Purdue Pharma's Opioid Scandal
A Window Into One Private Company Boardroom
By Maureen Milford
Richard Sackler, former board co-chairman of opioid-maker Purdue Pharma, apparently thought his emails would always remain confidential, based on court documents.
That might explain why Sackler felt comfortable expressing in a 2001 email his solution to the growing evidence of opioid abuse and addiction: “We have to hammer on the abusers in every way possible. They are the culprits and the problem. They are the reckless criminals,” wrote Sackler who is one of Purdue’s family owners, according to an unredacted complaint filed by Massachusetts Attorney General Maura Healy in January.
The lawsuit filed against the Sacklers, Purdue, former board members and officers alleges they created the deadly opioid epidemic and made billions of dollars from it by using “a web of illegal deceit” to aggressively push the company’s opioid products. The defendants have denied the allegations.
But the company did announce a recent $10 billion settlement and filed for bankruptcy as part of the deal.
Before those recent moves, Purdue and other defendants in the case fought to keep millions of pages of documents from public inspection, including board compensation and directors’ assertions about opioids. But a Massachusetts Superior Court justice ruled that “disclosure of the information – while it may prove embarrassing for some of the defendants—is not intensely personal or private.”
“In essence, the information describes the inner workings of a company and discussions about company business among its directors, officers and employees. Any interest in keeping this information secret is hardly compelling and certainly not enough to overcome the presumption of public access,” wrote Superior Court Justice Janet L. Sanders in a January order.
The result is the public now has a picture window into innards of a private company boardroom. Among other things, the cases illustrate that there are no guarantees of absolute confidentiality for what happens in the boardroom.
“The expectation and promise is for confidentiality, yet legal processes can penetrate and make the promise void,” says Stephen McClure, principal consultant at Family Business Consulting Group. “Don’t write anything in emails, in notes, or in minutes that you would not want to see on the front page of the local newspaper.”
Indeed, legal documents paint a portrait of the board members as zealous hands-on directors “intimately involved with the minutiae of running Purdue.” The Sackler family, which always held a majority of seats on the board, was “not content to rubber-stamp what others presented to them…” according to a consumer fraud case filed in early September against seven former Sackler board directors by Delaware Attorney General Kathleen Jennings.
In 2011, the-then board co-chairman Richard Sackler even demanded to be sent into field with sales representatives despite compliance concerns, court documents allege. One executive wrote that he and the CEO agreed that during sales calls Richard Sackler would have to “be mum throughout, and not identify himself other than as a home office person.”
The Delaware case, along with a Massachusetts case, are two of the approximately 2,000 lawsuits filed by states and municipalities against the opioid maker. Purdue filed a Chapter 11 bankruptcy petition in September as part of a proposed settlement to resolve the litigation. However, Delaware, Massachusetts and numerous other states had not agreed to the deal by mid-September.
Court documents also detail the perks of being director of Purdue.
“By the Sacklers’ choice, sitting on the Board of Purdue Pharma Inc. was a globe-trotting endeavor. The Sacklers held Board meetings for their U.S. drug company in a castle in Ireland, and in Bermuda, London, Portugal, Switzerland, New York, and Connecticut,” the Massachusetts complaint alleges.
“The directors also paid themselves handsomely for their position on the board,” court documents allege. Former Board Chairman Ralph Snyderman, for example, was paid $168,887 in 2015, the documents say. (According to a recent Private Company Director, Family Business Magazine and Compensation Advisory Partners, study the median annual retainer is $30,000. See the full article here.)
Purdue and other defendants tried to keep the compensation information from public view, but Justice Sanders decided against them.
“That the size of an individual defendant’s compensation might prove to be embarrassing for him or her is not grounds for impounding this information,” she wrote.
The email trail of sensitive information at Purdue’s highest levels shows a failure in the board’s judgment regarding good business practices, maintains Jennifer Pendergast, executive director of the Kellogg Center for Family Enterprises at Northwestern University. While it is not unusual for private company boards to maintain less rigorous standards, board members are responsible for the health of the company, which entails accountability to all stakeholders, she explains.
“Purdue is a large, complex, sophisticated company in a regulated industry. Their independent directors should operate under the same standard as a public company board,” Pendergast continues. “The negligence of the independent directors in understanding their stakeholder responsibility is a lesson to all private company directors to take their fiduciary obligation seriously.”