Purdue Pharma Considers Converting To A Public Trust Amid Lawsuits Over Opioid Crisis
AILSA CHANG, HOST:
All right. And to understand more about what this settlement could mean for the company, the plaintiffs and the Sackler family, we turn now to Charles Tatelbaum. He's a director at Tripp Scott law firm and is a former bankruptcy professor at the University of Maryland Law School.
CHARLES TATELBAUM: Thank you.
CHANG: So one part of this proposed settlement is that Purdue Pharma would transform from a private company into what's called a public beneficiary trust. What does that even mean?
TATELBAUM: It means that through the bankruptcy court process, which they're going to do, they will turn the ownership of the business to a trustee - or actually three trustees - for the benefit of the public. So they're in essence turning over the ownership of the company to the public.
CHANG: OK. So then how would this settlement get executed? Like, how does that work?
TATELBAUM: The way it works is that the public trust will now operate the company and will generate profits, which they anticipate to be between $7 and $8 billion. And those profits will be used to help settle some of the claims. Additionally, if they have any subsidiaries that are non-opioid that they sell, the proceeds from that sale will be used to pay the creditors.
CHANG: Ah, OK. Are there other examples of private companies that for one reason or another become public beneficiary trusts?
TATELBAUM: This is the first one I've seen in my 53 years of bankruptcy practice.
CHANG: Really? Wow. So why has it been so rare, you think, for something like this to happen - for private companies to be made into a public beneficiary trusts?
TATELBAUM: Because most of the bankruptcy trusts have kept the companies running under the current ownership to protect the stockholders because they've been mostly public companies. Here, the Sackler family owns the interest...
TATELBAUM: So it lends itself to their turning over the company because there are no shareholders to complain.
CHANG: Well, what about non-private companies? Have you seen other examples of non-private companies being turned into public beneficiary trusts after being sued?
TATELBAUM: We see trusts are created in the bankruptcy. They're not public beneficiary trusts because the shareholders keep some of the interest and the trustees get some of the interest. So in a lot of cases where you have public companies such as asbestos cases, IUD cases, the breast implant cases, Piper Aircraft, for example - all of them were public companies where the ownership went some to the trust and some to the creditors and some to the shareholders.
TATELBAUM: Here, there are no shareholders...
TATELBAUM: ...Except the Sackler family.
CHANG: OK. So what else stands out to you in this agreement?
TATELBAUM: Well, what's so important is besides the Sacklers themselves purportedly donating or contributing $3 billion, what's so important is that the bankruptcy court will resolve this by approving the settlement if they do. And then the bankruptcy court will enter what's called a bar order, which if the bankruptcy court finds that the Sacklers' contributions are meaningful contributions, then the bankruptcy court will bar any person or entity from ever suing or claiming against the Sacklers or the company again.
CHANG: I see. OK. So, to be clear, after this happens, this public beneficiary trust is set up, going forward, every single asset of the Sackler family will be protected from any future lawsuits related to Purdue Pharma.
TATELBAUM: Correct, if the bankruptcy judge finds that what the Sackler family is contributing is a meaningful contribution.
CHANG: Got it. So how likely, you think, is it that this judge will sign off on this?
TATELBAUM: I think it may be likely if everybody who is a proponent of the deal is able to convince the judge that based upon the financial capabilities of the Sacklers and the public benefit from this that all of this will be to the public good. It is totally subjective with the bankruptcy judge to approve it, but I suspect that the judge will.
CHANG: Charles Tatelbaum is a director at Tripp Scott law firm.
Thank you very much for speaking with us today.
TATELBAUM: My real pleasure.
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