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. Later, McKenzie was relieved of his duties by the Debtors’ board of directors due to his management and performance failures. Despite his termination, the Debtors allegedly paid Defendant 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 wearing two hats – as an employee of the Debtors and an employee of GIG, which allegedly resulted in the Debtors’ demise.

The Trustee further 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 ”). Following his termination, 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”).

The Trustee asserts that the Severance Obligation was fraudulent because it was premised on McKenzie’s purported voluntary resignation, which was a sham. Further, the Trustee argues that since the Board terminated McKenzie for the poor financial performance of the Debtors, he was not entitled to any amount under the terms of his employment with the Debtors, including the Bonus Transfers and Severance Transfers. 

The Trustee argues 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.

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