Sinow v Heritage Healthcare Bond Sellers
Heritage Healthcare Bondholders Want Their $130 Million Back
Several class actions have been filed against numerous parties connected to eleven municipal bond offerings in California, Florida, Illinois, and Texas on behalf of persons who purchased the bonds between December 1996 and March 1999. The $130,000,000+ in bonds related to Heritage Healthcare, were to be used to acquire, renovate, and reopen former hospitals in the states as facilities designed to assist elderly persons-- instead, the funds were allegedly diverted and misused so that all of the facilities went into bankruptcy shortly after the bond offerings. The bondholders seek to recover compensatory damages for the loss of value of their bonds.
Heritage HealthCare purportedly planned to use the bond money to build a dozen nursing homes focused on Alzheimer's care. The action alleges that the bond offering was actually just a huge Ponzi scheme. Due to wrongful disbursements, diversions of bond proceeds and improper commingling of funds, renovations at many of the facilities were never completed. Because a substantial portion of the monies raised in the first few offerings were improperly diverted, monies raised in the latter offerings were then improperly used to finish the renovations on earlier facilities. By mid-1999, the underwriter of the offerings refused to conduct any more offerings. Shortly thereafter the Ponzi nature of the scheme came to light and the scheme collapsed.
The bonds issues involved in this class action are the following:
(1) Bonds issued by the Danforth Health Facilities Corporation in Texas for Danforth Gardens on December 20, 1996; Sam Houston Gardens on March 3, 1997; and Duval Gardens on July 10, 1998.
(2) Bonds issued by the Tarrant County Health Facilities Development Corporation in Texas for St. Joseph Gardens on May 15, 1997, and October 5, 1998; Valley Gardens on March 11, 1999; and Eastwood Gardens on November 13, 1998.
(3) Bonds issued by the City of Mexico Beach, Florida, for Heritage House of Sarasota on December 22, 1997, and Heritage House of Seminole on December 21, 1998.
(4) Bonds issued by the City of Chicago, Illinois for Heritage House of Chicago on July 24, 1998.
(5) Bonds issued by the Desert Hot Springs Public Financing Authority in California for Heritage Hospital on August 20, 1998.
