Hearing Set for Compounding Firm's Bankruptcy, Challenges Filed

By Walter F. Roche Jr.

The U.S. Trustee has charged that a plan to end the bankruptcy case of the firm blamed for a fatal national outbreak of fungal meningitis could let unidentified parties off the hook, including some charged with federal crimes stemming from that outbreak.
In a filing in U.S. Bankruptcy Court in Massachusetts, U.S. Trustee William K. Harrington also charged that releases which are part of the plan are "contrary to public policy and are not in compliance with applicable law and First Circuit precedence."
He termed the releases "extremely broad and wide ranging." 
The critical filing comes just days before a hearing is scheduled before U.S. Bankruptcy Judge Henry Boroff.
Also filing objections to a disclosure agreement filed by Bankruptcy Trustee Paul D. Moore were health care providers who administered fungus tainted steroid injections in the spines and joints of patients across the country and a company that constructed some of the facilities used to compound the steroids.
The filings come in the bankruptcy case of the New England Compounding Center, the pharmaceutical firm blamed by state and federal regulators and prosecutors for sickening 778 patients in 20 states and killing 76 of them.
In his 12-page filing, Harrington cited the fact that many of those who stand to benefit from the  releases contained in the trustee's proposal were among 14 people affiliated with NECC who were indicted on fraud and even second degree murders charges late last year.
Harrington also argued that the agreement appeared to benefit parties who have not contributed to the pool of money that will be earmarked for victims and other creditors. He said many of those so-called third parties "are unknown and unidentifiable."
He also criticized the agreement for failing to provide an opt out agreement for those victims and creditors who object to the plan.
In a separate filing, attorneys for Liberty Industries charged that the trustee's proposal would put the small Connecticut firm out of business. They charged that the trustee had refused to negotiate a settlement with the firm though he did reach agreements with several other parties.
Stating that the company had not had any substantive dealings with NECC in seven years, the lawyers stated that Liberty "continues to be unjustly forced to defend itself on multiple fronts."
Liberty constructed the clean rooms that were used by NECC to produce sterile drugs, including fungus tainted methylprednisolone acetate. The firm has been named as a defendant in 99 pending civil suits.
Also filing objections were Pennsylvania based Rothman Institute and, Mercy Health Systems and health care facilities in North Carolina and New Jersey.
Under the proposed plan a total of about $135 million would be available to victims and other creditors. The largest amount, nearly $50 million, would come from the owners of NECC, including Barry J. Cadden.
Cadden and NECC supervisory pharmacist Glenn Chin were charged late last year with 25 counts of second degree murder for their respective roles at the Framingham, Mass. company. They and 12 other defendants have entered not-guilty pleas and are awaiting trial.
The hearing before Boroff is scheduled for 10 a.m. Tuesday at the U.S. Court House in Springfield, Mass.
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