Sunwest reorganization plan pays former CEO

EUGENE — Senior living chain Sunwest Management's ambitious reorganization plan has left some investors seething because it gives a salary to the former CEO accused of defrauding them.

The plan filed Tuesday night in U.S. District Court in Eugene calls for about 150 of the top-performing Sunwest assisted living centers to be bundled together in a new company. Investors would get stock in the new entity.

The new company could file for Chapter 11 by early October and be out of bankruptcy by the end of the year, said Clyde Hamstreet, a Portland consultant who serves as Sunwest's chief restructuring officer.

But investors quickly criticized the plan because it gives former CEO Jon Harder a $75,000 salary for no future work and a 25 percent stake in the new company if the reorganization is successful.

Sunwest, which lost $2 billion before it went broke last year, was one of the largest assisted living chains in the country.

The company's affiliates stopped making promised payments to investors a year ago. In March, the Securities and Exchange Commission sued Harder, charging he had misled investors, committed fraud in the sale of securities, and in the final months operated the company as a Ponzi scheme.

The plan calls for the sale of approximately 60 senior residences, including two in Grants Pass — Spring Meadow Cottages on Shady Lane and Spring Meadow Retirement Community on Redwood Circle. Middlefield Oaks Senior Living Community in Cottage Grove, a project financed by Medford-based PremierWest Bank, also is on the list.

Eagle Cove Retirement and Assisted Living in Eagle Point is among the properties that would be retained in the new company.

Mark Fickes, a lawyer in the SEC's San Francisco office, said his agency wasn't invited and didn't attend the mediation sessions where the proposed compensation package for the Sunwest executives was devised.

"It's unprecedented that somebody gets to commit fraud to the tune of $400 million and then could emerge with a 25 percent equity interest in the emerged company," Fickes told The Register-Guard newspaper.

Steve English, one of Harder's lawyers, defended the plan, noting that Harder and two other top executives could end up with nothing more the $75,000 annual payments. The plan calls for them to get a chunk of the company only after it generates $500 million in value for the investors. He also said there was no proof of wrongdoing.

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