Sunrise Senior Living, Inc., et al.

U.S. Securities and Exchange Commission

Litigation Release No. 21600 / July 23, 2010

Accounting and Auditing Enforcement Release No. 3157 / July 23, 2010

Securities and Exchange Commission v. Sunrise Senior Living, Inc., et al. Civil Action No. 1:10-CV-01247 (D.D.C.)

SEC BRINGS SETTLED CIVIL CHARGES AGAINST SUNRISE SENIOR LIVING, INC. AND TWO FORMER COMPANY OFFICERS, LARRY E. HULSE AND KENNETH J. ABOD

Sunrise and Hulse Agree to Injunctions and Hulse Agrees to Pay $164,993 in Penalties, Disgorgement, and Prejudgment Interest

The Securities and Exchange Commission today filed a civil action in U.S. District Court for the District of Columbia against Sunrise Senior Living, Inc., a Virginia-based owner and manager of assisted living facilities whose stock is listed on the New York Stock Exchange, and former Sunrise officers, Larry E. Hulse and Kenneth J. Abod. The Commission's complaint alleges that Sunrise engaged in financial reporting fraud during the relevant period from 2003 through 2005, by making improper adjustments to its reserve for self-insured health and dental benefits and its accrual for corporate bonuses to meet public earnings forecasts. The complaint further alleges that Hulse, Sunrise's Chief Financial Officer during most of the relevant period, oversaw improper adjustments to the health and dental reserve and signed false SEC filings and Sarbanes-Oxley certifications. In addition, the complaint alleges that Hulse and Abod, Sunrise's former Treasurer during most of the relevant period, directed Sunrise employees to make improper adjustments to the bonus accrual account. Hulse and Abod are both certified public accountants.

Without admitting or denying the allegations in the complaint, Sunrise has agreed to a final judgment permanently enjoining it from violating Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rules 12b-20, 13a-1, and 13a-13. Hulse has consented, without admitting or denying the allegations in the complaint, to entry of a final judgment permanently enjoining him from violating and/or aiding and abetting violations of the antifraud provisions of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 ("Securities Act") and Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, and 13a-13, 13a-14, and 13b2-1.

Hulse also agreed to pay $164,993, comprised of $50,000 in civil penalties, disgorgement of $83,333, and prejudgment interest of $31,660. As part of his settlement, and following the entry of the proposed final judgment against him, Hulse, without admitting or denying the Commission's findings, has consented to the issuance of an administrative order pursuant to Rule 102(e) of the Commission's Rules of Practice, suspending him from appearing or practicing before the Commission as an accountant, with the right to apply for reinstatement after three years. Abod has agreed, without admitting or denying the allegations in the complaint, to pay a civil penalty of $25,000. The proposed settlements in the civil action are subject to Court approval.

In a related settled administrative proceeding, the Commission charged that for Sunrise's year-end 2004 and its first fiscal quarter of 2005, Abod willfully violated Exchange Act Section 13(b)(5) and Rule 13b2-1 thereunder and caused and willfully aided and abetted Sunrise's violations of Exchange Act Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and Rules 12b-20, 13a-1 and 13a-13 thereunder. Abod has agreed to cease and desist from committing or causing the violations charged as well as any future violations of these provisions and denied the privilege of appearing or practicing before the Commission as an accountant with a right to apply for reinstatement after one year.

The terms of the proposed settlement with Sunrise reflect credit given to Sunrise for its substantial assistance in the investigation.

See Also: SEC Complaint