The Securities and Exchange Commission is bringing new charges against two former executives of Assisted Living Concepts, alleging the executives listed fake occupants at some of its senior living communities in order to meet lease requirements.
The charges, filed and announced by the SEC Enforcement Division, allege that former CEO Laurie Bebo and former CFO John Buono conduced a scheme under which they manipulated internal books and records when it appeared they would default on lease covenants under an agreement with Ventas, Inc. Under the scheme, the executives allegedly misrepresented their occupancies at several properties by listing friends, family members, and existing and past employees as residents, when they did not in fact reside in the communities.
“Rather than come clean with their landlord and investors, these executives falsely portrayed family and friends as senior housing occupants and certified misleading company filings,” said Andrew J. Ceresney, Director of the SEC Enforcement Division, in a press release. “False filings threaten the integrity of financial reporting in our markets and will be pursued vigorously.”
The new charges follow a lawsuit filed by Ventas against Assisted Living Concepts in April 2012 for lease violations, and the firing of Bebo in May of that year. A separate lawsuit, a class action suit filed by shareholders against the company, resulted in a $12 million settlement Bebo and ALC agreed to in September 2013.
According to the SEC’s findings announced today, the alleged fraud began in 2009 and continued through 2012, at which point ALC operated more than 200 senior living communities including more than 9,000 units. In 2008, ALC began operating eight communities owned by Ventas, located in Alabama, Florida, Georgia and South Carolina. Investigators allege that Bebo was a proponent of entering the lease agreements with Ventas while other company officials were against it. A year later, according to the allegations Bebo and Buono realized the danger of default, devised and carried out the scheme without ever disclosing the practice to Ventas. They added more fake residents as the financial standing of the properties worsened.
The company has since been acquired by TPG, a global private investment firm in a $278 million deal. It later rebranded and changed its name to Enlivant.
Written by Elizabeth Ecker
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