Senior Care Centers’ President, Mark McKenzie, Sued For Alleged “Breach of Fiduciary Duty and Fraudulent Transfers”
February 26, 2021, Northern District of Texas – Trustee Alan D. Halperin for the bankruptcy estate of Senior Care Centers, LLC et al ( the “Debtors” ) brings a complaint against Defendant Mark McKenzie for “breach of fiduciary duty and fraudulent transfers” under Sec. 544(b), Sec. 550 of the Bankruptcy Code and TUFTA $ 24.001.
McKenzie was the president and a director of the Debtors. He ostensibly “breached his fiduciary duties” to the Debtors through a series of transactions that favored the Debtors’ indirect parent, Granite Investment Group (“GIG”), and its affiliates. By way of background, Defendant was supposedly hand-picked by GIG to become the Debtors’ president. As alleged in the complaint, McKenzie was later relieved of his duties by the Debtors’ board of directors due to his “management and performance failures.” Despite his termination, the Debtors allegedly paid Mckenzie millions of dollars in “unwarranted bonuses and severance payments” during the four years before the Debtor’s bankruptcy.
The Trustee alleges that McKenzie was not acting in the Debtors’ best interests because there were “significant conflicts of interest.” McKenzie was seemingly wearing two hats – as an employee of the Debtors and an employee of GIG, which allegedly resulted in the Debtors’ demise.
The Trustee also alleges that even though the Debtors were “insolvent and lacked adequate capitalization,” McKenzie “kept on receiving bonuses” over his annual base salary of $575,000 (the “Bonus Transfers ”). Adding further, the Trustee contends that McKenzie also received “severance payments” of $575,000. (the “Severance Transfers”, and collectively with the Bonus Transfers, the “Transfers”) under an obligation in his severance agreement (the “Severance Obligation”) after his termination.
Thus, according to the Trustee, the Severance Obligation was “fraudulent because it was premised on McKenzie’s purported voluntary resignation, which was a sham.” Further, since the Board “terminated McKenzie for the poor financial performance of the Debtors,” the Trustee argues that he was not entitled to any amount under the terms of his employment with the Debtors, including the Bonus Transfers and Severance Transfers.
Accordingly, the Trustee contends that the Debtor “did not receive reasonably equivalent value” in exchange and the Transfers were “made with an actual intent to hinder, delay or defraud creditors.”