Seven state attorneys general and a court-appointed federal bankruptcy watchdog oppose up to $94 million in pre-bankruptcy bonuses paid to senior executives and other insiders at the opioid drug company Endo International in Chester County, according to court documents.
Bonuses to top executives were distributed ‘secretly’ and drain financial resources from Endo losing money available to victims of Malvern’s addictive pills, state attorneys general who filed objections say in committee on Wednesday in New York.
Pennsylvania Attorney General Josh Shapiro is one of seven whose court record has called pre-bankruptcy bonuses for senior executives “excessive.”
Endo, facing extensive litigation over its alleged role in the national opioid crisis, filed for bankruptcy protection on August 16. The Inquirer first reported on the bonuses a few days later.
U.S. Administrator William Harrington, the watchdog, said in a separate statement The court filing earlier this month that Endo paid $94 million in bonuses to senior executives and other insiders in the months leading up to the bankruptcy filing, while Endo’s restructuring plan leaves initially only $27.4 million to individual opioid victims who are not state entities.
Endo “provided virtually no information, let alone sufficient information” to assess the bonus payouts, Harrington told the court.
Endo paid out the last batch of pre-bankruptcy bonuses to senior executives less than a week before filing for bankruptcy. On August 11, Endo agreed to pay general manager Blaise Coleman $11.85 million; Matthew J. Maletta, general counsel, $3.5 million; Patrick Barry, president of global business operations, $3.3 million; and Mark Bradley, chief financial officer, $3.5 million.
Endo is expected to respond in bankruptcy court on Monday. The pharmaceutical firm had no comment on Friday.
For an August 24 Inquirer article on executive bonuses, an Endo spokesperson said, “Recent incentive and retention payments are critical to Endo’s continued business during the Chapter 11 process and have been approved by the independent members of Endo’s Board of Directors”.
The spokesperson said it was important to note that part of the bonuses “will have to be refunded if certain pre-established financial and operational objectives are not met in 2022 and 2023”. The spokesperson also said in last month’s statement that “payments are subject to the recipient’s continued employment with Endo for several years.”
Temple University law professor Jonathan Lipson said Friday that the court’s objections to the bounties ‘paint a picture of Endo executives looting the company before bankruptcy, leaving little for tort victims. . There may be more to the story, and employees should definitely be paid fairly. But the bonuses raise important questions about who management was acting for. People fear that the [bonus] the money was badly spent and should go to creditors instead.
Endo, which is based in Ireland for tax purposes but runs its US operations out of Malvern, was one of the country’s largest manufacturers and distributors of opioids with its flagship painkiller Opana and cheaper generic opioid pills.
Endo withdrew the very powerful Opana from the market in 2017 after the The Food and Drug Administration asked him to due to the potential for abuse.
Although Endo claims in court documents that Opana accounted for less than 1% of the opioid market, Tennessee has been rocked by Endo’s Opana tablets with overdoses and addictions. According to a 2019 lawsuit filed against the company by then-Attorney General Herbert H. Slatery III, nearly one million more Endo’s Opana ER tablets were sold in the Knoxville area between 2007 and 2014. than in New York, Los Angeles and Chicago — combined.
In August, Endo announced that second-quarter revenues fell 20%, primarily due to new generic competition on its brand name diabetes drug Vasostrict. A bankruptcy court filing says Endo spends more than $200 million a year in opioid litigation and other lawsuits, double what it spends on research and development. The company faces 3,100 opioid lawsuits, many of which are brought by government entities.
U.S. Bankruptcy Judge James Garrity of the Southern District of New York scheduled a hearing on employee wages and compensation on Wednesday as Endo restructures its ailing business in bankruptcy court.
A group of state attorneys general were negotiating with Endo as he prepared for his bankruptcy filing. The “Endo Multistate Executive Committee” includes the attorneys general of Maine, Massachusetts, New Hampshire, Vermont, and Virginia, in addition to those of Tennessee and Pennsylvania. The committee, Endo and its secured lenders agreed to settle the state and local government lawsuits for $450 million over a decade.
The top executive “the bonuses were paid in secret at a time when Endo was in active negotiations with the [committee] regarding state opioid litigation against the company,” the court filing filed by state attorneys general said Wednesday.