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Shake-up shakes Manor residents

Meals were served on time, shuttle vehicles picked up and dropped off residents and the sun glistened off hundreds of Rogue Valley Manor windows Monday on Barneburg Hill.

In many ways, the Rogue Valley Manor promises a life above the fray for its upscale continuing care retirement community clientele, but lately there have been a lot of frayed nerves.

Following Friday's removal of seven of the nine Manor board members and the firing of veteran Executive Director Kevin McLoughlin, the newly constituted three-person board withdrew its legal challenge to Pacific Retirement Services' control of the 51-year-old retirement community.

"We are going through a difficult time," wrote Doug Philips, resident council president to Manor occupants on Monday. "We have lost Kevin McLoughlin, our excellent and much-loved executive director. Our board lost a legal battle, and seven members of that board have been dismissed by Pacific Retirement Services. Our reactions to these sudden and unexpected changes are ranging from outrage to grief."

Philips spent much of the day reviewing possible steps the Manor's 960-plus residents may take in an ever-widening rift that culminated in the former board — appointed by Pacific Retirement Services — filing suit Aug. 10 to separate Rogue Valley Manor from PRS.

Pacific Retirement Services, created by Manor management in 1991 to support the Medford senior community, and eventually facilities in five states, responded by putting McLoughlin on administrative leave and serving notice it intended to fire what it considered renegade RVM board members.

When Jackson County Circuit Judge Philip Arnold declined to issue a temporary restraining order to block the dismissals last week, that set the stage for PRS to build a new board — currently consisting only of board Chairman Bill Leever and Vice Chairman Ed Jolly — both of whom are also members of the governing PRS board — and former Jackson County Commissioner Sue Kupillas, who was appointed Friday.

As of Monday, PRS chief operating officer Mike Morris continued in a dual role, after taking on McLoughlin's duties two weeks ago.

"We have spoken to a few other potential new members and are waiting for their responses," PRS chief executive officer Brian McLemore said. "In addition, we are working with resident leadership to bring a Manor resident on the board as well. In the past there has not been a resident as a voting member on the Manor board."

Both the dismissed board members and Philips issued statements Monday, hinting that there are plenty of issues that have not been resolved by the shake-up.

"What PRS did was not illegal, as Judge Arnold concluded," wrote the former board members — Bruce Van Zee, Dave McLaughlin, Jim Wright, Len Merryman, Carol Christlieb, Rick Hutchins and Patti Metz. "We concur that his ruling follows the letter of the law, however it did not speak to the merits of our complaint against PRS. We had hoped he would grant a temporary restraining order to allow us to negotiate with PRS in the light of public scrutiny, in an effort to address not a legal issue, but rather a moral one."

Once removed from their voluntary positions, Manor board members lost insurance that would have covered them in case of litigation, Van Zee said. As a result, they limited their comments to a single document.

"Boards of non-profit organizations are ethically bound to be fiduciary agents for their organizations," the members wrote. "Although the PRS/Manor relationship started in mutual trust in 1991 when the Manor formed and funded PRS and most of the board members and executives were working for both organizations; over the years, the interests of the two entities diverged and in our collective opinion PRS breached that trust and their fiduciary duty to the Manor and its residents.

"At first glance," the letter continued, "given that both PRS and RVM were separate non-profit corporations and each had its own board, the PRS board would not necessarily be expected to have a fiduciary relationship with the Manor because the Manor had its own board to protect it and perform the fiduciary duties. The action taken by PRS on Friday proved that to be an illusion. Perhaps PRS should just abolish the RVM board and the management contract (since it basically will be negotiating with itself) and remove all pretenses.

"At this point, we can all see that the residents of the Manor have no recourse other than the good will of PRS itself; and given the recent history, that is thin comfort."

Following Arnold's decision last week, McLemore told the Mail Tribune that the Manor board "approved the formation of PRS in 1991 after two years of intense study, which included advice from two nationally respected law firms.

"The current structure was selected by the (RVM) board because it allowed the new company (PRS) to grow its mission and not put Rogue Valley Manor assets at risk," McLemore wrote in an email. "Alternative structures that were studied did not provide this same protection."

Among the issues roiling Manor residents has been the $3,500 per unit annual maintenance fee — about $2,000 more than the actual services delivered, according to Thomas McDermott, a Portland lawyer who represented the former board members in court. McLemore disputed that.

"The management fee arrangement has been disclosed in residence and care agreements signed by residents upon moving in to RVM," McLemore wrote. ". . . The management fee is a percentage of revenue and we believe is well within industry standards. This has been acknowledged just this year when the management fee was reviewed and approved by the banks that provide financing for the Manor. No funds are taken from Rogue Valley Manor reserves for other PRS affiliated communities."

More immediate to the Manor — and an irritant for residents — is the expenditure of nearly $18 million in Manor funds tied to the development of Centennial Golf Course. A second matter was the land swap for property where the Homewood Suites hotel is located off Ellendale Drive.

"The core issues for me are the way PRS handled the Rogue Valley Manor funds relative to the Centennial land purchase," said Jim Ellis, who once led new business ventures for Pacific Telesis and has lived in the Manor for six years. "It was egregious. Whether the Rogue Valley Manor got an appropriate amount of compensation for the land traded dealing with the motel remains an open question as is as what they do with the funds we send to PRS each month."

Last week, roughly 85 percent of the Manor residents signed a petition in a matter of hours to support McLoughlin and the dissident board members' efforts. To that end, Philips has appointed a steering committee to review the residents' next move.

"We're studying options to see whether we should go to court or force some kind of negotiation," Philips said. "We know it wastes time, but we have to know the effects it's going to have on the Manor residents and PRS."

Reach reporter Greg Stiles at 541-776-4463 or e-mail business@mailtribune.com.