Nuclear Warfare with a Corporation

One Foot in the Gravy

Nuclear Warfare with a Corporation

In 2005 we had to move my mother into assisted living as she could no longer take care of herself. We were told at the time that if she remained in the home for three years and could no longer make her rent payments, they would accept her income, less $40 a month, as payment.

My sister in Maryland was still working at the time and had a job entailing a lot of travel throughout the Eastern US, where she would remodel and renovate Sears stores. Caregiving fell to us, and my sister visited when she could. She provided much of the money needed to keep Mother afloat financially. It was a decent arrangement, and we knew that a point would come where no additional financial support would be needed.

Maybe things aren’t going so well

In 2008, two months before our mother was going to need to use the financial exception, I visited the home’s director and alerted him to the forthcoming change. He thanked me for the notice and said that the Board of Directors of the parent corporation was not certain whether it would honor that promise. My antennae went up and I started some research.

Sure enough, two days before the end of the month which we had assumed for three years would be the transition point for the facility collecting only her income -$40 each month, the director said that Board had decided not to accept only income -$40 each month and her full rent had to be paid the following day or she must vacate the home. I had a few blanks to fill in and did so that evening.

Doing Homework

It seemed that the corporation had issued new stock during the period when it was “deciding” what to do. Also, a member of the Board of Directors had arranged a private sale of about $15M in stock. I got information from the company’s annual report and knew the total number of residents nationwide in their properties, and approximate ages. I noted that the corporation never revealed a potential liability I calculated at about $225M, or equal to several times their net profits for the past three years. There was no accounting notation showing the liability. I was ready.

I wrote three e-mails. The first was to the Securities and Exchange Commission. The second was to the American Stock Exchange. The third was to the company’s fraud reporting address. In the last I related what the Director had told me, pretending that I was shocked to learn that the company had perpetrated a potential stock fraud on the public, and allowed one of its directors to sell stock without disclosing material information.

Surprise!

The following day I went to the assisted living center and asked to speak with the director. It appeared he had left suddenly that morning to pursue other opportunities.