The former CEO of assisted living chain Sunwest Management voluntarily surrendered to U.S. Marshals last Friday prior to pleading not guilty during his arraignment for 56 counts of fraud in relation to his role in defrauding investors out of approximately $130 million.
Oregon and North Dakota resident Jon Michael Harder was the founder, majority owner, CEO, and president of Sunwest Management; last week, he was indicted on allegations that he controlled a network of companies which bought, constructed, and managed a nationwide chain of assisted living communities. During Sunwest Management’s peak, the company and its affiliates owned approximately 300 assisted living properties.
Harder is alleged to have made false promises to investors that they were investing money into certain assisted living properties; that any return on investment would be based solely on the financial performance of that particular community; and that the Sunwest enterprise was a successful business, says the DOJ. Instead, investment money that was supposed to go into specific communities was actually being commingled with money coming in from all investors and banks.
“Investors should be able to rely on the honesty of the promises made to them when they decide to invest,” said U.S. Attorney Amanda Marshall in a statement released jointly by the FBI and the Department of Justice. “The allegations in this indictment describe a massive fraud affecting over 1,000 investors around the country. This office is determined to vigorously pursue financial fraud whenever it occurs.”
Sunwest was losing millions of dollars as early as 2006, the indictment alleges. Between 2006 and 2008, Harder and Sunwest acquired more than 100 communities, buying properties at a rate of about one per week after raising about $300 million from investors.
Harder was essentially running a Ponzi scheme by taking in millions of dollars from both investors and banks—supposedly to acquire new assisted living communities—that were used to pay guaranteed returns to earlier investors, according to the allegations. The former Sunwest CEO is accused of laundering the proceeds of this fraud by diverting large amounts of money to live a lavish lifestyle.
As a result of the allegations, Harder was charged with 25 counts of mail fraud, 11 counts of wire fraud, and 20 counts of money laundering. Each count of mail and wire fraud carries a sentence of up to 20 years in prison and a $250,000 fine, or both. Each count of money laundering can result in a prison sentence of up to 10 years and a fine of $250,000.
In 2010, a joint venture formed by Emeritus Corp., Blackstone Real Estate Advisors, and Columbia Pacific Advisors acquired and assumed operation of 144 Sunwest communities through a bankruptcy auction for approximately $1.2 billion.
Written by Alyssa Gerace