Attorney General Sends Staff from San Francisco and Sacramento to Meet with the Ad Hoc Committee to Save Keiro
LOS ANGELES: November 24, 2015 – Two days before Thanksgiving, the Office of the California Attorney General (“AG”) committed three staff members to fly down from their San Francisco and Sacramento offices to hear representatives from the Ad Hoc Committee to Save Keiro and 16 members of Congress represented by the Honorable Maxine Waters present the reasons why the community is outraged by Senior Assistant Attorney General Tania Ibanez’s decision to waive the community’s right to a public hearing which would have ensured that the general public was informed of the planned sale of Keiro’s non-profit facilities to a for-profit company and, most importantly, for the AG to hear public comment. Once the public hearing was waived and the opportunity for public comment was effectively eliminated, the AG approved the sale of Keiro’s two non-profit nursing homes, one non-profit intermediate care facility, and one non-profit retirement home to Pacifica, a for-profit real estate development company based on what appears to be inadequate, inaccurate and incomplete, if not, intentionally misleading and fraudulent information submitted by Keiro management to the Attorney General’s office. All meeting participants introduced themselves and then meeting facilitator, Mark Breckler, Chief Assistant Attorney General, Charitable Trusts Section said “we are here in listening mode”. The Ad Hoc Committee representatives began to present the many hours of work by both committee and community members who have summoned the courage to stand up and work tirelessly and passionately to Save Keiro.
From Keiro’s own website page called ‘Our History’, Keiro is described as a non-profit organization with the following beginning,
“In 1961, a group of eight community leaders — George Aratani, Edwin Hiroto, Kiyoshi Maruyama, James Mitsumori, Gongoro Nakamura, Frank Omatsu, Joseph Shinoda, and Fred Wada — established Keiro Senior HealthCare to meet the needs of Japanese American seniors. This formidable achievement by the Founders of Keiro created a culturally-sensitive environment with familiar language, food, and values, a place for seniors in their twilight years to call “home.””
“Home” is the operative word in this description that epitomizes what people think of when they think of Keiro. For almost 50 years now, the single word “Keiro” has become synonymous with the Keiro nursing homes, not the Institute for Healthy Living and its Genki Living community education programs. The webpage goes on to say,
“Through the courage and sacrifices of the Founders, along with the generosity of many donors and volunteers, Keiro has grown year by year. Today Keiro is the largest, Japanese health care provider in the nation and encompasses
- Keiro Nursing Home and Special Care Unit (See photo of historic Max Malztman building purchased from the Jewish Home for the Aged).
- South Bay Keiro Nursing Home
- Keiro Intermediate Care Facility
- Keiro Retirement Home
- The Institute for Healthy Aging at Keiro
The history of Keiro is a proud testimony of the Japanese American community banding together to meet the needs of its people. Today, our community is aging faster than any other; one in five Japanese Americans is over age 65, approximately twice the national average, and this number continues to grow rapidly. Thanks to the foresight of the Founders back in 1961, Keiro continues to respond to the increasing and ever-changing needs of our elderly and their families.”
The buyer is Pacifica Companies, self-described as “Founded in 1977, Pacifica is a privately-owned real estate firm with operations that span the globe.” Their philosophy as stated on their website is “Pacifica’s goal is to always strive to achieve the greatest returns to the company while maintaining diversification and substantial liquidity, as well as minimizing risk to Pacifica’s and our partners’ capital.”
Before Pacifica was even considered as a potential buyer, a December 20, 2013 article printed in the Rafu Shimpo reports Keiro CEO Shawn Miyake’s reasons for contemplating the sale of the facilities as: (1) declining funds, (2) changing demographics and (3) changing needs in the Japanese American community.
Nikkei Demographic Changes and Keiro’s Flawed Paradigm of Reduced Need for Facilities.
While these three reasons are very interdependent, the Ad Hoc Committee first countered Keiro’s “significantly reduced need for Keiro facilities due to changing demographics” reasons. Keiro contends that the demographics of the Japanese American community is changing in such a way that eliminates the need for the Keiro facilities but somehow does not eliminate the need for their Genki Living programs. Keiro claims that fewer Sansei and Yonsei than Issei who speak Japanese, then implies that if and when the Sansei and Yonsei need a facility for the elderly, they will not want to go to a Keiro facility. Besides providing Japanese-speaking caregivers, Keiro also provides quality care in an environment where the cultural norms for social interactions are familiar and comfortable as the elderly make the transition from losing their independence and the comfort of living in their own home to adjusting to a new assisted living facility. This environment and quality of care still makes Keiro’s facilities a preferred option for Japanese Americans whether or not Japanese is their primary language.
Another demographic change that Keiro cites as a change which results in a reduced need for Keiro’s facilities is interracial marriage among the Nikkei. Keiro implies that interracial marriage causes the Nikkei to abandon their cultural heritage and to de-identify themselves as Japanese Americans. Herein lies the flaw in Keiro’s paradigm. Shawn Miyake and his board do not know and do not understand the Japanese American community when it comes to taking care of its elders. They only consider Nikkei and fail to recognize the recent Issei as part of the Japanese American population for whom Keiro facilities are intended to serve. The population in the Keiro facilities is already predominately Japanese-speaking Shin-Issei, not Nikkei. This reality of diversity in the JA population should have been taken into consideration in formulating the management policy of the Keiro facilities. The Keiro board is made up largely of Nikkei, whereas Keiro residents are mostly native Japanese speakers. A former chairman of the Keiro board, Frank Kawana, exhibited this divide clearly, when he was heard saying to a Nikkan San reporter, “Keiro was founded for Issei and Nisei, not Shin-Issei, I’m sorry to say. They don’t participate in our community. They have no right to say, ‘You can’t do this, you can’t do that.’ They have no right.” The Ad Hoc Committee made it clear to the AG that the Japanese American community that is fighting to Save Keiro is an inclusive community of the Issei pioneers and their descendants, as well as, the post-WWII Shin-Issei. If the needs of the Shin-Issei were unworthy of mention by Shawn Miyake and his board, then they are unworthy stewards of this community treasure known as the Keiro Homes.
Keiro Failed to Inform Community of Pacifica Transaction/Absence of Good Faith Effort for Transparency.
The Attorney General waived the requirement to hold public hearings because Keiro insisted that the community was already adequately informed. In SECTION 999.5(d)(10), Appendix J of the Attorney General case file, Keiro provided a list of sixty-two (62) community meetings and thirteen (13) publications that supposedly informed the public of the proposed transaction. The sheer volume of meetings and publications surely is impressive but due to sloppy preparation or intentionally flooding the AG with superfluous and meaningless data, the content of all the meetings and all the publications could not have accomplished Keiro’s stated purpose of informing the community about the Pacifica transaction because Pacifica hadn’t even entered into the scene as a potential buyer at the time these meetings took place and when the publications were published! Nevertheless, four committee members undertook the task to find people who were actual attendees of the meetings on the list.
All persons interviewed either confirmed that the sale of the Keiro facilities was not discussed or that they could not recall if the sale was discussed, except for one person. (See timeline graph of meetings where persons interviewed confirmed the sale was not discussed.) One person said “the sale was discussed extensively”. When asked what details of the sale were covered, who was the presenter at meeting, who were other attendees, there was no further response. This one person is currently on staff with Keiro’s Genki Living program.
The most egregious example that Keiro cited as a community meeting where the general public was supposedly informed of the proposed sale is Meeting # 42, JAO Craft Workshop ICF. An AHC member attended these JAO craft workshops as a team mom for many years when her daughter’s basketball team played in the JAO girls’ basketball league. On the morning of the AG meeting, an actual attendee of Meeting #42 was found and she confirmed that there was no discussion of the proposed sale of the Keiro facilities. The craft workshop is a holiday tradition where youngsters glue together hundreds of pieces of felt, ribbon and glitter into Christmas ornaments for the Keiro residents. A printout of Keiro’s Facebook Photo Album of the event was distributed. (See 2013 JAO Craft Workshop Facebook Photo Album).
All of the publications listed in Appendix J were reviewed and confirmed as uninformative with respect to the proposed transaction with Pacifica which is no surprise since all publications were published before Pacifica was identified as a potential buyer. Our review of the publications in Appendix J was expanded to include a review of as many publications we could find related to the sale. This expanded review painted a picture, not of publications which informed the community of the sale, but instead a very comprehensive and consistent picture of publications with questions, shock, disbelief and demands for transparency. The first publication that specifically addressed the details of the Pacifica transaction was published on June 2, 2015. This notice was posted on Keiro’s website with a non-descript link on their webpage. This link is labelled as “Notice for Keiro Senior HealthCare Facilities (June 2, 2015)” — the description omits any mention of “sale”, “Pacifica”, “Important Announcement”, “escrow” “Public Comment Period”, etc. This is the most significant notice because it is the only publication that informs the community of (1) a public comment period and (2) how to get the details of the Pacifica transaction. Keiro never provides the minimum details necessary to formulate an opinion of support or opposition to the sale. Keiro set up a process that requires people to work, and work hard, to get these details. In order to request the details, one must provide their name and address to the Attorney General’s office or view the 2,000 page file onsite in the facilities’ administrative offices. The process discourages any requestor such as employees and residents who seek anonymity. The public comment period was announced in this June 2nd notice and closed on June 26th. No community meetings and no publications that summarize the details of the sale are scheduled or released during this public comment period. In addition, Shawn Miyake and six staff members move into new leased office space in November 2014, physically distancing themselves from the facilities staff, residents and patients exacerbating the lack of communication and transparency.
Failed Due Diligence in Selecting Equivalent Quality Buyer/Operators
The Ad Hoc Committee asserts that Keiro failed its due diligence in selecting a buyer that has demonstrated experience in delivering the same high quality care that Keiro has maintained for 50 years. In the 2,000-page ‘Written Notice to the California Attorney General’ under ‘Buyer’s Due Diligence Request’, Pacifica specifically requested reports from the Department of Social Services and Department of Public Health regarding the Keiro facilities. The same cannot be said for Keiro. No documentation exists to suggest that Keiro did their “due diligence” by requesting reports from licensing agencies for the Pacifica, Aspen and Northstar operated facilities. Either Keiro was negligent for failing to request the reports, the buyer and operators were non-compliant for not providing the reports, or worse yet, the reports were provided and intentionally omitted from the AG file because of incriminating information. A simple internet search of Pacifica facilities uncovered an April 2015 ‘Notice of Intent to Revoke License’ issued to a Pacifica facility in North Carolina and a www.cbs46.com post reporting “This is not the first time Pacifica Senior Living in Wilmington has had issues. In July of 2013, the facility had to pay a penalty of $7,000 for inadequately supervising a resident who fell out of a second story window and sustained multiple injuries. They also paid a $1,000 penalty in November 2012 for administering ear drops to a resident’s eye on two separate occasions.” In California, a May 28, 2015 inspection report posted on the Department of Social Services, Community Care Licensing system details penalty assessments for repeat violations that occurred from 3/24/2014 through 4/10/2015 at Pacifica’s Senior Living San Leandro facility currently operated by Northstar. (See Pacifica Senior Living San Leandro CCL Inspection Report 2015-05-28) A review of the California Department of Public Health, Health Facilities Consumer Information System finds Aspen facilities average 28.6 complaints for the past five years compared to Keiro’s 2.5 average. Comparing data from the California Department of Social Services and from the California Department of Public Health, Pacifica and Aspen operated facilities had significantly more citations and complaints than Keiro facilities.
One of the most important aspects of the quality of care at Keiro is their culturally sensitive care. The contracted agreement between Keiro and Pacifica contains an operational definition of ‘culturally sensitive’ services. While the list includes Japanese menu items, origami classes, and Japanese reading materials, it fails to require the most important factor — Japanese-speaking caregivers. This is another example of gross negligence. Without provisions in the contract to ensure a comparable ratio of Japanese-speaking caregivers to patients/residents, Keiro is already compromising the emotional well-being of our elders and is reasonably expected to compromise safety and quality outcomes if this sale goes through. Keiro is negligent for not ensuring the same level of high quality care that is appropriate and necessary for the Japanese-speaking elderly. Keiro’s contract has no requirement for the buyer to ensure the same level of quality care and the civil rights of Japanese-speaking patients beyond what are the minimum requirements from Title VI of the 1964 Civil Rights Act.
Uncertainty in Proposed Sale Causing Detrimental Psychological Impact on Residents.
Until recently there were long waiting lists of Japanese and Japanese American elderly who applied for admission to the four Keiro facilities. The waiting list averaged two to five years. There are now vacancies for the first time in decades.
The psychological impact on the residents of Keiro is severe. They are angry, feeling helpless and abandoned, nervous and depressed, fearful of speaking out, and they report that they have sleepless nights. Some have expressed that they wish to die within the next five years so they would not have to face the real possibility of having to find an alternative place to move into, knowing that there really is no comparable facility. Most are Japanese-speaking elderly who have sold their homes in this state or another state or in Japan, many are widowed and do not have family members to care for them. These are the serious concerns expressed by elderly residents who are aware of the recent turn of events.
Keiro Failed Due Diligence for Achieving Fair Market Value of Assets.
The California Corporation Code (the Code) contains detailed guidelines for the Attorney General to follow in carrying out its responsibility to protect the best interest of the people. In particular, that the fair market value has been achieved by the seller. In the case of Keiro’s sale of its facilities to Pacifica, the Attorney General file did not contain sufficient information to make a clear determination. It contained outdated appraisal and pricing reports and did not follow procedures set forth in the Code in determining whether $41,000,000 was the current fair market value of the assets being sold. The Code requires evidence of aggressive marketing resulting in multiple bidders and the highest price. Instead, Keiro spends less than a month to go from a failed sale to Ensign to an accepted offer from Pacifica at a price that is $3,000,000 lower, clearly contradicting the aggressive marketing guideline. Also, no documentation or other evidence to support the lower price exists. The failure to comply with standards set forth in the Code should have resulted in an uncertainty that would prompt a full review of the actual fair market value of the assets. This uncertainty caused by the failure to provide current information and reports and non-adherence to factors set forth in the Code would mean a denial of the Waiver and full investigation of all transactional items including a public meeting for public comments.
Keiro Failed to Protect Employees and Risk Continuity of Care.
The employment of the facilities staff will be terminated at close of escrow. The new operators will extend offers of employment to all employees in good standing as of the Closing date at their existing wages and with benefits that are not less favorable than similar employees at the operator’s other facilities in California. The operators will provide one year service credit for rehired employees. The success of Keiro’s facilities is in great part due to the kind, caring and dedicated staff. Since the public hearing was waived, the Ad Hoc Committee must inform the AG directly about our concerns about the lack of employee job protection, transferable seniority, and the resulting lack of protections for patients’ continuity of care. If any of the Japanese-speaking staff is not retained, Keiro and Pacifica cannot guarantee the sales condition of providing an equivalent “culturally-sensitive” environment.
Keiro’s Assertion of Declining Funds and Divesture
Although Keiro management’s decision to divest Keiro to Pacifica includes the observation of declining funds, high-level analysis of disclosed audited financial statements for FY 13 and FY 12, does not appear to speak of an organization with issues of immediate financial insolvency. Alternatively said, a requirement for immediate turnaround tools such as bankruptcy, cash infusion, or divestures to operate tomorrow are not necessarily warranted. Financial viability indicators include for example the auditor’s opinion that there is no going concern, no disclosures on the use of credit lines with banks, and no specific disclosures on changes to the bank’s (3rd party) assessment of risk given the consistencies with borrowing rates. The financials also show net positives for unrestricted net assets, temporarily restricted assets, and permanently restricted assets. In addition, commentary on financial due diligence factors considered by management have yet to be exchanged. An example includes management’s projected provisional benefits associated with operating under a large acquiring corporation versus the current state. Further discussion would offer an opportunity to fully appreciate the financial reasons behind management’s decision to divest at the current timing.
Critical Points For Review By The Attorney General.
The Attorney General did not have adequate information made available to it upon which to make an informed decision to consent to the sale: It did not have input from the relevant stakeholders. The committee’s analysis shows what was represented to be “public hearings”. Those hearings were about a sale to a different buyer.
The lack of opportunity to be heard did not allow the Attorney General to consider the difference in the quality of care that can be reasonably anticipated to be provided. In the fifty-year history of Keiro under current ownership, it never received a single citation versus the several citations that Pacifica has received in a handful of years.
The economic/business rationale for the sale is nonsensical. When Keiro was started fifty-years ago, it could not be done in reliance on the fees charged to residents which is why the eight founders undertook to provide the needed services as a nonprofit. Nonprofits exist because they provide services that cannot be provided by for-profit organizations. Keiro has relied on community support for its entire existence. The economic/business rationale of the impact of Healthcare Reform is not a factor that justifies the sale of Keiro.
The residents have no viable alternatives. Keiro is providing care not available at other facilities. It is unique in what it does and the rates other facilities such as Hollenbeck Palms are almost twice those charged by Keiro.
After the Ad Hoc Committee presentations, Congresswoman Maxine Waters asked the AG why the conditions of the sale are so weak. Why was the public hearing waived? Assistant AG Tania Ibanez explained that past experience has shown, when the AG holds public hearings for other nursing home transactions, the AG organizes the meeting, orders a court reporter and only two people show up, a representative from the seller and a representative from the buyer. The AG did not think it was worthwhile to hold a public hearing for the Keiro sale to Pacifica. Ms. Ibanez proceeded to explain that the AG received an additional list of community meetings and publications from Keiro that was accepted as satisfactory documentation to meet the requirements to waive the people’s public hearings. We requested copies of the additional lists. Ms. Ibanez shared that the public comment period generated two (2) letters from residents. Congresswoman Maxine Waters asked the AG if it thought that two (2) letters from residents was adequate representation from a community of 600 residents/patients, their families, employees and a very active Japanese American community? She didn’t wait for a response, she said “that’s a problem … horrified by the thought of an 85 or 90 year old resident who will have no protections in five years.” She asked the AG what they can do about a public hearing. Robert Sumner, Deputy District Attorney. Office of Legislative Affairs mentioned recent legislation (SB 1094?) that would have given the AG the authority to amend decisions when new information was presented, but was vetoed by Gov. Brown. In his veto message he said “For nearly two decades, the Attorney General has had the authority to approve, deny or place conditions on these transactions in order to evaluate potential impacts on a community’s access to health care services, and safeguard – as much as possible – those assets that have been held in the public trust. Occasionally, disputes pertaining to the conditions of approval arise after a transaction has been approved, and the Attorney General must appeal to the courts to impose the remedy.”
Congresswoman Waters reiterated to the AG that eighty percent of Keiro’s patients are Medicare and MediCal eligible. She asked the AG if they surveyed the income level of current Keiro residents to see if a 3% increase would put these residents at risk of not being able to afford services from the new operators. The AG confirmed that such a survey was not performed.
The Ad Hoc Committee requested the AG’s updated plans, valuation studies, and any other documents that demonstrate the AG’s independent analysis of the information provided by Keiro. Ms. Ibanez said she will find out to what extent the AG performed independent analysis and provide the resulting documentation.
Congresswoman Waters said aloud what the community feels every day, “I cannot accept the AG office saying nothing can be done. I don’t want to wake up the next morning and hear that escrow has closed”. Her office will research options at the Congressional level.
Suzy Loftus, General Counsel and Mark Breckler committed to provide an update by next week Wednesday, December 2, 2015.
The staff members from the Attorney General’s Office agreed to review the findings presented by the Committee and to respond in a timely manner. The Ad Hoc Committee along with 12,000 members of the community who signed the petition requesting that the Attorney General Kamala Harris to hold a public hearing await their response.
If the community hears any specifics on when escrow is expected to close, Mark Breckler requested the AHC let the AG office know and they will do the same.
The meeting lasted two and one half (2.5) hours when only ninety (90) minutes was scheduled.