BOSTON, Jan 8 (Reuters) - The person hired to run the bankrupt pharmacy linked to a deadly U.S. meningitis outbreak is "hopelessly conflicted" and should be removed from the job, a U.S. Justice Department official said on Tuesday.
William Harrington, the U.S. Trustee for Region One, argued that New England Compounding Center's board should not be able to hand-pick its chief restructuring officer.
NECC filed for bankruptcy protection last month after U.S. authorities shut down its pharmacy operations amid a meningitis outbreak that has killed 40 people and sickened 664 others, according to the U.S. Centers for Disease Control.
NECC shipped thousands of vials of a fungus-tainted steroid to medical facilities throughout the United States, according to authorities.
Before filing for bankruptcy protection on Dec. 21, NECC's board hired Keith Lowey of Verdolino & Lowey PC to liquidate its assets and create a compensation fund for meningitis victims. NECC's ownership and board includes the suburban Boston families of recycling entrepreneur Greg Conigliaro and NECC's chief pharmacist Barry Cadden. Conigliaro's sister, Lisa, is married to Cadden.
Harrington asked the bankruptcy court to deny NECC's application to retain Lowey and his firm as financial advisers and accountants. Lowey did not return a telephone call seeking comment.
"The (chief restructuring officer) is hopelessly conflicted in this engagement due to his appointment by the board," Harrington said in a motion filed on Tuesday. "... It is essential that the debtor's affairs be managed by a truly independent fiduciary, not subject to the direct or indirect control of (NECC management)."
Harrington is the U.S. Trustee for a region that includes Massachusetts and other New England states. The U.S. Trustee Program is the component of the Justice Department responsible for protecting the integrity of the bankruptcy system.
Harrington asked the court to appoint a Chapter 11 trustee to oversee the case.
The case number for New England Compounding's Chapter 11 bankruptcy case is 12-19882-HJB.