One of America’s most corporate-crime-friendly bankruptcy judges forced to recuse himself
Today (Oct 16) I'm in Minneapolis, keynoting the 26th ACM Conference On Computer-Supported Cooperative Work and Social Computing. Thursday (Oct 19), I'm in Charleston, WV to give the 41st annual McCreight Lecture in the Humanities. Friday (Oct 20), I'm at Charleston's Taylor Books from 12h-14h.
"I’ll believe corporations are people when Texas executes one." The now-famous quip from Robert Reich cuts to the bone of corporate personhood. Corporations are people with speech rights. They are heat-shields that absorb liability on behalf of their owners and managers.
But the membrane separating corporations from people is selectively permeable. A corporation is separate from its owners, who are not liable for its deeds – but it can also be "closely held," and so inseparable from those owners that their religious beliefs can excuse their companies from obeying laws they don't like:
Corporations – not their owners – are liable for their misdeeds (that's the "limited liability" in "limited liablity corporation"). But owners of a murderous company can hold their victims' families hostage and secure bankruptcies for their companies that wipe out their owners' culpability – without any requirement for the owners to surrender their billions to the people they killed and maimed:
Corporations are, in other words, a kind of Schroedinger's Cat for impunity: when it helps the ruling class, corporations are inseparable from their owners; when that would hinder the rich and powerful, corporations are wholly distinct entities. They exist in a state of convenient superposition that collapses only when a plutocrat opens the box and decides what is inside it. Heads they win, tails we lose.
Key to corporate impunity is the rigged bankruptcy system. "Debts that can't be paid, won't be paid," so every successful civilization has some system for discharging debt, or it risks collapse:
When you or I declare bankruptcy, we have to give up virtually everything and endure years (or a lifetime) of punitive retaliation based on our stained credit records, and even then, our student debts continue to haunt us, as do lawless scumbag debt-collectors:
When a giant corporation declares bankruptcy, by contrast, it emerges shorn of its union pension obligations and liabilities owed to workers and customers it abused or killed, and continues merrily on its way, re-offending at will. Big companies have mastered the Texas Two-Step, whereby a company creates a subsidiary that inherits all its liabilities, but not its assets. The liability-burdened company is declared bankrupt, and the company's sins are shriven at the bang of a judge's gavel:
Three US judges oversee the majority of large corporate bankruptcies, and they are so reliable in their deference to this scheme that an entire industry of high-priced lawyers exists solely to game the system to ensure that their clients end up before one of these judges. When the Sacklers were seeking to abscond with their billions in opioid blood-money and stiff their victims' families, they set their sights on Judge Robert Drain in the Southern District of New York:
To get in front of Drain, the Sacklers opened an office in White Plains, NY, then waited 192 days to file bankruptcy papers there (it takes six months to establish jurisdiction). Their papers including invisible metadata that identified the case as destined for Judge Drain's court, in a bid to trick the court's Case Management/Electronic Case Files system to assign the case to him.
The case was even pre-captioned "RDD" ("Robert D Drain"), to nudge clerks into getting their case into a friendly forum.
If the Sacklers hadn't opted for Judge Drain, they might have set their sights on the Houston courthouse presided over by Judge David Jones, the second of of the three most corporate-friendly large bankruptcy judges. Judge Jones is a Texas judge – as in "Texas Two-Step" – and he has a long history of allowing corporate murderers and thieves to escape with their fortunes intact and their victims penniless:
But David Jones's reign of error is now in limbo. It turns out that he was secretly romantically involved with Elizabeth Freeman, a leading Texas corporate bankruptcy lawyer who argues Texas Two-Step cases in front of her boyfriend, Judge David Jones.
Judge Jones doesn't deny that he and Freeman are romantically involved, but said that he didn't think this fact warranted disclosure – let alone recusal – because they aren't married and "he didn't benefit economically from her legal work." He said that he'd only have to disclose if the two owned communal property, but the deed for their house lists them as co-owners:
(Jones claims they don't live together – rather, he owns the house and pays the utility bills but lets Freeman live there.)
Even if they didn't own communal property, judges should not hear cases where one of the parties is represented by their long term romantic partner. I mean, that is a weird sentence to have to type, but I stand by it.
The case that led to the revelation and Jones's stepping away from his cases while the Fifth Circuit investigates is a ghastly – but typical – corporate murder trial. Corizon is a prison healthcare provider that killed prisoners with neglect, in the most cruel and awful ways imaginable. Their families sued, so Corizon budded off two new companies: YesCare got all the contracts and other assets, while Tehum Care Services got all the liabilities:
Then, Tehum paid Freeman to tell her boyfriend, Judge Jones, to let it declare bankruptcy, leaving $173m for YesCare and allocating $37m for the victims suing Tehum. Corizon owes more than $1.2b, "including tens of millions of dollars in unpaid invoices and hundreds of malpractice suits filed by prisoners and their families who have alleged negligent care":
Under the deal, if Corizon murdered your family member, you would get $5,000 in compensation. Corizon gets to continue operating, using that $173m to prolong its yearslong murder spree.
The revelation that Jones and Freeman are lovers has derailed this deal. Jones is under investigation and has recused himself from his cases. The US Trustee – who represents creditors in bankruptcy cases – has intervened to block the deal, calling Tehum "a barren estate, one that was stripped of all of its valuable assets as a result of the combination and divisional mergers that occurred prior to the bankruptcy filing."
This is the third high-profile sleazy corporate bankruptcy that had victory snatched from the jaws of defeat this year: there was Johnson and Johnson's attempt to escape from liability from tricking women into powder their vulvas with asbestos (no, really), the Sacklers' attempt to abscond with billions after kicking off the opioid epidemic that's killed 800,000+ Americans and counting, and now this one.
This one might be the most consequential, though – it has the potential to eliminate one third of the major crime-enabling bankruptcy judges serving today.
One down.
Two to go.
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Reading about the Sacklers and Purdue and how they created the opioid epidemic.
Capitalism sure is a thing. Lie to everyone, poison people for money, and keep doing it when you get exposed.
Over and over again, the rich lie and get richer, and then they give back a pittance while congratulating themselves for showing even a hint of compassion.
Today a federal judge is expected to certify Purdue Pharmaceutical’s bankruptcy plan – a $4.5 billion settlement between the company and thousands of state and municipal governments that have sued for damages related to the opioid epidemic. The settlement occurs more than two decades after Purdue began aggressively marketing OxyContin to an unsuspecting public and after more than 500,000 people died in the United States as a result.
Purdue will be bankrupt, but members of the multi-billionaire Sackler family -- who were responsible for the decisions that led to these deaths and profited the most from Purdue’s opioid dealings -- will gain near-total immunity from future litigation. By the time the settlement is paid out they most likely will be as wealthy as they ever were.
So where does personal responsibility come in?
Arthur M. Sackler made a fortune in the 1980s by being the first to directly market prescription drugs to physicians. Utilizing many of the same direct-marketing techniques, his brothers Mortimer and Raymond and nephews Richard and Jonathan, began pushing OxyContin, which had about 1.5 times the strength of morphine. Richard, while an executive and then president of Purdue Pharma, claimed repeatedly that opioids were not highly addictive. To increase company profits, he urged doctors to prescribe as high doses as were possible, even having Purdue measure its performance in proportion to the strength of the doses it sold despite allegedly knowing that sustained high doses of OxyContin risked addiction. As Paul Hanly, a leading attorney in the case, told the Guardian, “this is essentially a crime family … drug dealers in nice suits and dresses.”
Not just nice suits and dresses. The Sackler family also purchased fawning respectability from universities, medical centers, and museums to which they contributed a fraction of their billions. Even prestigious medical schools ostensibly dedicated to advancing the public’s health fell for the ruse. One example, from the Yale School of Medicine’s magazine in late 2009:
“It would be an understatement to say that philanthropy runs in the family of Richard S. Sackler, M.D., and his brother, Jonathan Sackler. The names of their parents, Raymond and Beverly Sackler, adorn cultural and scientific centers around the world, from the Sackler Galleries at the British Museum to the famed Sackler Wing of New York’s Metropolitan Museum, to the just-launched Raymond and Beverly Sackler Institute for Biological, Physical, and Engineering Sciences at Yale. … In keeping with their family’s long-standing generosity to Yale, the brothers’ respective foundations have now joined forces to donate a $3 million endowment establishing the Richard Sackler and Jonathan Sackler Professorship, expressly intended to be held by those appointed as director of Yale Cancer Center. Richard Sackler said, “My father raised Jon and me to believe that philanthropy is an important part of how we should fill our days.”
In America, shame and honor have become confused partly because institutions that bestow honors often have the ulterior motive of extracting as much money as possible from rich honorees while knowing as little as possible about how these donors obtained their wealth. In return for the donation, honorees are imbued with moral approval.
Richard Sackler and other family members involved in this tragedy deserve to be shamed. Institutions that took their blood money should remove the Sackler name from their centers, professorships, buildings, and pediments. If they won’t be held accountable in a court of law, they must be held accountable at least in the public sphere.
The decision by a federal bankruptcy judge grants members of the family who own Purdue Pharma, maker of OxyContin, sweeping protection from
I don’t have coherent words for what a colossal miscarriage of justice this is, just a string of expletives I’m too tired to type out. A disgusting, immoral, and blatantly wrong injustice that denies thousands of families the chance to hold the Sacklers accountable for experimenting with and killing our loved ones, all out of greed. Genuinely sickening
Keep in mind that the Sacklers essentially handpicked Judge Robert Drain to handle their case, his feigned disappointment or whatever he’s going for here means nothing.
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The Sacklers woulda gotten away with it if it wasn't for those darned meddling feds
The saga of the Sacklers, a multigenerational billionaire crime family of mass-murdering dope-peddlers, is an enraging parable about how the wealthy, the courts, and sadistic high-powered lawyers collude to destroy the lives of millions, profit handsomely, and evade justice.
But there's an unexpected twist to this tale. After the Sacklers procured a sham bankruptcy that denied their victims the right to sue while leaving their fortune largely intact, the Supreme Court – yes, this Supreme Court – saw through the scam and froze the process, pending a full hearing:
The Sacklers basically invented modern, legal dope peddling. Arthur Sackler, the family's original crime-boss, revived the practice of direct-to-consumer drug marketing, dormant since the death of the medicine show, to peddle Valium. An aggressive and shrewd lobbyist, Arthur built the family fortune and, more importantly, its connections:
A generation later, the family's business company created Oxycontin, and procured misleading and false research about the drug's safety kickstarting the opioid epidemic, whose American body-count is closing in on a million dead. Armed with inflated claims about opioid safety, the Sacklers' pharma reps bribed, cajoled and tricked doctors into writing millions of prescriptions for oxy.
This scam had a natural best-before date. As ODs flooded America's ERs and bodies piled up in America's morgues, it became increasingly clear that something was rotten. The Sacklers pursued a multipronged campaign to keep the truth from coming to light, and to keep the billions flowing.
On the one hand, they hired McKinsey to find novel ways to encourage doctors to keep writing prescriptions and to convince pharmacists to turn a blind eye to abuse. McKinsey had all kinds of great ideas here, including paying pharma distributors cash bonuses for every overdose death in their territory:
When the issue of these deaths came up in public, the Sacklers blamed "criminal addicts" for their own misery, stigmatizing both people who desperately needed pain relief and the people who'd been deliberately hooked on the Sacklers' products. The legacy of this smear campaign is still with us, both in the contempt for people struggling with addiction and in the cruel barriers placed between people in unbearable agony and medical relief.
But mostly, the Sacklers kept their names out of it. They laundered their reputations by donating a homeopathic fraction of their vast drug fortune to art galleries and museums in a bid to make their names synonymous with good deeds.
The Sacklers didn't invent this trick. Think of the way that history's great monsters – Carnegie, Mellon, Rockefeller, Ford – are remembered today for the foundations and charities that bear their names, not for the untold misery they inflicted on their workers, their crimes against their customers, and the corruption of governments.
But the Sacklers made those Gilded Age barons seem like amateurs. They invented a modern elite philanthropy playbook that Anand Giridharadas documents in his must-read Winners Take All, about the charity-industrial complex that washes away an ocean of blood with a trickle of money:
As part of this PR exercise, the individual Sacklers kept their names and images out of the public eye. For years, there were virtually no news-service photos of individual Sacklers. When journalists dared to criticize the family, they used vicious attack-lawyers to intimidate them into retractions and silence (I was threatened by the Sacklers' lawyers).
They also worked their media mogul pals, like Mike Bloomberg, who added their names to the "Friends of Mike" list that Bloomberg reporters were required to consult before writing negative coverage:
But Stein's Law says that "anything that can't go on forever will eventually stop." As lawsuits mounted, the Sacklers found themselves increasingly synonymous with death, not charitable works. But like any canny criminal, the Sacklers had a getaway plan.
First, they extracted vast sums from Purdue and shifted it into offshore financial secrecy havens:
Even as this money was disappearing into legal black holes, the Sacklers demanded – and received – extraordinary protection from the courts, who aggressively sealed testimony and materials presented through discovery:
When this gambit finally failed, the Sacklers insisted that were down to their last $4 billion, and, with trillions in claims pending against them, they declared bankruptcy.
When a normal person declares bankruptcy, they are required to divest themselves of nearly everything of value they possess, and then still find themselves hounded by cruel arm-breakers who deluge them with threatening calls and letters:
But for the richest people in America, bankruptcy is merely a way to cleanse one's balance sheet of liabilities for any atrocity you may have committed on the way, without giving up your fortune.
The Sacklers are a case-study in how a corrupt bankruptcy can be conducted.
Purdue Pharma presents a maddening case-study in the corrupt benefits of bankruptcy. When it was announced in March, many were outraged to learn that the Sacklers were going to walk away with billions, while their victims got stiffed.
First, they converted their victims' right to compensation into "property" that the Sacklers themselves owned. This transferred jurisdiction over these claims from the regular court system to the bankruptcy court. A bankruptcy judge – not a jury – would decide how much each of these claims was worth, and then what how much of that worth these victims (now recast as creditors) would be entitled to through the bankruptcy.
Thus tens of thousands of claims were nonconsensually settled without a trial, by an administrative judge with no criminal jurisdiction, not a federal judge who'd undergone Senate confirmation:
These "coercive restructuring techniques" are not available to everyday people who are drowning in student debt or credit-card bills – these are the exclusive purview of the wealthiest Americans, who enjoy a completely different bankruptcy system that is rigged in their favor.
Three judges – David Jones and Marvin Isgur of Houston and Bob Drain of New York – hear 96% of the country's large corporate bankruptcies:
These judges are unbelievably horny for corporations, embracing a legal theory "that casts the invention of the limited liability corporation alongside that of the steam engine as a paradigmatic development in the pursuit of prosperity":
Now there are more than three bankruptcy judges in America, so how do the nation's biggest companies get their cases heard by these three enthusiastic Renfields for corporate vampirism?
They cheat.
For example: when GM was facing bankruptcy, it argued that it was a New York company on the basis that it owned a single Chevy dealership in Harlem, and got in front of Judge Drain.
The Sacklers were – characteristically – even more brazen. They really wanted to get their case in front of Judge Drain, the nation's most enthusiastic supporter of "third party releases," through which bankrupt billionaires can wipe the slate clean, securing dismissals of all claims by the people they wronged.
Drain is also uniquely hostile to independent examiners, "an independent third-party appointed by the court to investigate 'fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity…by current or former management of the debtor."
If you're the Sacklers, hoping to keep two thirds of your billions and extinguish all claims by your victims, there is no better helpmeet than Judge Robert Drain of the Southern District of New York.
So, 192 days before filing for bankruptcy, the Sacklers opened an office in White Plains, New York (a company may claim jurisdiction in a specific court once they've operated a business there for 180 days).
Then they filed a bankruptcy in which they altered the metadata on their casefile, inserting the code for a Westchester county hearing into the machine-readable, human-invisible parts of the documents they uploaded to the federal Case Management/Electronic Case Files (CM/ECF) system (they also captioned the case with "RDD, for "Robert D Drain").
They chose their judge, and the judge obliged. UCLA Law's Lynn LoPucki is one of the leading scholars of these bankruptcy "megacases," and has written extensively on why these three judges are so deferential to corporate criminals seeking to flense themselves of culpability. She sees judges like Drain motivated by "personal aggrandizement and celebrity and ability to indirectly channel to the local bankruptcy bar. The judge is the star and the ringmaster of a megacase – very appealing to certain personalities."
Thus, these judges are "willing and eager to cater to debtors to attract business…[an] assurance to debtors that…these judges will not transfer out cases with improper venue or rule against the debtor…"
This kind of judge-shopping goes beyond the Sacklers; the cases that Drain and co preside over make a mockery of the idea of America as a land of equal justice. "Prepack" and "drive-through" bankruptcies are reliable get-out-of-jail-free cards for capitalism's worst monsters: private equity firms.
Whether PE murdered your grandmother by buying her care-home and putting each worker in charge of 30 seniors:
30% of America's bankruptcies are private equity companies using the bankruptcy system to wipe away claims for their misdeeds, while keeping a fortune, thanks to the shield of limited liability.
Take Millennium Health, JamesS lattery's fake drug-testing company, which promised to help nursing homes figure out whether seniors were abusing (or selling) their meds by testing their piss for angel dust and other drugs. Slattery defrauded Medicare and Medicaid for millions, borrowed $1.8 billion (Slattery got $1.3 billion of that). He eventually walked away from this fraud after paying a mere $256m to settle all claims, and kept a fortune in assets, including the 40 vintage planes his private company ("Pissed Away LLC" – I am not making this up) owned:
For the wealthy, bankruptcy is the sport of kings, a way to skip out on consequences. For the poor, bankruptcy is an anchor – or a noose. This is by design: judges who preside over elite bankruptcies speak of their protagonists as heroic "risk takers" and tiptoe around any consequences, lest these titans be chained to a mortal's fate, costing us all the benefits of their entrepreneurial genius.
PE companies helped the Sacklers design their own bankruptcy strategy, and it was a standout, even by the standards of Bob Drain and his kangaroo bankruptcy court. But now, the Supreme Court has pumped the brakes on the whole enterprise.
The judges ruled that the exceptions the Sacklers took advantage of were intended for bankrupts in "financial distress" – not billionaires with vast fortunes hidden overseas. In so doing, the court threatens all manner of corrupt arrangements, from "the Boy Scouts, wildfires and allegations of sexual abuse in the church diocese — where third parties get a benefit from a bankruptcy they themselves aren’t going through.”
The case was brought by the DoJ's US Trustee Program, which lost in the Second Circuit when it tried to halt the Purdue bankruptcy and argued that the Sacklers themselves had to declare bankruptcy to discharge the claims against them.
Now the Supremes have hit pause on the bankruptcy the Second Circuit approved, and will hear the case themselves. It's only one step on a long road, but it's an unprecedented one. Some of the country's filthiest fortunes are riding on the outcome.
Going to Defcon this weekend? I’m giving a keynote, “An Audacious Plan to Halt the Internet’s Enshittification and Throw it Into Reverse,” tomorrow (Aug 12) at 12:30pm, followed by a book signing at the No Starch Press booth at 2:30pm!
https://info.defcon.org/event/?id=50826
I’m kickstarting the audiobook for “The Internet Con: How To Seize the Means of Computation,” a Big Tech disassembly manual to disenshittify the web and bring back the old, good internet. It’s a DRM-free book, which means Audible won’t carry it, so this crowdfunder is essential. Back now to get the audio, Verso hardcover and ebook:
http://seizethemeansofcomputation.org
If you'd like an essay-formatted version of this thread to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
#1yrago The secretive wealthy family behind the opioid epidemic are using the same tactics to kill public education
The Sackler Family are best known for philanthropy, but their real legacy is the opioid epidemic, which they engineered through their family firm, Purdue Pharmaceutical, which used a variety of front organizations that paved the way for massive overprescription of the company's painkillers, while covering up the flaws in the drug-testing for Purdue's products and the false claims about their safety and efficacy.
Sackler philanthropy sometimes supports research, museums, and other traditional "good causes," but the family's philanthropic efforts also include titanic sums of cash spent to promote pet political causes, including the destruction of public education and its replacement by charter schools.
Jonathan Sackler is the nephew of Arthur Sackler, a Medical Advertising Hall of Famer who effectively invented modern pharmaceutical advertising and marketing. Jonathan Sackler uses the family money to fund an ecosystem of organizations that spread critical messages about teachers' unions and public schools and promote private charter schools in their places.
These include "nonpartisan" news sources that are uniformly critical of public schools and teachers' unions.
This is the kind of vertical integration that made Purdue's opioid marketing so devastatingly effective. By fronting advocacy organizations, media organizations, lobbyists, and astroturf operations, the super-rich are able to turn their self-serving ideological projects into reality the rest of the world.
