PG&E’s lawyers are considering taking the $71 billion company into bankruptcy as a way of avoiding any successful legal claims for damages people may have suffered during the recent wildfires. [stderr]
Guess who else is “looking at” bankruptcy as a way of avoiding lawsuits? Purdue Pharma. [guard]
Purdue Pharma, the maker of OxyContin, is exploring filing for bankruptcy to address potentially significant liabilities from roughly 2,000 lawsuits alleging the drugmaker contributed to the deadly opioid crisis sweeping the United States, people familiar with the matter said on Monday.
The potential move shows how Purdue and its wealthy owners, the Sackler family, are under pressure to respond to mounting litigation accusing the company of misleading doctors and patients about risks associated with prolonged use of its prescription opioids.
Since Purdue Pharma is a privately held company, there’s no stock ticker run-up I can include to demonstrate how much money the company is worth. Considering that synthesizing opioids is not that expensive, and the quantities are relatively small, I imagine the company has been massively profitable for a long time. They certainly spent a lot on marketing, though now they are supposedly cutting their marketing staff by 50% and not promoting Oxycontin aggressively, anymore. Cynics among you are wondering “what alternative are they going to sell?” Extreme cynics among you are assuming, “no doubt they’ll raise the prices.”
The Sackler gallery in Washington; I admit it’s lovely.
As the company is privately held, we don’t know how much the executives pay themselves, what the total value of the company is, etc., – all the things that would allow the public and courts to better understand what’s going on. Cynics among you are thinking, “surely that’s a coincidence.”
I’m not a lawyer, and I don’t play one on the blogosphere, but I’d like to try an argument on you – namely, that “thinking about going bankrupt to protect against judgements” is an affirmative defense. Affirmative defenses are defenses which admit to guilt but try to wave it away for other reasons, which is why most lawyers won’t advise a client to attempt an affirmative defense unless it’s a last-ditch maneuver. Basically, it’s “yes, I am a serial killer but on my behalf let me say that I was as gentle as possible.” It seems to me as though a company attempting to file for bankruptcy to avoid judgements has just admitted that it’s guilty and ought to be liquidated immediately and parceled out to its victims. After all, that is what they are saying is going to happen if time and the courts take their course.
Maybe the Sacklers could try, “Hey we bought you a fucking museum with the money!” Well, a tiny bit of the money, anyway.
Over at the Journal of the American Medical Association (JAMA) they have discovered that marketing to doctors, worked: [jama]
Findings In this population-based, cross-sectional study, $39.7 million in opioid marketing was targeted to 67 507 physicians across 2208 US counties between August 1, 2013, and December 31, 2015. Increased county-level opioid marketing was associated with elevated overdose mortality 1 year later, an association mediated by opioid prescribing rates; per capita, the number of marketing interactions with physicians demonstrated a stronger association with mortality than the dollar value of marketing.
Meaning The potential role of pharmaceutical industry marketing in contributing to opioid prescribing and mortality from overdoses merits ongoing examination.
“Paging Doctor Obvious, to the red courtesy phone immediately, Doctor Obvious to the red phone please.”
If Purdue Pharma’s marketing budget for a single product is nearly $20 million/year, their profits must have been ginormous.
And realists are “Why not both?”
I feel constrained to point this out for my friends and their children :
fusilier, Notre Dame ’71
James 2:24
How about a legal distinction: in a situation like this – you’re not broke but large bills are headed your way – you can declare moral bankruptcy.
The perk: You get to keep all your liability-laden cash, since that was going to happen anyway thanks to your filing for (pretend) bankruptcy. Society will just have accept that. (Or eat the rich with a side dish of lawyer)
The drawback: You freely admit to what you’re doing: You’re saving your cash before your creditors even realise they’re you’re creditors. You’re dodging your responsibility. Moral bankruptcy is a legally binding acknowledgement of the fact.
The consequence: If you ever in your life try to
– build another business / run another company / manage assets and liabilities OR
– refuse to acknowledge that the blame for the bankruptcy lies with you OR
– claim there were other reasons your company went bankrupt and everyone else (but you) ended up with nothing
you will be immediately arrested, dismembered and your remains put on display across the realm.
Incidentally, that also happens if you’re found guilty of falsely declaring regular bankruptcy when you should have filed for moral bankruptcy instead.
Komarov
Nope, not severe enough, these people only care about their money and would still be able to enjoy more than they could ever spend. The only way of stopping the declaring of bankruptcy to protect individuals assets is to put a limit on the amount of assets that can be protected. Lets not be too mean, lets take out the worth of the top ten percent and say you can retain the median of the worth of the rest of the population. That ought to provide a nice incentive, if coupled with any evidence of attempts to conceal wealth will be penalised by taking all but the mean of the offenders wealth.
So how does this work exactly?
I always assumed that when you declare bankruptcy a lawyer or bank takes control of the company, strips it of all its assets, sells them, and uses the proceeds to (partially) cover as many outstanding bills or debts as possible. Any further debts get a “Sorry, but there’s nothing left, this company no longer exists.” If there is anything left after this proces you couldn’t have filed for bankruptcy since you’re not bankrupt.
So since the legal claims are not there yet, the company is not bankrupt yet, and so can’t file for bankruptcy?
Or is it really as simple as giving your CEO a gazillion dollar bonus for a job well done and then saying “oops, now we can’t pay the electric bill anymore. Sorry!”
Robert:
While Purdue Pharma is one thing, I have some questions/issues about PG&E:
1. If the company is broken up and stripped like you say, how much better will the vampire squid venture capital firm that picks up the pieces be at running a safe utility?
2. If we take the “socialist” view, will a government agency be that much better? Marcus might laugh at that, I would imagine.
3. What human system can be perfect? ONE missed tree branch can start a conflagration.
4. Should we even be building towns like Paradise? Sure it is “pretty” and the rural American Dream (no offense to our host), but it was a disaster waiting to happen. One family was described as moving from Santa Rosa after losing their home to the even more fire-prone “forests with twisty roads” of Paradise. It reminds me of people who build expensive beach houses on East Coast barrier islands….Or people who stay in the Russian River Valley despite floods every decade or so. And this is not even considering climate change!
No bonuses. No stock dividends. Executive salaries slashed. But I am not sure “breaking up” PG&E would be very helpful.