Banking & Finance  March 10, 2023

Columbine, North Shore shareholders air dispute in bankruptcy court

LOVELAND — An ownership group for North Shore Manor in Loveland has filed for Chapter 11 bankruptcy protection and claims in its petition that a co-owner and his management company improperly forced the financial distress that caused the action.

Its claims were deemed serious enough to prompt an expedited hearing at which a request for emergency court orders were considered and laid over until another hearing Thursday next week.

The case, at least as described by those filing the action, pulls back the curtain on one of the largest nursing-home and assisted-living operators in the region — Columbine Health Systems, its owner J. Robert Wilson, and its management company, Columbine Management Services Inc.

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The bankruptcy is actually two actions, one filed by North Shore Manor Inc., the owner of the nursing home operation at 1365 W. 29th St. in Loveland, and North Shore Associates LLP, the owner of the real estate at that location. The companies are owned by the same people with the same shares in each.

North Shore Manor is located just north of Lake Loveland. Ken Amundson/BizWest.

Wilson is a shareholder in the debtor and also has or had management control of the operation. 

Linda Fogel is listed as a partner in the real estate company; she signed the bankruptcy petition. Keri Riley of the Denver law firm Kutner Brinen Dickey Riley PC is the attorney of record.

Robert Church Jr. signed the petition for the operating company. He’s listed as “chief executive officer (interim)” in the documents. Aaron Garber of the law firm Wadsworth Garber Warner Conrardy PC of Littleton is the attorney of record.

Columbine is represented by attorney John O’Brien of Spencer Fane LLP.

A balance sheet included with the North Shore Manor Inc. filing lists assets of $1.58 million — $1.1 million of which is in accounts receivable — and $2.6 million in liabilities. Among the liabilities are bank loans, one of which became due on March 7, the day after the bankruptcy filing.

Financial records included with the filing were incomplete; one of the requested court orders was to compel Wilson and his Columbine Management Services to produce records that other shareholders in the company have been unable to see. O’Brien said in today’s court hearing that the shareholders have had access to monthly financial records “for decades.”

Over multiple pages of the bankruptcy filing, those shareholders laid out the history. They said that the 120-bed facility across 29th Street from Loveland’s most visible park, North Shore Park, was founded by “four Jewish immigrant families that fled the atrocities of Eastern Europe…”

The four families employed Wilson “in some capacity,” and in 1979, one of the original owners exited the venture and sold his 25% ownership to Wilson (15%) and the other owners (10%). 

In 1980, Wilson became general manager responsible for day-to-day operations, and he later became president of the operation.

In 1997, the corporation was reconfigured and new bylaws adopted, according to the filing. Wilson remained as president and also became CEO. About that same time, the filing alleged, Wilson formed Columbine Health Systems, which included Columbine Management Systems. 

Columbine Health Systems, according to its website, has facilities in Loveland, Fort Collins and Windsor, including 478 nursing-home beds, 215 assisted-living apartments, 307 independent-living apartments, 68 patio homes, 150 homecare clients and about 250 infusion patients.

In 2006, Wilson became managing partner of North Shore Associates, with authority to encumber the property up to 80% of its appraised value.

In the first decade of the new century, all of the original owners died and passed their ownership interests to heirs. Those heirs “had no say in operation of the facility and were never involved or consulted regarding the same,” according to the filing.

O’Brien countered in the hearing that “shareholders collected their dividend checks like coupons and never personally guaranteed [operating loans] like Mr. Wilson did.”

The filing continued: “Over the last year, it has also been revealed and it is believed that, during this time [2006-2022] Wilson purchased several other nursing home facilities… and established several middle-man service providers through which Wilson serviced and continues to service the facility and its residents as well as his other nursing home facilities including but not limited to dietary services, transport, pharmacy, medical supplies, infusion therapies…

“It is believed and that evidence will show by 2022, Wilson single-handedly provided 90% of the services to the facility. …(S)uch contracts were awarded without review by the debtor or NSA and such contracts were above-market.”

Later in the filing, the debtors alleged that Wilson was charging “between 44% – 154% more for certain medical supplies” than what a comparison company was charged. 

In 2018, Wilson notified the other shareholders that the facility was no longer profitable and that distributions to them would stop.

In 2022, Wilson told some shareholders that he intended to retire and sell all of Columbine, and in March 2022 Wilson notified some shareholders that he had a letter of intent to sell all of his holdings, according to the filing.

Efforts to seek information on the deal were rebuffed, the bankruptcy documents said. Wilson’s attorney, Spencer Fane LLP, was reported to have said that the LOI contained confidential information about Wilson’s other operations.

Rental payments to the real estate entity stopped in April 2022 but in mid-summer of that year, Wilson offered to buy out the other shareholders for $12 million, contingent upon sale of all of his Columbine operations. The purchase price would be discounted by certain debts and other unpaid obligations, including two bank loans totalling $2.2 million and a note payable to Wilson for about $800,000.

The deal for Columbine fell through, and the offer to buy out shareholders of North Shore also was abandoned. In October 2022, shareholders were notified by letter that Wilson was not going to retire and would work to restore profitable operations.

Shareholders appointed a new board of directors in November, revoked the partnership agreement with Wilson that had made him managing partner and brought in a consultant to evaluate the operation.

Wilson contacted the new board in February this year and said he “can no longer fund the short term cash needs of North Shore” and recommended a $1 million capital call from the owners. That’s when the board sought bankruptcy counsel.

On Feb. 24, Wilson through his attorney sent a letter asserting monetary and non-monetary defaults of the management agreement and threatened termination of the agreement if defaults were not cured.

The debtors are seeking use of bankruptcy law to prevent the termination of the agreement until the financial situation can be clarified.

To that end, the debtors hired Eisner Advisory Group LLC to help with sorting out the financial situation, including acquiring financial records from Columbine. Robert Church, who signed the bankruptcy petition, is Eisner Advisory’s managing director of health care fraud, forensics and litigation; he was appointed to serve as interim CEO of North Shore.

Motions before the bankruptcy court include:

  • A motion to use cash collateral for operations.
  • A motion to compel turnover of assets, including financial and insurance records.
  • An application to hire an accountant.
  • An application to employ a special counsel to deal with insurance-related matters.
  • An application to employ a bankruptcy attorney.
  • A motion to maintain the cash management system, especially the institution’s current bank accounts that receive the automated monthly payments from patients.

Garber in his presentation at today’s hearing complained of being unable to easily communicate with O’Brien or Columbine, thus making settlement of differences difficult.

O’Brien countered during the hearing and in two written responses filed moments before the hearing that “contrary to the impression the debtor wants to give, the problem of turning over records rests with the debtor. CMS is anxious to part ways with the debtor as quickly as possible, to include handing off the records.

“The debtor’s motion … tells quite a tale demonizing CMS and Robert Wilson with the objective of stampeding readers into blaming someone else for the debtor’s failures.”

He said shareholders elected as board chairman Mayer Kohn, the son of North Shore’s largest shareholder, who demanded that Wilson buy out the shareholders’ shares “for more than they were worth, or he would put NSM into bankruptcy.”

He also alleged at the hearing that Kohn had signatory authority over the nursing home’s bank account, had access to bank records and withdrew money on his own from the account to pay bankruptcy professionals.

“Kohn found it more convenient to obtain working capital by stiffing trade creditors through the bankruptcy process,” O’Brien wrote in a response.

O’Brien in the second response, also filed minutes before today’s hearing, said that a company operated by Wilson, Wapello Holdings II LLC, has a first lien on all accounts. O’Brien said Wapello Holdings II was formed to buy out loans that Wilson had personally guaranteed on behalf of North Shore. 

He complained that Columbine has been restricted from coming onto the site and yet has responsibility for the residents. “Columbine can’t be responsible for residents it can’t see,” he said.

While Columbine wants to exit the situation and remove its signage as soon as possible, O’Brien said that his client projects that North Shore “will not be sustained and residents will have to be relocated. … North Shore is going to lose money, but we [Columbine] shouldn’t have to lose money as a result of the filing.”

Judge Joseph Rosania Jr. of the bankruptcy court said an often unstated purpose of bankruptcy is to force the parties to talk when acrimony has caused stiffening of positions. He ordered the parties to attempt to agree on four motions to handle cash collateral and the other issues raised by the debtor’s proposed motion. “If you can’t agree, then I’ll rule,” he said. 

A hearing was set for 3 p.m. Thursday to consider the motions.

A call to Wilson early today was not returned. Wilson and his wife, Kitty, are well known in health care circles in the region. They established the Columbine Health Systems Center for Healthy Aging in the Health Care & Medical Center building on the Colorado State University campus.

The actions filed in Federal Bankruptcy Court in Denver are North Shore Manor Inc., case number 23-10809, and North Shore Associates LLC, case number 23-10808.

LOVELAND — An ownership group for North Shore Manor in Loveland has filed for Chapter 11 bankruptcy protection and claims in its petition that a co-owner and his management company improperly forced the financial distress that caused the action.

Its claims were deemed serious enough to prompt an expedited hearing at which a request for emergency court orders were considered and laid over until another hearing Thursday next week.

The case, at least as described by those filing the action, pulls back the curtain on one of the largest nursing-home and assisted-living operators in the region — Columbine Health Systems, its owner…

Ken Amundson
Ken Amundson is managing editor of BizWest. He has lived in Loveland and reported on issues in the region since 1987. Prior to Colorado, he reported and edited for news organizations in Minnesota and Iowa. He's a parent of two and grandparent of four, all of whom make their homes on the Front Range. A news junkie at heart, he also enjoys competitive sports, especially the Rapids.
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