NEWARK, N.J. (CN) - A nursing home CEO used investor money and revenue to help his struggling businesses - and he needs to be stopped before defrauded investors are out of luck, federal regulators say.
The U.S. Securities and Exchange Commission on Friday filed an emergency lawsuit seeking a restraining order, alleging that Christopher Brogdon raised $189 million from investors through 54 securities offerings, then used millions to fund a "lavish lifestyle" for himself and his wife.
He also paid off debt in several other failing businesses he ran, the SEC claims.
Most of the Brogdon offerings were municipal bonds, the debt of which is backed by states, cities and other municipalities. The 66-year-old Atlanta resident allegedly told investors he planned to use the money he raised from those offerings to renovate or built nursing homes and assisted living facilities, but he instructed his accountants to commingle the funds and used the cash in myriad ways, including paying personal expenses.
The diverted funds were used to pay pilot salaries for two private jets Brogdon used for both private and business reasons, payments to one of his restaurants, credit card bills, and bank loans, according to the 33-page complaint, which was filed in New Jersey Federal Court.
SEC officials said Brogdon "deceived investors" when raising the money and also failed to file financial statements with the agency or make required municipal bond disclosures to investors.
"Instead of investing in a single offering or facility, investors and bondholders were actually, unknowingly investing in Brogdon and his many business ventures," the lawsuits states.
The government is asking for an immediate restraining order against Brogdon and his wife Connie to prevent them from destroying documents or filing for bankruptcy, to preserve as much value in the companies and return as much of the allegedly stolen cash to investors as possible.
Connie and Brogdon's adult son Tygh are also named in the suit as "relief defendants," as they have received salaries and monthly distributions from Brogdon's companies, according to the SEC.
"Without emergency relief, there is a very real possibility that [the] facilities will fail and that proceeds of the piecemeal sales of [the] facilities will be dissipated," the lawsuit states, adding that the alleged scheme went on for many years and may have involved dozens of businesses.
Brogdon, who lives in Georgia, has been chairman of the board of several nursing home and assisted living companies, including Retirement Care Associates, NewCare Health Corporation, and AdCare Health Systems, from which Brogdon resigned in October after hints of financial impropriety were raised.
He is currently the CEO of Global Healthcare REIT, a publicly traded real estate trust, the SEC says.
Court documents show that the alleged scam also had the flavor of a Ponzi scheme, as Brogdon allegedly took funds raised for one project to pay off investors and expenses in other already failing projects.
In one case, Brogdon allegedly raised $1.4 million to construct retirement housing in Georgia, then used nearly half the raised funds to pay off credit card bills and taxes on an unrelated nursing home in Oklahoma. He also cut his wife a check for $50,000, according to the complaint.
When Brodgon couldn't pay investors back, he'd rely on third-party loans - or, in some cases, drawing down on his own lines of credit - to cover the payouts, the lawsuit states. The SEC estimates that one-third of the offerings remain outstanding, with nearly $100 million still owed to investors, and three of the municipal bonds are in default.
Brogdon has a checkered legal history. In 1986 he was censured and fined as a broker-dealer by the National Association of Securities Dealers for making trades without adequate backing capital, while at the same time withdrawing cash and securities investments from his firm's accounts, according to the SEC.
A 1997 article from The Wall Street Journal, which describes Brogdon as something of a "miracle worker" for his ability to expand a single nursing home into a "sprawling retirement-home company," lists several other run-ins with the law, including millions in allegedly overdue taxes and a shareholder class-action lawsuit alleging fraud and improper accounting.
The article details Brogdon's rise starting in 1992, when he took over a failing assisted-living center in Omaha, Neb., and caused a meteoric rise in revenue.
He has since expanded into other businesses, such as the J. Christopher's chain of breakfast and lunch restaurants in Georgia. The restaurant chain was formed in 1996 by Brogdon and Jay McCann, according to the company website.
Calls to Global Healthcare REIT went to voicemail. The investment firm's website says its mission is to "increase shareholder value through strategic purchases of senior care facilities."
An email request for comment sent to Brogdon's attorney Tony Powers was not immediately returned.
U.S. District Judge Kevin McCarthy held a hearing on Friday to determine whether a receivership should be set up for Brogdon's companies. Brogdon has until Dec. 3 to show why an injunction should not be filed against him.
The SEC investigation is ongoing.Follow @NickRummell
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