October 05, 2020

Whitehouse, Hassan Call on Justice Department to Hold Purdue Accountable in Newly Revealed Settlement Negotiations

With bankruptcy settlement negotiations underway worth as much as $18 billion, senators urge Trump administration not to cave to pressure and repeat mistakes that cost countless American lives

Washington, DC – Senators Sheldon Whitehouse (D-RI) and Maggie Hassan (D-NH) are calling on the U.S. Department of Justice to avoid a sweetheart deal for the opioid-maker Purdue Pharma and its owners, the Sackler family, in newly revealed settlement negotiations as the company goes through federal bankruptcy.  In a letter to Attorney General Bill Barr, the senators urge the Department to avoid its mistakes of the past, highlighting the Department’s failure to proceed with criminal charges laid out in a 2006 memo by federal prosecutors.  Charges then, the Senators said, may have prevented over a decade of continued overprescribing of opioids and untold opioid-related deaths.

 

We have heard through credible sources that negotiations to resolve the United States’ current claims are underway,” Whitehouse and Hassan write.  “It is unclear whether these negotiations include discussions of other potential civil or criminal liability, including claims against the Sackler family or other culpable individuals.  DOJ’s history of leniency with Purdue Pharma give us pause that the Department will once again let connected lawyers obtain a settlement that does not adequately address the harms caused by the company.”

 

In July, the Justice Department filed paperwork in Purdue’s bankruptcy proceeding that shows the troubled company owes as much as $18.1 billion in criminal and civil penalties related to its unlawful marketing and sale of opioids.  A credible source has since alerted the senators to settlement negotiations between Purdue attorneys and the Department. 

 

While settlement negotiations in major bankruptcy proceedings are common, past mistakes loom large.  In previous talks about alleged criminal acts over a decade ago, Purdue’s team of high-powered attorneys—including former U.S. Attorney and Trump attorney Rudy Giuliani, former U.S. Attorney Mary Jo White, and former General Counsel of the Federal Bureau of Investigation Howard Shapiro—seem to have used special access to top decision makers at the Department to prevent charges.  The Department eventually let Purdue off the hook with modest fines and decided against felony charges for executives implicated in kickbacks to physicians and other illegal schemes.

 

Hassan and Whitehouse repeatedly asked the Department for the 2006 prosecution memo and related information about the choice not to proceed with stronger action against Purdue and the Sacklers.  The Department continues to refuse the senators’ requests, even as details emerge in the press.

 

The Department must ensure that it follows its own rules and procedures in deciding how to proceed “[so that] we and the millions of Americans who have been touched by the opioid crisis can have confidence that DOJ has represented their interests,” the senators conclude.

 

Full text of the senators’ letter is below.  A PDF copy is available here.

 

 

The Honorable William P. Barr

Attorney General of the United States

U.S. Department of Justice

950 Pennsylvania Ave. NW

Washington, D.C. 20530

 

Dear Attorney General Barr:

 

In the early days of the opioid crisis, a Department of Justice (DOJ) investigation revealed that several of Purdue Pharma’s top executives had intentionally misled the public about the health effects of their product, and recommended filing felony charges.  In 2006, several former DOJ officials negotiated on their behalf for significantly lower penalties.  On July 30, 2020, DOJ filed a Proof of Claim in Purdue Pharma’s bankruptcy proceeding reportedly seeking as much as $18.1 billion in criminal and civil penalties.   We are concerned that once again DOJ will settle the United States’ claims against Purdue Pharma without obtaining appropriate recompense for the widespread suffering the company knowingly caused in communities across America.

 

We have previously requested  information about DOJ’s earlier investigation of Purdue Pharma and whether the Department was inappropriately influenced by the targets of the investigation.  In 2006, after a four-year investigation of Purdue’s opioid marketing and other business practices, career prosecutors at DOJ drafted a memo recommending that Purdue and its executives be indicted for mail fraud, wire fraud, money laundering and conspiracy in pushing opioids.  Then-Deputy Chief of the Fraud Section of DOJ’s Criminal Division, Paul Pelletier, described the document as the “most detailed prosecution memo he had ever seen” and argued that “[t]here [was] no justification for which you shouldn’t prosecute those individuals.”  

 

Purdue Pharma, however, hired several former DOJ officials—including former U.S. Attorney Rudy Giuliani, former U.S. Attorney for the Southern District of New York Mary Jo White, and former General Counsel of the Federal Bureau of Investigation Howard Shapiro—to represent them in negotiations with senior DOJ officials.   Because of those negotiations, Purdue Pharma executives walked away with lesser charges and lower fines, instead of possible jail time.

 

DOJ’s recent filings in the Purdue bankruptcy case show how the company continued its deceptive marketing practices after DOJ declined to prosecute—practices which contributed to millions of people becoming addicted to opioids.  DOJ claims that Purdue Pharma induced healthcare providers and pharmacies to submit medically unnecessary prescriptions to federal healthcare programs.   They also claim that Purdue Pharma paid kickbacks to doctors to reduce and reward opioid prescriptions; to an electronic health records vendor to create alerts that would prompt doctors to prescribe more opioids; and to specialty pharmacies that filled opioid prescriptions that were rejected by other pharmacies.   The company then transferred assets to other companies that were owned by the Sackler family in order to “hinder a recovery by creditors or without receiving reasonably equivalent value for these transfers.”  

 

We have heard through credible sources that negotiations to resolve the United States’ current claims are underway.  It is unclear whether these negotiations include discussions of other potential civil or criminal liability, including claims against the Sackler family or other culpable individuals.  DOJ’s history of leniency with Purdue Pharma give us pause that the Department will once again let connected lawyers obtain a settlement that does not adequately address the harms caused by the company.  So we and the millions of Americans who have been touched by the opioid crisis can have confidence that DOJ has represented their interests, we request that DOJ assure us that it will:

 

1.      Ensure that any settlement receives the required approvals, including, if necessary, by the Attorney General.  See 28 C.F.R. § 0.160, et seq.; DOJ Justice Manual 4-3.110, 4-3.120;

 

2.      Make public the written settlement agreement, see id. 4-3.400, as well as any referral memoranda seeking approval of the settlement, id. 4-3.320, and the compromising or closing memorandum fully explaining the basis for the settlement, id. 4-3.310.    If the Department makes the extraordinary decision to enter into a confidential settlement agreement in contravention of normal DOJ procedure, please provide an explanation of why such an exception is permitted and which DOJ official(s) authorized it.  28 C.F.R. § 50.23; DOJ Justice Manual 1-18.200; 4-3.410;

 

3.      Ensure that the final settlement does not bargain away DOJ’s ability to pursue related civil or criminal claims against culpable individuals by resolving its claims against the company.  See id. 4-3.100; 4-3.400; cf. 9-16.050; and

 

4.      Ensure that the scope of the settlement does not foreclose civil or criminal claims by other government entities or individuals against the corporation or culpable individuals, and adequately accounts for those parties’ right to obtain relief.

 

We also respectfully renew our August 2018 and September 2019 requests for the 2006 prosecution memo and for additional information and documents related to DOJ’s decision to settle this matter for misdemeanor charges.  In addition, we specifically request any communications between DOJ, Rudy Giuliani and Giuliani Partners, Mary Jo White, and Howard Shapiro in their capacity as representatives of the Defendants in United States v. Purdue Frederick Company Inc.

 

Thank you for your prompt attention to this matter.

 

###