States suing Purdue Pharma over the marketing of its OxyContin painkiller are demanding access to confidential documents as part of a probe into whether some members of the billionaire Sackler family engaged in misconduct when they managed the opioid-maker.
More than 20 states said federal prosecutors' claims tied to a $225 million accord unveiled last month provide a "substantial reason" to believe some of the Sacklers "committed crimes in operating Purdue and secreting its assets," according to a bankruptcy filing Wednesday. The family members deny the allegations.
Those states want U.S. Bankruptcy Judge Robert Drain to force the Sacklers to hand over files they claim are confidential as part of an investigation into whether shifts of "billions of dollars out of Purdue" amounted to fraudulent transfers, the filing shows. Drain signed off on an $8.3 billion settlement between Purdue and the U.S. government last week.
The states point to the U.S. government's assertion in settlement documents that Sackler family members transferred funds out of Purdue "with the intent to hinder future creditors and/or were otherwise voidable as fraudulent transfers," according to court filings.
Jim Boffetti, an assistant attorney general in New Hampshire who is overseeing the office's opioid litigation, said his state is among those that want access to Purdue's confidential documents about the fund transfers.
"Those documents are critical to our ongoing investigation of whether the members of the Sackler family directed the transfer of billions of dollars out of Purdue for their own direct benefit and whether those transfers were fraudulent," he said Friday in an emailed statement.
Both the Raymond and Mortimer Sackler sides of the family have filed court documents rebutting allegations that the transfers at issue were improper. Creditors demanding the confidential documents have produced an "utter lack of evidence" that any of the transfers amounted to a "fraudulent conveyance," lawyers for the Raymond Sackler wing of the family said in one such filing last month.
The Mortimer Sackler wing of the family denies any wrongdoing, including the Department of Justice's allegations, a representative said in an email. A representative for the Raymond Sackler wing of the family didn't respond to a call or email requesting comment. "The Sackler Families vigorously deny all allegations that they acted unlawfully or unethically in connection with the Debtors' marketing and sale of opioid products," their lawyers said in court papers filed Oct. 22 about the settlement.
U.S. Justice Department officials made their findings of fact as part of a civil settlement with the Sacklers resolving questions about their role in OxyContin marketing. Purdue agreed separately to plead guilty to a trio of felonies as part of a separate $8.3 billion resolution of the investigation; the Sacklers weren't charged with any criminal wrongdoing.
The states' request is based on the "crime/fraud exception" to secrecy rules governing lawyer-client communications. Objectors contend some Sacklers are improperly withholding "communications with attorneys that furthered" what state officials allege were fraudulent and criminal activities, according to the Wednesday filing.
"Without receiving the inappropriately withheld documents, such investigation will be far from complete. And recall -- it is the Sacklers who seek releases," the unsecured-creditors' committee said in court documents. In bankruptcy court, a judge has the power to grant a company or a person releases from any future payments tied to the opioid litigation.
Purdue itself has made thousands of attorney-client privileged documents related to its owners available to its creditors, the company said in a statement. Purdue has done so because its "ultimate goal is to achieve a global settlement that would deliver more than $10 billion in value, including 100% of Purdue's assets, to address the opioid crisis."
A bankruptcy audit last year uncovered more than $10 billion in company transfers by family members since 2008. Some of that money went to offshore trusts and holding companies controlled by the Sacklers. Lawyers for family members have said in court filings the transfers were proper.