Purdue Judge Backs Bankruptcy Examiner After Explosive Hearing

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Purdue Pharma LP’s bankruptcy judge on Wednesday approved a narrow probe of the OxyContin maker’s corporate governance despite calling part of the request that prompted it “a load of hooey.”

U.S. Bankruptcy Judge Robert Drain approved an investigation into whether the drugmaker’s owners, members of the billionaire Sackler family, have had undue influence on an independent committee of Purdue board members. That so-called special committee reviewed potential lawsuits against the family members and is seeking a settlement instead of litigation.

The appointment is the latest twist in a bankruptcy case that has aired the grievances of those affected by the opioid crisis -- from states and cities to individuals. By one measure, Purdue is facing legal claims totaling more than $40 trillion, or about double the U.S. GDP in 2020. It’s trying to settle those claims by handing Purdue’s assets to a trust for the benefit of cities and states, who would use the money on opioid crisis abatement.

In a contentious five-hour hearing, Drain said there’s no evidence to suggest the board members’ independence has been compromised, but decided the court papers filed to request the investigation were so misleading that a probe is needed to remove any “taint” over the bankruptcy process.

He repeatedly chided Jonathan Lipson of Temple University, the law professor who filed the request, calling the motion “slanderous” and containing “unsupported, inflammatory allegations.”

“I obviously disagree with all of those statements,” said Lipson, who made the examiner request on behalf of a man that lost his daughter to an OxyContin overdose. “Those are surprising comments from a federal judge, but I am grateful for his ruling,” he said by phone Wednesday.

In the hearing, a lawyer for Purdue vehemently denied that the board members were influenced by members of the Sackler family in their decision to pursue a settlement. A lawyer for the drugmaker’s low-ranking creditors opposed the probe as well, arguing it’s a waste of money in light of the creditor group’s own independent investigation of the company.

A single individual with a $200,000 budget will carry out the probe, Drain said. The results should be known prior to Purdue’s proposed bankruptcy plan confirmation hearing in August, he said.

The case is Purdue Pharma LP, 19-23649, U.S. Bankruptcy Court for the Southern District of New York (White Plains).

©2021 Bloomberg L.P.

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