Family members of former residents of Westchester Meadows senior housing in Ossining claim that a non-profit organization that took over the facility has diverted more than $19 million in refundable entrance fees.
The family members accused Bethel Methodist Home and several affiliates of breach of covenant in a class action complaint filed on May 31 in Westchester Supreme Court.
After gaining control of the facility in 2016, the complaint states, Bethel Methodist Home and its affiliates “systematically and improperly diverted, or permitted to be siphoned off, facility funds and assets.”
Westchester Meadows was licensed as a continuing care retirement community. It had 120 independent living apartments, a nursing home and a health center on a 29.5-acre site. Each residents paid refundable entry fees to live there.
When Westchester Meadows petitioned for bankruptcy protection in 2015, according to the complaint, entry fee deposits totaled $19.2 million.
Bethel submitted the winning bid to take over the facility, the complaint states. It assumed the obligation to refund entry fees but tied the payments to financial metrics.
Before, residents had to be refunded within a year of departing. Now 7.5% of the deposits would be refunded within a year and the rest would be repaid based on Bethel’s financial targets and annual operating surplus.
According to the complaint, a Bethel executive testified at a bankruptcy hearing that the financial goals would be achieved within three years.
The state attorney general and Department of Health put conditions on the deal, according to the lawsuit. Bethel could not commingle Westchester Meadows assets and liabilities with affiliates; pay affiliates’ expenses; or pay more than $500,000 a year to its management affiliate. It had to account for the facility’s finances separately from all other Bethel operations.
Bethel officially acquired Westchester Meadows in October 2016 and rebranded it as The Knolls.
Bethel’s ventures included several nonprofit entities, such as Bethel Springvale Nursing Home Inc., in Croton-on-Hudson, and one for-profit entity.
After the deal closed it formed two new management companies, one as a non-profit and one for-profit, according to the complaint.
Almost immediately, the complaint states, Bethel increased the Ossining facility’s management fee to $800,000.
From 2017 through 2022, Bethel allegedly loaned $13.2 million to one of its affiliates; transferred $17.4 million to five affiliates; and paid $1.3 million in dividends to an affiliate.
Bethel refunded the first, 7.5% in entrance fees, according to the complaint, but has not paid the remaining refunds, “claiming that the financial metrics have not been met.”
The families claim the financial metrics would have been met if Bethel had not paid excessive management fees and dividends and transferred funds to the affiliates.
The complaint charges Bethel and its affiliates with breach of covenant, tortious interference with contracts, violation of the state not-for-profit corporation law, and fraudulent conveyances. It accuses executives Anastasios Markopoulos and Beth Goldstein of aiding and abetting fraudulent conveyances.
The case was brought by Susan Newman, Andrea P. Taber, Andrew H. Popik, Geraldine Bellush Goldberg, and Deborah Lynda Bellush, as representatives of former residents. It was filed as a class action complaint on behalf of more than 60 people who were residents as of 2016.
Bethel did not reply to an email submitted through its website, asking for its responses to the allegations.
Mr. Heltzel , can you please tell us the name of the law firm that is bringing the action against The Knolls. We would like to join it. Thank you very much.