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Judge Says Robins Transactions ‘Subterfuge.’

June 7, 1986

RICHMOND, Va. (AP) _ A federal judge says some transactions by A.H. Robins Co. that were paid through a subsidiary were subterfuge because they came after Robins filed for protection under federal bankruptcy law.

The idea for the payments originated with ″some smart guy who thought he could violate the law,″ U.S. District Judge Robert R. Merhige Jr. said Friday.

Merhige’s comments came during testimony on the government’s request that Robins be held in contempt of court for making payments barred during bankruptcy proceedings and that a trustee be appointed to run the company.

Federal prosecutors have alleged the pharmaceutical company made about $25 million in unauthorized payments on debts incurred before the company filed last Aug. 21 for Chapter 11 protection from creditors in the wake of mounting injury claims over the Dalkon Shield birth control device.

Robins has acknowledged that unauthorized payments were made but said its actions resulted from faulty communications between company officials and bankruptcy lawyers.

Merhige used the word subterfuge twice Friday during Assistant U.S. Attorney Robert W. Jaspen’s questioning of Robins treasurer H. Carlton Townes. Each time involved requests that Townes said he approved for payments by a Robins subsidiary, Elkins-Sinn Inc. of Cherry Hill, N.J.

One ESI payment involved an advance of $120,000 to Robins Communications Inc. Townes said that was made after a March 3 request to shore up the ratings of two radio stations in Greensboro, N.C. He said it made good business sense to spend the money but Robins couldn’t do it directly because a court order blocked it from sending assets to a subsidiary.

The second instance referred to the company’s $78,894 contribution on Dec. 11 to the United Way of Greater Richmond.

Townes said William A. Forrest Jr., Robins’ general counsel at the time, told him that Elkins-Sinn could make the payment.

Townes also said the company’s outside lawyers had said subsidiaries were free to do what they wanted to do because only the parent firm was in reorganization under Chapter 11.

Merhige and U.S. Bankruptcy Judge Blackwell N. Shelley also heard testimony on a motion by lawyers for four groups of potential Dalkon Shield plaintiffs to extend the notification deadline for women in foreign countries who claimed injuries from using the device.

Of the nearly 310,000 claims filed by the April 30 deadline, only 8 percent - 24,244 - came from outside the United States, said Mark E. Ellenberg, lawyer for one of the claimants’ groups.

In contrast, he said, 38 percent of the 4.5 million Dalkon Shields sold by Robins in the mid-1970s were sold in some 90 foreign countries.

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