PORTLAND, Ore. – The former head of an Oregon-based chain of retirement centers pleaded guilty Thursday to charges related to a complex scheme that authorities say defrauded investors out of $130 million.
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Prosecutors plan to recommend a 15-year prison sentence for Jon Harder at his Nov. 16 sentencing. Harder's lawyers are expected to seek five years.
Assistant U.S. Attorney Allan Garten said Harder operated what amounted to a "classic fraud scheme," raising money from investors and banks during the collapse of his Sunwest Management chain of more than 300 assisted-living centers and related operations.
Harder pleaded guilty to mail fraud and engaging in monetary transactions in property derived from unlawful activity. Prosecutors dropped other charges in the plea agreement.
Garten said the former CEO led investors to believe Sunwest was a thriving company when, by early 2006, it was hemorrhaging cash "hand over fist."
Harder went on a buying spree to hide its losses, acquiring more than 100 assisted-living centers at a rate of one a week. The indictment said Sunwest Management routinely commingled investor funds in Sunwest-controlled companies, and then misled investors about its financial strength and practices.
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Garten said Harder lived a lavish lifestyle while defrauding more than 1,000 investors in the scheme. Some of those investors packed the standing-room-only courtroom, but all declined U.S. District Judge Michael Simon's offer to speak.
After Garten outlined the government's stance, defense attorney Chris Schatz told the judge, "Basically, we don't agree with anything Mr. Garten just said."
Schatz did not articulate Harder's version of events, preserving his words for a "scope-of-the-fraud" hearing in May that's expected to run three weeks. That proceeding will help Simon decide the sentence he will hand down in November.
"I'd like to see him spend at least 15 years in prison," investor Darlene Myers, of Portland, said after the hearing. Myers said she invested about $150,000 at the tail of the scheme. She got one payment before Sunwest collapsed.
The company went through a re-organization after Harder stepped aside in 2009. A private equity company bought most of the holdings, and investors eventually got some or all of their money back.
In a separate case, the U.S. Securities and Exchange Commission filed a lawsuit in 2009 that accused Harder of committing securities fraud.
The SEC sought up to $190 million in civil penalties, but a judge struck down the attempt.