SEC charges senior living exec with fraud, freezes assets
Securities and Exchange Commission
Atlanta-based businessman Christopher F. Brogdon misused investor funds raised to purchase and renovate senior living facilities, the Securities and Exchange Commission alleged in announcing fraud charges and an emergency asset freeze against Brogdon Nov. 20.
Brogdon amassed nearly $190 million through dozens of municipal bond and private placement offerings in which investors purportedly earned interest from revenues generated by the assisted living community, nursing home or other retirement housing projects supported by their investment, according to the SEC. The businessman, however, secretly commingled investor funds instead of using the money to finance the project described to investors in the disclosure documents for each offering, the commission alleges. From the commingled accounts, he has diverted investor money to other business ventures and personal expenses, according to the commission. The health of several of the facilities is in jeopardy, according to the SEC, and they now will be overseen by an independent fiduciary.
Brogdon, currently the CEO, president and director of Global Healthcare REIT, perpetrated the fraud through at least 43 entities he owns or controls, according to the SEC.
“As alleged, Brogdon deceived investors about the true nature of these investment opportunities,” said Sanjay Wadhwa, senior associate director of the SEC's New York regional office. “Brogdon falsely promised investors they were investing in specific senior living projects when in reality they also were funding his personal expenses and other businesses, including some that are struggling financially.”
According to the SEC's complaint, filed in federal court in Newark, N.J., Brogdon has been paying investors by borrowing money from third parties, using proceeds from other offerings, and drawing down on personal lines of credit, all of which are improper sources under the offering disclosures made to investors.
The SEC complaint charges Brogdon with violating antifraud provisions of the securities laws and related SEC rules, and it seeks the return of ill-gotten gains with interest and penalties. The complaint also seeks permanent injunctions against further violations of the securities laws and a bar prohibiting Brogdon from serving as an officer or director of a public company. The complaint also names Brogdon's wife, Connie, son Tygh and several of his other business entities as relief defendants for the purpose of recovering ill-gotten gains plus interest for investors.
Brogdon is a former chairman of the board of companies such as Retirement Care Associates, Contour Medical and NewCare Health Corp., according to the SEC. From September 2009 to Oct. 13, 2015, the commission said, he was vice chairman and chief acquisitions officer of AdCare Health Systems, Inc.
While the SEC continues to investigate, the New Jersey Bureau of Securities and the Financial Industry Regulatory Authority also have filed an enforcement action against Cantone Research Inc., a broker-dealer that served as a placement agent for some of Brogdon's offerings.
McKnight's Senior Living has contacted Global Healthcare REIT and Cantone Research, will share any responses received and will continue to follow this news.
The actions against Brogdon came during the same week that former Sunwest Management CEO Jon Michael Harder was sentenced to 15 years in prison for defrauding assisted living community investors of millions of dollars. In January, Harder had pleaded guilty to one felony count of mail fraud and one felony count of money laundering. He admitted to lying to more than 50 investors to obtain more than $5 million from late 2007 through February 2008.