The federal bankruptcy system is morally bankrupt. The system has been abused by corporations and rich people to the point that it no longer upholds the mission it was designed for: providing a limited shelter from creditors so financially strapped individuals and companies could either liquidate or reorganize and put their affairs back in order.
The mission has morphed into helping the rich hold onto their vast financial assets while ensuring the people they’ve wronged get nothing, or as little as possible. Two recent examples underscore how the system serves the rich rather than holds them in check.
Years before gaining fame for its coronavirus vaccine, drug maker Johnson & Johnson was facing a public relations disaster after losing a high-profile civil Missouri lawsuit related to cancer-causing asbestos in Johnson’s Baby Powder. A $2 billion verdict in favor of women who sued after contracting ovarian cancer went all the way to the U.S. Supreme Court, where it was upheld. A Missouri jury originally set damages at $4.7 billion, but the figure later got reduced in court.
Instead of paying out and accepting responsibility, Johnson & Johnson formed a shell company in Texas, LTL, then assigned all financial and legal responsibility for the baby powder cases to the new company. Two weeks ago, LTL filed for bankruptcy. Now all financial awards are in limbo. Johnson & Johnson, reported to have more than $25 billion in cash reserves, likely will be shielded from future liability on these court-validated claims.
Then, of course, there’s the billionaire Sackler family of Purdue Pharma infamy. They are the subject of a new Hulu series, “Dopesick,” recounting how the family devised a strategy to market the opioid drug OxyContin as a miracle pain reliever. It was specifically advertised to doctors as non-addictive. In fact, it was highly addictive and played a major role in creating the nationwide opioid-addiction epidemic of the past two decades.
In a deft legal maneuver, the Sacklers found a way to tie themselves to the bankruptcy filing of Purdue Pharma in order to protect their fortune from future liability. Purdue Pharma reached a deal with various states to pay out $4.5 billion for its role in creating the addiction epidemic. Part of its bankruptcy deal is that it will dissolve. The Sacklers, who are nowhere close to bankruptcy, get to continue rolling in billions of dollars of family wealth — much of it derived from profits off sales to OxyContin addicts.
The bankruptcy judge acknowledged that the settlement protecting the Sacklers was a “bitter result.” But because the family had manipulated the system so expertly in their own favor, he was powerless to stop them.
These maneuvers drip with cynicism about the ease with which the rich and powerful can manipulate the justice system to their favor, never fully accounting for the lives they’ve ruined.
