Sen. Baldwin Objects To Purdue Pharma Bankruptcy Plan

Purdue Pharma, the company that makes the painkiller OxyContin, filed for Chapter 11 bankruptcy in 2019. As it prepares to exit bankruptcy and move forward, it is facing some opposition. Among those who oppose Purdue’s post-bankruptcy plans is Wisconsin Senator Tammy Baldwin. Baldwin took the unusual step of writing to the bankruptcy court to argue for changes to Purdue’s reorganization plans.  

The Hanson & Payne team was already monitoring this case because it is a big one, but Baldwin’s interest in it makes it even more important. Is this a one-off situation, or will our Senator comment on future bankruptcy cases? 

Purdue Declares Bankruptcy 

Purdue Pharma is the creator and heavy marketer of OxyContin, which many view as the seed that started the opioid epidemic. Thousands of families and governmental bodies have filed lawsuits against Purdue and the Sackler family, which controls the company, in an attempt to hold it responsible for what many consider irresponsible prescribing and insufficient warnings about Oxy’s potential for abuse. In response, Purdue filed for Chapter 11 bankruptcy. 

The company’s reorganization plan dissolves the drugmaker and shifts assets to a new charity-oriented company not controlled by Sackler family members. It will funnel its profits into government-led efforts to prevent and treat addiction. The proposed plan also sets up a compensation fund that will pay some victims of opioid abuse an expected $3,500 to $48,000 each. After these actions are taken, the Sackler family will be shielded from future opioid litigation.

Opposition To Purdue’s Reorganization Plan

Many people are dissatisfied with Purdue’s reorganization plan. Even the DOJ is considering appealing its approval.

Just before the reorganization plan was approved, Wisconsin Sen. Tammy Baldwin and a handful of other lawmakers sent a letter to the judge overseeing the case, urging him to reject it:

We write today in opposition to Purdue Pharma’s recent motion requesting $34.7 million in employee bonuses, including $5.4 million for its top executives, as part of Purdue’s Chapter 11 reorganization plan. 

 

[…]

 

While employee retention can be an important aspect of bankruptcy reorganization plans, Purdue has pled guilty to multiple federal crimes and is facing thousands of lawsuits, including those from states, localities, and individual claimants, for tens of billions of dollars. Furthermore, the bonus request is completely untenable with the company’s plan to transition to a public benefit company (PBC) that functions “entirely in the public interest” and demonstrates a complete lack of understanding about the company’s future.

 

It would be contrary to public policy and public health – and a miscarriage of justice – to provide those running an alleged “criminal enterprise” with upwards of $35 million in bonuses, including $5.4 million for top executives and $67,000 per employee, while individual victims can receive no more than $48,000. We therefore request reallocation of these funds towards settlements with victims, their families, and states and localities.

The letter ended up not having any impact, but it is still notable. While the Purdue bankruptcy is unique, Baldwin’s involvement in the opposition has made many Wisconsin companies sit up and take note. The Hanson & Payne team will be keeping a close eye on this case, and watching to see if Baldwin’s actions were a response to this unusual case, or if she is taking an active interest in additional bankruptcies.

Mark Twain’s Safety Net: Bankruptcy

“There are two times in a man’s life when he should not speculate: when he can’t afford it and when he can.” -Mark Twain

Although he married into a wealthy family, was a best-selling author, invented a popular scrapbook, and went on many profitable public tours — including here in Wisconsin — Mark Twain was forced to declare bankruptcy at the height of his popularity. Money ran through that man’s hands like water, and as the quote above indicates, he was always throwing money at what he hoped was the next big thing. 

Over the years he invested in and lost money on, an engraving process, a magnetic telegraph, a steam pulley, the Fredonia Watch Company, railroad stocks, and a protein powder called Plasmon, which he claimed delivered 16 times the nutritional value of steak at a cost of a penny a day. But those were small potatoes compared to his two biggest business blunders. 

He sank the modern equivalent of millions of dollars into a machine called the Paige Typesetter, which promised to revolutionize the printing world. Twain saw a demonstration of the printer on one of the rare days a prototype of it was working and invested heavily. He continued to pour money in over the next decade as the machine’s inventor promised he needed just a little more time to work out some bugs. “At first, Twain had called Paige—who would run through four sets of backers—the ‘Shakespeare of mechanical invention.’ By the end, he fantasized about catching a certain part of Paige’s anatomy in a steel trap and watching him slowly bleed to death.”

Twain’s second big mistake was starting his own publishing company. He was bitter about the admittedly poor deal he got from his first publisher and thought he could do better himself. So, when it came time to publish The Adventures of Huckleberry Finn, he established his own company and put his nephew in charge of it. At first, things were great. Twain’s new book sold well. As did the autobiography of President Grant, which Civil War veterans peddled door to door. Unfortunately, every other book Twain’s nephew chose to publish was a disappointment. There was no commercial market for a book of sermons by Pope Leo XIII or an in-depth analysis of the speech of monkeys. Twain called the company a “lingering suicide.”

By the 1890s, the cash-strapped Twain owed more than $80,000, which would be more than $2 million today, to authors, bookbinders, and a bank. On the advice of a friend, Twain transferred all of his remaining assets to his wife, then filed for bankruptcy. 

This was questionable advice then and would be considered fraud now, but it helped get Twain back on firm financial footing. Post-bankruptcy he went on a world lecture tour that brought in money and acclaim and reignited public interest in his writing. He made so much money he paid off all his old debts, even though he had no obligation to do so. And he once again started investing in dubious ventures. 

Bankruptcy was a safety net for Mark Twain, just as it is for so many people today. It is a way to start fresh or refocus on what you do best. If you have questions about bankruptcy, Hanson & Payne’s experienced team of attorneys is here for you. Please contact us today to schedule an initial consultation. 

Being “Too Stubborn” To Go Bankrupt Is Not Something To Brag About

Although it is not as widely celebrated, the logging industry is as much a part of what makes Wisconsin Wisconsin as the dairy industry. Some of the first settlers in the area were loggers, and many Wisconsinites continue to make their living as modern-day lumberjacks. However, the closure of the Verso paper mill in Wisconsin Rapids has had a dramatic impact on our state’s timber industry. 

The mill was the largest buyer of wood in the area, so its closure has caused a supply glut. There is so much pulpwood available, the price is crashing and loggers and haulers are losing their shirts. The U.S. Department of Agriculture is trying to keep everyone aloft through its Pandemic Assistance for Timber Harvesters and Haulers program, but there may be nothing the government can do in the wake of such strong market forces. 

Wisconsin Public Radio reports that “Low prices have pushed some Northwoods loggers to the brink of bankruptcy. One attendee at [a roundtable with U.S. Senator Tammy Baldwin] joked that loggers were “too stubborn” to go bankrupt; others said they wished that were true. [The president of the Great Lakes Timber Professionals Association] said as an owner/operator of his business, he’s been able to make changes that have kept him profitable, barely, but it’s come at the expense of his own retirement and benefits plans.”

Let’s take a deeper dive into this quotation. 

Joking that you are too stubborn to go bankrupt is not terribly funny. Midwesterners as a whole, and blue-collar business owners in particular, often wait too long to seek help when facing financial distress. Getting help is not a sign of weakness. If anything, it demonstrates sound business judgment. 

Speaking with an experienced bankruptcy attorney like those of us at Hanson & Payne as soon as it is clear drastic action must be taken means there are more options on the table. The longer the delay, the fewer paths forward. 

The other thing in the quote that jumps out is the business owner who has apparently dipped into their own retirement account and cut benefits in order to stay profitable. This is admirable if it saved the company and saved other people’s jobs, but we hope it was done in consultation with financial or business advisors. If the market doesn’t turn around, and the business goes under, this owner will be without a job and without anything to fall back on. An early bankruptcy, that allowed the business to renegotiate its financial obligations and retool its operations may have been a better option. 

Milwaukee area businesses facing financial uncertainty can count on Hanson & Payne, LLC to have their back. Our experienced team of attorneys isn’t just paper pushers. We are business-minded counselors who can help your business navigate these uncertain times. Please contact our office today to schedule an initial consultation.