Yesterday there were reports that Johnson & Johnson had settled the first batch of claims in regard to the law suits against their baby talcum powder. $700 million of the $8.9 billion so this is just the start of a painful period for the company.
Johnson & Johnson however did try and avoid this by using a method what is known as the Texas Two Step. They created a subsidiary company in 2021 and pushed the baby powder products into that company making it liable for the law suits with the aim of then declaring bankruptcy. The judge however declared this was incorrect and denied their bankruptcy case. What is wild is the company tried this again in 2023 and again the judge ruled that this was not allowed as the company had sufficient funds and was not in financial distress. Here we are as customers expecting integrity and trust especially with a household name, but that is so far from the truth.
Johnson & Johnson did split the company in June 2021 which is the 6th time the company has split. The pharmaceutical business which will be on it's own which is 5 x more lucrative then the consumer business. This makes sense considering you protect the cash cow being the Pharmaceuticals generating nearly $80 billion per annum vs the consumer brands only $18 billion.
The various lawsuits will be paid out from the consumer side which I am sure they are disappointed about having to pay anything. When people say business is dirty this is what they are referring to when a business walks away from it's responsibilities. Morally wrong yes. but legal.
Only 4 companies have used this tactic over the years even though it has been around since 1989. A perfect loophole of sorts in the legal system which has the perfect name as this is a type of dance except it is a business dance side stepping their obligations.
First up was Koch Industries who moved the problem child being paper and building products containing asbestos into a newly formed subsidiary called Bestwall. Three months later in 2017 Bestwall declared bankruptcy and this is perfectly legal.
Saint-Gobain had a similar issue with asbestos and used a subsidiary that filed for bankruptcy 3 months later. Trane Technologies also another asbestos problem created 2 companies which filed for bankruptcy 7 weeks later.
Johnson & Johnson tried the same move using the same law firm Jones Day using exactly the same tactics, but were denied due to having sufficient funds. Think of it in this same way if you owe someone some money and transfer your money to someone else then you cannot pay the debt even though you still in theory have the money. This is fraud and all it is intended to do is abuse the system intentionally preventing them from having to pay the parties they owe money to. This is a planned bankruptcy that has been allowed to happen and is the same as planning a crime yet it is deemed legal.
I am no lawyer or legal expert, but I do find what some businesses do quite fascinating especially when they are backed into a corner. Big business is crooked and the law in this case has been protecting them and very happy to see Johnson & Johnson being denied this easy escape route. I still cannot believe they tried to do the same dirty trick twice after failing the first time around.
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It's funny how big companies like Johnson & Johnson try to dodge their responsibilities with these tricky legal maneuvers. They split their company and try to avoid paying up. It's not fair to the people they owe at all. I wonder how those people will get their money
They will have to pay as their trick to avoid paying failed.
It was real gotten out of hand
Big business no matter which line of business involved are wicked, buy big lawyers then try get out of their bad situations they put themselves in with eyes wide open.
Money grabbing tricksters!
I was just talking to a friend tonight about bankruptcy lawyers. They are like bulldogs. You can't fool them for nothing.