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Suit alleges financial shenanigans at high-dollar retirement communities

03/04/2013 4:54 PM

03/14/2013 2:33 PM

A Grapevine man has filed a whistle-blower claim alleging financial improprieties at a Dallas nonprofit that runs five Texas retirement communities, including an upscale facility in Fort Worth.

At issue is whether Senior Quality Lifestyles Corp. violated a promise to keep funds invested in the individual retirement community where the seniors lived. SQLC has communities in Houston, Corpus Christi, Austin, Dallas and at the Stayton at Museum Way, near Fort Worth's Cultural District.

David Brown, former vice president for development at SQLC, said he was fired after he alerted the nonprofit's board of directors that SQLC's president and CEO Charles Brewer was planning to divert local funds to boost an ailing project in another state, and that Brewer had a personal investment interest in that same project .

"It's just a matter of what's right and wrong,'' Brown said. "I have a lot of respect for the seniors we serve. I felt like they were not being treated with the utmost respect and honesty, and that is what bothered me most."

Scott Sykes, chairman of the nonprofit's board of directors, did not return a phone call seeking comment. Brewer declined to comment and referred all questions to Dallas attorney James Berglund.Berglund said that his nonprofit client complied with all state laws and regulations and that the company's disclosures to residents were "accurate and thorough."

Brown is a "disgrunted former employee who was terminated for cause,'' Berglund wrote in response to questions from the Star-Telegram.

About 745,000 Americans live in the upscale "continuing-care" retirement communities, which have independent living, assisted living and a skilled nursing centers under the same roof.

To live at The Stayton in Fort Worth, residents must sign "life-care" contracts with entrance fees "from several thousand to over a million dollars," according to Brown's suit. In addition, residents pay monthly service fees to the tune of "thousands of dollars."

SQLC's website features Brewer in a virtual walk through a facility's ornate door, which opens to a lavish staircase and opulent rooms. He describes SQLC as "a five-star retirement lifestyle that appeals to your five senses ..."

"Above all," he continues, "we want to appeal to your sixth sense -- your sense of security with life care, health care for life."

Several residents contacted for this report declined to comment or did not return calls.

At The Stayton, luxury abounds, including valet parking, lush gardens and opulent furnishings. Its $167 million in tax-exempt bonds are supporting a facility that houses 181 independent living units, seven catered living units, 42 assisted living units, 20 memory-support units and a nursing facility with 46 nursing beds, bond documents show.

Financial risks are part of such communities, according to the Government Accounting Office which noted that some across the nation have filed for bankruptcy.

If projects fail, residents can lose all or part of their entrance fee or could be charged unexpectedly for services that were free when they signed up, a GAO 2010 report said.

The SQLC retirement communities were supported by tax-exempt bonds approved by the Tarrant County Cultural Education Facilities Finance Corp.

SQLC, Berglund said, puts a portion of its funds in investments to support the operation of the "continuing-care" retirement communities. Funds "stay in the community," he said, and dividends aren't paid to shareholders and outside investors because it is a charitable organization.

What's more, he said, SQLC's marketing brochures "do not restrict or regulate a location where funds may or may not be invested."

The dispute grew to a crescendo last spring when Brown addressed his concerns to the SQLC board of directors.

Brown's attorney, Dusty Fillmore, said his client had a duty to report concerns that could expose the charity to lawsuits.

"We believe that this problem could pose a significant loss to SQLC," Fillmore said.

Brown was a dedicated employee who "sacrificed himself" for residents, Fillmore added. Brown "is on the side of SQLC residents."

The suit, filed in Tarrant County district court , has drawn the attention of the state attorney general's office. State law requires the state be notified when a charity is sued, allowing the state to keep up with proceedings.

The attorney general's involvement "is pretty common, actually," attorney general spokesman Tom Kelley said.

Fillmore is hopeful that the state's involvement could lead to better consumer protections for thousands of elderly Texans and their families.

"This whistle-blower case is important," he said.

Yamil Berard, 817-390-7705

Twitter: @yberard

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