Group Homes Financed by Partner's Board

By Walter F. Roche Jr.

An affiliate of Tennessee' s largest provider of group homes for disabled residents has obtained tax free bond financing through a public board on which one of its business partners sits.
A $20 million bond issue approved by the Health and Educational Facilities Board of Nashville and Davidson County is being used  to construct eight group homes for current residents of the Greene Valley Development Center, a state facility under a federal court closure order.
The same bond issue, approved by the Nashville board on May 30, will be used to refinance the debt on facilities providing care to 256 disabled patients.
Sitting on the Nashville board is Richard "Dick" Brown, an attorney and former employee of the state agency providing care to the physically and intellectually disabled.
The bond issue was issued in the name of the WCO AL DP, the non-profit that owns group homes run by the Open Arms Care Corp, another non-profit. But the contract to operate the homes, including the eight new ones, is a for-profit firm called Integra Resources.
Integra is owned, in turn, by the SMI Group and Flatrock Investors. Flatrock is owned by Brown and Joseph Torrence.
Minutes of the May 30 meeting of the Nashville board show that Brown was present for the meeting and was involved in a discussion about the bond issue but recused himself from the vote.
"Mr. Brown then provided information on the services provided at the proposed facilities and an historical overview of the closing of the State of Tennessee's institutional facilities," the minutes state.
"Mr Brown described his consulting and management role with WCO and his involvement in the proposed financing," the minutes continue.
Brown said in an email response to questions that he participated in the discussion at the board's request "given my experience with facilities for intellectually disabled individuals over a career of thirty plus years and my current position as an executive with Integra Resources, which is now manager of Open Arms Care."
Though Brown said he disclosed his own personal financial interest to his fellow Nashville board members, he did not do so during meetings with other county boards whose approval was needed because Open Arms facilities are located in those jurisdictions.
"Because none of these bodies had a financial interest in the bond financing and I am not a member of any of them, I did not make a disclosure of financial conflict of interest at those meetings," Brown said, adding that he accompanied the bond counsel at those meetings in Hamilton, Shelby, Greene and Williamson Counties.
He said he only actually spoke at one of those meetings to answer a question.
Minutes of the Hamilton County Commissioners March 30 meeting note Brown's presence, along with an attorney for Open Arms.
The commission voted its approval of the bond issue at a subsequent meeting.
In Greene County records show the  commissioners were told the refinancing was being requested "to obtain lower interest costs."
Brown said in response to questions that he consulted with legal counsel to ensure that his actions complied with state ethics statutes.
"I did have legal advice from the board attorney, bond attorney and Integra Resources counsel on the applicable conflict of interest requirement and followed it as described," he wrote.
 Technically, Brown added, the only direct beneficiary of the bond issue was WCO AL DP, the nonprofit that owns the facilities, but he acknowledged that Open Arms and Integra "will benefit from the use of the facilities to provide the services requested and required by the State of Tennessee."
He said the Nashville board was the logical choice to seek funding since the same board provided funding to Open Arms Care in 1998.
Records show the bonds issued by the Nashville board were purchased in a private sale by Facilities Funding Group. Facilities Funding, state records show, is located in Brown's Nashville office. He is listed on state records as resident agent for the corporation.
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