Daikon Shield maker may seek trustee

Press, 12 June 1986, Page 11

Daikon Shield maker may seek trustee

By

TOM BRIDGMAN

NZPA staff correspondent Washington A. H. Robins Company, the maker of the Daikon Shield birth-control device, may have a trustee appointed to run its affairs after charges it had spent millions of dollars in violation of court orders. Nearly 310,000 women from around the world, including more than 300 from New Zealand, plus 40,000 trade creditors have filed claims against A. H. Robins since the company filed for protection from creditors with the United States Bankruptcy Court in Richmond, Virginia, last August. Last week another 22,000 women had filed potential claims after a Court ordered an April 30 deadline. Women allege that the Daikon Shield, which turned out to have extraordinary rates of sometimes fatal pelvic infection, was a defective product and are seeking billions of dollars in

compensation in productliability awards to compensate for injury. The “Washington Post” reported that a further twist to the complicated saga has brought claims that A. H. Robins spent millions of dollars without court permission after it had filed for protection from creditors, in violation of United States law. A. H. Robins “has done something wrong and something has to be done about it,” Federal Judge Robert Merhige said after three days of hearings in Richmond.

The “Washington Post” reported that he will decide after another round of legal arguments next Saturday whether to grant a Government request to name a trustee to run Robins, and to hold the company in contempt of court for violating court orders issued after it filed for protection from creditors last August 21 by going into voluntary bankruptcy. The Government alleges Robins made deferred bonus payments to executives, and ordered

subsidiaries that were not involved in the bankruptcy case to make transactions that Robins was barred from making. The company has acknowledged the payments were’ made, but said poor communications between company officials and a private law firm hired by Robins were responsible. The “Washington Post” has also reported that recent developments concerning the giant A.E.T.N.A. Casualty and Surety Company, which insured Robins against possible lawsuits brought by users of the intrauterine contraceptive device, could affect the size of the pool of money the U.S. Bankruptcy Court in Richmond will eventually authorise for payouts to claimants.

Five weeks ago, A.E.T.N.A., the United States’ largest casualty insurer which had 1985 sales of SUS3.S billion ($6.3 billion) filed a “proof of claim” for $U557.4 million ($103.32 million) that made A.E.T.N.A. a powerful

competitor for the money from the Robins estate. The “Post” reported that A.E.T.N.A. said in the document that it sought to recoup mainly what it called “overpayments” for liquidation of shield lawsuits and claims. A.E.T.N.A. contends that it paid more than its rightful share of the bills of shield claimants and their lawyers, expecting before the bankruptcy filing to be reimbursed, the paper said. However, A.E.T.N.A. itself is also the subject of a lawsuit from a shield user, the woman accusing Robins and A.E.T.N.A. of reaching agreements that changed their relationship “from insured and insurer to joint enterprise” in several respects — another class action suit names A.E.T.N.A. as the sole defendant — and a probe by the court-appointed Daikon Shield claimants committee is under way to determine whether A.E.T.N.A. and other insurance carriers owe money to the Robins estate.