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January 24, 2013

Lawyer: Massachusetts pharmacy tied to meningitis outbreak paid out $70M

(Continued)

In a motion Tuesday, the Official Committee of Unsecured Creditors, represented by Molton and including family members of victims, said the company had been “looted” by its owners in its last year of existence.

But the company replied in a statement that there were no indications as late as the end of September that it was in trouble.

“On the contrary, the company had experienced significant growth and was a thriving corporate entity,” it said. “The cash flow patterns and expenditures identified as part of the Chapter 11 process were consistent with the routine operations of NECC throughout 2012.”

The firm said a large part of what was paid out to the owners was to cover the company’s taxes.

Daniel Cohn, an attorney representing NECC during the bankruptcy, said Thursday that the owners have indicated they are amenable to returning about $6 million they received since July 10, the date their attorneys have determined they were effectively insolvent, due to liabilities accruing amid the burgeoning but still undiscovered outbreak.

But outside court, creditors’ committee attorney William Baldiga said the company may have been insolvent far longer. But he said it was unknown how much of the disbursed money creditors could claim now or get back.

Also Thursday, Boroff agreed an independent trustee should be appointed to oversee the firm’s bankruptcy proceedings. U.S. Trustee William Harrington was expected to quickly make that appointment.

The NECC had initially opposed the appointment of a trustee, saying it would delay the creation of the victims’ compensation fund. But Cohn said once it became clear the creditors wanted a trustee, “one thing we did not want to do was create a battle.”

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