AdCare board changes follow Brogdon fraud charges
Healthcare real estate investment company AdCare Health Systems has declassified its board of directors following a Dec. 10 annual meeting of shareholders.
“The decision to declassify the board is consistent with our commitment to sound corporate governance practices and is in the best interest of AdCare and its shareholders,” AdCare Chairman and CEO Bill McBride said in a press release. “The views of our shareholders are important to the board. Declassifying our board structure affords shareholders the opportunity to express their views on the performance of individual directors on an annual basis.” Several board members resigned this year, McBride said, and two new members joined: Tom Knaup and Allan Rimland.
With the board declassified, all of the company's directors will be elected each year to serve one-year terms. Previously, directors were elected to serve staggered, three-year terms.
The change comes on the heels of the Nov. 20 announcement that the U.S. Securities and Exchange Commission had filed fraud charges and frozen the assets of businessman Christopher F. Brogdon for allegedly misusing investor funds raised to purchase and renovate senior living facilities. Brogdon, who was the CEO, president and director of Global Healthcare REIT at the time of the charges, was vice chairman and chief acquisitions officer of AdCare from September 2009 to Oct. 13, 2015, according to the SEC complaint. AdCare says he holds more than 5% of the company's common stock.
“The Company is not a defendant in this action,” AdCare said in its press release. “The complaint, among other things, petitions for receivership of a number of properties listed in the complaint, three of which are owned (but not operated) by the Company. On December 10, 2015, the SEC submitted to the court a revised list of properties over which the SEC is seeking receivership. The revised list does not include any of the Company's properties, and the SEC is not seeking receivership of such properties,” the statement continues.
In other action, AdCare continues the plan it announced more than a year ago to divest its senior living properties and become a holding company.
“Fiscal 2015 has been a year of significant accomplishments for AdCare as we close the door on our legacy, operations-focused business model and open the door to a new chapter for the company as a healthcare property holding and leasing company,” McBride said. “With all of the actions to shift our business model nearly complete, we are increasingly seeking to embark on new initiatives to maximize shareholder value.”
The company has entered into agreements for all 40 of the healthcare facilities it owned, operated or managed. Thirty-six facilities have transferred operations to third-party operators or are under management contracts. Operations for two Oklahoma facilities are expected to be transitioned to a third-party operator at the end of the year, and one facility in Arkansas and one in Oklahoma have been sold. Also, an Alabama facility owned and operated by the company's consolidated variable interest entity has been sold to a third party.