Assisted Living Chain Snarled in Lawsuits

     MILWAUKEE (CN) – Assisted Living Concepts cost shareholders $100 million by “consistently and systematically violating the laws in numerous states” in its assisted living centers, a shareholder claims in a derivative complaint.
     Named plaintiff George Passaro sued 11 executives, directors and former directors of the company, in Milwaukee County Court. The company and its subsidiaries operate assisted living centers in 20 states.
     This is the third lawsuit, and the second class action, involving Assisted Living Concepts since June.
     Passaro claims the directors “failed to take action to correct widespread deficiencies” despite “repeated violations, fines and warnings from regulators throughout the entire period of time that Assisted Living Concepts has been a publicly traded company.”
     A landlord for eight of the company’s homes sued it in April this year, “alleging that the company breached its lease by failing to comply with regulatory requirements,” the complaint states. “As a result, the company was forced to spend $97 million to purchase the properties, plus an additional $3 million ‘litigation settlement fee,’ in order to resolve the action with its landlord.”
     According to the complaint: “Contrary to the company’s statement, for the entire period of time that ALC has been a publicly traded company it has operated its facilities in violation of numerous state regulations, resulting in a multitude of fines and other penalties. ALC’s facilities are consistently understaffed, fail to maintain adequate records, and failed to properly provide medication, putting residents’ health and safety at risk. ALC’s facilities’ violations range from refusing to supply toilet paper and soap to its resident, to being so understaffed that a resident was left behind when evacuating a building during a fire, to falsifying documents in order to conceal regulatory violations. Despite the repeated violations and fines, and in a number of instances, license revocation proceedings, the individual defendants … failed to take appropriate action to correct the misconduct or prevent its recurrence.”
     To top it off, Passaro says, the company disclosed in August “that it is being investigated by the Securities and Exchange Commission,” which has subpoenaed it for documents.
     In what Passaro calls “only a sampling of egregious violations,” he alleges more than 20 examples of legal and regulatory noncompliance in 16 states, including providing services without a license, decertification for uncorrected violations, repeated violations despite a resident’s death, repeated failure to protect residents from financial exploitation, failure to provide medications and finding “imminent harm” to residents.
     He claims the defendant officers and directors “willfully approved the company’s illegal and improper conduct and ignored the obvious and pervasive problems with the company’s legal and regulatory compliance, and failed to make a good faith effort to correct the problems or prevent their recurrence.”
     Lead defendant is Laurie A. Bebo, who was Assisted Living’s president and CEO from 2006-2012.
     Assisted Living and Bebo were sued in August in a federal class action alleging securities violations.
     And Bebo sued Assisted Living in June, in Waukesha County Court, claiming it failed to provide records she requested to “ascertain her risk and exposure” from an internal investigation by the company’s audit committee.
     Passaro seeks costs and damages for breach of fiduciary duty.
     He is represented by Guri Ademi with Ademi & O’Reilly, of Cudahy, Wisc.

%d bloggers like this: