A South Carolina businessman has been accused of siphoning millions of dollars from funds he raised from investors that were earmarked for purchasing or renovating senior living facilities, according to a complaint from the U.S. Securities and Exchange Commission (SEC).
The SEC alleges in a complaint that Dwayne Edwards, founder of Georgia-based Oxton Senior Living LLC and founder and owner of Manor House Senior Living LLC, along with his business partner Todd Barker, improperly commingled at least $3.9 million from several bond offerings and facility revenues.
The partners and the limited liability companies they set up raised nearly $62 million for specific senior living projects and acquisitions, but millions were improperly commingled and thousands of dollars were allegedly siphoned for Edwards’ personal use.
“As alleged in our complaint, investors thought they were investing in a single senior housing project while their money was actually being used to fund an ever-expanding web of affiliated facilities and the personal expenses of Edwards and his friends and family,” Andrew M. Calamari, director of the SEC’s New York regional office, said in a statement.
The SEC asked for a freeze on the assets in addition to fraud charges because the fraud is ongoing, the agency stated. Edwards continued to commingle facility revenues as recently as November 2016, and the current management company for the facility “has found numerous invoices Edwards did not pay and that the facilities were in disrepair, putting assisted living and memory care residents at risk,” the complaint says.
Edwards and Barker raised the money, which was meant to be used to purchase and renovate particular assisted living and memory care facilities, through nine separate conduit municipal bond offerings between July 2014 and September 2015. The revenues generated by those facilities were supposed to be used to make periodic interest and principal payments back to investors, according to the SEC’s analysis of offering documents.
The statements in these documents were false, according to the SEC, as Edwards allegedly commingled $3.9 million in facility revenues and offering proceeds, “including working capital funds, by sweeping up available cash to be used for various purposes.”
Reportedly, Edwards started fraudulently utilizing funds in a manner of days after the second offering closed. Revenues and offerings were utilized to purchase new facilities through newfound offerings. He also misappropriated thousands of dollars in revenues and proceed for personal use.
Additionally, Edwards disbursed more than $944,000 in offering proceeds and revenues to an entity controlled by Sharon Nunamaker, who has been named a relief defendant in the complaint. Barker aided and abetted the fraud, according to the SEC, though he exited the business at the end of 2015.
Edwards filed preemptive bankruptcies for two facilities in Georgia after actions were filed against him.
The business partnership between Edwards and Barker appears to have deteriorated with the misuse of funds—Barker wrote Edwards an email that said he had “picked out [his] orange jump suit” and that all involved were about to “pay a big price.”
Written by Amy Baxter