The Newberg Graphic Online

Sunwest CEO is fined $4.2 million

Senior Living — Investors recruit new senior facility managers to run sites in bid offer

• By: David Sale  
• Published: 2/2/2010 1:44:12 PM

   Jon Harder — former CEO of Sunwest Management Inc., owners of Chehalem Springs in Newberg — has been barred from working in the financial industry and must pay $4.2 million in restitution, the Oregon Department of Consumer and Business Services announced Jan. 25.
   Harder, who filed for personal bankruptcy in late 2008, is presently facing a securities fraud suit from the federal Securities and Exchange Commission, and payment of the restitution is contingent on his receiving financial benefit from that lawsuit.
   Meanwhile, he is prohibited from using securities registration exemptions, must surrender his broker and dealer licenses, and will not be allowed to apply for any license issued by the department.
   Sunwest leveraged $400 to $600 million in private equity from more than 1,200 investors, typically using bank loans secured by individual properties, until the housing and credit crisis led to the company’s collapse. At its height, Sunwest managed 290 senior care centers.
   The SEC fraud charges arose from the way Sunwest represented itself to investors, who believed they were investing in individual properties and would receive income in the form of rents. Instead, Sunwest allegedly managed its empire as a single entity, co-mingling funds and using profits from successful properties to pay debts of unsuccessful ones.
   Meanwhile, with Sunwest in receivership, the asset management group Blackstone Real Estate Advisers is positioning itself as the lead candidate to purchase the bankrupt company by announcing last week a joint venture with Emeritus Senior Living, one of the nation’s largest senior living providers, which would manage the former Sunwest facilities for a fee equal to 5 percent of gross revenues.
   The partners have made an offer of $1.15 billion, a combination of cash and assumption of debt, but the bankruptcy court process is required to include an open bidding period that would allow other qualified parties to bid on the portfolio.
   A decision is expected in February.

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