New alleged details have emerged regarding Scott Brinker’s contentious departure from Welltower Inc. (NYSE: HCN) and potential future employment with HCP Inc. (NYSE: HCP).
The situation involves, among other things, suspiciously timed emails, the unauthorized use of a personal iCloud account, and a “networking spree” that involved Brinker “zig-zagging across the country” with proprietary Welltower information—if Welltower is to believed.
Brinker worked at Welltower in various capacities since 2001, and most recently served as the chief investment officer for the Toledo, Ohio-based health care real estate investment trust (REIT) before departing in January 2017. About four months later, HCP announced Brinker would be joining the Irvine, California-based health care REIT as its executive vice president and CIO, effective Jan. 4, 2018.
This news did not sit well with Welltower; the company responded the same day with a lawsuit against Brinker, claiming that he had violated their separation agreement.
Now, a newly filed amended complaint details the extent of Brinker’s alleged wrongdoings—and paints HCP as a knowing “co-conspirator” working alongside its future CIO to bring damage to Welltower.
An attorney representing Brinker declined to comment on the amended complaint to Senior Housing News. As of press time, HCP hadn’t returned SHN’s request for comment.
Brinker’s alleged betrayal
Brinker’s acceptance of the executive role at HCP “is wrong, prohibited under [his] Separation Agreement [with Welltower], and flies in the face of Ohio law,” according to an amended complaint filed by Welltower in the Court of Common Pleas, Lucas County, Ohio, on July 7.
The reasons why, the REIT asserts, are plentiful.
First, “in the weeks before Brinker was separated from Welltower, he forwarded highly confidential documents, including trade secrets, from his Welltower email account to his personal Hotmail account,” the complaint reads.
The emails included, among other things, a spreadsheet featuring Welltower’s trade secrets associated with a market opportunity in the skilled nursing facility sector that the REIT was pursuing, and an excerpt from an internal company presentation that identified target investors in the health care real estate space.
“By collecting and storing these documents during the period immediately prior to his departure, Brinker was stockpiling Welltower’s trade secrets and highly confidential information for his own purposes, not to advance Welltower’s interests,” the complaint says.
The emails never should have been sent, Welltower argues, adding that they also should have been returned to the company immediately after Brinker left.
Similarly, the complaint says, Brinker refuses to delete confidential information from his personal iCloud account, despite Welltower repeatedly asking him to do so.
“Even now, more than six months after he was separated from Welltower, Brinker continues to maintain a treasure trove of Welltower’s most highly confidential documents and trade secrets on his personal iCloud account,” the complaint states.
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The non-public financial performance of each of Welltower’s major operating partners—many of whom are also HCP’s operating partners—is reportedly still being stored in Brinker’s personal iCloud account. Having continued access to this and similar information has helped Brinker unfairly “line up business partners and prospective deals for his new venture” and “to disrupt and move business away from Welltower,” the complaint alleges.
Plus, the information initially came in handy when Brinker was searching for a new job opportunity, Welltower believes.
“Armed with this information, Brinker… went on a networking spree, zig-zagging across the country to develop and nurture relationships with representatives of organizations that Welltower routinely partners with,” the complaint states.
Brinker’s actions have done plenty of damage—financially and otherwise—as Welltower would never have paid him millions of dollars in severance had it known of his transgressions, which ultimately put its business deals in jeopardy, according to the REIT.
“The chilling effect Brinker’s public affiliation with HCP has and will have on Welltower’s potential deals cannot be quantified or remedied by monetary damages,” the complaint says.
Still, Welltower is asking the court to award it at least $7.64 million, in addition to costs, fees, disbursements and punitive damages.
HCP as ‘co-conspirator’
In characterizing HCP’s business strategies throughout this whole ordeal, Welltower seemingly pulls few punches.
The rival REIT—“Brinker’s new employer and co-conspirator”—understood that Brinker’s conduct was wrong, the amended complaint says.
Notably, HCP reportedly agreed to fully reimburse Brinker in connection with the lawsuit “he knew was coming,” and HCP acknowledged in the press release announcing Brinker’s hiring that his start date at HCP could be postponed or never actually occur—”a telling admission that Brinker’s and HCP’s gambit was on tenuous legal ground,” the complaint states.
When HCP announced it had hired Brinker, the REIT was already dealing with a slew of other top-level leadership changes. The month prior, HCP President Justin Hutchens announced his intention to leave the company and become CEO of UK-based care home operator HC-One. It had also been announced that Kai Hsaio, HCP’s executive vice president-senior housing properties, would depart.
These leadership changes weren’t reflecting particularly well on HCP, Welltower suggests. Consequently, the REIT may have longed to release some positive news, such as the May 15 announcement of Brinker’s hiring.
“Both Brinker and HCP wanted the press release to boost market confidence in HCP, which had taken a hit as a result of recent high profile departures and underperformance,” the complaint reads. “Their unusual business alliance appears to have achieved its short-term goal: HCP’s stock price has risen after HCP announced Brinker’s hiring.”
Brinker and Welltower have agreed to litigate all claims arising out of the separation agreement, according to the complaint.
Written by Mary Kate Nelson