A judge this week dissolved a partnership behind a network of nursing homes and assisted living facilities in several states, criticizing the majority owner’s lack of cooperation and the “complicated jumble of entities” through which he operated.
ELCM was a private-equity acquisition firm specializing in real estate and healthcare investment that had a presence in at least 10 states. But after having multiple facilities placed in receivership because of a failure to deposit rents, pay staff or provide critical resident services, several investors sued to have their partnership dissolved.
Delaware Chancery Judge Sam Glasscock III on Wednesday granted the motion, outlining on page after page his own frustrations with owner Andrew White. The case involved multiple motions for delays, with White claiming repeatedly that he was unable to appear due to health issues that he never documented for the court. Vice Chancellor Glasscock threatened to have White held for contempt at least three times.
Absentee owner and misdirected funds
In one of a series of business moves Glasscock characterized as “insidious,” White refused to put patients’ rent checks into an account explicitly established for the receiver and instead deposited them into an account for one of his other business entities.
White was largely absent as his investors tried to get properties removed from his control, similar to how officials in other states found he had been running his nursing homes in absentia. Included among the portfolio were at least six senior care facilities in Oklahoma and Vermont and three facilities leased by National Health Investors in Indiana, North Carolina and Tennessee.
In addition to White, nominal defendants included East Lake Capital Management, ELCM East Healthcare Real Estate Fund, Sponsor I and RSL BUYER LLC.
White — in control of all those businesses — proceeded without an attorney for much of the case, at one point telling the judge the attorney he had briefly lied about his illnesses. The judge called those allegations “wholly incredible.”
In conjunction with the initial filing in November, Glasscock granted temporary receivership as requested by the plaintiffs. But the appointed receiver then told the judge that White had acted unprofessionally and failed to alert him to urgent issues — blindsiding him with last-minute payroll requests and more.
For months, White failed to show for hearings or produce required documentation or bank account numbers needed by receivers to run facilities.
Ultimately, Glasscock determined that the limited partnership between White’s companies and his investors was no longer practicable.
“Mr. White, as principal of the general partner, was unlikely to be able to operate these business in his current state of health, in light of his record testimony and his serial inability to attend (or his evasion of) proceedings in this Court. Moreover Mr. White is, I find, manifestly unwilling to assist others in conducting the business … Even with a receiver in place, the business is in jeopardy.”
Glasscock ordered the parties to agree on a third-party final receiver who can help liquidate the remaining assets — namely the Oklahoma homes already in receivership.
The case referred to is GMF ELCM Fund L.P., et al. v. ELCM HCRE GP LLC, et al.