AnthemCare Tennessee LLC has been picked to operate the Autumn Hills Assisted Living, formerly the J.B. Knowles Home for the Aged.(Photo: Submitted)CONNECT>TWEET>LINKEDINCOMMENTEMAILMORE
The former developer and operator of Knowles Assisted Living Center sued Metro, the Metro Development and Housing Agency, outgoing Councilman Nick Leonardo and Councilman Jim Shulman on Friday for failing to hold up their end of his contract, resulting in the financial turmoil for the publicly owned facility.
Vision Real Estate and its principal, Mike Hampton, sued for $120 million in damages for violating his property rights and for the "intentional, reckless and malicious actions" that led to the violation of his contract.
Seeking to reduce its approximately $10.5 million annual subsidy for Knowles and other hospital authority facilities in 2014, Metro contracted with Vision Real Estate Investment and its sister company Autumn Hills to run the facility.
Under the terms of the deal, Metro would phase out its subsidy and sell Knowles in exchange for giving Vision development rights for nearby city-owned land.
Within three years, the city subsidy for Knowles went from $1.75 million to zero, but the ancillary development never came together and the 100-person adult day care facility accumulated a slew of unpaid bills.
Hampton accuses MDHA of lobbying for the passage of council legislation to allocate $10 million in federal flood recovery money for a housing development in the Bordeaux area. The development selected land near the Knowles Home which Hampton had under contract.
According to the lawsuit, Metro backed out of its deal with Hampton because MDHA wanted the land he had under contract for its housing project.
Hampton also accuses Metro of failing to support the re-zoning he says he needed in order to complete the planned ancillary development. When the development didn't come together, the finances for running Knowles Home became troubled.
He said several councilmembers, beginning with former Councilmen Lonnell Matthews and Loniel Greene and continuing with current council members Sharon Hurt, Shulman and Leonardo, didn't support his re-zoning efforts. He needed the re-zoning in order to build the mixed-use project adjacent to Knowles, according to the lawsuit.
"First, foremost and always, this was a real estate deal," Hampton said.
A Metro Internal Audit report last year found about $400,000 in unaccounted spending by Knowles management. That included at least $334,636 in funds spent without the notation of a business purpose in Autumn Hills' records. The audit also found an additional $99,443 in ATM withdrawals from patients' personal trust fund accounts. The funds
come from social security checks and are intended for entertainment, snacks and other personal expenses.
After the problems were discovered, Metro severed its contract with Hampton's firm. In January, 2017, the city picked AnthemCare Tennessee to run Knowles on an interim basis.
In his lawsuit, Hampton pointed to his contract with Metro, which underwent two amendments, where the government agree to support his re-zoning.
Hampton said in the lawsuit he needed the re-zoning and tax increment financing in order to make his mixed-use development work. But when MDHA opposed his TIF application and the re-zoning never came together, the deal fell apart.
"An appraiser who had been hired by (Hampton) was told in February 2016 by an executive of MDHA that, the assisted living facility would not qualify for TIF financing," Hampton claimed in his lawsuit. "This statement was made without consideration of the plaintiff's due process rights to a hearing and an opportunity to be heard.
"Rather, it indicated a conspiracy by MDHA to violate the applicant’s due process rights to 'kill' the deal so the conditions in the Second Contract could not be met by Autumn, Vision and Hampton thus allowing MDHA to purchase the property from Metro."
Earlier this week council appointed Leonardo to a vacant General Sessions judgeship.
Metro Director of Law Jon Cooper said he'd not seen the lawsuit and had no comment.