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US Supreme Court questions Sackler liability releases in Purdue bankruptcy

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US Supreme Court questions Sackler liability releases in Purdue bankruptcy

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The Supreme Court on Monday questioned the Department of Justice’s effort to invalidate a settlement in the bankruptcy of Purdue Pharma that would shield members of the company’s founding Sackler family from future civil liability in exchange for a $6bn contribution.

“For 30 years bankruptcy courts have been approving plans like this . . . why is [this settlement] categorically inappropriate?” Justice Brett Kavanaugh asked a lawyer for the DoJ, Curtis Gannon, who had argued that the comprehensive liability releases granted to the Sacklers could not be justified under existing US law.

Gannon argued that Sacklers should not get such a release, no matter the size of their contribution, unless they filed for bankruptcy themselves.

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“The Sacklers are saying they want global peace, they would pay a lot for 97.5 per cent,” Gannon said, arguing that nearly all claimants wanted to be paid soon and thus would bring the Sacklers to the bargaining table for a deal even without a comprehensive release.

But lawyers for Purdue, the Sacklers and the creditors committee, which includes individual claimants, have argued the full liability release is a condition for the Sacklers making any financial contribution to the settlement pot.

Legal experts say a decision in the case, which will probably come by the summer, will influence Chapter 11 bankruptcies for years, ranging from mass torts to cryptocurrency blow-ups and private equity-centred restructurings.

“I think the case is the most important corporate bankruptcy case to come to the court in at least the last 30 years,” said Anthony Casey, a law professor at University of Chicago.

An initial deal struck and approved in 2021 by the New York federal court overseeing Purdue’s bankruptcy called for members of the Sackler family who had long controlled the company to put up $4.3bn of their fortune to fund payments to users of painkiller OxyContin, as well as treatment programmes run by states and cities.

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In exchange for the contribution, the Sacklers insisted that the deal would permanently bar any civil lawsuits against them over Purdue’s alleged misdeeds — although it would not foreclose potential criminal proceedings.

The Office of the US Trustee, a division of the justice department that oversees the bankruptcy, has said those releases are unlawful because the Sacklers did not file for Chapter 11 bankruptcy protection. Further, the US Trustee said, those proposed releases would stop those who said they were harmed by Purdue from exercising their constitutional right to sue the family.

The independent managers who have taken control of Purdue, along with the Sackler family, have argued the settlement — eventually raised to between $5.5bn and $6bn — has been agreed by well over 90 per cent of Purdue creditors and that a bankruptcy deal is the fairest and fastest way for money to reach needy victims.

“[W]ithout the releases, there is no settlement, the debtors likely would be forced into a Chapter 7 liquidation, and unsecured creditors would probably recover nothing from the debtors’ estates,” Purdue wrote in its brief to the Supreme Court.

The US Trustee said the settlement will still leave the Sacklers with billions of dollars. The family, and Purdue, dispute that they have much more to give, asserting that much of funds withdrawn from the company over the years went to pay taxes.

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While US bankruptcy law does not explicitly allow “third-party releases” extinguishing liability for entities not actually in bankruptcy, judges have for several years used the broad powers of bankruptcy law to help shield parties who provided substantial contributions to creditor recoveries.

Legal scholars have debated whether releases have become too common as companies or organisations facing a pile of “tort” lawsuits over defective products or corporate malfeasance file for bankruptcy in order to reach comprehensive settlements.

Supporters of the Chapter 11 bankruptcy process say leaving plaintiffs to sue in separate lawsuits spread across US courts leads to inequitable outcomes for victims forced to compete for a fixed settlement pot.

“Purdue goes to the core functioning of Chapter 11,” said Casey, warning that pending settlements in such cases as the sprawling Boy Scouts of America sex abuse matter could be unwound depending on the Supreme Court’s ruling.

Watchers of the court, however, expect its conservative majority to be sceptical of the releases.

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“The conventional wisdom is that the Supreme Court is now comprised of textualists, and to paraphrase former Justice [Antonin] Scalia, as such they do not believe Congress ‘hides elephants in mouseholes’,” said Jonathan Lipson, a law professor at Temple University. “Here, the ‘elephant’ would be the discharge-like power of the non-debtor release.”

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Trial begins for Vietnamese property tycoon accused of $12bn fraud

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Trial begins for Vietnamese property tycoon accused of $12bn fraud

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The fraud trial of a Vietnamese real estate tycoon who allegedly misappropriated $12bn started on Tuesday, as part of the country’s largest corruption case that has also ensnared officials from the central bank and government.

Truong My Lan faces a death sentence or imprisonment if found guilty in the graft case, which has rocked the property and corporate bond markets of one of the world’s fastest-growing economies.

The graft case is part of a corruption crackdown launched by Vietnam’s Communist party that has resulted in the arrests of hundreds of senior government officials, including cabinet ministers. Lan, developer Van Thinh Phat Group’s chair, is the most prominent businessperson to face graft allegations.

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Vietnam has been one of the biggest beneficiaries of manufacturers seeking to diversify their supply chains beyond China as geopolitical tensions between Washington and Beijing rise. However, the Vietnamese economy grew 5.05 per cent in 2023, missing the government’s official target, as overseas demand slowed.

The anti-corruption campaign has slowed down project approvals by the government, and more state scrutiny of private businesses could hurt investor confidence, analysts said.

Lan, 67, comes from one of Vietnam’s richest families who made their fortune in property. She has been charged with bribery, embezzlement, abuse of power and “lack of responsibility causing serious consequences”, according to state media.

She has denied wrongdoing, state media reported. Lawyers for Lan, who was arrested in 2022, did not respond to a request for comment.

Lan is accused by Vietnamese authorities of using Saigon Joint Stock Commercial Bank (SCB), in which she owns a controlling stake of about 90 per cent, to funnel 304tn dong ($12.3bn) to her real estate company Van Thinh Phat.

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Loans worth more than $44bn were given by SCB to Van Thinh Phat and related companies between 2012 and 2022, accounting for 93 per cent of the total loans disbursed by the bank.

Authorities also said Van Thinh Phat used allegedly fake companies to sell corporate bonds through SCB to the bank’s depositors.

In addition to Lan, 85 people — including 15 officials from Vietnam’s central bank — are charged in connection with the case. The central bank officials are accused of receiving bribes from Lan to cover up the alleged fraud.

“The trial is important in terms of scale and because it signals that the [Communist] party is willing to expand its anti-corruption campaign to the private sector despite potential risks that it might have on the economy,” said Nguyen Khac Giang, a visiting fellow at Singapore’s Iseas-Yusof Ishak Institute.

He said Lan’s corruption case had dented the confidence of some private businesses in Vietnam worried about the risks of operating in the country and the state companies they work with.

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The anti-corruption campaign has also made government officials hesitant to approve projects, he added, out of fear that they could be implicated in graft.

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FAA audit faults Boeing for 'multiple instances' of quality control shortcomings

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FAA audit faults Boeing for 'multiple instances' of quality control shortcomings

Boeing workers at the Renton Municipal Airport in Washington finalize assembly of an Alaska Airlines Boeing 737 Max jet on Feb. 27. An FAA audit faulted Boeing for “multiple instances” of quality control shortcomings.

Jovelle Tamayo for NPR


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Jovelle Tamayo for NPR


Boeing workers at the Renton Municipal Airport in Washington finalize assembly of an Alaska Airlines Boeing 737 Max jet on Feb. 27. An FAA audit faulted Boeing for “multiple instances” of quality control shortcomings.

Jovelle Tamayo for NPR

WASHINGTON — After a six-week audit of Boeing, federal regulators say they found quality control problems at Boeing and Spirit AeroSystems, one of its top suppliers.

The Federal Aviation Administration says it found “multiple instances” of Boeing and Spirit failing to “comply with manufacturing quality control requirements.”

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The FAA launched the audit of Boeing and Spirit AeroSystems, which builds the fuselage for the Boeing 737 Max, after a door plug panel blew out in midair during an Alaska Airlines flight on Jan. 5.

No one was seriously hurt when the plug came off as the new jet climbed through 14,000 feet after departing Portland, Ore. It returned to make an emergency landing as winds whipped through a hole in the fuselage.

A preliminary investigation by the National Transportation Safety Board determined that four key bolts that were supposed to hold the door plug in place were missing when the plane left Boeing’s factory.

The audit found problems in “Boeing’s manufacturing process control, parts handling and storage, and product control,” the FAA said in a statement.

The agency says FAA administrator Mike Whitaker discussed the findings with Boeing CEO Dave Calhoun last week, when the agency gave Boeing 90 days to come up with a plan of action to address its quality control problems.

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The FAA says it provided both companies with a summary of the audit findings. But the agency declined to share those details with NPR, citing its ongoing investigation.

Auditors visited Boeing’s factory in Renton, Wash., and Spirit’s plant in Wichita, Kan.

Boeing confirmed Friday that it is in talks to buy Spirit AeroSystems.

“We believe that the reintegration of Boeing and Spirit AeroSystems’ manufacturing operations would further strengthen aviation safety, improve quality and serve the interests of our customers, employees, and shareholders,” said Jessica Kowal, Boeing’s director of media relations, in a statement.

That would be a change of strategy for Boeing, which nearly two decades ago sold off the assets that are now part of Spirit.

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But the supplier has had several costly and embarrassing problems with quality control in recent years as it pushed to keep up with Boeing’s ambitious production schedule.

NPR’s Joel Rose reported from Washington, D.C., and Russell Lewis from Birmingham, Ala.

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Read the Decision in the Trump Colorado Ballot Case

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Read the Decision in the Trump Colorado Ballot Case

Cite as: 601 U. S.

Per Curiam

(2024)

5

a wide array of offices-rather than by granting rights to all. It is therefore necessary, as Chief Justice Chase concluded and the Colorado Supreme Court itself recognized, to “ascertain[] what particular individuals are embraced”” by the provision. App. to Pet. for Cert. 53a (quoting Griffin’s Case, 11 F. Cas. 7, 26 (No. 5,815) (CC Va. 1869) (Chase, Circuit Justice)). Chase went on to explain that “[t]o accomplish this ascertainment and ensure effective results, proceedings, evidence, decisions, and enforcements of decisions, more or less formal, are indispensable.” Id., at 26. For its part, the Colorado Supreme Court also concluded that there must be some kind of “determination” that Section 3 applies to a particular person “before the disqualification holds meaning.” App. to Pet. for Cert. 53a.

The Constitution empowers Congress to prescribe how those determinations should be made. The relevant provision is Section 5, which enables Congress, subject of course to judicial review, to pass “appropriate legislation” to “enforce” the Fourteenth Amendment. See City of Boerne v. Flores, 521 U. S. 507, 536 (1997). Or as Senator Howard put it at the time the Amendment was framed, Section 5 “casts upon Congress the responsibility of seeing to it, for the future, that all the sections of the amendment are carried out in good faith.” Cong. Globe, 39th Cong., 1st Sess., at 2768.

Congress’s Section 5 power is critical when it comes to Section 3. Indeed, during a debate on enforcement legislation less than a year after ratification, Sen. Trumbull noted that “notwithstanding [Section 3] … hundreds of men [were] holding office” in violation of its terms. Cong. Globe, 41st Cong., 1st Sess., at 626. The Constitution, Trumbull noted, “provide[d] no means for enforcing” the disqualification, necessitating a “bill to give effect to the fundamental law embraced in the Constitution.” Ibid. The enforcement mechanism Trumbull championed was later enacted as part of the Enforcement Act of 1870, “pursuant to the power

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