Regulators near civil charges in Heritage Healthcare bond case.

The Securities and Exchange Commission has notified nine individuals that they will likely face civil charges related to the collapse of Heritage Healthcare of America, the now-defunct organization that defaulted on $130 million in municipal bonds to build health care facilities for Alzheimer's patients.

As the Business Journal reported in December, bond investors and lenders have filed suit seeking repayment of lost funds, and accused the founder of the Alzheimer centers, Robert Kasirer, of fraud. Kasirer was subpoenaed last month by a federal grand jury in Los Angeles investigating Medicare fraud.

SEC spokesman John Heine refused to confirm or deny the issuance of so-called Wells notices, which alert subjects of the commission's intent to proceed with enforcement action. The notices give subjects a final chance to respond before any charges are filed.

However, several lawyers familiar with the case said that nine persons related to the bonds" default received Wells notices in late December.

An attorney for Kasirer refused to say whether his client had received a Wells notice.

But Kasirer's business partner and a lawyer for Heritage, Jerold Goldstein, received a notice, according to one lawyer familiar with the proceedings.

Also receiving a Wells notice was Joel Boehm, the lawyer who represented the underwriter of the Heritage bonds, according to his lawyer, Charles Grebing, Boehm claims to have lost all of the files related to the bond offerings, and is among nearly 50 defendants being sued by investors who lost their money.

Eleven bond offerings were issued from 1996 to 1999 to build nursing homes in California, Florida, Illinois and Texas. Only five facilities actually opened, including Rancho Hospital in Rancho Cucamonga, which filed for bankruptcy. The others were taken over through a receivership.

Many of the bonds were sold to senior citizens who had relatives with Alzheimer's disease.

The SEC's involvement in the case dates back to late 2000, when the commission seized the assets of three municipal bond funds and other private accounts managed by Heartland Group Inc., which had purchased some of the Heritage bonds.

According to news reports, Heartland sold some of the Heritage bonds to the Wisconsin Investment Board and state auditors later found that some of the bonds were already in default and were worth far less than half their par value when they were sold.

Field Steps Aside

The billionaire music impresario charged with transforming struggling dot-corn ArtistDirect Inc. into a traditional music company has resigned as its chief executive. Ted Field remains at the helm, however, of the firm's money-losing record label venture.

Fields, co-founder of Interscope Records, agreed to become chairman and chief executive of ArtistDirect in 2001.

But the firm has straggled, losing $45 million on ArtistDirect Records--a joint venture between the company, Field and the BMG division of Bertelsmann AG--as it has tried to compete against major labels.

In April, ArtistDirect's auditor, KPMG, warned that its losses had raised "substantial doubt" about its viability. The company has stemmed some of its losses, but has struggled to generate revenues. The company reported a third-quarter loss of $1.7 million, compared with a loss of $10 million for the like period a year ago. Revenues fell 50 percent, to $879,000.

According to a quarterly 10Q report filed with the SEC in November, Field resigned as chief executive of ArtistDirect Inc. in September.

Replacing Field is Jon Diamond, former BMG executive. Diamond co-founded GRP Records, a jazz label that was sold to MCA Corp. (now part of Vivendi Universal SA) in 1990 for $45 million. Diamond co-founded and ran a string of online music outfits. He served briefly as chairman of BMG's MyPlay.com before BMG shut it down last year.