WASHINGTON –
U.S. Senator Chuck Grassley (R-Iowa), ranking member of the Senate Judiciary
Committee joined senators John Cornyn (R-Texas), Thom Tillis (R-N.C.), Josh
Hawley (R-Mo.) and Ted Cruz (R-Texas) in sending a letter to Attorney General
Garland and Acting SEC Chair Lee requesting an investigation into the chemical
firm Avantor’s role in drug trafficking and the opioid epidemic after it was
reported
that one of its products was being diverted to Mexican drug cartels.
“I am writing to urge you to conduct an
investigation of a publicly-traded American company for its apparent
longstanding contribution to the opioid epidemic that killed 50,000 of our
fellow citizens in 2019, the most recent year for which data is available,” they
wrote.
“In August 2020, Bloomberg investigative journalists
highlighted that Avantor’s acetic anhydride product line, J.T. Baker, was being
diverted to Mexican drug cartels, who would then use it to produce heroin and
methamphetamine. Avantor availed itself of foreign subsidiaries based in Mexico
to produce, manufacture, and distribute this precursor chemical in the cartels’
backyard.”
“That Avantor did not feel the need to warn the
American public in its SEC disclosures that a dangerous precursor chemical it
produced in Mexico had helped fuel the opioid epidemic in the United States is
alarming, and certainly warrants further investigation by the DOJ and the SEC.”
The
full text of the letter is
here
and below.
April
14, 2021
Attorney
General Merrick Garland
U.S.
Department of Justice
950
Pennsylvania Avenue, NW
Washington,
DC 20530
Acting
SEC Chair Allison Herren Lee
U.S.
Securities and Exchange Commission
100 F
Street, NE
Washington,
DC 20549
Dear
Attorney General Garland and Acting Chair Lee,
I am
writing to urge you to conduct an investigation of a publicly-traded American
company for its apparent longstanding contribution to the opioid epidemic that
killed 50,000 of our fellow citizens in 2019, the most recent year for which
data is available.
As you
know, opioids include heroin and pharmaceuticals like OxyContin, Vicodin,
codeine, morphine, methadone, and fentanyl. Families and communities have
been ripped apart by the opioid epidemic. The United States Government
has fought this killer with all of the tools available. In recent years,
Congress has passed two major laws to do just that —the Comprehensive Addiction
and Recovery Act (CARA; P.L. 114-198) and the 21st Century Cures Act (Cures
Act; P.L. 114-255). Since 2016, Congress has appropriated 1.75 billion
taxpayer dollars for CARA grants alone.
In
2018, Congress also enacted the Substance Use-Disorder Prevention that Promotes
Opioid Recovery and Treatment for Patients and Communities Act (P.L. 115-271;
the SUPPORT for Patients and Communities Act, or the SUPPORT Act). This law
authorized over a billion dollars in funding for health care and law
enforcement programs to help fight the opioid epidemic and deal with the
devastating effects of opioid addiction.
The
enforcement role played by the Department of Justice (“DOJ”) and the Securities
and Exchange Commission (“SEC”) in helping fight against the opioid epidemic
cannot be overstated. Enforcement of our civil and criminal laws is an
important piece in stemming the tide of the opioid epidemic. Criminals
need to know that if they choose to divert precursor chemicals, sell,
manufacture, or deal opioids, or materially misrepresent their actions to the
American people, they will be brought to justice.
Fortunately,
the Department of Justice has a record of rising to this challenge. In
October 2020, for example, the DOJ announced an $8 billion settlement with
Purdue Pharma, the OxyContin maker. In its settlement agreement, Purdue
Pharma admitted that “it marketed and sold its dangerous opioid products to
healthcare providers, even though it had reason to believe those providers were
diverting them to abusers.”
I
recently learned of deeply troubling connection between another American
company, Avantor, and the opioid crisis. Avantor is a publicly-traded
company in the U.S. that has produced, manufactured, and sold a dangerous
precursor chemical—(acetic anhydride)—for years in Mexico. While it is
true that acetic anhydride can be used for legitimate purposes, it is also the
key ingredient to convert opium to heroin. Acetic anhydride is banned in
many countries due to its use in heroin production and also in the manufacture
of improvised explosive devices (“IEDs”).[1]
In
August 2020, Bloomberg investigative journalists highlighted that Avantor’s
acetic anhydride product line, J.T. Baker, was being diverted to Mexican drug
cartels, who would then use it to produce heroin and methamphetamine.
Avantor availed itself of foreign subsidiaries based in Mexico to produce,
manufacture, and distribute this precursor chemical in the cartels’
backyard. According to the Bloomberg investigation, there is a “thriving
retail market” in Mexico for the purchase of smaller containers of acetic
anhydride. Indeed, Bloomberg investigative journalists highlighted
instances where acetic anhydride was solicited and purchased with no questions
asked. Yet the toll even one jug of acetic anhydride has on a community
is devastating—one $324 jug of acetic anhydride is capable of producing
approximately 90,000 hits of heroin.
When
the Bloomberg articles were published, Avantor abruptly stopped selling acetic
anhydride in Mexico and ordered the destruction of any remaining
inventory. Under all the circumstances, it is simply not credible to
believe or argue that Avantor was not aware of the use of its product in Mexico
for the production of heroin, 92% of which is exported to the United
States.
The
diversion of acetic anhydride to drug traffickers is not something that first
came to light in August 2020. Since the 2000s, the International
Narcotics Control Board (“INCB”) has been sounding the alarm regarding the
diversion of acetic anhydride to drug traffickers. INCB has urged
companies, like Avantor, to incorporate best practices and abide by INCB
protocols to stop diversion. Unfortunately, Avantor’s J.T. Baker product
of acetic anhydride has shown up in numerous drug busts in Mexico since 2010.
Furthermore, Bloomberg reported that before its initial public offering (“IPO”)
in 2019, “Avantor . . . became the only U.S. company to have international
sales of its acetic anhydride blocked by authorities from 2016 through 2018,
according to officials involved and INCB records.”
Avantor’s
conduct also compels an investigation under the Foreign Corrupt Practices Act
(15 U.S.C. § 78dd-1, et seq.) Under federal law, Avantor, as an “issuer”
of stock, is required to “make and keep accurate books, records, and accounts
that, in reasonably detail, accurately and fairly reflect the issuer’s
transactions and dispositions of assets.” Additionally, Avantor is
required to devise and maintain reasonable internal accounting controls
sufficient to provide reasonable assurances that transactions are compliant
with the Foreign Corrupt Practices Act (“FCPA”). In practice, and
according to the FCPA Resource Guide produced by the DOJ and SEC in July of
2020, that means the following:
“Fundamentally,
the design of a company’s internal controls must take into account the
operation realities and risks attendant to the company’s businesses, such as:
the nature of its products or services; how the products or services get to
market; the nature of its work force; the degree of regulation; the extent of
its government interaction; and the degree to which it has operations in
countries with a high risk of corruption. Just as a company’s internal
accounting controls are tailored to its operations, its compliance program
needs to be tailored to the risks specific to its operations. Businesses whose
operations expose them to a high risk of corruption will necessarily devise and
employ different compliance programs than businesses that have a lesser
exposure to corruption.”
It is
not clear what, if anything, Avantor has done to address the “operational
realities and risks attendant” with producing acetic anhydride, a key
ingredient to make heroin, in the cartels’ backyard since acetic anhydride
appears to have been easily diverted to the Mexican drug cartels for a number
of years. This circumstance and the various alarm bells being sounded by
the INCB and the media covering the Mexican drug busts should cause Avantor to
take further precautionary measures to tighten any and all controls on products
that contribute to the opioid epidemic. Additionally, in its recent
annual SEC filing, Avantor did not disclose any “outstanding litigation” that
it believes would result in material losses or any “unasserted matters that are
reasonably possible to result in a material loss.” That Avantor did not
feel the need to warn the American public in its SEC disclosures that a
dangerous precursor chemical it produced in Mexico had helped fuel the opioid
epidemic in the United States is alarming, and certainly warrants further
investigation by the DOJ and the SEC.
In
light of the foregoing, I request an investigation into Avantor. I
further respectfully request that you answer the following questions:
(1) Is
there an active civil or criminal investigation into Avantor and/or any of its
executives?
(2)
Before the August 2020 Bloomberg story on Avantor’s connection to Mexican drug
cartels was published, did Avantor self-disclose that it had produced,
manufactured, and sold a precursor chemical—(acetic anhydride)—that had been
diverted to Mexican drug cartels?
(3) If
there is an open investigation into Avantor’s conduct related to acetic
anhydride, would you say that the company is “cooperating” with that
investigation? If so, how?
(4) If
there is no open investigation into Avantor’s conduct, will you commit to me to
reminding Avantor of the importance of corporations “self-policing,” and
providing “voluntary disclosures to the government of any problems that a
corporation discovers on its own”? See Justice Manual 9-28.900.
(5)
What steps, if any, are the DOJ and SEC taking to regulate companies that are
tied to the opioid epidemic, including, but not limited to, the diversion of
dangerous precursor chemicals to Mexican drug cartels?
(6)
Are there any other legislative solutions that could help increase internal
controls and reporting requirements for chemical companies, like Avantor, who
manufacture and distribute dangerous precursor chemicals?
I look
forward to your prompt attention to this matter.
Sincerely,
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