All Distributions Were Legitimate — Purdue Always Had Ample Cash

Distributions to the Sackler family were entirely appropriate:

  • Purdue never had any meaningful debt.
  • Every year there were distributions, hundreds of millions of dollars in cash remained in the company. 
  • From 2014 on, there was over a billion dollars a year of cash in Purdue every year—after distributions.
  • None of the opioid-related lawsuits that led to Purdue’s bankruptcy were even filed until 2014, and there was only a handful until 2017.
  • Only in 2017 did a huge wave of litigation strike, and distributions then ended.

Substantial Amounts of Unrestricted Cash on Hand Remained at Purdue After Distributions

Substantial Amounts of Unrestricted Cash on Hand Remained at Purdue After Distributions

More Than Half of Sackler Family Distributions Went to Taxes & Reinvestment in Companies to Be Sold in Pending Settlement

The $10.3 billion in distributions that became public in October 2019 had been fully disclosed to all the states, local governments and other plaintiffs in 2018. Every party agreeing to the proposed settlement knew all about the distributions. (The Sackler family is offering to contribute its ownership of Purdue – whose future profits valued at $4 billion[1] will be dedicated to addressing opioid addiction – plus an additional $4.325 billion to help communities and people in need.)

Distributions Declined Over Last Decade & Ceased Once Wave of Litigation Emerged 2017

Purdue/Rhodes Total Cash Distributions to or for the Benefit of IACs and Taxing Authorities[2]

Purdue/Rhodes Total Cash Distributions to or for the Benefit of IACs and Taxing Authorities

Distributions Occurred Before Wave of Litigation Emerged in 2017

The company had previously settled all claims with the federal government and every state by 2007. Before 2017, management assured the Board that the risk of litigation was low.

Purdue did not face meaningful litigation until 2017.

From 2008 to 2012, Purdue was under a federal monitorship—and any litigation at that time was both manageable and resolved.

Of the few opioid lawsuits against Purdue prior to 2017, none threatened Purdue’s solvency.

  • Purdue settled an investigation by New York State for $75,000. 
  • Purdue settled a lawsuit by Kentucky for $24 million over eight years.

Until this current round of litigation, Purdue had resolved all cases and inquiries for reasonable sums.

Purdue ceased making distributions once the “wave” of litigation began in 2017. 

Purdue’s distributions were never more than a fraction of Purdue’s sales revenues.

Publicly Traded Opioid Manufacturers Did Not Believe Opioid Marketing Liability Was Foreseeable Risk Before 2018

None of Mallinckrodt, Endo, Teva, and Amneal included opioid-marketing litigation as a risk factor in their 10-Ks until 2018.

Historical Dividend Payments and Stock Buybacks

Historical Dividend Payments and Stock Buybacks

Bond Prices for Comparable Companies Confirm Debt Markets Did Not Perceive Substantial Credit Risk From Opioid Litigation Until 2018 or 2019

Example: Mallinckrodt International Finance S.A.

Example: Mallinckrodt International Finance S.A.
Bloomberg, Excludes Ludlow Corp, 8.0% 3/25 issued in 1993 as the bond is issued by a separate entity.

Credit Rating Agencies Did Not View Opioid Litigation As Basis for Public Company Downgrades Until 2019

Example: Quarterly Ratings by Moody’s for Amneal Pharmaceuticals

Example: Quarterly Ratings by Moody's for Amneal Pharmaceuticals
Moodys.com (Rating Reports October 2013 – November 2019), Bloomberg

SEC Disclosures Did Not Include Risk of Opioid Litigation As Risk of Financial Health Until 2017

Number of Opioid-Matter Disclosures

Year DisclosedMNKENDPTEVAAMRX
20130No 10KNo 10KNo 10K
20140No 10KNo 10KNo 10K
201500No 10KNo 10K
201600No 10KNo 10K
201700No 10KNo 10K
2018110No 10K
20192411

Emails Were Actually About Keeping Money in Purdue

A series of emails among Sackler family members are inaccurately described as advocating for additional cash distributions from the company. In this example, Jonathan Sackler was, in fact, urging that additional funds remain inside the company.

Paragraphs 160-162

False Claim

“… Jonathan Sackler emailed David Sackler, Richard Sackler, and a long-time financial advisor, stating that an investment banker once told him, ‘your family is already rich, the one thing you don’t want to do is to become poor.’” 

The same day, David Sackler replied-all by email: “[W]hat do you think is going on in all of these courtrooms right now? We’re rich? For how long? Until which suits get through to the family? I think [the investment banker’s] advice was just violated in a Virginia courtroom. My thought is to lever up where we can, and try to generate some additional income. We may well need it… Even if we have to keep it in cash, it’s better to have the leverage now while we can get it than thinking it will be there for us when we get sued.”

In or about April 2008, Richard Sackler wrote a memorandum to Kathe Sackler, Ilene Sackler, David Sackler, Jonathan Sackler, and Mortimer D. A. Sackler in which he discussed limiting the Sackler family’s risk in the ownership of Purdue: “[T]he most certain way for the owners to diversify their risk is to distribute more free cash flow so they can purchase diversifying assets.”

Fact

This email exchange is focused on how to manage money and whether to use leverage, not how much to take from Purdue. 

  • David Sackler, before he was on Purdue’s board, notes that “as someone of a different generation (a) little leverage here and there is a good thing.” 
  • Jon Sackler provides an analysis of the “wonderful run for asset values” asking, “Will that continue forever?” and how to hedge against market swings. 
  • As for a brief speculative reference to potential lawsuits naming family members, Jon sums that up this way: “you should rest assured that there is no basis to sue ‘the family.’”
  • In an April 2008 memorandum to the Board, the risk Richard Sackler was discussing referenced the exclusivity for OxyContin expiring in 2013 as of that time.

Paragraph 164

False Claim

The same day, Jonathan Sackler responded to Mortimer D. A. Sackler that “when the business has more cash flow than is required, I’ve supported distributions, and we’ve taken a fantastic amount of money out of the business.”

Fact

  • Jon Sackler provides a full-throated argument against distributing in favor of keeping cash inside the company. 
  • Jon then acknowledged being a “little heated” during an earlier meeting when he argued against distributions, concluding: “I feel a sense of obligation to keep the companies strong, not just for us and our children, but also for the people who’ve thrown in their lot with us.”
  • It is disappointing the government has completely mischaracterized this email exchange by using out-of-context quotes.

Paragraph 165

False Claim

About a month later, on October 12, 2014, Jonathan Sackler emailed Richard Sackler, David Sackler, and others: “I think we can continue to make money in it [opioid analgesics] for decades to come, particularly if we are smart and diligent around emerging markets, formulation, generics, and APIs, but in the aggregate, it’s more of a smart milking program than a growth program.”

Fact

  • This is another example of the government suggesting an email exchange means the opposite of what the words actually say. 
  • Jon actually opens the email saying his views are “probably simplistic” because he’s “unfamiliar with strategy as a discipline.” He then talks about how Purdue “stumbled into opioid analgesics” and that future growth would likely be limited because Purdue is not likely to invent substantial new products. 
  • The reference to “smart milking program” is an acknowledgment that profits are likely to decline due to “brand and price competition and price sensitivity.“
  • Put simply, this email exchange has absolutely nothing to do with selling more OxyContin.