Investigations Newsletter: Department of Justice Announces $8.3 Billion Settlement with Opioid Manufacturer Purdue Pharma and Members of the Sackler Family

Arent Fox

Department of Justice Announces $8.3 Billion Settlement with Opioid Manufacturer Purdue Pharma and Members of the Sackler Family

On October 21, the Department of Justice (DOJ) announced that it reached a global resolution of its criminal and civil investigations into opioid manufacturer Purdue Pharma (Purdue), and a civil resolution with individual Purdue shareholders from the Sackler family, collectively totaling more than $8.3 billion.

As part of Purdue’s criminal plea, the company will admit that from 2007 to 2017, it conspired to defraud the United States by misrepresenting to the Drug Enforcement Administration that it had an effective anti-diversion program when, in fact, it continued to market opioid products to more than 100 health care providers whom Purdue had reason to believe were diverting opioids. According to DOJ, the conspiracy also involved aiding and abetting the dispensing of opioid products, including OxyContin, without a legitimate medical purpose and therefore without a valid prescription, in violation of the Food, Drug, and Cosmetic Act. As part of the agreement, Purdue will plead guilty to one count of conspiracy to defraud the United States and to violate the Food, Drug, and Cosmetic Act, and two counts of conspiracy to violate the Anti-Kickback Statute. The penalties will include a $3.544 billion criminal fine and a $2 billion criminal forfeiture. Purdue will also pay $2.8 billion to resolve its civil liability under the False Claims Act. Members of the Sackler family have also agreed to pay $225 million to resolve their potential False Claims Act liability.

Because Purdue is currently in bankruptcy proceedings, the settlement is subject to the approval of the bankruptcy court in the Southern District of New York. A condition of the resolution is that Purdue emerge from bankruptcy as a public benefit company owned by a trust or similar entity designed for the benefit of the American people. DOJ has agreed to credit up to $1.775 billion against the $2 billion forfeiture amount as value to be conferred to state and local governments through the public benefit company.

The settlement agreement does not release any individuals, including members of the Sackler family, from potential criminal liability, and it does not release any of Purdue’s executives or employees from potential civil liability. According to DOJ, the settlement also does not resolve claims that states may bring against Purdue or members of the Sackler family.

The DOJ press release can be found here.

SEC Obtains Final Judgment Against Kik Interactive for Securities Law Violations

On October 21, the Securities and Exchange Commission (SEC) announced that a federal district court in the Southern District of New York entered a final judgment on consent against Kik Interactive Inc. (Kik) to resolve civil charges that the company allegedly violated federal securities laws in connection with its unregistered offering of digital “Kin” tokens in 2017. In its 2019 complaint, the SEC alleged that Kik sold digital asset securities to US investors without registering their offer and sale as required by US securities laws. Last month, the court granted summary judgment in the SEC’s favor, finding that undisputed facts established that Kik’s sales of the tokens constituted sales of investment contracts, and thus securities, requiring Kik to register the offering, which it failed to do.

The final judgment permanently enjoins Kik from violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933, requires Kik to notify the SEC before engaging in certain activities involving digital assets for a period of three years, and requires Kik to pay a $5 million penalty.

The SEC press release can be found here.

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ArentFox Schiff

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