Some Outbreak Victims Payments Delayed to 2021

By Walter F. Roche Jr.

 Final payments to victims of a national fungal meningitis outbreak may be delayed until March of 2021, an attorney told a federal judge today.
Michael Gottfried, the attorney for the post confirmation officer in the bankruptcy of the New England Compounding Center, said the delay was necessary because the IRS has four years to challenge tax refunds granted to NECC's former owners.
He told U.S.District Judge Rya Zobel that a total of $12 million in tax refunds collected by NECC's former owners has been earmarked for a national settlement fund for outbreak victims and is now being held in an escrow account.
Calling the $12 million a significant asset, Gottfriend said, "The hope would be that the IRS would not challenge."
Though Gottfried said the delay was "not a surprise to anyone," Zobel responded "It is to me."
According to a motion filed by Gottfried in behalf Paul D. Moore, the post confirmation officer, about $180 million has been collected under the NECC bankruptcy plan for eventual distribution to creditors and outbreak victims.
The 2012 outbreak was caused by steroids contaminated with fungus that were shipped from NECC to health care providers in 20 states. The outbreak sickened 758 patients, killing 76 of them.
About $85.7 million from the settlement fund has been distributed, according to a report submitted to Zobel earlier this week.
Victims can expect to receive a second payment in 30 to 45 days, according to the report and court testimony. However, final payments totaling $12 million, cannot be released until 2021, Gottfried told the court.
During the same court session Gottfried and Thomas Sobol, who heads a committee representing plaintiffs in the NECC bankruptcy, argued over bills totaling a little over $200,000 which Moore wants paid from the national settlement fund.
Sobol argued that the money should not be released because Moore "has decided to not tell us what he is doing."
Gottfried responded stating that under the bankruptcy plan Moore does not need approval from the court or anyone else.
"We think that the court should order the trustee (of the settlement fund) not to pay the funds requested," Sobol stated.
Following further argument, Zobel said she would defer to the bankruptcy court judge who already has scheduled a hearing for early next month.
Zobel also was given a status report on civil cases filed against a Maryland clinic where many outbreak victims were injected with tainted steroids. Some of those cases are being handled in Maryland state courts, while others remain before Zobel.
Zobel set an initial Feb. 26 trial date for the first case remaining in her court.
Ben Gastel, a Nashville Tenn. lawyer, reported that efforts to mediate a settlement of cases filed against a Crossville, Tenn. were continuing.
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