Purdue gets conditional OK for bonuses

STAMFORD — OxyContin maker Purdue Pharma would likely be able to move forward with its plan to pay up to approximately $29 million in bonuses for 2021 if its settlement plan is approved in bankruptcy court.

Judge Robert Drain said that he would grant, with conditions, the Stamford-based company’s request to pay the incentives, which would be distributed among the vast majority of its approximately 500 employees. Purdue officials have argued that the additional money is necessary to combat high turnover, but a nine-state group that includes Connecticut opposes the payments.

“This is much more of the normal compensation component,” Drain said in a July 29 hearing, which was held remotely. “Without it, these employees would not be compensated at market (value). I think that is an important point for people to understand given the somewhat loose usage of the term ‘bonus.’”

Purdue officials anticipate that Drain would enter an order approving the 2021 Key Employee Retention Plan payments if he approves the company’s settlement plan, also known as a plan of reorganization. Valued by Purdue at more than $10 billion, the proposal would resolve thousands of lawsuits alleging the company fueled the opioid crisis with deceptive OxyContin marketing. It also calls for Purdue to be converted into a new company focused on using its funds to tackle the opioid epidemic.

A confirmation hearing in which Drain would review that plan is scheduled for Aug. 12.

Several creditors’ committees supported the bonuses. At the same time, Connecticut and the eight other states that have not agreed to settle their lawsuits against Purdue objected to the new payments.

“We continue to believe these bonuses are unwarranted and unnecessary,” Connecticut Attorney General William Tong said in a statement this week.

Nearly two years after it filed for bankruptcy, Purdue is dealing with many personnel changes. So far this year, 38 people have left or plan to leave the company, while 27 have been hired. The company started the year with 517 employees.

“We have employees telling us when they are leaving that they are leaving for opportunities that pay more money,” Eli Vonnegut, an attorney for Purdue, said in last week’s hearing. “We think it just stands to reason that compensation is a significant portion of anybody’s decision on whether they stay with a job or leave that job.”

Also in last week’s hearing, Drain directed Purdue to conduct a review to ensure that no employees eligible for the bonuses were involved in criminal activity related to the company.

Last November, Purdue pleaded guilty to three criminal charges of conspiring to defraud the government and violate anti-kickback law. No individuals were charged, however, related to that plea.

“Most importantly, Purdue has yet to show that these bonuses will not be given to employees who improperly and unlawfully marketed, sold and promoted deadly addictive opioids,” Tong said. “We are pleased that the court has ordered the company to do that due diligence now.”

In addition to Tong, other opponents of the bonuses include Sen. Richard Blumenthal, D-Connecticut, and five other Democratic senators: Tammy Baldwin of Wisconsin; Maggie Hassan of New Hampshire; Joe Manchin of West Virginia; Tina Smith of Minnesota; and Elizabeth Warren of Massachusetts.

“At a time when individual victims and their families seek compensation for the devastating impact Purdue’s criminal actions have had on their lives and as governments at the federal, state and local level seek out and put forth as many resources as possible to fight back against an addiction crisis fueled by Purdue, allowing nearly $35 million in funds to go towards executive and employee bonuses is contrary to public health and public policy and runs counter to the company’s transition to a public benefit company,” the senators said in a July 26 letter to Drain.

The number cited in the letter factored in other bonus payments that Purdue has proposed.

Drain disagreed. He said that Purdue’s staff were “maintaining the value” of the company and “enabling the debtors (Purdue) to move to a focus in large measure on abating the opioid crisis.”

The judge did not rule on Purdue’s plan to pay up to $7.1 million in 2021 bonuses to Purdue CEO and President Craig Landau and several other top executives. The next “omnibus hearing,” when matters such as compensation are taken up, is scheduled for Aug. 16.