A. H. Robins Found in Contempt for Debt Payments

RICHMOND, Va. — A federal judge Saturday found the A. H. Robins Co. in contempt of court for making millions of dollars in unauthorized payments on debts the firm incurred before it filed for bankruptcy.

But U.S. District Judge Robert Merhige Jr., saying the company should be allowed to remain profitable, denied a motion from government lawyers to appoint a trustee to run the pharmaceutical giant.

“The law has been flouted,” Merhige said. “Subterfuge has been practiced. The debtor took steps prohibited by law.”

Fears Creditors Would Suffer

But Merhige said Robins’ creditors would suffer if he appointed a trustee to run the company in bankruptcy.

“A trustee is not, under the court’s view, necessary or desirable,” he said. “It would not be to the benefit of everyone.”

Merhige said he would rule later on what steps should be taken against Robins for the contempt finding. Among the measures he plans to consider will be appointing an examiner who would report on the company’s progress in resolving its financial problems, he said.

Government lawyers had asked the court to find Robins in contempt of court for making payments of $7 million to $10 million on debts incurred before the company filed for bankruptcy, which is prohibited by law.

The Richmond-based firm sought federal bankruptcy protection last August, citing the overwhelming burden of litigation related to the manufacture of the Dalkon Shield intrauterine birth control device.

In addition to the payments, which included about $1.2 million in deferred bonuses for executives, Assistant U.S. Atty. David Schiller has pointed to an additional $15 million in debts reportedly transferred to Robins’ subsidiaries.