After the independent committee of the board of Sunrise Senior Living submitted its report to the independent directors this week, we figured it would take a few weeks to digest the information, let alone act on it. Wrong. Effective today, Tom Newell, the president of Sunrise, Larry Hulse, the former CFO from 2000 to 2005 and most recently the CEO of the company’s captive insurance company, and Carl Adams, the Treasurer and former chief accounting officer from 2000 to 2004, were all given their walking papers. Well, Merry Christmas and Happy New Year to you, too. The company’s press release stated that the “entire senior finance team that was in place during the years covered by the pending restatement is now no longer with the Company.” And we thought that Brad Rush (the CFO from August 2005 until his abrupt dismissal on May 2, 2007) was the fall guy for the restatement process. It appears that the board is trying to put the entire accounting problem behind the company by saying everyone who had any decision-making authority in the process is gone and it is time to move forward. The market’s reaction? Sunrise shares were up 10% on the news.
Moving forward is what the company is doing, and today Sunrise also announced that all of its SEC filings would be up-to-date no later than March 17, 2008 (the New York Stock Exchange deadline for a de-listing), with the 2006 10-K being the first document to be filed, followed by the 2007 10-K and then the 2007 quarterlies. The 2006 10-Qs will not be filed. We, and we were not alone, have always suspected that the board really did not want to file these audited statements, hoping that a sale of the company would make it a moot point. The fact that these filings will be made in the first quarter of 2008 tells us that a sale of the company is off the table for the time being and they are moving forward as a public company. Although we have long stated that Sunrise would be better off as a private company, we will be better off if they remain public. The board, however, has made no announcement.
We have not heard much about the fate of Brad Rush’s wrongful termination lawsuit, filed last September, but with “the entire finance team” now dismissed, it would seem to make his case a little better, at least in the public’s eye. According to his lawsuit, Mr. Newell was one of the executives pressuring him to complete the restatement process, allegedly telling him that his “credibility was at risk” with the board. While we know that Mr. Rush received no severance, we would like to see what the other three are getting, if anything, and what “keep silent” agreement they signed. We would also like to see the independent committee’s report to find out if there ever was a smoking gun (probably not) and what the recommendations were. It would make a nice stocking stuffer (for me), whoever would be so inclined.
