Attorney General Announces Settlement of at least $5.5 billion with Purdue Pharma and Sackler Family

Published on Thursday, March 03, 2022

Following successful appeal, AG Neronha and eight AG Colleagues secure more than $1 billion in additional funds from the Sacklers to be used for abatement; Rhode Island’s recovery more than doubled

PROVIDENCE, R.I. – Attorney General Peter F. Neronha, along with eight Attorney General colleagues, today announced a settlement with Purdue Pharma and the Sackler family for their role in the opioid epidemic that will increase the amounts of funds paid by the Sacklers from $4.325 billion under the original plan to at least $5.5 billion, and up to $6 billion. As part of the agreement, the Sackler family will issue a statement of regret for their role in the opioid epidemic and allow institutions to remove the Sackler name from buildings and scholarships.

Rhode Island will receive approximately $45 million from the settlement, more than doubling its recovery of approximately $20 million from the initial bankruptcy plan. All funds will be used to fund opioid treatment and prevention.

The settlement keeps intact provisions of the Purdue bankruptcy plan, forcing the company to be dissolved or sold by 2024 and banning the Sacklers from the opioid business. The initial bankruptcy plan also required Purdue and the Sacklers to make public over 30 million documents, and the settlement announced today forces disclosure of additional records previously withheld as privileged legal advice.

Today’s settlement is the product of a court-ordered mediation, which began on January 3, 2022 under Judge Shelley C. Chapman, a federal bankruptcy judge. The mediation consisted of dozens of in-person, video and telephonic negotiation sessions, including Rhode Island’s participation in a multi-day negotiation session in New York. Today’s resolution would not have been possible without Judge Chapman’s tireless efforts throughout this process.

Settlement highlights include:

The Sackler families must pay a total of at least $5.5 billion, with the potential for up to $6 billion.
The new deal brings an additional $1 billion more than the initial bankruptcy plan, as well as $175 million that was previously conditioned on certain approvals, but that now must be paid on the effective date.
The new deal further provides for up to an additional $500 million from the sale of certain international assets in the event those assets are sold for an amount above a specified benchmark.
Under this settlement, Rhode Island’s recovery more than doubles, from about $20 million to about $45 million. The first payment is expected this summer. A portion of the funds secured through the bankruptcy will flow directly to Rhode Island’s cities and towns, as with the distributors and J&J settlements announced earlier this year.
Under this new plan, the payments are spread over 18 years, the same period of time as the settlement reached with the three largest pharmaceutical distributors, with larger payments frontloaded so that the states will receive more money, sooner, as compared to the previous bankruptcy plan.
The Sackler families will issue a statement expressing their regret for their role in the opioid epidemic and for the grief and loss it brought to the victims and families whose lives have been devastated.
The Sackler family must allow institutions to remove the family name from buildings, scholarships, and fellowships.
Purdue must make public additional documents previously withheld as privileged legal advice, including legal advice regarding advocacy before Congress; the promotion, sale, and distribution of Purdue opioids; the structure of the Purdue Compliance Department and its monitoring and abuse deterrence systems; and documents regarding recommendations from McKinsey & Company, Razorfish, and Publicis related to the sale and marketing of opioids.
Responding to the states’ requests, mediator Judge Shelley C. Chapman has recommended to the Bankruptcy Court that it afford an opportunity for victims and families who have lost loved ones to address the Court and members of the Sackler family at the bankruptcy approval hearing.
States reserve their rights to oppose non-consensual, non-debtor releases before the U.S. Supreme Court, should an appeal be heard there.
States reserve their rights to oppose non-consensual, non-debtor releases in any other bankruptcy proceeding.

“As I have said before, there is no amount of money that will be enough to undo or compensate Rhode Islanders for the harms perpetrated by Purdue and the Sacklers. I objected to the bankruptcy plan because, in my view, the plan didn’t provide justice or accountability, and didn’t provide adequate resources for treatment and recovery,” said Attorney General Neronha.

“I fought hard for the principle that third-party releases for the Sacklers, who aren’t bankrupt and yet want the benefits and protections of the bankruptcy process, are unlawful, and we won. Today’s settlement represents a significant, meaningful increase, nearly 25%, in the amount of money the Sacklers must pay. This settlement also lays bare the dangers of third-party releases in the bankruptcy context – the Sacklers were almost allowed to get away with leaving more than a billion dollars on the table.”

Rhode Island filed suit against Purdue and the Sacklers in 2018 and 2019, suing a total of eight individually named members of the Sackler family. Rhode Island’s complaints allege that the company and family peddled a series of falsehoods to push patients toward its opioids, reaping massive profits while opioid addiction skyrocketed. Among the allegations in Rhode Island’s complaint is the fraudulent transfer of hundreds of millions of dollars from Purdue Pharma to the Sacklers to shield their wealth from accountability.

Purdue Pharma filed for bankruptcy in September 2019. In 2021, the bankruptcy court approved an inadequate Purdue bankruptcy plan that granted a lifetime legal shield to the Sackler family, thereby blocking states such as Rhode Island from pursuing claims against the family. The plan required the Sackler family to pay approximately $4.325 billion over nine years to the states, municipalities and plaintiffs that sued the company.

California, Connecticut, Delaware, Maryland, Oregon, Rhode Island, Vermont, Washington, and the District of Columbia objected to and ultimately appealed the plan. The United States Trustee, an arm of the Department of Justice, also appealed. New Hampshire also objected to the original Purdue bankruptcy plan but did not file an appeal.

In December 2021, the U.S. District Court vacated the Purdue bankruptcy order, agreeing with appealing attorneys general and the United States Trustee that the bankruptcy court lacked authority to force states to release their claims against the Sackler family. Purdue has appealed to the United States Court of Appeals for the Second Circuit, and that appeal will proceed. Should the case proceed to the U.S. Supreme Court, Rhode Island reserves its right to continue its fight against non-consensual non-debtor releases.

Today’s announcement is a civil settlement. The settlement is conditioned upon approval by the bankruptcy court, on the Second Circuit’s reversal of the District Court’s order, and consummation of the bankruptcy plan. Neither this agreement nor the prior bankruptcy plan releases the Sacklers from any potential future criminal liability.

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