Renowned local businessman and retired U.S. Air Force Col. Charles Cheever Jr. has filed a lawsuit against his current Northeastside residence, Army Residence Community, a development that houses retired military officers and their spouses, widows, or widowers.
The lawsuit, filed on Feb. 2 in the Bexar County District Court, alleges breach of contract, breach of fiduciary duty, elder exploitation, and negligence. Cheever, chairman emeritus of Broadway Bank and Texas Business Hall of Fame inductee, is one of 750 residents who live at Army Residence Community (ARC). He is seeking repayment of damages and attorneys fees.
The 143-acre complex, located between Fort Sam Houston and Randolph Air Force Base, is incorporated under nonprofits Army Retirement Residence Foundation San Antonio Inc. and Supporting Foundation, which does business as Army Residence Community. It is “one of the country’s finest accredited military retirement homes,” according to its website, and “has continually evolved and grown to meet the needs of residents.”
But Cheever said the place is being financially mismanaged and that he and other residents, who are on fixed incomes, are suffering because of it.
“They feel that the assets are being misused or squandered,” said former mayor Phil Hardberger, attorney at Dykema Cox Smith who Cheever enlisted for the case.
Mark Randolph, the local attorney defending ARC in the case, could not be reached for comment on Wednesday. Randolph sent a statement to the San Antonio Business Journal:
“Mr. Cheever is a highly respected member of our community in San Antonio and in the ARC community. However, the ARC strongly disagrees with the position taken in the petition that the current management of the ARC has mismanaged the institution.”
ARC is a state-of-the-art facility with a rolling green landscape and resort-like amenities including a tennis court and a lakeside fishing dock. High-rise apartments overlook cottages, assisted living facilities, healthcare services, and other resources for residents, all of whom have served at least 10 years in the military.
Residents expect to pay more for the exclusive luxury than the military retirement provides, but the monthly fees have increased beyond reason, Cheever said.
“We’re not saying it’s illegal,” Hardberger said. “We’re saying it’s badly run.”
Randolph’s statement indicated that documents would be disclosed during the course of the lawsuit that prove the nonprofits are financially solid.
Cheever and his family have made substantial charitable donations to ARC over the years. Some donations went toward creating the Betty Cheever Memorial Chapel in 1999, named after Cheever’s mother who also lived at ARC.
Seeing how much she enjoyed the facility during her time there, Cheever said, made the decision easy for him and his wife, Nancy, to move there in 2013.
“[My mother] loved everything about it, she loved the people, she was well taken care of,” he said, adding that he’s also been well taken care of during his time at ARC so far. “… My memories of how well my mother was treated out here made me want to be part of it.”
Hardberger said that Cheever paid nearly $300,000 for his two-bedroom unit on top of about $4,700 in monthly operational fees. Other units on the development can exceed $300,000. Those payments are nonrefundable, according to Hardberger and the contract. Estates that are left behind by residents who have passed away at ARC go back to the organization instead of their families.
The alleged financial mismanagement by ARC, Hardberger said, has caused a number of former residents to move away, jacking up monthly fees for remaining retirees whose military pensions are not coming in quickly enough to keep up.
This is the primary reason why Cheever and some of his neighbors are suing the nonprofit, because they “live in an environment of fear and anxiety as a result of [ARC’s] mismanagement,” the lawsuit states.
“The negative environment has caused many of the ARC’s residents to vacate their residences, which has raised vacancy rates and reduced occupancy rates. As a result, the ARC’s management has attempted to correct its loss of revenue from the decline in resident fees by increasing the fees charged to remaining residents. Such actions have only exacerbated the problem by driving more residents away.”
Over the past three months, Cheever has led a reform effort with 300 other ARC residents. In a petition, they called for the replacement of ARC CEO Mary Garr “because of mismanagement and incompetence,” Hardberger said. They also demanded that some ARC residents be put on the nonprofit’s board of directors, which is currently made up of retired military officers and spouses of retired military officers, all non-residents of the facility.
“Both of those requests were flatly denied,” Hardberger said.
In general, ARC residents are not kept up to date with necessary financial information to grasp the organization’s overall financial condition, which is in decline, he added.
One of the key examples of the financial misuse, according to the lawsuit, “is demonstrated by the handling of reported financial malfeasance by the ARC’s Chief Financial Officer [Bruce Chittenden] … which involved an off-the-books deferred compensation plan totaling $535,000 to $750,000.”
Randolph denied that any deferred compensation was “paid under the disputed agreement and the ARC has no intention to pay any deferred compensation under the disputed agreement.”
An ARC accountant who reported the occurrence was fired, Hardberger said.
“Not until the malfeasance became known among the ARC’s residents did the ARC’s leadership initiate any reasonable action to address the matter,” the lawsuit states. The board later put Chittenden on indefinite suspension, where he remains.
The lawsuit also alleges that the ARC made duplicate payments to an undisclosed Florida-based firm for loan origination fees, resulting in overpayments of $57,000. That was not disclosed to ARC residents, either.
“[ARC management] has stonewalled any reformation of these practices,” Hardberger said, and that’s why Cheever has taken action – to hopefully improve the financial management at ARC.
Just like back in his Air Force days, “a lot of people come to Charlie as a natural leader,” Hardberger said.