Thread by @doctorow

I've been writing about the Sackler crime-family for years, as a new generation turned the family's benzo empire into a opioid powerhouse, exceeding the Rockefeller family fortune by pushing Oxycontin and jumpstarting an epidemic that has claimed 800,000 American lives.

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The Sacklers are canny: for years, they laundered their reputation through elite philanthropy, using blood money to paint their names on the world's great cultural institutions and spending comparable sums to threaten journalists and critics into silence about their crimes.

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But no one can run across a river on the backs of alligators forever - eventually, even the fleetest grifter will lose a leg. The Sacklers eventually came into the crosshairs of district attorneys, federal enforcers, bereaved families and recovering addicts.

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Outwardly, the family continued to maintain their innocence and assure us that they would prevail in court. Privately, they laundered billions into offshore financial secrecy havens.

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Every big con needs a blow-off, a final trick that lets the crook wriggle out of the gator's jaws. For the Sacklers, that was a breathtaking capture of the bankruptcy system, in the person of Judge Robert Drain of the SDNY, the American judiciary's top billionaire enabler.

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The gambit worked. Drain will unilaterally settle all the Sacklers' victims claims for $4b, leaving the Sacklers to keep $6.7b in blood money. No Sackler will go to jail. No Sackler will face financial hardship. Key documents will never be unsealed.

pluralistic.net/2021/07/12/mon…

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Judge Drain is embracing the monstrous ideology of Josef Stalin: "Great crimes require great forgiveness." The Sacklers cost America more lives than coronavirus - and their punishment is a $6.7b fortune.

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This blow-off has attracted a lot of press attention to the way that the US bankruptcy system has been captured by the ultra-rich, who "judge-shop" for enablers like Bob Drain.

creditslips.org/creditslips/20…

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The best writing on the subject I've read so far is Maureen Tkacik's "How Do You Solve a Problem Like the Sacklers?" for @TheProspect.

prospect.org/justice/how-do…

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Tkacik puts the Sacklers' gambit in context, showing how it is just the latest act of a longrunning shadow-play that has quietly demolished the country's economy and ruined countless lives.

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Long before the Sacklers were calling upon Bob Drain to legitimize their murderous legacy, the good judge was servicing the financial criminals of the private equity world, allowing looters to steal from investors, workers and suppliers.

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The private equity playbook often puzzles people who first hear about it. How can "investors" get away with buying a company, selling off all its vital assets, borrowing heavily against it, then declare bankruptcy and walk away from their creditors with billions?

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The answer is the US bankruptcy system and the tiny number of judges who oversee large corporate bankruptcies, whose supervision can be had by any PE grifter merely by renting an empty office in their district and declaring it to be your headquarters.

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If this sounds familiar, it's because it's a pathology in all areas of the judiciary. Think of the Eastern District of Texas, where judges and juries never met a patent troll they didn't find in favor of.

eff.org/deeplinks/2014…

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That's why Marshall, TX is full of empty buildings serving as nominal HQs to hundreds of companies - and why companies that make "things" as opposed to "lawsuits" (like Samsung) court locals by installing Texas's only outdoor, year-round ice-rink.

pluralistic.net/2021/03/22/gan…

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The total claims against the Sacklers add up to $2t, but they're only going to pay $4b. Though the sums are large, the pattern is an old one, and familiar to private equity watchers - after all, 3 in 10 US bankruptcies involve a PE firm flushing a company it ruined.

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Tkacik reminds us of the last time the bankruptcy system breached public consciousness, when PE giant Apollo Global Management trashed Caesars Palace and asked a bankruptcy judge to let them keep the billions they embezzled.

diversionbooks.com/books/the-caes…

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Apollo and its partner David Sambur were named in a racketeering suit, which revealed Sambur's looting of billions from the company prior to the bankruptcy, a display of shameless larceny that included buying a $15m Manhattan home.

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Like the Sacklers, Sambur put his evil plans in writing, emailing colleagues Powerpoint presentations detailing his scheme to "have our cake and eat it too" by taking on and then defaulting on vast debts.

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Sambur might be forgiven for his brazenness, because he was only repeating a stunt that Judge Drain himself had previously greenlit, when Sambur bought, looted and destroyed Momentive, a silicone manufacturer.

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Sambur borrowed 15 times Momentive's earnings and defaulted, laying off half the company's workers and using Drain's bankruptcy court to force a $300m loss on "secured" bondholders, shielding himself and the company from liability AND retaining control of the firm.

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As Tkacik writes, America's captured bankruptcy judges are "steeped in 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 said prosperity."

cambridge.org/core/journals/…

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For these judges, impunity is a feature, not a bug - a way to embolden "risk takers." And while the economists who espouse this theory wring their hands about the "moral hazard" of public health care and housing, they're oddly sanguine about limited liability.

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Small wonder that PE-owned companies are 10 times likelier than traditionally structured companies to declare bankruptcy - bankruptcies that free looters from both their financial and moral obligations to the rest of us.

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Whether PE murdered your grandmother by buying her care-home and putting each worker in charge of 30 seniors:

washingtonpost.com/local/portopic…

or poisoned your kids by filling your neighborhood with carcinogens:

webmd.com/special-report…

limited liability wipes the slate clean.

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But while PE loves buying up and looting REAL businesses, they're even more fond of buying up criminal enterprises and looting THEM. Take Millennium Health, a con that stole millions from Medicare and Medicaid.

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Millennium's founder, a former general contractor turned drug-testing kingpin named James Slattery, found kindred spirits in Voya Capital, who bought into the company and then helped it borrow $1.8b, $1.3b of which went straight into Voya's pockets.

wsj.com/articles/voya-…

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The company paid $256m to settle its fraud lawsuits. It got a full release from any liability, as did Voya. Voya kept $1.3b. Slattery (whose LLC was called "Pissed Away) kept hundreds of millions, and his collection of 40 vintage airplanes.

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Tkacik points out the lawyer who represented Millennium in its bankruptcy deal is now a federal bankruptcy judge himself - the honorable John T Dorsey, of the Delaware bankruptcy court. Lucky for us, Delaware is hardly known for its financial crimes.

deb.uscourts.gov/content/judge-…

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Millennium's crime bosses all fared well. Millennium CEO Ronald A Rittenmeyer went on to take the helm at Tenet Healthcare, a company famous for kidnapping people from AA meetings, having them declared incompetent, and billing for their imprisonment.

nytimes.com/1991/10/26/bus…

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Ironically, Tenet stands to lose big in the Sacklers' bankruptcy (don't worry, it still got a fortune in federal CARES dough and flipped two of its community hospitals to PE companies that debt-loaded them and took them through bankruptcy to shed that debt).

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As the Sacklers planned their blowoff, they consulted with both PE companies (for tips on spinning off profitable units to put them out of creditors' reach, and advice on cashing in on the epidemic they started with addiction treatment businesses), and McKinsey.

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All of this criming did not escape Elisabeth Warren's notice, who used it as occasion to launch one of her signature 2019 election campaign plans, the Stop Wall Street Looting Act (SWSLA), which drew outraged squeals from the PE industry.

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For all its detail, the SWSLA would not have prevented the Sacklers' crimes - nor would it stop the copycats at blue chip firms like Johnson and Johnson and Apple, who have used their tactics to perfect what Tkacik calls "legalized embezzlement."

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It really looks like the Sacklers will keep billions, and like Judge Drain will continue to hear cases like theirs. But Warren learned from 2019, and has introduced new, stronger legislation, the Nondebtor Release Prohibition Act, which would block deals like this for good.

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Elite impunity is rotting America and threatening the planet itself.

There's nothing it doesn't touch.

Simone Biles is a survivor of Larry Nasser's abuse. The claims of Nasser's survivors were wiped out by a bankruptcy judge.

https://twitter.com/matthewstoller/status/1420500782022078464?ref_src=twsrc%5Etfw

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Image:
Geographer (modified)
commons.wikimedia.org/wiki/File:Serp…

CC BY-SA:
creativecommons.org/licenses/by-sa…

eof/

ETA - If you'd like an unrolled 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:

pluralistic.net/2021/07/29/imp…