributing free cash flow to themselves. They did.

In 2010, Purdue released a new formulation of OxyContin with an abuse-deterrent mechanism that is harder to crush or dissolve. Sales boomed anyway because the company paid bonuses to its sales personnel that, on average, exceeded their salaries.

Massachusetts’ lawsuit claims the Sacklers siphoned more than US$4 billion from corporate to personal accounts between 2008 and 2016. Oregon asserts the family took out US$10 billion.

It’s hard to believe that with fines, billions rolling in, and negative media, the Sacklers were just “passive” owners. The company was built by three Sackler brothers who were all physicians and psychiatrists who made their first fortune with Valium. The late Arthur Sackler was inducted into the Medical Advertising Hall of Fame for his promotional work in helping Valium to become the first US$100 million drug.

Now the gig’s up.

The Tate Museum, Metropolitan Museum of New York and the Louvre are embarrassed having received millions from the family. Whatever money is left, or assets bought with it, should be part of the settlement. The Louvre has covered over the Sackler name on an entrance.

Hopefully, American judges will confiscate their mansions, yachts, fancy cars, trust funds, bank accounts, art collections, stock portfolios and reputations.

They deserve ignominy and bankruptcy.

Financial Post

Original Source