The federal bankruptcy system is morally bankrupt. The system has been abused by corporations and the wealthy to the point that it no longer fulfills the mission for which it was designed: to provide limited shelter from creditors so that strapped individuals and businesses can either liquidate, or reorganize themselves and put their affairs in order.
The mission has transformed into helping the rich maintain their vast financial assets while ensuring that those they have wronged receive nothing, or as little as possible. Two recent examples show how the system serves the rich rather than holding them in check.
Years before it rose to fame for its coronavirus vaccine, drugmaker Johnson & Johnson faced a public relations disaster after losing a high-profile Missouri civil lawsuit over carcinogenic asbestos in Johnson’s Baby Powder. A $ 2 billion verdict in favor of women who sued after contracting ovarian cancer went as far as Supreme Court of the United States, where it was confirmed. A Missouri jury initially set the damages at $ 4.7 billion, but the figure was later reduced in court.
Instead of paying and accepting responsibility, Johnson & Johnson formed a Texas shell company LTL and then gave the new company all financial and legal responsibility for baby powder cases. Two weeks ago, LTL filed for bankruptcy. Now all the financial rewards are in limbo. Johnson & Johnson, which is said to have more than $ 25 billion in cash reserves, will likely be immune to any future liability on these court-validated claims.