AdCare Health Systems, Inc. (NYSE MKT: ADK) is looking to boost board accountability in the wake of a scandal involving one of its former directors.
Specifically, AdCare’s shareholders approved a proposal to declassify the company’s Board of Directors during the company’s annual meeting of shareholders on Dec. 10.
Declassifying the board means that each one of AdCare’s directors will be elected each year to serve a one-year term, according to a press release. In the past, directors had been elected to serve staggered, three-year terms.
“The decision to declassify the board is consistent with our commitment to sound corporate governance practices and is in the best interest of AdCare and its shareholders,” said Bill McBride, AdCare’s chairman and CEO. “The views of our shareholders are important to the board. Declassifying our board structure affords shareholders the opportunity to express their views on the performance of individual directors on an annual basis. In addition to this structural change, a number of our board members resigned during the year and we added top industry talent in Tom Knaup and Allan Rimland.”
The vote to declassify the board comes after Christopher Brogdon, a former director of AdCare and a holder of more than 5% of the company’s common stock, was accused by the U.S. Securities and Exchange Commission of defrauding investors in senior care properties.
Brogdon allegedly raised $190 million from investors since 1992 through municipal bond and private placement offerings. The investors were told that the money would be utilized to buy, build or renovate assisted living facilities, nursing homes or retirement homes, and they would earn interest from revenues generated. Instead, the SEC claims, the money was being diverted to support Brogdon’s other businesses and his wife’s luxurious lifestyle.
Brogdon, who resigned from AdCare’s board on Oct. 13, remains the current president and director of Global Healthcare REIT.
The SEC filed a complaint against Brogdon in federal court on or about Nov. 20, according to an AdCare press release. AdCare is not a defendant in this action. Among other things, the complaint petitions for receivership of multiple properties listed in the complaint, three of which AdCare owns, but does not operate.
On Dec. 10, the SEC submitted to the court an updated list of properties over which the SEC is seeking receivership. The new list does not feature any of AdCare’s properties, and the SEC is not seeking receivership of such properties.
AdCare, a self-managed health care real estate investment company, invests mainly in real estate purposed for senior living and long-term health care through facility lease and sub-lease transactions. The company’s portfolio currently has 38 properties.
Written by Mary Kate Nelson