Christopher Brogdon stands accused of defrauding investors in senior care properties. An industry veteran, Atlanta-based Brogdon is the current president and director of Global Healthcare REIT and until recently served on the board of AdCare Health Systems (NYSE MKT: ADK).
Since 1992, Brogdon has raised $190 million from investors through municipal bond and private placement offerings, according to the U.S. Securities and Exchange Commission. The investors were told that the money would be used to purchase, construct or renovate nursing homes, assisted living or retirement homes, and they would earn interest from revenues generated. In fact, the money was being diverted to support Brogdon’s other businesses and his wife’s lavish lifestyle, the SEC charges.
Brogdon was paying investors by borrowing money, using proceeds from other offerings, and drawing on personal lines of credit, the SEC’s legal complaint states.
The agency is seeking the return of “ill-gotten gains,” with penalties and interest added, as well as a bar on him serving as an officer or director of a public company. In addition, “emergency relief” is needed because many of the facilities have negative cash flow and cannot cover required payments to investors, the legal complaint states.
“Without emergency relief, there is a very real possibility that Facilities will fail and that proceeds of the piecemeal sales … will be dissipated,” the document states. “The emergency relief requested in this action will ensure that the Brogdon Entities are preserved and their value maximized in order to return as much money as possible to investors.”
Brogdon perpetrated the alleged fraud through these Brogdon Entities, which are 43 entities he owns or controls, according to the complaint. They include Highlands Assisted Living LLC, Limestone Assisted Living LLC, Polo Road Assisted Living LLC and Chestnut Independent Living LLC.
Several of the entities are named as relief defendants in the suit. They include Brogdon Family LLC, which owns nursing homes and assisted living properties in the Southeast and Midwest, and Winter Haven Homes, which Brogdon co-founded. His wife, Connie Brogdon, wholly owned Winter Haven as of December 31, 2014.
Brogdon’s ties to the senior living industry are long-standing and extend beyond these enterprises, including his recent affiliation with AdCare.
Brogdon resigned from the board of AdCare on Oct. 13, according to an SEC filing from the company. He had served as chief acquisition officer from September 2009 to December 2012, and as vice-chairman from September 2009 to March 2015.
AdCare did not respond to inquiries from Senior Housing News over the weekend.
No reason was given for Brogdon’s resignation, but the filing states that, to AdCare’s knowledge, the departure was not due to “any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.”
In July 2014, AdCare announced that it would be transitioning from an owner and operator of senior care properties to a holding and leasing company similar to a real estate investment trust. It currently has a portfolio of 38 properties, primarily skilled nursing facilities. Georgia, Ohio and Arkansas account for 31 of the properties.
Brogdon currently is the director and president of Global Healthcare REIT, a senior housing-focused REIT that was formed in September 2013. The company—which intended to make a REIT election when the board determined that it qualified as a REIT under Internal Revenue Code guidelines—owned nine properties as of September 30, 2015. These were leased on a triple-net basis to third-party operators.
A call from Senior Housing News to Global Healthcare REIT went unreturned.
The charges against Brogdon come less than a week after sentencing in a different, high-profile case of investor fraud in the senior housing industry. Jon Harder, former CEO of senior housing development and management company Sunwest, was sentenced to 15 years in federal prison for the $130 million scheme.
Written by Tim Mullaney