March 3, 2009 in Business

Parkway Village’s parent company accused of fraud

The Spokesman-Review
 
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WASHINGTON (AP) — Federal regulators on Monday accused Sunwest Management Inc., one of the nation’s largest operators of assisted-living facilities, and its former chief executive of securities fraud in connection with real estate investments that turned sour.

The Securities and Exchange Commission announced the charges against Sunwest, based in Salem, Ore., and went into federal court to seek an emergency order freezing the company’s assets — a request denied by the judge.

The judge ordered the parties involved to negotiate a settlement, and attorneys for Sunwest and Jon Harder, the company’s former president and chief executive, said they were working toward that end.

Sunwest operates more than 200 senior housing facilities around the country, including Parkway Village Assisted Living, at 3708 E. 57th Ave. in Spokane.

The SEC said Sunwest raised more than $300 million from 1,300 investors around the country from 2006-2008 by promising annual returns of around 10 percent and touting a track record of never missing a payment. The money was used for down payments on about 100 retirement homes, with the rest of the financing coming from institutional lenders and banks, the SEC said in a civil lawsuit filed in federal court in Eugene, Ore.

The agency alleged that Sunwest lied to investors about its operations and concealed the risks of the property investments, exposing them to huge losses when the economic downturn and credit crisis brought the collapse of Sunwest. At least half of the properties lost money, according to the SEC.

The company, whose properties were valued at one point at $2 billion, defaulted on numerous loans after it began running out of cash last year and couldn’t obtain any more credit.

The SEC also named Harder, who founded Sunwest in 1991, in its suit. Harder turned over control of the company to corporate turnaround consultant Clyde Hamstreet after Harder filed for Chapter 11 bankruptcy protection on Dec. 31 and later resigned as company CEO.

The SEC is seeking unspecified civil fines and restitution from Sunwest, Harder and two related companies, Canyon Creek Development Inc. and Canyon Creek Financial LLC.

The SEC also alleged that, even after Sunwest ran into problems refinancing properties and lenders began foreclosing, Sunwest and the others continued raising money from investors. The company took in millions more in investments up to June 2008, continuing to misrepresent that the money was earmarked for a specific property when it was actually used to prop up the failing business, the SEC said.


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