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Sterigenics Funnels $1.3 Billion in Cash to Shareholders as Victims’ Claims Grow

Shawn-3-Copy-300x177Yesterday, lawyers for the plaintiffs in the cases against Sterigenics held a press conference to expose what we have recently learned about the apparent attempts of Sterigenics and its corporate owners to make it more difficult for our clients who prove their cases to receive just compensation.  As we detail in our newest court filing (and as summarized below), in the two years since the federal government in 2016 concluded that ethylene oxide is 30 times more potent of a carcinogen than previously believed, Sterigenics and its owners have taken $1.3 billion in cash out of the company, put it in their own pockets, and replaced it with money borrowed from banks.  The effect of this is to put company cash and other assets out of reach of plaintiffs who prove that Sterigenics caused their cancers.

Rest assured:  we will expose this behavior, get to the bottom of it, and hold Sterigenics accountable in court for anything they have done here that is unlawful.  We will bring this behavior before the Judge and jury, and demand justice—which includes just compensation for our clients who prove their cases.

This past Friday, we filed an amended complaint adding new allegations to our lawsuits. The new allegations are as follows:

In December 2016, when the US EPA altered EtO’s cancer weight of evidence descriptor from “probably carcinogenic to humans” to “carcinogenic to humans” and changed its adult based inhalation unit risk to 0.0001 μg/m³ from 0.003 μg/m³ (a thirty-fold increase), GTCR recognized that its investment in Sterigenics had become substantially riskier and drastically increased its efforts to recover its money.

Sterignics-Feb-4-243x300Sterigenics U.S., Sotera, and GTCR each played indispensable roles in a carefully-orchestrated funneling of nearly $1.3 billion to shareholders over 27 months beginning in 2016, with the intention of ensuring that these funds will not be available to compensate Plaintiffs when they secure judgments against them in this Court. By these transfers, Sterigenics U.S. and Sotera effectively admit, but hope to avoid accountability for, their culpability in exposing Willowbrook area residents (including Plaintiffs) to the extraordinarily dangerous EtO, which seriously damaged the health of many, and even claimed the lives of some.

Specifically, during those 27 months, Sterigenics U.S. and Sotera executives were learning:

  1. in 2016, that the US EPA would reclassify ethylene oxide as a “known” (from “probable”) human carcinogen, and that the chemical was 30 times more likely to cause cancer than US EPA had previously recognized,
  2. in 2018, that this information would soon be reported to the public, including and especially Willowbrook area residents,
  3. in 2018, that cancer-stricken plaintiffs had begun to file lawsuits, some of them wrongful death lawsuits, and
  4. in 2019, that the first of these plaintiffs had successfully obtained the remand to this Court of their lawsuits which had been baselessly removed by defendants to federal court.

Yet, throughout these months, Sterigenics U.S. and Sotera executives were working with their corporate parents to make sure that virtually all available cash and other assets would be funneled away from these unsecured-creditor-Plaintiffs — and instead to their venture-capitalist investors and their banks in the form of massive distributions, pledged assets, and hundreds of millions in interest payments on borrowings undertaken to fund these payments. For example:

  1. In October 2016, Sterigenics-Nordion Topco, LLC (“Topco”), a parent of defendants Sterigenics U.S. and Sotera, borrowed $350 million, for the purpose of funding a $340 million cash distribution to GTCR and other shareholders. Sterigenics U.S. and Sotera were necessary to this borrowing, upon information and belief, as they each guaranteed its repayment by granting the lender group a security interest in their tangible and intangible assets, thus making these assets unavailable to Plaintiffs, as Sterigenics U.S.’ and Sotera’s unsecured creditors.
  2. In October 2017, Sotera Health Holdings, LLC (“Health Holdings”), also a parent of Sterigenics U.S. and Sotera, with Topco, together increased their borrowings by $175 million and added to these increased borrowings some $28 million in free cash to fund a $203 million distribution to their shareholders, including GTCR. As with the October 16 transactions, upon information and belief, the repayment of these borrowings was guaranteed by Sterigenics U.S. and Sotera, thus granting the lender group a security interest in their tangible and intangible assets, making the pledged assets unavailable to pay the judgments Plaintiffs will secure.
  3. In August 2018, Sotera itself made a $95 million cash distribution to investors, including GTCR, thus making this cash unavailable to Plaintiffs.
  4. In July 2019, Health Holdings borrowed an additional $320 million, which was used in its entirety to fund a $320 million cash distribution to Sterigenics’ investors (including GTCR). Upon information and belief, once again, Sterigenics U.S. and Sotera each facilitated this distribution by guaranteeing repayment of Health Holdings’ borrowing, thus granting the lender group a security interest in their tangible and intangible assets, thus making these assets unavailable to Plaintiffs as Sterigenics U.S. and Sotera’s unsecured creditors.
  5. Just last month, in December 2019, Health Holdings completed a refinancing of, inter alia, previous borrowings, obtaining nearly $3.28 billion in new debt financing. This borrowing was used, in part, to fund a $309 cash million distribution to investors in December of 2019. As with previous borrowings by their parents, Sterigenics U.S. and Sotera guaranteed the repayment of this new borrowing, thus granting to the lender group security interests in their tangible and intangible assets.

Sterigenics U.S., Sotera and GTCR’s central role in this orchestrated and intentional effort has effectively placed the companies’ cash and other assets out of Plaintiffs’ reach, prevented Sterigenics from investing in emission control equipment, and dangerously de-stabilized the Sterigenics companies, thereby jeopardizing the companies’ viability and the likelihood that Plaintiffs will receive just compensation for their injuries. As Moody’s has observed, after the 2019 transactions noted above, these companies have “a high degree of environmental risk[,]” and will have “limited ability to absorb unforeseen setbacks or cash demands on the business…”

These new allegations will help juries to see what our clients have known all along: that Sterigenics and its parent companies put profits ahead of people. We are more determined than ever to get justice for our clients.

Media coverage of this story:

https://wgntv.com/2020/02/03/victims-accuse-sterigenics-of-moving-over-1-billion-to-safeguard-money-from-lawsuits/

https://abc7chicago.com/sterigenics-paid-investors-to-avoid-paying-victims-attorney/5901024/

https://www.wbez.org/shows/wbez-news/did-sterigenics-preemptively-pay-out-investors-to-drain-legal-settlement-funds/63024e60-3606-47f3-b76b-6fe5d7aa1673

https://chicago.suntimes.com/2020/2/3/21119583/sterigenics-payouts-shareholders-avoid-damages-toxic-emissions-lawsuit

 

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