Purdue Pharma CEO’s $2.5M bonus approved
STAMFORD — OxyContin maker Purdue Pharma gained a bankruptcy judge’s approval Wednesday to pay its CEO and president a bonus of up to approximately $2.55 million for 2022, but the plan also entails him giving up his rights to a potential sevenfigure severance payout.
Connecticut and 23 other states had opposed the 2022 bonus pay for Dr. Craig Landau — which would have originally totaled up to about $3 million — because they believe he should step down as CEO. But recent negotiations between them and Purdue produced a revised bonus plan, which entails a lower maximum amount and Landau’s agreement to forgo any severance compensation, which would now be worth up to about $2.87 million.
“That, in my mind, is a clearly reasonable settlement of these issues,” Judge Robert Drain said as he approved the plan during a remotely held hearing. It marked the latest Purdue hearing he would preside over because he is retiring on July 1.
Despite agreeing to the 2022 bonus — after objecting to other, sevenfigure bonuses for Landau that Drain has approved since Purdue filed for bankruptcy in September 2019 — Connecticut Attorney General William Tong still opposes Landau holding the company’s top position. Landau, 55, has served as CEO and president since June 2017 and worked at Purdue since 1999.
“Craig Landau led Purdue while the company peddled and profited from deadly addictive opioids, and rewarding him with a golden parachute would be unconscionable. The objecting states negotiated this agreement to ensure that Purdue’s remaining funds go to abating the opioid crisis, not to enriching executives,” Tong said in a statement Wednesday, after Drain’s ruling. “Landau should not have any role in any new entity emerging from bankruptcy, and his resignation is both necessary and appropriate.”
In November 2020, Purdue pleaded guilty to three criminal charges of conspiring to defraud the government and violating anti-kickback law. No individuals, however, were charged in connection with that plea and Purdue officials have denied that Landau has been involved in any wrongdoing at Purdue.
“We strongly disagreed with the unsubstantiated and previously rejected attacks on Dr. Landau. Our independent board of directors has total confidence in Dr. Landau as the right leader for the company during this transformational time,” Purdue said in a statement Wednesday. “The agreement approved today allows Dr. Landau to continue his focus on responsibly running the company for the benefit of all creditors as the company stands ready to deliver billions of dollars of value, including potentially life-saving overdose-reversal medicines, to help Americans affected by the opioid crisis.”
Landau’s bonus plan allows, however, for parties to try to claw back payments if were subsequently found to have knowingly participated in criminal misconduct while at Purdue.
The bonus plan also calls for Landau to submit an undated letter of retirement to the board of Knoa Pharma, the company that would succeed Purdue after it emerges from bankruptcy — a measure that would allow that panel to decide if or when he should retire from the company.
“His service as president and CEO has always been at the board’s discretion, which is standard corporate governance for all companies, whether they are in bankruptcy or not,” Purdue added in its statement. “Craig is fully committed to ensuring Purdue’s successful emergence and transformation into Knoa Pharma, and he is equally committed to the post-emergence success of Knoa Pharma.”
In response to several inquiries from Hearst Connecticut Media, Purdue has so far declined to disclose Landau’s current base salary. It had totaled about $2.6 million, according to court filings in early 2020.
Among related rulings, Drain last month accepted Purdue’s request to pay up to approximately $31 million in 2022 bonuses to the vast majority of its approximately 500 employees.
In their arguments for the lowerlevel employees’ bonuses, Purdue officials said the additional compensation is necessary to combat high turnover and compete for new hires. Even with bonuses, attrition “has remained high,” with 19 resignations so far in 2022 — equal to a year-todate “annualized voluntary turnover rate” of nearly 13 percent, according to a Purdue motion filed in April.
Unresolved litigation
Nearly three years after filing for bankruptcy, Purdue is still trying to resolve litigation related to the several thousand lawsuits that allege it fueled the opioid crisis with deceptive OxyContin marketing.
In March, eight states, including Connecticut, that had appealed Drain’s approval last September of Purdue’s settlement plan announced that they would accept a $6 billion national agreement with the company and the Sackler family members who own the firm.
But the settlement is not guaranteed because district judge Colleen McMahon last December overturned Drain’s decision. The company appealed McMahon’s ruling to the U.S. Court of Appeals for the Second Circuit. It is not clear when the Second Circuit will issue a ruling on the appeal.
If the Second Circuit finds that Drain properly confirmed the settlement plan, then Purdue would work toward emerging from bankruptcy, a process that could be completed within the next few months.
But if a party disagrees with the Second Circuit’s ruling, it could appeal to the U.S. Supreme Court. The Department of Justice’s U.S. Trustee still opposes Purdue’s proposed settlement terms.