Canyon Creek Development, Inc., Sunwest Management, Inc ...
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STATE OF OREGON
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DEPARTMENT OF CONSUMER AND BUSINESS SERVICES DIVISION OF FINANCE AND CORPORATE SECURITIES
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BEFORE THE DIRECTOR OF THE DEPARTMENT OF
CONSUMER AND BUSINESS SERVICES
6
7 In the Matter of:
8 CANYON CREEK DEVELOPMENT, INC., SUNWEST MANAGEMENT, INC.,
9 CANYON CREEK FINANCIAL, LLC., SENIOR LIVING PROPERTIES II, LLC.,
10 SENIOR LIVING PROPERTIES III, LLC., KDA CONSTRUCTION, INC.,
11 SENENET, INC., 12 ENCORE INDEMNITY MANAGEMENT, LLC.,
ENCORE INDEMNITY, LTD., 13 SILVER INSURANCE MANAGEMENT, LLC., and
SILVER INDEMNITY, LTD.
14 Respondents.
15
S-09-0028-1
ORDER TO CEASE AND DESIST, ORDER DENYING EXEMPTIONS, ORDER ASSESSING CIVIL PENALTIES, AND NOTICE OF RIGHT TO A PUBLIC HEARING
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Division of Finance and Corporate Securities Labor and Industries Building 350 Winter Street NE, Suite 410 Salem, OR 97301-3881 Telephone: (503) 378-4387
Page 1 -- CANYON CREEK DEVELOPMENT, INC., et al. -- S-09-0028-1 -- ORDER TO CEASE AND DESIST, ORDER DENYING EXEMPTIONS, ORDER ASSESSING CIVIL PENALTIES, AND NOTICE OF RIGHT TO A PUBLIC HEARING.
1 2 I.
Contents
FINDINGS OF FACT.................................................... 5
3 A. THE RESPONDENTS AND OTHER PARTIES ................................. 5
4 B. OVERVIEW ......................................................... 18
5
C. ORGANIZATION, OPERATION, AND FINANCING ........................... 21
6
1. Initial Project Acquisition -- Formation of the Co-Owner ........ 21
7
2. Formation and Financing of the Master Tenant ................... 27
8
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3. The Master Lease Agreement ..................................... 31
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4. Registration or Filing of TICs and Preferred B Interests under ORS
11
59.065 or ORS 59.049 ................................................ 33
12
5. Facility Construction and Development (Land Acquisition Only) . 34
13
6. Facility Management and Operation (Facility and Land Acquisition)
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35
15
7. Project Sale/Liquidation ....................................... 36
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Division of Finance and Corporate Securities Labor and Industries Building 350 Winter Street NE, Suite 410 Salem, OR 97301-3881 Telephone: (503) 378-4387
17 D. COMINGLING OF FUNDS .............................................. 37
18
1. Additional Sources of Financing ................................ 37
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2. Cash Management ................................................ 38
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3. Liquidity Management ........................................... 38
21
E. COLLAPSE OF THE SUNWEST ENTERPRISE ............................... 42
22
23 F. Canyon Creek Financial Compliance Examination .................... 45
24
1. Books and Records Violations ................................... 45
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2. Suitability of Canyon Creek Financial's Broker-Dealer Salesperson
26
Recommendations ..................................................... 48
Page 2 -- CANYON CREEK DEVELOPMENT, INC., et al. -- S-09-0028-1 -- ORDER TO CEASE AND DESIST, ORDER DENYING EXEMPTIONS, ORDER ASSESSING CIVIL PENALTIES, AND NOTICE OF RIGHT TO A PUBLIC HEARING.
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3. Hiring of Richard Wielde ....................................... 48
2
4. Insolvency of Canyon Creek Financial ........................... 50
3
G. Representative Examples of Projects in which the Sunwest Enterprise
4
and Affiliates Offered or Sold Securities ............................. 50
5
1. Example #1: Chestnut Lane Facility Acquisition ................. 50
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7
2. Example #2: West Salem Senior Living Land Acquisition Phase I . 56
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3. Example #2 (cont'd): West Salem Senior Living Land Acquisition
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Phase II ............................................................ 60
10 II. CONCLUSIONS OF LAW................................................. 64
11
A. ORS 59.015 Definitions ........................................... 64
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B. Violations of ORS 59.135(2) and ORS 59.205(2) .................... 66
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1. Material Omissions ............................................. 67
Division of Finance and Corporate Securities Labor and Industries Building 350 Winter Street NE, Suite 410 Salem, OR 97301-3881 Telephone: (503) 378-4387
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2. Untrue Statements .............................................. 69
16 C. Violations of ORS 59.135(3) -- Direct Participants ................ 70
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D. Violations of ORS 59.135(3) -- Indirect Participants ? and ORS
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59.205(2) ............................................................. 71
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E. Offers and/or Sales of Unregistered Securities under ORS 59.055 .. 71
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21 F. Hiring Unlicensed Broker-Dealer and Broker Dealer Salespersons under
22 ORS 59.165(3) and Willfully or Repeatedly Violating or Failing to Comply
23 with Provisions of the Oregon Securities Laws under ORS 59.205(3) ..... 72
24 G. Canyon Creek Financial's Book and Records Violations under ORS
25 59.195, ORS 59.205(14) and OAR Chapter 441, Division 195 .............. 72
26 H. Failure to Supervise Broker-Dealer Salespersons of under ORS
Page 3 -- CANYON CREEK DEVELOPMENT, INC., et al. -- S-09-0028-1 -- ORDER TO CEASE AND DESIST, ORDER DENYING EXEMPTIONS, ORDER ASSESSING CIVIL PENALTIES, AND NOTICE OF RIGHT TO A PUBLIC HEARING.
1 59.205(13) and OAR 441-205-0210 promulgated thereunder ................ 73
2 I. Unsuitable Recommendations under ORS 59.205(2) and OAR 441-205-0140
3 promulgated thereunder ................................................ 73
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J. Insolvency under ORS 59.205(1) ................................... 74
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K. Actual Expenses Incurred at the Examination under ORS 59.235 ..... 74
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7 III. ORDERS ........................................................... 74
8 A. Oregon Securities Law Violations ................................. 74
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1. Cease and Desist ............................................... 74
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2. Denial of Exemptions ........................................... 75
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3. Actual Examination Expenses .................................... 75
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4. Civil Penalties ................................................ 75
14 B. Summary of Civil Penalties ....................................... 77
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Division of Finance and Corporate Securities Labor and Industries Building 350 Winter Street NE, Suite 410 Salem, OR 97301-3881 Telephone: (503) 378-4387
Page 4 -- CANYON CREEK DEVELOPMENT, INC., et al. -- S-09-0028-1 -- ORDER TO CEASE AND DESIST, ORDER DENYING EXEMPTIONS, ORDER ASSESSING CIVIL PENALTIES, AND NOTICE OF RIGHT TO A PUBLIC HEARING.
1
The Director of the Department of Consumer and Business
2 Services (hereinafter, the Director) has conducted and is
3 continuing to conduct an investigation into certain business
4 activities of Canyon Creek Development, Inc.; Sunwest
5 Management, Inc.; Canyon Creek Financial, LLC; Senior Living
6 Properties II, LLC; Senior Living Properties III, LLC; KDA
7 Construction, Inc.; Fuse Advertising, Inc.; Contract
8 Interiors, LLC; Hill Architects, P.C.; Senenet, Inc.; Lease
9 Reserve, LLC; Encore Indemnity Management, LLC; Encore
10 Indemnity, Ltd.; Silver Insurance Management, LLC; Silver
11 Indemnity, Ltd.; Jon Michael Harder and others.
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The Director has determined that certain of those parties
13 have engaged in activities constituting violations of ORS
14 59.005 to 59.451, 59.991 and 59.995 (the Oregon Securities
15 Law).
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The Director, acting by the authority of the Oregon
17 Securities Law, hereby issues the following Findings of Fact,
18 Conclusions of Law, Orders, and Notice of Right to a Public
19 Hearing.
20
I. FINDINGS OF FACT
21 The Director FINDS that:
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A. THE RESPONDENTS AND OTHER PARTIES
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1. Canyon Creek Development, Inc. (Canyon Creek
24 Development) is an Oregon domestic for-profit corporation
25 (Business Registry Number: 012198-98) formed on or about March
26 28, 2001 with offices located at 3723 Fairview Industrial
Division of Finance and Corporate Securities Labor and Industries Building 350 Winter Street NE, Suite 410 Salem, OR 97301-3881 Telephone: (503) 378-4387
Page 5 -- CANYON CREEK DEVELOPMENT, INC., et al. -- S-09-0028-1 -- ORDER TO CEASE AND DESIST, ORDER DENYING EXEMPTIONS, ORDER ASSESSING CIVIL PENALTIES, AND NOTICE OF RIGHT TO A PUBLIC HEARING.
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