Two Ulster County companies that were warned by the U.S. Food and Drug Administration about unsound manufacturing practices have petitioned for Chapter 11 bankruptcy reorganization.
Dennis Borrello, the majority owner and president of Ultra Seal Corporation of New Paltz and Ultra-Tab Laboratories Inc. of Highland, states in an affidavit that it has become evident to an outside evaluator that their practices “did not meet industry standards or FDA expectations.”
As the companies struggled with regulatory issues over the past three years, revenues have declined sharply.
In 2020, according to the petitions, Ultra Seal booked $26.7 million in revenues and Ultra-Tab booked $13.3 million. As of Oct. 6 when the petitions were filed in U.S. Bankruptcy Court in Poughkeepsie, Ultra Seal had year-to-date revenue of $7.75 million and Ultra-Tab had $473,921.
Borrello formed Ultra Seal in 1976 to package dietary foods, and in the early 1990s it began packaging over-the-counter ointments and tablets for the industrial first aid industry.
Customers provided products purchased from outside manufactures to be packaged by Ultra Seal.
In 1996, Borrello formed Ultra-Tab to make the products and establish Ultra Seal as the sole source for customers.
Ultra-Tab manufactured and packaged over-the-counter products such as triple antibiotic, bacitracin ointment, hydrocortisone cream, acetaminophen tablets, aspirin, and cough and cold medicines at facilities in New Paltz and Gardiner and three locations in Highland.
The companies shared the same managers and employees. Ultra Seal paid the salaries and operating costs. Ultra-Tab paid Ultra Seal a management fee.
In 2018, the FDA cited Ultra Seal for inadequate equipment cleaning procedures and other violations, and in 2020, Ultra-Tab was cited for similar violations.
“In an attempt to address FDA concerns” in October 2021, Borrello states in his affidavit, the business stopped production at Ultra-Tab and quarantined finished products worth $3 million.
The companies recalled products in November 2021 and this past January.
In March, the FDA issued a warning letter and ordered the businesses to hire an outside consultant to evaluate their practices.
FDA investigators questioned, for example, how machinery was cleaned and samples were tested to prevent cross-contamination when various products were blended and pressed on the same equipment.
The companies’ investigation of cross-contamination of Pain Aid Extra Strength tablets, for instance, failed to identify the root cause of contamination and failing test results were disregarded.
“Instead, your firm resampled and retested failing lots with invalidated and unverified test methods,” the warning letter states, “until passing results were obtained.”
On Aug. 11, Ultra Seal notified the state Department of Labor of a possible mass layoff within three months of 86 employees, due to the FDA findings.
Borrello asked bankruptcy court to approve compensation and benefits incurred before the bankruptcy petition was filed for 83 employees.
If his motion is not granted, he states in the affidavit, “I believe significant deterioration in morale among employees would result at this critical time, which undoubtedly would have a devastating impact on the debtors, its customers, the value of the estate assets, and the debtor’s ability to reorganize.”
Judge Cecilia G. Morris granted the motion.
