A federal judge has dismissed the Securities and Exchange Commission’s (SEC) request to slap Sunwest Management Inc.’s former chief executive officer Jon Michael Harder with at least $180 million in civil penalties.
The SEC accused Harder of overseeing a corporate fraud scheme that caused investors to lose more than $130 million, but U.S. District Court Judge Michael Hogan let the former Sunwest CEO off the hook for civil penalties due to his role in helping restructure the now-defunct management company.
While acknowledging that Harder and Sunwest violated securities law, Hogan noted “miraculous” efforts by Harder, Sunwest executives and others to minimize losses to investors.
Most Sunwest investors will now receive a return of about 60 percent, Hogan said. Some investors who rolled their money into the surviving entity could be made whole, and then some.
…Hogan also presided over the SEC’s 2009 civil lawsuit accusing Harder of fraud. Along the way, he restructured the company, fended off foreclosures and—at times—angered investors and lenders.
The effort proved a stunning success. Last year, a restructuring team sold 145 Sunwest senior living centers to private-equity giant The Blackstone Group in 2010 for $1.25 billion.
Harder gave up $130 million in equity invested in the company, his attorneys estimate. At one key juncture, he gave up $58 million invested in properties that Sunwest sold to private-equity firm Lone Star Funds. That sale gave Sunwest relief to continue operating until its sale to Blackstone.
Without Harder’s contributions, Hogan said, dozens of Sunwest’s senior centers would’ve been foreclosed upon. Because of the way investments were structured, the foreclosures could have socked investors with tax bills on forgiven debt.
In September, Harder pleaded not guilty to 56 counts of fraud relating to his role in defrauding investors after operating Sunwest like Ponzi scheme, federal prosecutors allege. But, unlike other alleged Ponzi schemes, Oregon Live reports, Harder “voluntarily cooperated with the SEC and never invoked his right to avoid self-incrimination,” according to the judge.
Written by Alyssa Gerace