WHITE PLAINS, N.Y. — Purdue Pharma CEO Craig Landau can receive a $1.3 million bonus, after the judge overseeing the OxyContin maker’s bankruptcy on Friday approved one of the most contentious proposals the company has presented during the case.

Judge Robert Drain said Purdue was justified in giving Landau the additional remuneration because it would help to keep him at Purdue, where he has served as chief executive since June 2017. With that ruling — which followed his approval last month of a broader $35 million package of bonuses — Drain largely resolved a major argument about employee compensation between Purdue and 24 states including Connecticut that has persisted since the firm’s bankruptcy filing last September.

“If you cannot get capable people to perform this type of work without paying that amount of money or more — or alternatively, the replacement cost is greater than what is being proposed — it’s really not in the interests of the creditors and not appropriate to say, nevertheless, they (Purdue) should take a ‘haircut’ because it seems like a lot of money,” Drain said during the hearing at the federal courthouse in downtown White Plains, New York.

Connecticut and the 23 other “non-consenting” states that have not agreed to settlement terms with Purdue had strongly opposed the bonus.

“I'm disappointed by this decision and certainly would have preferred the money be spent on opioid recovery, treatment and prevention,” said Connecticut Attorney General William Tong. “But this is one step in a long process, and we will continue to fight to ensure that Purdue and the Sacklers cannot hide behind this bankruptcy proceeding to evade accountability.”

In a statement, Purdue officials praised Drain’s ruling, which they said recognized the importance of Landau continuing to lead the company during the Chapter 11 bankruptcy proceedings.

“As a physician who has dedicated his career to developing new pain treatments, Dr. Landau is uniquely positioned to help ensure the company's successful reorganization as a public benefit corporation that can deliver more than $10 billion in value to communities and families impacted by the opioid crisis,” the statement said. “His years of clinical experience treating patients with pain in civilian, academic and military settings, including service in the U.S. Army supporting American forces in Iraq and Afghanistan, will help the company maximize its value by ensuring that its current and future public health initiatives address important unmet clinical needs.”

Ongoing debate

When he approved the $35 million bonus package on Dec. 4 , Drain held off on ruling on Landau’s 2019 performance bonus so Purdue and the non-consenting states could try to broker an agreement. They were unable, however, to reconcile their differences on the matter.

Purdue officials have maintained that the company and Landau have made major concessions, including him forgoing a 2019 retention bonus that would have been worth up to approximately $1.6 million and the firm reducing his performance bonus by 50 percent from its original amount.

The performance compensation would equate to about half of Landau’s approximately $2.6 million base salary for this year.

In addition, Purdue and Landau consented to deferring until Dec. 31 the “vesting” or delivery of the final $3 million of a $6 million retention bonus awarded to Landau in March 2018, as long as he also received the performance bonus. The retention bonus would have vested March 1, according to previous terms.

If he were to resign before Dec. 31, 2020, Landau would forfeit the $3 million unvested 2018 retention payment and would have to repay that amount to the company.

“Dr. Landau’s and the debtors’ willingness to make repeated concessions with respect to his compensation reflects his and their commitment to stewarding the debtors properly through these chapter 11 cases, while still compensating Dr. Landau appropriately for the extraordinarily difficult work he is being asked to undertake,” Purdue wrote in a motion last week.

The non-consenting states were unpersuaded, reiterating their opposition in a filing this week.

“By making their offer to defer vesting contingent upon immediate payment of the (performance bonus), the debtors seem to assert that they must guarantee that Landau receives more than $4.3 million to ensure that he continues his work with the debtors this year,” the filing said. “However, they offer no explanation as to why deferring the vesting of just the $3 million and not paying him the additional $1,313,250 will not have the same result, while saving the estate more than $1 million.”

Striking a balance

They have also expressed concerns about Landau’s involvement in the litigation.

The approximately 2,700 lawsuits against Purdue allege the company fueled the opioid crisis with deceptive OxyContin marketing. Some, such as Massachusetts’, accuse Landau of being directly involved in the purported malfeasance. He previously served as the company’s chief medical officer and as the head of its Canadian business.

Landau agreed that the court could consider reconsider the bonus if he were “finally determined to be liable,” in a pending case, for wrongdoing in the sale of Purdue’s opioids.

With that ability to “claw back” the bonus if Landau were found to have committed misconduct, Drain said “an appropriate balance” had been struck to address the non-consenting states’ concerns.

“It is conceivable to me that Dr. Landau could, as alleged in those complaints, have some liability. It is equally conceivable to me… that he does not,” Drain said. “I believe it would be wholly inappropriate to, in essence, send a debtor into material risk of not having a chief executive officer merely because a complaint has been filed again against him or her.”

Landau’s performance bonus is set to be paid on or about June 1, while the remaining half would be paid on or about Sept. 1.

pschott@stamfordadvocate.com; 203-964-2236; twitter: @paulschott