SEC Files Suit Against Kasirer, Alzheimer’s Home Fundraiser
WALL STREET WEST
The Securities and Exchange Commission filed civil fraud charges last week against Beverly Hills resident Robert Kasirer and four executives involved in the collapse of Heritage Healthcare of America, which sold $131 million of municipal bonds in the late 1990s, ostensibly to fund health care facilities for Alzheimer’s patients.
The complaint, filed in U.S. District Court for the Northern District of Illinois, claims the five California defendants engaged in a Ponzi scheme that defrauded 1,800 investors in 36 states.
The 11 municipal bond offerings, sold from 1996 to 1999, were supposed to be used to build nursing homes in California, Florida, Illinois and Texas. Only five facilities actually opened, including Rancho Hospital in Rancho Cucamonga, which filed for bankruptcy. The others were taken over through a receivership.
The SEC complaint alleges that Kasirer, 55, an attorney who controlled Heritage Healthcare, engaged in kickbacks and profited from the scheme, including putting his wife and father on the payroll of Heritage affiliate companies.
The other defendants include Jerold V. Goldstein, 63, an Encino attorney and Heritage executive; Joel T. Boehm, 57, an attorney in Carlsbad for now-defunct bond underwriter Miller & Schroeder; James E. Iverson, 68, a former executive vice president of Miller & Schroeder; and Victor P. Dhooge, 59, who worked in the Solana Beach office of Miller & Schroeder.
Brian Barry, a lawyer representing hundreds of bondholders who are suing Kasirer and other defendants in the case, received preliminary approval last month for settlements totaling more than $8 million to investors who hold worthless Heritage bonds.
“We’re hoping investors will get some money out of these people,” he said.
Gary Kurtz, Kasirer’s attorney, did not return a call seeking comment.
Kate Berry
Price of Going Private
Shareholders of Edelbrock Corp. can thank the company’s chairman and chief executive, Victor Edelbrock Jr., and his financial advisor, Bank of America, for a generous boost in the price he’s paying to take the company private.
Edelbrock, whose father founded the Torrance-based maker of performance auto parts in 1938, originally offered $14.80 a share to buy the 48.8 percent of the company he and his family didn’t already own. At the time, the company’s shares hadn’t risen above $15 for nearly five years. In June of last year, the stock was trading around $10.
Nevertheless, a shareholder lawsuit claimed that the offer price was too low.
Edelbrock formed a special committee of three directors to negotiate the best deal for shareholders. They hired Kerlin Capital Group LLC, a boutique investment bank that produced the fairness opinion on the deal, and the law firm Skadden Arps Slate Meagher & Flom LLP, which helped negotiate with Edelbrock.
Edelbrock ultimate agreed to pay $16.75 a share.
The final price represents a 24 percent premium over the $13.52 a share closing price immediately before discussions took place a few months ago. Bank of America and City National Bank provided the $53 million in debt financing for the transaction.
“We went through a two-month process to come up with a fair price,” said Bill Doyle, principal of Kerlin Capital in Los Angeles. “It was a price Edelbrock was willing to pay and people can draw their own conclusions as to why the price was so low in the past.”
The fairness opinion will be included in Edelbrock’s upcoming proxy.
Kate Berry
Rate Impact
The Federal Reserve Board’s much-anticipated decision to raise interest rates generated the predictable anticipation of how it would affect the real estate market.
A profit warning from mortgage lender Washington Mutual Inc. one day before the Fed’s quarter-point rate hike had already rattled markets, causing mortgage stocks to tumble.
Countrywide Financial Corp. in Calabasas was quick to respond with news that it had already factored rising interest rates into its past guidance. While its stock was down $1.82, to $69.68 on June 29, it had rebounded by July 1 to $70.25.
Even WaMu saw some recovery. After falling by $4.51 on June 29, to a low of $36.80 in intraday trading, its stock staged a partial rebound to $38.13 by the July 1 close.
“I don’t think it’s particularly surprising at the beginning of a rate cycle to have negative reaction,” said Matthew Park, senior analyst at A.G. Edwards & Sons in New York.
He said he expects Countrywide, which became a mortgage powerhouse in the refinance boom of the past three years, to continue gaining market share.
Homebuilder stocks also fell last week. KB Home in Los Angeles saw its stock drop 1.2 percent on July 1 to close at $67.80, despite issuing $350 million of 6.375 percent senior notes just days before the rate hike to repay bank debt.
“I would expect, as interest rates rise, that we would see a slowdown in home sales,” said Craig Kucera, senior analyst at Friedman Billings Ramsey in Arlington, Va. “There’s going to be a certain segment of the market that could be pushed out of the market as rates rise. I don’t think a 25 basis point increase will have a real substantial impact, however.”
Debt research firm Fitch Ratings said on June 30 that it saw no short-term impact due to the rate increase in several real-estate sectors, including homebuilders, commercial mortgage-backed securities and real estate investment trusts.
Rebecca Flass
Stamp of Disapproval
Shares of Stamps.com Inc. have plunged 27 percent since late April, when the company’s board approved a 1-2 reverse stock split.
More often, a stock split doubles the number of outstanding shares of a company. The price for each share is initially halved, but companies that split their stock usually have confidence that the shares will continue rising.
A reverse split is the opposite. Often, it occurs when a company’s stock price has fallen, because it reduces the number of shares outstanding and increases the per-share price proportionally.
The higher price appears to be a good thing, but it’s seen by market professionals as a negative. In the case of Stamps.com, the number of shares sold short more than doubled between early May and early June.
Shares of Stamps.com had fallen 24.9 percent to $9.85 a share on July 1, down from $13.12 a share on May 12, when the reverse split took effect.
Craig Ogg, vice president of research and development at the Santa Monica-based company, said Stamps.com has not issued any news that caused the stock to drop.
Kate Berry
