A class action suit filed by residents of Vi at Palo Alto alleges its parent company, CC-Palo Alto, transferred millions of dollars in refundable entrance fees from the senior retirement community to its corporate parent in Chicago, jeopardizing the financial security of its clients.
The lawsuit, which was filed on Feb. 19 in the U.S. District Court, also claims that CC-Palo Alto overcharged the residents by improperly allocating increased tax assets, earthquake insurance and marketing costs to Vi at Palo Alto's operating expenses, and represented the charges as inflated monthly fees.
Prior to entering Vi, each resident is required to give CC-Palo Alto an entrance fee of several hundred thousand dollars or more. The plaintiffs claim they were promised that 75 to 90 percent of the fees would be refunded to their heirs or estates after they died, or would be returned if they left Vi.
Since opening in 2005, the plaintiffs claim they collectively paid $450 million in entrance fees. California law requires continuing care retirement communities such as Vi to maintain reserves to act as security for the entrance fees they collect. But instead of maintaining the reserves, as of December 2012, CC-Palo Alto allegedly transferred $190 million upstream to its corporate parent, CC-Chicago. As a result, CC-Palo Alto is financially incapable of honoring its debts to the residents when the loans become due... (To read the entire article, please click HERE)
