Two former executives of a Wisconsin assisted living provider listed phony occupants to meet the company's leasing requirements, the U.S. Securities and Exchange Commission said.
The SEC on Wednesday filed civil fraud charges against former Assisted Living Concepts Inc (ALC) chief executive Laurie Bebo, and chief financial officer, John Buono, who devised a scheme to fraudulently inflate occupancy rates at certain facilities it ran for seniors.
Their misconduct included adding Bebo's parents and husband in the company's leasing figures as well as employees who had been fired, the SEC said.
The conduct led ALC to submit false and misleading financial statements to the SEC between 2009 and 2011, the SEC said.
Bebo "intends to vigorously defend the claims," said Mark Cameli, her Milwaukee-based lawyer. She acted in good faith and in the best interests of her employer and its shareholders, Cameli said. What's more, the SEC's choice to present the case to one of the agency's administrative judges deprives Bebo of her constitutional right to have the matter heard in U.S. federal court, Cameli said.
An SEC spokeswoman and a lawyer for Buono could not be immediately reached for comment.
The alleged fraud by Bebo and Buono involved eight assisted living facilities that ALC began operating in 2008 for Ventas, a Chicago-based real estate investment trust (REIT) specializing in healthcare facilities. REITs invest in commercial real estate, such as hotelsand strip malls, offering investors a way to profit from rises in property values.
A leasing agreement between ALC and Ventas Inc required ALC to meet certain occupancy rates or pay Ventas the remaining rent due for the full term of the lease, which amounted to tens of millions of dollars, the SEC said.
Bebo and Buono put the scheme into action in 2009, the SEC said. ALC gave calculations to Ventas that included fake occupants and the purported revenue from their units.
Ventas is neither a target nor defendant in the case and has been cooperating with the SEC, a spokeswoman said. Private equity firm TPG bought ALC in 2013. A spokesman declined to comment.
