New York Uncovers $1B in Sackler Family Wire Transfers
nytimes.com
nytimes.com
As long as the financial punishment don’t outpace this kind of behavior among the wealthy, it’s really just a tax on them.
Pushing that much narcotics on people normally lands you in jail.
It is a way to change incentives. I don't know what part of their $13B wealth comes from opioids, but this tax made it suddenly far, far less profitable. They will make their calculation of what would have been a better course of action, but if they had found a way to stay within the law and only lost $3B in revenues, it would have been profitable.
Fines are an efficient way to regulate companies and always welcomed, even if insufficient.
Not only this is like a tax, but there is a randomness factor it: it depends on a court decision. A lot of companies are risk-adverse so such a fine can have a chilling multiplier.
And the multiplier works in the other way. Because of the non-deterministic chance of whether you get caught and whether you get punished and whether all of this happens before you donate all your money to charitable causes and die, the expected value of your loss is a fraction of the fine. A truly effective penalty would fine them many times the illegal profit to account for that.
> A truly effective penalty would fine them many times the illegal profit to account for that.
How much of the profit was illegal and how would you go about quantifying that?
I mean, I haven't done a criminal investigation of the Sacklers, so I'm the wrong person to ask.
But on general principle - if the goal is to use fines to disincentivize future criminal behavior (which seems reasonable to me, but it's not the only factor at play in setting fines), you should treat all profit that was related to the criminal behavior as criminal and not try to reverse-engineer "How much money would they have made if they hadn't done this crime." Otherwise you're still incentivized to try 10 different legally-questionable strategies and keep the profit from the 9 that were found to be on the other side of the line.
As a concrete example, if Google's copying of Java interfaces were ruled illegal (and to be clear I don't think it should be), then an appropriate fine is (some multiple of) all profit from Android, not some attempt at retconning how much money Google would have made if they had used something other than Java or waited for OpenJDK.
(That's a fine, to be clear, not damages. Oracle's damages should be calculated by retconning how much they would have gained had Google kept the laws, and nothing more.)
The company and some executives already plead guilty in 2007 to, essentially, false advertising, during the 1995-2001 period immediately after the drug was developed. During that time, "OxyContin brought in $2.8 billion in revenue for Purdue Pharma."[1] Double Jeopardy means that specific crime during that specific period is done and settled.
The company paid out $600 million in fines and the execs another ~$35 million. So that's 22% of revenue in fines in that instance. (I guess the courts didn't agree with your notion that fines should be 100+% of revenue.)
The New Yorker estimated in 2017 that OxyContin has brought in $35 billion in total revenue for Purdue[2]; if that's true, subtracting the 2.8 from earlier suggests that it produced $32 billion in revenue 2001-2017.
Did Purdue Pharma commit another crime (or the same mislabeling / false advertising kind of crime) after 2001?
[1]: https://www.nytimes.com/2007/05/10/business/11drug-web.html
[2]: https://www.newyorker.com/magazine/2017/10/30/the-family-tha...
If you rob a bank you can't just give the money back if you get caught, and you certainly can't just give half of it back.
How much less oxycontin do you think they'd have sold if their advertising was less reprehensible?
Notably, Purdue produced some of the first extended-release opioid formulations on the market, which does have some real value even without exaggerated sales. It developed MS Contin (XR morphine) in 1984 and OxyContin (XR Oxycodone) in 1996. (CONTIN™ is Purdue's extended-release drug delivery system developed in the 70s.)
OxyContin was also the first "Abuse-deterrent Formulation" (ADF) approved by the FDA, for whatever value that has[1]. Today, ten such formulations are approved and of those, five are actually available.
So tl;dr, I don't think your metaphor is especially apt. They should be punished for their sales tactics, which were outrageous, but there seems to be this mentality that all opioid manufacture is evil, and I don't believe that.
[1]: https://anesthesiology.pubs.asahq.org/article.aspx?articleid...
The message that this huge PR/Sales/Lobbying effort was sending was: XR opioids have a low addiction potential, and not prescribing them, or preventing them from being prescribed is malpractice and insensitive to patients that are in pain. I don't doubt that many fewer people are in significant pain now, but we also have something like 4% of the entire U.S. population addicted to opioids.
I am skeptical but there are many threads spinning here.
(Also, to be clear, I think the current Warren tech-are-utilities thing is bozo)
It started with the post great recession, Occupy Wall Street movement. That was the first major populist movement in the US in the 21st century. Even though that largely failed to result in anything draconian (fortunately), the US banking system was brought under far stricter control. The Fed with the Treasury is capable of dictating almost everything about the businesses of the large financial institutions. Today the US financial system is by far the strongest and safest financial system of any major economy. It's due in part to that populist response after the crash.
Trump's election was in fact also a massive populist backlash, against electing more of the same political dynasties (Clinton / Bush) that had come to rule the US. Trump defeated powerful, massively well-funded representatives of both entrenched dynasties to win the Presidency (which tells you just how dramatically voters were willing to reject a continuation of the old). Trump is the first populist President that the US has had in a century. Nearly every organization and individual that was part of the entrenched establishment was against Trump and he won regardless. And no matter what people think of Trump, his election will represent a permanent split with the past when it comes to the US political system. Things will never be the same, to put it mildly. AOC, as one example, is in Congress solely due to this cultural shift, new outcomes are possible (variations of Democratic Socialists were exceptionally rare in the past; they won't be rare in the near future). Obama was also partially responsible for and representative of this process that is underway; it's no coincidence he won immediately following the great recession crash, as the backlash and desire for a different direction is part of what made him possible (Hillary Clinton or McCain win that election otherwise).
Trump is the kind of populist you get when the first one fails. Trump has many former Obama voters.
Trump lost the popular vote. It wasn't a populist backlash, it was a broken system.
Purdue would immediately declare insolvency with just any one settlement. These transfers are the first big-item ticket you would be looking at.
In this situation, who is the creditor that was defrauded by the conveyances in question at the time of conveyance?
The Sacklers' biggest self-payments were in 2008-2011 per the article's figure and actually got smaller in later years, with data only through 2016.
It's not clear that at any point for which we have data, the Sacklers "knew" their company was facing future financial liabilities that put it into bankrupcy. Did they make self-payments from August 2019 on? I don't think the article says either way.
While they might be rich, reprehensible people who made money by selling legal, but highly addictive drugs - its not as if they tried to pull money out just before a huge liability came up.
They and others were engaged in massive production and sale of opiates, even as the news reported increasing number of opiate deaths.
I'm not in favor of pinning everything on the last unlucky bastard standing around, but taking profits now when you can expect future corporate liabilities should be illegal.
As the sibling comment says, anyone or any corporation with assets is a target for potential future litigation, with or without merit. That cannot be the basis for what makes profit-taking fraudulent, or companies could never pay owners a dividend.
> They and others were engaged in massive production and sale of opiates, even as the news reported increasing number of opiate deaths.
I basically disagree with this premise. The media reporting on opiate deaths is misleading.
* IMO, production and sale of opiates is broadly a public good. To the extent that people are suffering, and opiates are an effective treatment for that pain, having opiates available is a boon. Some of the recent restrictions on prescribing due to the "crisis" are overbearing for the majority of doctors and patients, and probably cause net increase in suffering in the country.
* Rate of conversion from on-label opioid prescription to addiction ("opioid use disorder") is lowish; this metastudy[1] claims 8-12% on average, but the 95% CI is anywhere from 3-17% and I'm not sure what they're measuring the percentage of (i.e., long-term prescriptions might both be more represented in the data and have higher conversion rates) — I doubt 8-12% of people who get 3 days of vicodin for their wisdom teeth extraction develop an opiate use disorder. They also point out that some studies showed misuse rates below 1% and "significant variability remains in this literature." We should expect these rates to fall as tighter prescription quantities from the last several years impact "leftover" pill rates.
* The rate of conversion from prescription opioid addiction to heroin is low; 4-6% per the government.[2]
* Overall opioid-involved overdose annual deaths in the US rose from 8000 in 1999 to 47600 in 2017; of those, the prescription-involved number rose by 13600 deaths (+300%), from 3400. Conversely, the non-prescription-involved deaths rose from by 26000 deaths (+465%), from 4600.[3](Figs 3-4) 26000/39600 = ~66%. (The population has also grown about 17% over that period, but that doesn't change the calculus too much.)
* Therefore: the overall growth pattern in opioid deaths in the last two decades is largely accounted for by heroin and other non-Rx use, which are a tiny population with a very high (and rising) death rate. The rising death rate is mostly due to the surge in black market sale of fentanyl as "heroin."[3] (esp. figures 4-5 and associated text) (Perhaps as a result of DEA and other restriction on the supply of the relatively safer, but less dense, heroin, and restriction on supply of the vastly safer prescription opioids.)
* Notably, the number of non-fentanyl-involved prescription opioid-involved deaths has actually been in decline since 2011![3] (fig. 4.), despite a rising population. Let me echo that since it's really important: prescription opioid-involved overdose, ex fentanyl, both in number and per capita rate, HAS BEEN IN DECLINE SINCE 2011! Why doesn't any news story on opioids in the US headline with that? The primary reason the overall prescription opiate-involved death rate hasn't tracked that decline is rising co-(ab)use with illicit fentanyl, and its relatively higher death rate.
If we could wave a magic wand and wipe (illicit) fentanyl off the earth, our annual opioid death rate would fall by something like half.
Given we don't have a magic wand, what can we do? Obviously we can't stop fentanyl from entering our borders or being synthesized illicitly here. We can (and have) leaned on illicit fentanyl-producing countries like China and Mexico to make those businesses less lucrative. We can do harm reduction things for the vulnerable population — which is mostly heroin users. We could legalize heroin with a prescription for existing addicts?
Harm reduction stuff: Provide free/cheap testing for fentanyl adulteration? Make naloxone available without prescription, on the shelf, for cheap or free, and encourage businesses and residents to keep some around, even if they aren't users and don't know any users? Maybe provide monitored, safe injection sites where addicts overdosing can be assisted immediately if needed but are not arrested or forced into any overbearing programs. Maybe even supply quality- and quantity-controlled heroin to these addicts for use on-site to reduce likelihood of overdose and even allow people to taper off if they want to.
/rant, sorry. Finally:
> I'm not in favor of pinning everything on the last unlucky bastard standing around, but taking profits now when you can expect future corporate liabilities should be illegal.
(Emphasis added.) Totally agree. The article does not say anything about taking profits now; its last figures on taking profits are from 2016.
[1]: https://www.ncbi.nlm.nih.gov/pubmed/25785523
[2]: https://www.drugabuse.gov/drugs-abuse/opioids/opioid-overdos...
[3]: https://www.drugabuse.gov/related-topics/trends-statistics/o...
Your comment does not help make that case for corporate accounting fraud, because none of that context suggests to any reasonable person that an immensely profitable company is facing imminent bankrupcy.
The Sacklers's aggressive sales tactics were awful and I get that people hate them and don't like seeing them "get away with it." But this article does not illustrate a crime.
> that an immensely profitable company is facing imminent bankrupcy.
An immensely profitable company with multiple states and individuals lined up to sue it, whose principals know that they engaged in repeated (many already known) acts of deception and fraud to earn a non-negligible portion of profits, who were at the highest levels and thereby cannot claim ignorance is entirely likely to realize that should an adverse judgment be entered into, the damages may well approach a level that threatens solvency.
Realize that we're not just talking awful, aggressive sales tactics. We're talking willful deception and active hiding, obfuscating of research that showed increased levels of addiction that were instead being marketed as less addictive, more beneficial, in the context of a medical product. Aggressive sales tactics are what car dealers do. Wilful, fraudulent misrepresentation of the benefits and side effects of a prescription drug, to the detriment of individuals and societies, is a whole other level.
Purdue is going to declare bankruptcy eminently, that is one reason the settlements here are so soft - the government is trying to get what it can before they offshore everything.
To elaborate, I don't see where the article states they wired money from their company to their private accounts right before declaring bankrupcy. The article instead seems to be describing shuffling of their personal assets between accounts.
My contention is that nothing in this article shows or even purports that the Sacklers committed a corporate accounting crime. Apparently people disagree with the position but I haven't seen any greatly articulated arguments why I'm mistaken.
Wiring around your own lawfully obtained money isn't a crime. Taking profits from your private company that isn't facing bankrupcy (2008-2016) broadly isn't a crime.
Negotiating a different deal with State's Attornies than the highest offering bid by the SA's also isn't a crime. It's not the family's lowest offer; it's the mutually-agreed settlement.
There's a lot of reason not to like the Sacklers or Purdue Pharma! And there's a lot of reasons they should maybe lose some money or go to jail! Those reasons are just unrelated to the contents of this article — which is stirring up shit that looks bad to laypeople but isn't criminal.
So the potential exists for them to commit a crime should they face personal fines. It's not uncommon for people to hide assets during legal proceedings to reduce their liability.
There's a reason, when someone is under investigation, that they're not allowed to leave the country because it's easy to just not come back if they're charged. The same applies to money, it's easy to make money inaccessible which is why assets are often frozen during criminal probes.
Is it? Does being more wealthy increase your liability in some way? Is the huge crime a federal or state crime, and can you point me to any reference? (I'm sure claiming to be insolvent and unable to pay a civil suit when you have hidden assets is a type of fraud. But, that is not what happened here. Forbes estimates the family's worth at about $13 billion; no one is making the claim that they are bankrupt or unable to pay settlements / judgments.)
In general, in the US, wealth is private information between you and the IRS. There are judicial exceptions, certainly — you can't lie about your wealth in sworn testimony at trial, for example. But the Sacklers' suits did not go to trial — they settled outside of court.
> this article is basically telling us that they're dramatically understating their wealth to minimize the settlement damage.
$1 billion over a period of 10 years is not a huge chunk of $13 billion, IMO; and that's just the amounts moved a decade ago. It isn't clear all of it ended up "hidden." I'm also not sure of the mechanism by which understating your wealth minimizes settlement damage unless you actually claim insolvency.
Provably false advertising = fraud. Paying DRs to prescribe and push false information = fraud/bribery. I am doubtful, but I hope the recent release of coordination comms on the Marino bill and response to block DEA enforcement of laws helps a RICO case. Imagine if all the big banks got together to figure out how to help each other get out of KYC.
And they are repeating the exact same playbook in India right as we speak. It makes me very angry.
If doctors prescribe harmful drugs without evaluating their efficacy and without questioning the marketing, aren’t they responsible ? They are ultimately the ones “pushing” OxyContin after all.
Should doctors not be allowed to prescribe OxyContin?
Very weird to me that the focus is on the people least responsible. Doctors, FDA, AMA all have to approve the prescription of OxyContin. The whole point of the FDA is to evaluate drugs using science instead of marketing.
If one accepts that Purdue is the party most responsible for the opioid crisis then one must consider doctors, the AMA, and the FDA all incompetent idiots, right?
OxyContin is a perfectly legitimate drug and it is reasonable for the FDA and AMA to sign off on its use. What isn't legitimate is doctors and pharmacists prescribing the drug over and over again when there was no reason to.
I.e., "pill mills."
Doctors are highly trained specialists with limited time, and no, their job isn't to evaluate drug efficacy and safety. That's the FDA's job, and yes, to some extent the FDA failed here.
/pedantry
So they are using financial records to claim that they are hiding assets...their evidence for this is...the financial records...that they have...already. How does that work?
And they went to the trouble of briefing against the Sacklers but don't explain what information they don't have already or aren't being given (i.e. why they believe something is being hidden). They just say: we have the records, boy there is a lot of them, we haven't gone through them all...but we know they aren't complete...the bois working hard there.
And why is the punishment related to individual wealth at all? Are limited liability companies not really limited when a state govt laywer changes their mind? If someone breaks the law then charge the person who breaks the law (the point here is a headline for a politican...which is unfortunate given that some people at the company were clearly acting improperly).
Also, transferring money to a Swiss bank account is not against the law. The lawyer quoted says it was moved offshore to "conceal" the source of money...that isn't how money laundering works. You need to move it to an account that won't report to the US authorities..this doesn't exist in Switzerland or anywhere in the world (a disadvantage of weak libel laws, I am pretty sure this would be actionable in Commonwealth law systems given how obviously erroneous and misleading the statement is).
The whole lawyer/politician thing in the US is entertaining as an outsider. It is utterly bizarre when considered using any kind of logic.
Money laundering "works" through a chain of actions whose intent is to conceal the original source of said money. Some or all of those actions might be legal in themselves, it is the intent that counts - if you know the state is after your assets and you knowingly transfer those assets to a place the state can't find them (or even, would have trouble finding them, whether or not it could technically find them), then a pattern is fairly evident even if the transfer itself is legal.
Generally, playing games to make the state's job harder once it's investigating you is going to be a crime in the US (and many other places I believe). This is because the law has never been "blind" in the sense that it only considers actions - the law has always considered intentions and efforts to get results. Putting poison in a cup by itself isn't illegal, for example. Leaving that cup anywhere someone might drink from it on the other hand winds-up in crime.
https://en.m.wikipedia.org/wiki/Structuring
Perfectly legal activities. Illegal as hell when performed with intent to evade reporting.
Also note similar laws in other countries are cited.
The company was charged and convicted of a felony which would pierce the corporate veil.
No. The transfers were (a) personal wealth and (b) a decade ago.
Because they didn't get the financial records from the Sacklers. A Court would want a full financial disclosure as part of the settlement. Let's say the IRS audited a small business owner and settled with the owner for back taxes and fines. Well, the owner could have used some creative accounting to hide money, maybe contract out some work to an overseas company he controlled. This might not be illegal alone. But hiding his ownership of the overseas company could decrease the back taxes and fines he owned. So it's going to look bad for him if the IRS discovers his stake in the overseas company from his bank reporting a suspicious transaction.
You provide the cooked books to anyone who is suing you, Uncle Sam for taxes, and so on. Of course you have another set of documents that tells you where your money is, the point of having two set of books is to use one set to lie, misdirect, be non truthful in a court of law.
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And Limited Liability Corporations have good faith as part of their contract as a requirement. You commit purposeful fraud and the LLC will not shield you. The term for this is known as "Piercing the Veil" / "Piercing the Corporate Veil" and when the veil is pierced your assest away from the corporation can be seized for behavior you did as an agent of the corporation.
Now what are the rules of Piercing the Veil depends on your state for each state has different rules for Limited Liability Corporations, that said all 50 states have ways to pierce the veil for it is just a settled part of common law in the US.
Rama is personification of righteousness and Krishna, while a God, is also considered mischievous.