Brogdon wears out SEC's patience

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The Securities and Exchange Commission has run out of patience for Christopher Brogdon, telling a federal judge the SEC doesn't support giving the Atlanta-area businessman any more extensions on the timetable to repay the nursing home bond investors he has been found liable for defrauding.

The SEC filed a letter in a New Jersey federal courtroom Thursday informing Judge Kevin McNulty that the court-approved monitorship plan, under which Brogdon agreed to repay millions of dollars to investors harmed by a string of senior living bond deals, is “unlikely to generate additional benefit for investors.”

“Given the history of the monitorship plan, which has been characterized by a slower pace of sales, at lower prices, and with lower net proceeds than the Brogdons have projected, the SEC is concerned that further extensions will serve only to provide injunctive protection to the Brogdons and their assets while at best treading water with respect to the monitor’s fees, and thus will not generate additional value for investors,” the SEC told the court.

The plan would be converted into a money judgment under an existing court order, with a financial penalty to be determined later.

The SEC in 2015 charged Brogdon with fraudulently raising $168 million from 54 conduit municipal bond deals and $22 million from private placements over 25 years, using the money for personal expenses and other business pursuits while the nursing homes they financed defaulted on the payments. The court found Brogdon liable for the fraud that same year.

In 2016 the court ordered Brogdon to submit a plan to repay bondholders in full, and Brogdon said he could achieve that by the end of 2017. Soneet Kapila, a Fort Lauderdale, Florida, CPA, was assigned a monitor to oversee Brogdon’s progress in converting his personal assets into money for investors.

But in an April 30, 2019, report, Kaplila told the court that Brogdon was uncooperative and appearing to be dragging his feet on the sales of his personal property while continuing to spend lavishly on himself and his family.

Brogdon’s attorneys disputed Kapila’s version of events in their own letter to the judge, asserting that their client was making a good-faith effort to sell two expensive homes and an aircraft. Brogdon exited personal bankruptcy last year.

“The Brogdons still own, and are paying high carrying costs for, three assets—their condominium at the St. Regis in Atlanta, their vacation home on St. Simons Island, and their King Air 300 airplane—that have been the subject of extensive discussion before the Court for more than a year,” the SEC told the judge.

Though investors have been paid nearly $33 million under the monitorship plan, they are still owed more than $65 million, the SEC said. That means that regardless of the court's actions, the chance is slim that investors will be made whole.

Brogdon has been and projects to continue spending about $70,000 a month on personal expenses, the SEC told the court, an amount Brogdon’s lawyers have said is attributable mainly to the costs of maintaining his existing assets so they can be sold. If the monitorship were to continue, the SEC wrote, the sale of the property already under contract would probably not justify the cost of Kapila and his professionals working on the plan.

The decision is McNulty’s whether to press on with the monitorship plan or to default back to the judgment entered in 2015. In addition to ordering Brogdon and his wife to repay in full all investors, the judgment orders them to pay disgorgement and prejudgment interest, and for Brogdon to pay a civil penalty, in amounts to be determined by the court at a later date.

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