Brogdon trustee supports new repayment plan

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Former nursing home developer Christopher Brogdon is seeking a new court-ordered plan to repay the investors he's been accused of swindling just weeks after a federal judge ordered that the previous plan be wound down by mid-September.

The trustee bank is backing the Atlanta-area businessman's request, while the Securities and Exchange Commission has reiterated that it opposes extending the plan.

Brogdon’s request, as well as responses from the SEC and Bank of Oklahoma Financial, all emerged in federal court filings last week, mostly on July 30. It began with Brogdon’s request for a new repayment plan to replace the one that had been in place since 2016 and that a federal judge had ordered only partially continued following its expiration June 30.

The new monitorship plan, a court-supervised effort for Brogdon to repay the roughly $65 million he continues to owe investors he was found liable of defrauding through a string of retirement home bond deals, is summarized in court documents but is itself redacted. It would extend the plan through the end of this year.

Brogdon was found liable in 2015 for fraudulently raising $168 million from 54 conduit municipal bond deals and $22 million from private placements over 25 years. He initially told the court he could repay bondholders by the end of 2017, but both the SEC and his court-appointed monitor have expressed frustration at the slow pace of the repayments despite the recovery of about $33 million for bondholders so far.

Chief among the complaints has been what the monitor described as the lavish lifestyle Brogdon and his wife continue to lead, resulting in monthly personal expenses of some $70,000. The Brogdons continue to own multiple expenses residences and a $1.5 million aircraft despite at least nominal years-long efforts to sell them.

The SEC has told the New Jersey federal court judge presiding over the case that Brogdon’s monitorship is no longer cost-effective and should be ended in favor of a final judgment. Last week the SEC told the judge so again, urging that Brogdon’s motion for a new plan not be granted.

“The motion represents an 11th-hour attempt by the Brogdons to string out the monitorship plan to protect their own assets and lifestyle at the expense of investors,” the SEC told the court.

“With respect to the Brogdons’ remaining assets, any value to investors remains purely hypothetical. Despite a prolonged (in some cases years) marketing period, the Brogdons have either not received any offers at all, have not received offers at the Brogdons’ stated list prices, or their potential counterparties have been unable to obtain financing,” the SEC wrote. The Brogdons should not be permitted to use the fact that some of their assets are under contract to protect all of their remaining personal assets, the vast majority of which are not currently being used for the benefit of investors and are not projected to be monetized for the benefit of investors in the next five months.”

But the Brogdon proposal won the backing of Bank of Oklahoma Financial, which was trustee on 12 Brogdon deals at issue in the repayment plan.

“While results have been slow, overall the plan has been successful,” a lawyer representing BOKF told the court. “The plan reduced the debt for bond offerings for which BOKF acts as Indenture Trustee by over $25 million dollars.”

BOKF blamed “unacceptably high administrative costs” and “unacceptably ineffective efforts to liquidate assets” for jeopardizing the plan, but said the new proposal “meaningfully addresses” those factors.

“Termination of the plan at this time would unnecessarily sacrifice significant economic value to avoid short term costs,” BOKF wrote. “Such a result, in the eyes of the indenture trustee, would be imprudent and contrary to the best interest of the bondholders.”

BOKF requested that the court at least extend the plan into September so as to allow a negotiation of a new proposal or to allow an “orderly” termination.

Whatever the judge’s decision, it is likely bondholders will not be made whole.

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