Hedge fund tosses family that controls maker of OxyContin
Move comes as legal and financial pressures increase on multibillionaires
The billionaire family that controls OxyContin maker Purdue Pharma LP, already facing mounting legal and financial pressure, has been tossed out of alarge hedge fund for its alleged role in fueling the opioid crisis.
Investment entities of the Sackler family were told late last year by Hildene Capital Management that it was no longer comfortable managing their money. Hildene said last week that someone known by members of the firm had suffered an opioid tragedy.
The Sacklers have tried to avoid scrutiny for their role at privately held Purdue as state and federal lawsuits mounted and public-health officials criticized the company’s efforts to increase sales of painkiller OxyContin.
Now the family’s sophisticated, multibillion-dollar investment operations and charitable efforts are facing closer examination. Purdue, which has been an important source of the family’s wealth and income, is considering filing for bankruptcy, The Wall Street Journal has reported, citing people familiar with the matter. A number of nonprofits have said they were reviewing their philanthropic relationships with the family.
Lawsuits by 36 states and more than 1,600 cities and counties against Purdue, other drugmakers and distributors of prescription painkillers are starting to focus on Sackler family members. Four Sacklers have been called to testify this month as part of cases against Purdue in Ohio and Oklahoma, lawyers involved said.
Purdue has denied allegations that it is to blame for the opioid epidemic.
Citing the Sacklers’ ties to opioids, fund manager Brett Jefferson late last year forced the Sackler entities invested in the firm to start redeeming their investments in Hildene, his $10 billion asset manager.
“An opioid-related tragedy affected someone with a personal relationship to me and other members of Hildene,” Mr. Jefferson said in a statement last week about the incident, which he said occurred several years ago. The Stamford, Conn., hedge fund donated at that time to an organization fighting the opioid crisis and since then has repeatedly considered ending its relationship with the Sackler family, he wrote.
“Last year the weight on my conscience led me to terminate the relationship and initiate the redemption procedure,” Mr. Jefferson wrote.
Hildene joins a list of universities, museums and nonprofits, including most recently the New York Academy of Sciences and Columbia University, that are reviewing their relationships with the family as a result of its ties to opioids. Columbia said last month it wasn’t currently accepting donations from Sackler-related entities.
Widespread marketing and prescribing of OxyContin and other opioid painkillers starting in the late 1990s led to an addiction and overdose crisis across the U.S. The rate of drug overdose deaths involving prescription and illegal opioids has more than quadrupled, from 2.9 per 100,000 in 1999 to 13.3 per 100,000 in 2016, according to the Centers for Disease Control and Prevention. Besides Purdue, drug companies targeted by opioid-related suits include Johnson & Johnson, Teva Pharmaceutical Industries Ltd., Allergan PLC and Endo International PLC. The companies have denied wrongdoing.
The Sacklers until recently have best been known as benefactors of museums and universities around the world. The two branches of the family that own Purdue are worth more than $3.5 billion, said people familiar with the Sacklers. Forbes said in 2016 that an estimated 20 family members shared a $13 billion fortune tied to Purdue.
Some members of the Sackler family who have been active in Purdue are now named as defendants in at least two dozen opioid lawsuits. They have become more of a focus in the last several weeks after the unsealing of a lengthy amended complaint from the Massachusetts attorney general that cited internal emails and memos from Sackler family members.A spokesman for members of the Sackler family has said that lawsuits have made inaccurate claims about the family, which is committed to addressing the opioid crisis.
Richard, Kathe, Mortimer D.A. and Jonathan Sackler, all members of Purdue’s controlling family and former board members of the company, are scheduled to sit for depositions beginning this week. The interviews are likely to further probe family members’ roles in the company and marketing of its drugs. Mortimer D.A. and Jonathan are testifying in a case brought by Oklahoma’s attorney general scheduled for trial in May.
The depositions are believed to be the first for family members since Richard Sackler was questioned in 2015 as part of a Kentucky lawsuit. His testimony, which became public last month, showed the company’s efforts to boost the use of OxyContin for widespread painmanagement use.
Three Sackler brothers—Raymond, Arthur and Mortimer— bought Purdue’s predecessor in 1952. They transformed it from a small pharmaceutical firm making laxatives and antiseptics into a family-controlled enterprise that eventually became Purdue.
Not all Sackler family members have been involved in the company. Some of Arthur’s family members have said his estate sold out after his death in 1987, before Purdue launched OxyContin in 1996.
Purdue paid out more than $4 billion to the Sackler family owners between 2008 and 2016, according to the Massachusetts attorney general’s lawsuit. Branches of the Sackler family own independent companies associated with Purdue that sell OxyContin internationally.
The legal scrutiny of the Sacklers is highlighting their investment operations, which are some of the most sophisticated for a family in the U.S. Branches of the sprawling family are longtime investors in hedge funds, including successful early stakes in Perry Capital, which told clients in 2016 it would close, and Lone Pine Capital.
Some family members also have financial interests, directly or indirectly, in: Airbnb Inc.; the Honest Company Inc.; ski resort operators Vail Resorts Inc. and Peak Resorts; the Smith restaurant chain in New York; the luxury Amanyara resort in Turks and Caicos; and apartment complexes and hotel developments throughout the U.S. They have invested io biomaterials company Silk Therapeutics, Inc. and backed with $100 million Boston investment firm Balter Capital Management, according to people familiar with the matter. The hedge funds that count the Sacklers among their clients either declined to comment or didn’t respond to requests for comment.
The family office for Raymond Sackler’s son Richard is named Summer Road LLC for a street near the Alta ski resort in Utah, near where a branch of the family owns a home that is the site of family gatherings. Summer Road, run by Richard’s son David Sackler, a former hedgefund manager himself, has recruited nearly a dozen traders in recent years, many of whom focus on quantitative trading.
Betting on rising demand for cargo jets amid the growth in e-commerce, Summer Road in the last two years bought a passenger jet, refitted it for hauling cargo, and sold it for an undisclosed profit, said people familiar with the matter.
Raymond’s descendants are worth roughly $3.5 billion, according to a person familiar with the matter. Richard is a past president of Purdue and Richard’s son David, a former Purdue board member, worked at hedge fund Perry while in college. David Sackler later started his own hedge fund, Moab Capital Partners, with a former Perry colleague. He remains a passive, minority owner of Moab, according to a regulatory filing and a person familiar with the matter.
An entity called Kokino LLC invests the wealth of Jonathan Sackler and Kokino’s employees. Kokino operates out of the same building in Stamford that houses Purdue’s headquarters, along with other investment firms with connections to the Sacklers.
Several visitors to the building said they were struck by security measures in place, and one said his car was examined. Purdue’s headquarters in Stamford has become a site of protests by recovered addicts and people who said they had relatives who died of opioid overdoses.
Brian Olson, a co-founder of hedge-fund giant Viking Global, heads Kokino. Kokino as of late last year invested in roughly two dozen hedge funds, said a person familiar with Kokino’s operations. People familiar with Kokino said its investments include DeepCurrents Investment Group and Sunriver Management, which is housed in the same building as Purdue.
Jonathan Sackler is also an investor in Brookside Equity Partners and Soundview Real Estate Partners. Their portfolios include Airbnb, the Honest Company, Lyft, apartment and hotel developments throughout the U.S. and New York food hall operator UrbanSpace, according to their websites and people familiar with the matter.
The wealth of Mortimer’s family, spread among seven children from three wives, his surviving widow and a foundation, is difficult to estimate but a person familiar with the family said it is less than $3 billion.
New York-based Stillwater LLC invests the wealth of Mortimer D.A. Sackler, a son of Mortimer Sackler.
People familiar with Stillwater said it was an early investor in consumer-focused privateequity firm Alliance Consumer Growth, benefiting from investments including Shake Shack. Stillwater is also invested in the luxury Amanyara resort in Turks and Caicos and in 2014 invested in Change.org. Stillwater’s investment chief is Christopher Brody, formerly of Cerberus Capital Management. Fund manager Thomas Russo of Gardner Russo & Gardner, which has long counted the Sacklers among the firm’s clients, said he primarily associated the family with its long history of philanthropy. Managers who make money for philanthropic clients, he said, “end up funding public causes.”