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 Sunrise Insider Sales Need Independent Probe, Pension Fund Says

Nov. 26 (Bloomberg) -- Stock sales by directors of Sunrise Senior Living Inc., a U.S. operator of homes for the elderly, warrant an independent investigation, the Service Employees International Union's pension fund said in a Nov. 20 letter to the board.

Five board members, including founder and chief executive Paul J. Klaassen and his wife, director Teresa M. Klaassen, sold $32 million in shares before a May 9 announcement that the company would review its accounting, pension fund spokesman Dan O'Sullivan said in a statement today that repeated claims made in last week's letter.

The union has been campaigning to organize some company employees, McLean, Virginia-based Sunrise said in an e-mailed statement. Board members couldn't have known about the accounting review before selling their shares, the company said in the statement, provided by its treasurer, Carl Adams.

``Sunrise shareholders deserve to know what's going on with the company's finances,'' Steve Abrecht, administrator of the $11 billion fund, the SEIU Master Trust, said in the fund's statement. ``We need a thorough investigation by an outside source to restore shareholder confidence in the integrity of the Sunrise board and the accuracy of its financial statements.''

The fund, which says it owns 8,000 Sunrise shares, valued at $260,000, is asking Sunrise to bring in an independent monitor to hire outside counsel to investigate what it calls ``bullet dodging'' share sales and ``improbably dated'' executive stock option grants. The fund wants a response by Dec. 15.

44 Communities

Sunrise, which employs 40,000 people and operates more than 400 retirement communities, has delayed reporting earnings for three straight quarters while it reviews accounting procedures. Sunrise and Chicago-based Brookdale Senior Living Inc. are the two biggest providers of senior housing, each serving about 50,000 residents.

According to the pension fund, the three other Sunrise directors who also sold shares before the disclosure are: Ronald Aprahamian, an investor and chairman of Sunrise's audit committee; Thomas J. Donohue, chairman of the U.S. Chamber of Commerce; and J. Douglas Holladay, founder of Washington-based Park Avenue Equity Partners LP. The sales were first reported today in the New York Times.

Telephone messages left at the Klaassen home weren't immediately returned, nor were messages left at the home of Aprahamian in Great Falls, Virginia, and at Holladay's Park Avenue Equity office in Washington. Donohue's Chamber of Commerce spokesman Eric Wohlschlegel didn't respond immediately with comment.

Statement

``Any board member or Sunrise employee who conducted stock transactions earlier this year could not have had prior knowledge of the eventual accounting review and delay in our first-quarter earnings,'' the Sunrise statement said.

Sunrise said in its statement that all stock sales were conducted within a permitted trading window or were scheduled sales. The company also said it believes its stock-option practices were proper.

``Nevertheless, the Board will give the SEIU's letter careful consideration and respond in an appropriate and timely manner,'' the statement said.

The Klaassens sold 600,000 shares in 12 transactions, generating $21.4 million, from Dec. 19, 2005, to May 2, the fund said in its letter. They sold 100,000 shares at an average price of $36.91, netting $3.6 million, on May 1 and 2, a week before the announcement that drove shares down to $32.35, the SEIU said. The Klaassens still own about 10 percent of the stock outstanding, according to Bloomberg data.

1.8 Million Members

The SEIU fund is requesting the investigation as a shareholder, not as a union, O'Sullivan and Abrecht said. Only 95 of the SEIU's 1.8 million members work for Sunrise, at a nursing home in Ontario, and there are no outstanding bargaining issues there, O'Sullivan said. Sunrise's Adams said the union won the right to represent employees there last week.

``We're very active in corporate governance issues,'' Abrecht said in an interview. ``We file shareholder resolutions every year at companies where we don't think practices are up to snuff.''

Shares of Sunrise peaked at $39.49 on March 29 and fell as low as $25.85 on July 21. The shares closed Friday at $32.50 in composite trading on the New York Stock Exchange.

``It's come back some, but not all the way,'' said Abrecht, whose fund participated in shareholder activism earlier at Palo Alto, California-based Hewlett-Packard Co. and Minnetonka, Minnesota-based UnitedHealth Group Inc. ``That's one of the problems is we still don't know the extent of the accounting revisions.''

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