New Haven Register (New Haven, CT)
Senators blast Purdue CEO bonus
STAMFORD — Sen. Richard Blumenthal and four other Democratic senators are opposing Purdue Pharma’s plan to give its CEO another seven-figure bonus, citing concerns that he might have presided over “criminal activity” during his time with the company.
Craig Landau could receive between approximately $2.6 million and $3.5 million if the company reaches certain performance targets, as part of a broader package of payouts that will face a review by Judge Robert Drain during a federal bankruptcy court hearing on Sept. 30. In January, Drain approved a 2019 performance bonus of $1.3 million for Landau, who has served as CEO of the company, maker of OxyContin, since June 2017.
Stamford-based Purdue argues that its proposal to potentially give awards totaling tens of millions of dollars to Landau, other executives and lower-ranking employees is essential to keeping staff as the firm grapples with high turnover and difficult working conditions.
The senators’ opposition parallels the contention that erupted last year over a $35 million package of bonuses that was ultimately approved by Drain.
“This proposed incentive structure represents an affront to the thousands of families that have been harmed by the opioid crisis, and an entirely inappropriate exercise given the impact of Purdue’s continued recklessness,” the senators wrote in a letter Monday to Drain. “Since 2017, while Mr. Landau was reportedly ‘leading’ the company, Purdue has engaged in a number of potentially criminal activities, with the aim of further promoting the company’s opioid products.”
Purdue officials have defended their plan in court filings and previous statements and denied all allegations of misconduct against Landau and other executives.
“Through an unquestionably challenging period in its history and despite unprecedented headwinds, Dr. Landau has led the company and delivered results for its many stakeholders, keeping the company competitive and profitable in order to maximize value for claimants and the American public,” Purdue said in a statement.
Purdue’s rationale did not convince Blumenthal or fellow letter signatories Joe Manchin of West
Virginia, Tammy Baldwin of Wisconsin, Tina Smith of Minnesota and Maggie Hassan of New Hampshire.
They cited a number of reports of alleged company transgressions in recent years, including an accusation that it paid health-records company Practice Fusion to create an alert to help boost prescriptions of certain opioids.
“To provide Mr. Landau with this bonus is to endorse the very behavior for which Mr. Landau has been sued by multiple states,” the senators said. “These states allege that Mr. Landau is ‘one of the chief architects and beneficiaries of Purdue’s illegal marketing campaign.’ The investigation of Mr. Landau, and the associated litigation, have only been suspended in an effort to adjudicate this bankruptcy.”
Purdue officials responded that “the statements made in the letter about Dr. Landau's conduct are not factually accurate.” The company said Landau could not have overseen a program with Practice Fusion because the contract ran from June 2016 to June 2017. Purdue’s final payment to the company was in December 2016.
Landau is not named as a defendant in Connecticut’s lawsuit against Purdue, although others such as Massachusetts have personally accused him of wrongdoing.
A message left Tuesday for Connecticut Attorney General William Tong was not immediately returned.
Other bonuses
Including Landau, Purdue wants to cumulatively pay eight top executives up to nearly $10 million in performance-based bonuses.
In addition, the company outlined plans for “long-term retention payments” for Landau and those executives that could total up to $3.7 million.
Other proposed payments include a total of up to nearly $22 million to about 615 lower-level employees through a “key employee retention plan.” Certain recipients would also receive “targeted retention” payments that would total up to about $8 million.
Citing an annualized “voluntary” turnover rate of 13 percent from the start of its bankruptcy in September 2019 through Aug. 31, Purdue said it faces a “real and serious attrition problem that must be addressed.”
Today, Purdue employs more than 620, with more than 150 based in Stamford.
“The debtors are managing through a uniquely complex Chapter 11 process and significant reputational challenges, which have depressed employee morale and significantly hindered the debtors’ ability to retain key employees,” the company said in its motion. “As the debtors have suffered attrition, the workload on the remaining employees has only increased.”
Purdue also asserted that the payments would not represent a disproportionate amount of its income or assets. The bonuses for those who are not top executives would comprise about 2 percent of revenues and the “target retention” awards would account for about 0.6 percent, it said in its motion.
Blumenthal and his colleagues do not accept that argument. In their letter, they also cited the more than 122,000 people who have filed personal-injury claims related to Purdue-made opioids.
“Instead of preserving cash to maximize the amount available to these struggling families, Purdue wants to spend millions to ensure their executives stay motivated enough to simply continue doing their jobs,” the senators said. “Bonus payments as outlined in Purdue’s proposal should not be made while these families continue to wait for justice.”