$ 2,300 phone call. $ 1,000 in a taxi. Purdue is running a $ 400 million bankruptcy tab.
A phone call with the Department of Justice: $ 2,300. Two days at the Ritz-Carlton: $ 830. Oh, and a long cab ride to and from the court in White Plains, New York – it’ll cost $ 1,000.
These are just a few of the roughly $ 400 million in fees and expenses accrued by the professionals working on bankruptcy at Purdue Pharma LP, based in Stamford, Connecticut. The bills total more than half of the amount that all those injured by OxyContin would share under the drugmaker’s proposed settlement for personal injury claims.
Purdue’s financial woes turned into a cash machine for lawyers and consultants hired by the company and its creditors to sort it out complaints that the drugmaker fanned the flames of the opioid crisis in the United States. Law firms, leading restructuring advisers and investment bankers are raising thousands of dollars an hour for their work on the case while those hurt by Purdue’s products await payment – As is the norm in business bankruptcy.
“These are huge – this is a large sum of money that would otherwise be used to pay the victims of a horrific crime,” Bob Lawless, professor of law at the University of Illinois, said in an interview. “You have to pay the undertaker. Whether they should be paid that much is another question.
The charges highlight the harsh reality of corporate bankruptcy, where lawyers and consultants collect checks while creditors wait for repayment, often receiving pennies on the dollar. Purdue is unusual because its biggest creditors aren’t sellers or homeowners, but cities and states reeling from the opioid epidemic, as well as the people who have lost everything, including their loved ones, to the opioid epidemic. opioids.
Purdue Pharma is paying market rates for the professionals in the case, the company said in an emailed statement, noting that it is responsible for the costs of several groups of creditors.
“This is one of the most complex bankruptcies in history, and it deserves seasoned and experienced lawyers and financial advisers from all sides,” the company said. Purdue “is acting as quickly as possible to achieve a settlement worth over $ 10 billion” that would help ease the opioid crisis, the company said.
If and when the Purdue bankruptcy judge approves the project regulation, the drugmaker’s remaining assets will be turned over to trusts for the benefit of states, cities and counties that have filed a lawsuit to recoup the billions spent to deal with the opioid crisis in the United States.
There is nothing illegal about lawyers and consultants getting paid during bankruptcy. Anyone who provides goods and services to a business covered by Chapter 11 protection – from power companies to homeowners – is expected to be paid in the ordinary course of business. The nature and hourly rates of fees and expenses are similar to other bankruptcies, and restructuring professionals must periodically obtain court approval for their invoices.
Yet a close examination of Purdue’s case reveals a surprising gulf between the haves and have-nots that stem from alleged corporate malfeasance.
The case file is inundated with letters to Purdue bankruptcy judge Robert Drain asking for compensation, or just information, from Purdue. There is a former professional baseball player, describing the “deep heartache” he still feels after losing his son to an overdose years ago. Or the former military doctor who says he suffered a debilitating stroke after becoming addicted to opioids in 2018. Some notes are handwritten from prison by people who say they were addicted.
People who have filed personal injury claims have waited months for any kind of payment. They will ultimately be divided using a points-based rubric, with the most points awarded for OxyContin deaths. Payments will likely range from $ 3,500 to $ 48,000, according to an estimate provided in court documents.
Meanwhile, Purdue’s senior bankruptcy lawyer Davis Polk & Wardwell has already received more than $ 100 million for their work on the case, according to the drugmaker’s latest operating report. . The New York-based company is the primary source of income on a list of more than 25 mass-paid bankruptcy advisers.
The bills add up quickly. In October 2019 alone, a month after Purdue filed for bankruptcy, Davis Polk & Wardwell totaled nearly 7,000 hours on the case. This added over $ 5 million in fees for a single month, thanks to a team of nearly 100 legal professionals.
Regardless of its fees, the company billed Purdue $ 64,000 in expenses in October – mostly for computer research, but also taxis to and from court and over $ 5,000 for Just Salad’s meals and a Manhattan pizzeria. The company also spent about $ 3,500 that month at the Westchester County Ritz-Carlton, the closest hotel within walking distance of White Plains bankruptcy court.
Davis Polk rented several conference rooms at the hotel, which made it possible to hold meetings between stakeholders and save money by reducing travel time, according to a person familiar with the matter.
Purdue’s advisor roster is a collection of restructuring players, from investment bank PJT Partners to law firm Skadden Arps Slate Meagher & Flom. Consulting firm AlixPartners was paid $ 17.9 million for its work, largely for trace the flow billion dollars from Purdue to its billionaire owners.
Davis Polk, Skadden Arps, AlixPartners and PJT all declined to comment on their fees or did not respond to requests for comment.
Give its opinion
Much of the expense can be attributed to the astonishing breadth of the case. Simply informing the public was a monumental task: the company spent more than $ 20 million advising potential creditors of a deadline to file claims. The ad blitz was designed to reach nearly all American adults about six times, according to court documents.
More than 600,000 claims were ultimately filed against Purdue – nearly 10 times the amount filed against Lehman Brothers Holdings, the investment bank whose bankruptcy accelerated the 2008 financial crisis. First clerk, the company responsible for advising Purdue’s creditors and handling claims, has so far received more than $ 50 million for its work on the case.
Simply put, Purdue has a dizzying array of players. The drugmaker has negotiated with U.S. states, the federal government, local governments, individual opioid victims and insurance companies, to name a few, over billions of dollars in alleged damage .
“In these negotiations, you want someone who has a lot of experience, someone who is well regarded and at the top of the profession,” Lawless said. “These people are expensive.”
Marshall Huebner, Davis Polk’s senior partner in the case, currently charges $ 1,790 an hour for his services, according to court documents. A lower-ranking Purdue creditors attorney, Ira Dizengoff of Akin Gump Strauss Hauer & Feld, charges $ 1,655 an hour this year. Patrick Fitzgerald of Skadden Arps charges $ 1,775 an hour.
Huebner declined to comment. Dizengoff and Fitzgerald did not respond to the messages.
The numbers are mind-boggling, but have become the norm in the high-stakes world of Chapter 11 bankruptcy. PG&E Corp., the California utility driven into bankruptcy by lawsuits, has been at one point pay about $ 1 million a day to untangle your debts.
“Traditionally, bankruptcy has been about economy. I think that spirit is long gone, ”said Adam Levitin, professor of bankruptcy law at Georgetown University. “The bottom line is that bankrupt lawyers are not doing themselves a service in the public interest. “
The bankruptcy case is Purdue Pharma LP, 19-23649, US Bankruptcy Court for the Southern District of New York (White Plains).
Copyright 2021 Bloomberg.