Dems Unveil Bill Targeting Bankruptcy Releases Like Sacklers’
A powerful group of Democrats introduced new legislation Wednesday in both the Senate and the House targeting non-debtor releases in bankruptcy cases, pointing specifically to releases like the one in Purdue Pharma's Chapter 11 plan allowing the Sackler family to dodge liability for its role in the opioid crisis.
The Nondebtor Release Prohibition Act of 2021 looks to eliminate the use of such non-consensual, third-party releases, which lawmakers said are increasingly used to escape personal accountability for their actions by shielding themselves through another entity's or corporation's bankruptcy proceeding. The measure has the backing of Sen. Dick Durbin, D-Ill., and Rep. Jerrold Nadler, D-N.Y., the chairs of both the Senate and House Judiciary Committees, respectively.
Sens. Elizabeth Warren, D-Mass., and Richard Blumenthal, D-Conn., and Rep. Carolyn Maloney, D-N.Y., also support the bill, according to a joint statement. The legislation "would ensure that victims get to decide how they want their cases handled and expand access to justice for those harmed by bad actors," per the statement.
Nadler spoke about "abuses" of the Chapter 11 bankruptcy code during a House Judiciary subcommittee hearing Wednesday. It was the first in a series of hearings examining potential reforms to the bankruptcy system, he said.
"The bankruptcy system is supposed to work for everyone, but in many cases, it works only for the powerful," Nadler told the subcommittee on antitrust, commercial and administrative law. "And too often, it works best for big corporations and the very wealthy, who have not even filed for bankruptcy but who have figured out how to make the system work to their benefit."
Nadler said that the Sackler family wants to use a non-consensual, non-debtor release — which he called a "lifetime get-out-of-jail-free card" — to escape liability entirely for its role in the opioid crisis.
"The families of the people who died from addiction and misuse of OxyContin should be able to hold accountable the people that flooded the country with a dangerous drug they knew would be abused," he said.
On Tuesday, Purdue said it had achieved widespread support among voting creditors for its Chapter 11 plan, saying that more than 95% of the 120,000 votes submitted are in favor of the proposal.
Purdue CEO Steve Miller said the preliminary voting results show broad agreement with the company's plan to turn Purdue into a public benefit corporation, while providing a release of any claims against the Sacker family.
Under the plan, the Sacklers would give up their ownership in the debtor and contribute $4.5 billion to an opioid abatement trust that will be used to address the costs of the opioid crisis.
The U.S. Trustee's Office objected to the "extraordinarily broad release" in the plan earlier this month. In a filing lodged with a New York federal bankruptcy court, U.S. Trustee William Harrington urged the court not to confirm the proposed plan as is. Allowing the Sacklers to escape liability for their alleged role in directing the marketing and sale of painkiller OxyContin, which is claimed to have contributed to the opioid crisis in the U.S., constitutes "an impermissible discharge of hundreds (and possibly thousands) of non-debtors," Harrington said.
Non-debtor releases have also been considered in other pending bankruptcy cases, including the USA Gymnastics and Boy Scouts of America bankruptcies. In those cases, victims of sexual assault and abuse have had their cases dragged into bankruptcy courts without their consent, the lawmakers said in Wednesday's statement.
Maloney said in the statement that the new legislation would build on her existing proposal, the Stop Shielding Assets From Corporate Known Liability by Eliminating Non-Debtor Releases Act, or more succinctly, the Sackler Act. That measure would prevent entities that have not filed for bankruptcy, such as the Sackler family, from obtaining releases of claims from government agencies.
The Sackler family "directed Purdue Pharma to flood our communities with dangerous OxyContin," and created and fueled a national public health crisis that killed nearly half a million people, Maloney said.
"For too long, the unfettered abuse of non-debtor releases has allowed wrongdoers to evade responsibility for their actions," she said.
Warren added in the statement that bankruptcy is there to help companies in trouble. But over time, rich people in giant corporations have figured out how to game the system, she said.
"Now, billionaires like the Sacklers want to get the benefits of bankruptcy while they keep their assets secret," Warren said. "That's wrong. And this law would stop that."