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Sacklers did not influence Purdue in deal talks, examiner finds

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Bottles of prescription painkiller OxyContin made by Purdue Pharma. REUTERS/George Frey

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  • No evidence to support suggestion of impropriety, report says
  • Probe does not address merits of settlement

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(Reuters) - The Sackler family members who own Purdue Pharma LP did not exert any improper influence over a special committee of the OxyContin maker’s board in negotiating a settlement worth billions of dollars to resolve opioid-related litigation, an independent examiner has determined.

Stephen Lerner of Squire Patton Boggs issued his report on the matter on Monday night after being selected by the U.S. Department of Justice’s bankruptcy watchdog, the U.S. Trustee, to conduct the probe in June. The investigation was ordered by U.S. Bankruptcy Judge Robert Drain, who oversees Purdue’s Chapter 11 case, at the request of Peter Jackson, the founder of an advocacy group for parents whose children have died from opioid overdoses.

Following a 25-day investigation, Lerner said he "found no evidence that the Sackler Families either attempted to, or did, influence the Special Committee in its work," on the deal, which forms the basis of Purdue’s bankruptcy reorganization plan. Drain is scheduled to hear arguments for and against the plan on Aug. 9.

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He admitted in the report that he had “some degree of trepidation” in performing the investigation in the relatively short time frame provided, but that he was confident he completed all necessary work to reach his conclusions.

A lawyer for Jackson, Jonathan Lipson of Temple University Beasley School of Law, said his team appreciates the examiner's efforts and the transparency the report provided.

"On the other hand, the limits on the Examiner’s mandate, time, and resources mean that he had limited capacity to address the core concern, which is whether the Special Committee was committed from the outset, before bankruptcy, to the releases of the Sacklers which, as recent Plan objections show, are a central concern in these cases," Lipson said.

Under the deal, the Sackler family members have agreed to contribute nearly $4.5 billion in exchange for protection against opioid-related litigation. The settlement is supported by a wide array of creditor groups and around 40 states. The U.S. Trustee, U.S. Attorney for the Southern District of New York Audrey Strauss and a handful of states oppose the plan.

The examiner’s probe was focused specifically on the independence of the special committee of the Purdue board that negotiated the deal and was not intended to evaluate the merits of the Sackler settlement or Purdue’s proposed reorganization plan.

In conducting the investigation, Lerner interviewed every member of the special committee as well as members of the Raymond and Mortimer Sackler families, according to the report.

Lerner also reported that lawyers for creditor groups told him that the independence of the special committee was not a significant area of concern for them because they conducted their own research to form their opinions on the deal.

Additionally, Lerner said he did not find any communications between the special committee members and the Sacklers that indicate the Sacklers attempted to influence the committee’s work on a deal. He rejected the notion from an unnamed party-in-interest that a November 2019 letter agreement that imposed restrictions on the Sacklers’ ability to remove at-large directors or the Purdue chairman suggested possible attempts to remove those individuals previously.

Lerner stated that he chose not to investigate certain matters, including why the special committee and official committee of unsecured creditors have not released their analyses of potential claims against the Sacklers publicly, because they were outside the scope of his task.

The case is In re Purdue Pharma LP, U.S. Bankruptcy Court, Southern District of New York, No. 19-bk-23649.

For Purdue: Marshall Huebner, Benjamin Kaminetzky, Timothy Graulich, Eli Vonnegut and James McClammy of Davis Polk & Wardwell

For Peter Jackson: Jonathan Lipson of Temple University Beasley School of Law

For Stephen Lerner: Scott Kane of Squire Patton Boggs

Read more:

Purdue bankruptcy watchdog says protections benefiting Sacklers are ‘illegal’

Squire Patton Boggs’ restructuring chief named Purdue Pharma bankruptcy examiner

Purdue Pharma bankruptcy judge OKs examiner but condemns Sackler-related attacks

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Our Standards: The Thomson Reuters Trust Principles.

Maria Chutchian reports on corporate bankruptcies and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.

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