BOSTON (AP) – A bankruptcy court judge on Friday froze the assets of the four owners of a pharmacy blamed for a fatal meningitis outbreak, clearing the way for creditors to determine what’s left of the millions the owners received from the firm.
The order Friday by Judge Henry Boroff at a hearing in Springfield forbids the owners of the New England Compounding Center from spending or moving any of their assets, except to pay living expenses or legal bills. The written order from Boroff was expected to be released Monday.
The order, which came in response to a motion by a creditors committee, applies to owners Barry Cadden, his wife Lisa Cadden, her brother Greg Conigliaro and her sister-in-law Carla Conigliaro.
Anne Andrews, an attorney for one of the creditors on the Official Committee of Unsecured Creditors, called the decision a “big victory.”
Andrews said creditors can now find out how much the owners still have of the tens of millions they were paid, and the court can determine much they owe back to the creditors, who include victims of the outbreak. A hearing on that issue was scheduled for Feb. 28.
A request for comment was made Friday by email to a spokesman for the defendants.
The fungal meningitis outbreak, discovered in Tennessee in December, has killed 44 and sickened 600. The outbreak was linked to a tainted steroid made by the Framingham-based NECC. The state said subsequent inspections of the company found unsanitary conditions and flawed sterility testing procedures. The owners currently face 150 lawsuits.
The company filed for Chapter 11 bankruptcy in December, saying it wanted to establish a compensation fund for victims. It listed just $400,000 in net assets, which plaintiffs’ attorneys say is not nearly enough to cover the claims against it.
But the NECC also disclosed that in the last 11 months, the company made $21 million in payments to company insiders, including the four owners. In court Thursday, the creditors’ committee said over the last six years the company had paid $70.5 million to company insiders. The payments included salaries, shareholder disbursements and funds to cover the company’s taxes.
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