Tracking the complex web of money drawn from an opioid maker

Ninety minutes outside London, a turn down a narrow lane leads past fields of grazing cattle to a sign warning "Private Keep Off." Around an elbow bend, a great stone manor, its formal gardens and tennis court hidden behind thick hedges, commands a 5,000-acre estate.

The estate is a pastoral prize — proof of the great wealth belonging to the family accused of playing a key role in triggering the U.S. opioid epidemic. But there's little evidence of that connection. On paper, the land is owned by a handful of companies, most based in distant Bermuda, all controlled by an offshore trust.

The haziness surrounding the estate hints at one of the challenges for government lawyers as they eye a potential settlement with Purdue Pharma L.P. and its owners, the Sackler family, for their alleged role in flooding communities with prescription painkillers.

All but two U.S. states and 2,000 local governments have taken legal action against Purdue, other drugmakers and distributors. Sixteen states have sued family members by name, alleging they steered Purdue while draining more than $4 billion from the company since 2007. That's when the Oxycontin maker pleaded guilty to misleading doctors, patients and regulators about the drug's risks.

Purdue's CEO has said the company could file for bankruptcy. And this week, news organizations reported that Purdue, the family and government lawyers are negotiating a possible settlement , valued at $10 billion to $12 billion, that would see the Sacklers give up company ownership and contribute $3 billion of their own money.

But where, exactly, did the money withdrawn from Purdue over the years end up? And how much might the family be holding that state and local governments should consider fair game?

Answers are complicated by the way the Sacklers have shielded their wealth in a web of companies and trusts, a review by The Associated Press has found. Some are registered in offshore tax havens far from Purdue's Connecticut headquarters.

The web's complexity and offshore reach could affect the calculus for government lawyers as they weigh how to go after Purdue, including how to calibrate demands in settlement talks.

"The Sacklers allegedly moved significant money offshore, which potentially would make it harder for any judgment creditor to reach," said Mark Chalos, a lawyer representing counties and cities including Nashville, Tennessee, in suits against opioids makers.

"This is the real question and you're seeing it playing out in a lot of different states in different ways," said Elizabeth Chamblee Burch, a professor of law at the University of Georgia. "How do you make sure that they (the Sacklers) are not siphoning off those assets and hiding them away?"

A representative for the family of Purdue co-founder Mortimer Sackler declined to comment for this story, as did a company spokeswoman. A representative for the relatives of Raymond Sackler, Purdue's other scion, did not respond to a request for comment.

Purdue and the Sacklers have long relied on a coterie of attorneys and accountants, as well as the family's closely held ownership of the company, to keep their business and personal dealings private.

But AP's review of court papers, securities filings by companies that have had dealings with Purdue, and documents leaked from an exclusive Bermuda law firm, show how the family have tried to protect their wealth.

Purdue — controlled through layers of limited partnerships, holding companies and trusts — is at the center of the family's web. But it hardly ends there.

In Purdue's 2007 plea agreement with federal prosecutors, it listed 215 companies under its corporate umbrella. But that list did not include a number of companies used to manage property and investments for family members or the trusts, some offshore, set up to administer their fortunes.

Some offshore entities "appear to have served as conduits for monies from Purdue," a lawyer for New York's attorney general wrote recently to the judge presiding over the state's lawsuit.

New York has issued subpoenas to 33 Sackler companies, advisers and banks in the U.S., seeking details about money transferred out of Purdue. It is asking for court assistance to demand that four offshore entities also provide information about millions of dollars that "should be clawed back."

Many companies set up limited partnerships and country-specific subsidiaries to cap liabilities for shareholders, and many wealthy individuals manage their investments through opaque entities.

But an examination of the Sacklers' web shows striking complexity and a desire for secrecy, while revealing links between far-flung holdings.

The British estate, known as Rooksnest and acquired before Purdue introduced Oxycontin, is one example. The manor is the domain of Theresa Sackler, widow of one of Purdue's founders and, until last year, a member of the company's board of directors. Set in the West Berkshire countryside, it includes a stone mansion that dates to the 16th century, 10 acres of formal gardens and expansive pastures for heritage cattle, red deer and wheat.

It's run by a Bermuda company called Earls Court Farm Limited, records filed with UK authorities show. But some of the land is owned by five more companies, three also in Bermuda. Earls Court is owned by yet another offshore company. And all the companies are controlled by a trust, based on Jersey in the Channel Islands.

Public filings don't show who actually owns the estate, and gardeners at the site told an AP photographer they could not answer questions. But documents leaked from Appleby, a Bermuda law firm employed by numerous wealthy clients, show that the companies belong to the Sacklers, among at least 30 island-based entities controlled through family trusts.

Indeed, the leaked documents show that the trustee of the British estate also controls a Sackler company named in U.S. securities filing as one of Purdue's two "ultimate parents."

Some states have also sued that firm, Beacon Co., based in the Channel Islands, along with Purdue and the Sacklers. New York state is seeking to subpoena the offshore trust company used to control both Beacon and the British estate.

It has long been known that the Sacklers use Bermuda as a base for Mundipharma, a network of companies set up to do business outside North America. But their island portfolio also includes family foundations, real estate holding companies and an insurer, according to documents leaked in 2017 to the German newspaper Suddeutsche Zeitung. The documents are part of millions known as the Paradise Papers that were shared with the International Consortium of Investigative Journalists which provided access to the AP.

The Sacklers' use of offshore holding companies and trusts is telling, said Jeffrey Winters, a Northwestern University professor whose research focuses on how the powerful protect their fortunes.

"One would not put those trusts there if you didn't see some wealth defense benefit," Winters said. "It's very hard to see what's in there and it's very hard to seize what's in there. That's the purpose."

But David S. Neufeld, an international tax lawyer who works with wealthy clients and closely held companies, said the layered, partly offshore structure used to control Purdue, while not typical, is also not that uncommon.

"Somewhere in this picture is a desire to limit exposure to business liabilities. That's not, in and of itself, a problem. That's the very nature" of setting up a corporation, Neufeld said.

The Sacklers had an estimated net worth of $13 billion as of 2016, making them America's 19th-richest family, according to Forbes magazine. One of their largest holdings outside pharmaceuticals appears to be an estimated $1.7 billion portfolio in a family company, Cap 1 LLC, that recently sold a stake in 17 U.S. ski resorts.

Massachusetts, New York and other states are alleging that the family has worked methodically to move money out of Purdue to insulate their fortune.

At a meeting in December 2010, for example, the Sacklers and other board members approved the withdrawal of $261.3 million from Purdue, according to company records recently made public in the Massachusetts case, the first to name individual family members. Until recently, eight Sacklers served on Purdue's board.

The board instructed that the money be passed through three layers of holding companies, then split equally between Beacon Co. and Rosebay Medical Co., the other "ultimate parent" of Purdue. Both are controlled by Sackler trusts.

"Do you know whether any of these sums distributed between 2008 and 2011 made their way into any bank account over which you had control?" an attorney asked Dr. Kathe Sackler, one of the family members who approved the transfers, during a deposition this past April.

"I hope so," she answered, according to a partial transcript recently made public in court filings. "I think so."

The family's withdrawal of substantial sums from Purdue was noted by Dr. Richard Sackler, the former president and chairman, in a 2014 email to his sons, filed as an exhibit in court proceedings.

"In the years when the business was producing massive amounts of cash," he wrote, "the shareholders departed from the practice of our industry peers and took the money out of the business."

He did not need to remind his sons that the only shareholders of Purdue are Sacklers.

It is not clear where the money drawn from Purdue ended up. New York's attorney general alleges that the Sacklers sent it offshore to "unknown trusts, partnerships, companies" and other entities they control.

The possibilities are numerous. When family members directed payments to Rosebay Medical, for example, the company served as much more than a parent of Purdue. It is also the owner-of-record for Sackler companies spread from Poland to New Zealand, corporate registries in those countries show.

Rosebay is run from an office in Oklahoma City that manages many family holdings. When David Sackler, son of one of Purdue's founders, paid $22.5 million last year for a mansion in Los Angeles' Bel Air neighborhood, the executive who administers Rosebay served as his representative for the purchase.

Lawsuits allege that the Sacklers' money management decisions were framed by their awareness of state investigations of Purdue.

"Despite this knowledge, the Sackler defendants continued to vote to have Purdue pay the Sackler Families significant distributions and send money to offshore companies," Nevada's lawsuit says.

Family members voiced concerns about threats to their holdings.

"While things are looking better now," Mortimer D.A. Sackler wrote to his cousins months after Purdue's 2007 guilty plea, and quoted in Connecticut's lawsuit, "I would not count out the possibility that times will get much more difficult again in the future and probably much sooner than we expect."

Purdue agreed in March to a $270 million settlement with the state of Oklahoma to avoid going to trial. That included $75 million from the Sacklers.

A federal judge in Cleveland overseeing suits by local governments has pushed all parties to work toward a nationwide settlement. The resulting negotiations have included representatives for some of the state attorneys general who have filed suit.

The first federal trials are scheduled to start in October. Unless there's a settlement, family members could face more questions about their decisions to move money out of Purdue, some of it offshore.

At trial, lawyers for states and cities would "need to prove that the transfer of the money to these offshore accounts were made with fraudulent intent," said William J. Moon, a professor of law at the University of Maryland.

States can ask courts to order the return of such money to satisfy a legal judgment. But going after money moved offshore would be time-consuming and expensive, with few guarantees, Moon and others said.

Governments suing the company could start by asking judges to order the seizure of Sackler assets in the U.S., pending an eventual verdict, said Gregory Grossman, a Miami attorney specializing in international insolvency. That would require convincing a judge that they're likely to win the case. But it would be far easier than getting a U.S. judge to freeze offshore assets, he said.

"How comfortable is the court with ordering the seizure of things that are not in their jurisdiction?" Grossman said. "If they are comfortable, will they get cooperation with folks on the other side of the pond?"

If Purdue files for bankruptcy, all the company's assets would be considered fair game for creditors. But the company's coffers are separate from the family's own wealth.

Unless a state had already won their case by that point, a bankruptcy filing by Purdue would put lawsuits against it on hold, said Jessica Gabel Cino, a professor of law at Georgia State University.

As states decide how to proceed, they could find lessons in efforts to recover money lost in broker Bernard Madoff's infamous Ponzi scheme.

A court-appointed trustee has long sought money Madoff paid out to investors in offshore "feeder funds," using cash others entrusted to him. Madoff was arrested in December 2008. But just this February, a federal judge ruled that the money Madoff directed offshore had to be returned.

The ruling, though, is likely to be appealed.