A judge went even further than requested on Tuesday in holding the owners of a troubled nursing home and rehab facility in contempt of court.
A motion by court-appointed receiver Suzanne Roski had said that she was being denied key information and access to records in her effort to keep open the financially struggling Blue Ridge Rehab Center skilled nursing facility and Blue Ridge Manor assisted living facility in Martinsville.
Circuit Court Judge G. Carter Greer agreed that the defendants were in contempt of his order to comply from earlier this summer and must provide all access and information Roski requires or be fined $1,000 for each day they fail to do so.
Greer also ruled following a hearing that, in addition to the defendants specifically mentioned in the motion, Sovran Management Company – the higher-level holding company that owns Blue Ridge’s various corporations – its managers and owners and a legal firm that represents them are subject to the court order and are held in contempt of court.
In order to execute her assignment, Roski’s attorneys argued, she needs access to Blue Ridge’s accounting information, computer server and emails and that the company failed to provide that within three days as ordered in July.
And much of the hearing was a discussion of why access to those servers wasn’t being provided and new questions about money flowing through the various levels of corporate ownership that rise above the property most in area simply known as “Blue Ridge.”
On June 20, Greer issued an emergency order and appointed a special receiver (or manager), Roski, in an effort to keep open the financially struggling Blue Ridge Rehab Center and Blue Ridge Manor, located at 300 and 400 Blue Ridge St. in Martinsville. The order was extended on July 24.
Blue Ridge Rehab is a 300-bed facility that, as of July 3, had 231 residents. Blue Ridge Manor has a capacity of 60 and, as of an inspection on May 16, had 38 residents.
Greer’s action came at the request of OHI Asset Martinsville LLC and OHI Asset Martinsville ALF LLC in a lawsuit they filed against BRVA Properties LLC, BRNURSCO LLC and BRALFCO LLC.
The order identifies OHI Asset Martinsville LLC and OHI Asset Martinsville ALF LLC as the landlords of the 26-acre property. BRVA Properties is named as the tenant and BRNURSCO and BRALFCO LLC as the “defendant operators.”
As of the date their lease was terminated, Feb. 25, the operators owed basic rent of $5,647,059.26, along with other fees specified in the lease, and is delinquent on property taxes of at least $211,430.99. And since that termination holdover rent as of May 31 totaled $2,316,438.70, with that amount accruing at $24,642.96 per day.
Roski’s motion said that, because of lack of cooperation from Sovran Management, she and the management company she hired to run the day-to-day operations, Kissito Healthcare of Roanoke, did not gain access to the cash accounts until June 25.
“Accordingly … several disbursements initiated prior to the receiver order cleared the bank after the appointment of the receiver. The receiver is currently researching the identities of the payees for the applicable transactions,” her motion stated.
Roski’s attorneys said in the hearing that the receiver had been “more than patient” with repeated requests and also raised new questions about $9 million that was transferred out of the Blue Ridge business to Sovran LLC with no explanation why.
The computer server to which Roski wants access is not in Martinsville but rather is housed in Florida.
Michael Marshall and George Wagner are the primary officers of the defendant companies, and they along with attorney Augustus Epps of Williams Mullens’ Richmond office have the username and password to that server, the attorneys said.
A representative for Blue Ridge said that server also includes information pertaining to Sovran that Sovran does not want to share and that is not pertinent to this case; that there are three corporate entities involved with Sovran but not necessarily with Blue Ridge; and that Epps is not the counsel of record for all of them.
Plaintiff’s attorney Leighton Aiken described a similar case in Florida in which it was noted that Marshall and Wagner own 90% of the parent companies (defendants) involved in Blue Ridge’s case and that they own 100% of Sovran Management.
“At the top of the food chain are Mr. Marshall and Mr. Wagner, and at the bottom of the food chain are Mr. Marshall and Mr. Wagner,” Aiken said.
The role of the receiver, Aiken said, is first to get Blue Ridge under competent management and, second, to recover money owed to creditors.
He showed a collection of documents describing Sovran’s financials for Blue Ridge. One showed that Sovran had paid interest, taxes and $5.5 million in rent.
“Well, they didn’t pay rent. They didn’t pay taxes,” he said.
In 2018, BRVA Properties LLC (Blue Ridge) changed its name to Blue Ridge Properties Holdings LLC and transferred $9 million to Sovran, Aiken said, and in June 2018, when a receiver was appointed in North Carolina and Florida, it transferred another $900,000 to Sovran.
“Clearly, the money’s gone missing,” he said.
According an earlier deposition by Marshall, Aiken said, $69 million was transferred to American Senior Living L.P., which Bloomberg lists as having been founded in 1998 and based in Florida.
The records show that on May 31, at the end of a list of expenses, more than $13 million was recorded as paid by BRVA to an unknown payee, Aiken said.
Getting the full information about that money “is all relevant to the receiver doing her duty,” perhaps in the recovery phase, he said.
The bottom line, Aiken said, is that the court issued orders for BRVA to turn over its records from any defendant involved, and they have not done so.
He also argued that because of the nature of Epps’ involvement, he should be considered responsible, even if he isn’t counsel of record.
Aiken read through a deposition of Marshall about the company’s login and password in which Marshall had said he didn’t know those credentials by heart but had them written down at home. When asked if he could hand over that information by the next day, he replied, “Yeah, I can commit.”
At that point Epps, who also was said to have the information, was listed as counsel.
The same argument the defendants made Tuesday was rejected by Florida court, Aiken said.
A representative for the defendants said that BRVA was trying to find a way to get the information need while protecting unrelated company information, to ensure the receiver does not tell others about the unrelated company information she might discover.
Holly Kozelsky is a writer for the Martinsville Bulletin; contact her at 276-638-8801 ext. 243.