WASHINGTON, May 29 // -- The SEIU Master Trust, a shareholder of Sunrise Senior Living, Inc., is calling on the company's Board to remove its outside directors and replace them with truly independent directors who have the range of abilities and experiences necessary to rectify the company's leadership problems. Sunrise announced this morning that the SEC has commenced a formal investigation at the company.
"This Board is failing," said Stephen Abrecht, executive director of the SEIU Master Trust, the national pension fund for the Service Employees International Union. "In the last year we have seen an accounting review that keeps expanding, four straight quarters without filing financial statements, admission of material weaknesses in internal controls, multiple SEC inquiries, an expanding Special Committee investigation, the dismissal of the chief financial officer, and now the SEC investigation."
"On top of these leadership failures, the directors' conflicts of interest make it impossible for shareholders to have confidence in the Board as currently constituted," Abrecht said. "Sunrise is a leader in an industry undergoing rapid consolidation, with intense M&A activity. The company and its shareholders deserve a powerful Board that can navigate in such a transaction- rich environment to enhance shareholder value."
In a letter to the company's Board of Directors, the pension fund raised concerns that outside directors' personal and business ties to Sunrise and its management are impairing their objectivity and weakening their ability to pursue their fiduciary duties to shareholders. Conflicts of interest include:
-- Ronald V. Aprahamian served as a consultant to the company while a
director and sold shares just two weeks before the company announced
its accounting review; previously he was charged by the SEC with
leaking inside information about an impending takeover to three friends
and later consented to a court injunction and paid a $33,000 civil
-- Craig R. Callen, during his entire tenure as a director, has worked at
companies that have done significant business with Sunrise;
BusinessWeek has questioned the propriety of his insider trading at his
current employer, Aetna.
-- Thomas J. Donohue is a good friend of CEO Paul Klaassen and his wife,
Teresa Klaassen, who is also a board member; the Klaassens lived with
Mr. Donohue and Mr. Klaassen worked for Mr. Donohue at the U.S. Chamber
of Commerce, where they now sit on the Board together.
-- William G. Little is a former chairman and current director of the
Chamber Board and is the current chairman of the National Chamber
Foundation, where Mr. Klaassen and Mr. Donohue are directors.
-- J. Douglas Holladay was a director at CNL Hotels and Resorts, a former
affiliate of CNL Financial Group, which has been an owner of multiple
assisted living facilities managed by Sunrise.
Sunrise Senior Living (NYSE: SRZ) is the nation's second-largest operator of assisted living facilities and has a market capitalization of $1.6 billion.
In addition to recruiting a new, more independent group of outside directors, the SEIU Master Trust is also calling on the company to take action to improve its corporate governance, including:
-- Declassify the Board of Directors
-- Establish majority voting for directors
-- Separate the chairman and CEO positions
-- Remove the "poison pill"
-- Eliminate overlapping committee memberships
-- Establish director independence policies requiring at least two thirds
of the Board and all members of the audit, compensation, and nominating
committees to meet the independence standards of the Council of
Institutional Investors as defined in its Corporate Governance Policies
By immediately implementing these best-practice corporate governance standards and by appointing new independent directors, the SEIU Master Trust believes that the Sunrise Board can eliminate many of the conditions that gave rise to the company's accounting problems, restore shareholder confidence, and set the company on a sound footing for future growth. The Master Trust is calling on the Sunrise Board to announce its intention to make these changes by June 16, 2007.
The SEIU Master Trust first raised concerns in November about insider stock sales, questionable accounting practices, and improbably-timed stock option grants at Sunrise. Following the Master Trust's letter, the company announced that it had received an inquiry from the SEC and set up a special committee with outside counsel to investigate certain of the issues raised in the Master Trust letter.
Sunrise recently expanded the scope of its investigation to include accounting procedures and internal controls, and early this month the company fired its Chief Financial Officer. Sunrise still cannot determine when it will be fully caught up with its financial statements; the company is restating results for 2003, 2004 and 2005 and has delayed results for 2006 and the first quarter of 2007.
The SEIU Master Trust and other SEIU-sponsored funds are active proponents of sound corporate governance as a vital means to protect and enhance shareholder value.
To view a copy of the letter to Sunrise and for more information, visit http://www.sunriseshareholders.org.