Out with the old

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Today, the 79-year-old can't help raising his voice as he talks about the trouble facing the retirement home. That attracts a few of his concerned neighbors to his lunch table to hear McCullough's assessment of where they stand.

The others speak as well, but all tend to defer to McCullough, who, as treasurer of the residents' club, appears to enjoy his leadership role. He resembles the late actor John Houseman in appearance but not manner; McCullough is scrappy but not erudite.

He says he's ready for a nasty fight over Desert Crest. But it's clear that he, like his neighbors, finds the bankruptcy issues difficult to fathom.

It was only when outside homeowners associations, concerned about plans for so many apartments, contacted Desert Crest residents that many of them learned the foundation had filed bankruptcy months before.

McCullough complains that when he asked a foundation official about it, he was told, "There's nothing to tell except that bankruptcy has been filed and it's business as usual."

With only limited information coming from the foundation for several months, rumors ran rampant and the residents assumed the worst.

McCullough shakes his head in disgust. Resident Shirley Cowlin takes advantage of the temporary silence to interject: "It's been hard to separate fact from fiction around here for quite a while."

"It's like it was in the Depression," adds 88-year-old Carl Roselius. "You can hear everything but meat a-frying."

With greater cooperation from the foundation in recent weeks, the residents have begun to piece together what has led them to the brink of disaster. McCullough pulls out several folders to show the research he's done that reaches far into the past to chronicle the saga of Desert Crest.

A document in the retirement home's library indicates that planning began on the facility in 1951, and that it was finished in 1957 by Arizona Sunset Homes. In 1959, the complex was taken over by Pacific Homes, an affiliate of the Methodist Church. In a 1969 photograph, the sign at the entrance reads: "Desert Crest--Methodist Sponsored."

Pacific Homes offered its seniors contracts for lifetime care. For up to $100,000, residents bought themselves a permanent place at Desert Crest and other Pacific Home facilities.

Then, in 1977, Pacific Homes went belly up, leaving thousands of seniors with useless contracts. Unable to get their money out of Pacific Homes, the seniors sued the Methodist Church. Claiming that it was exempt from lawsuits, the church tried to distance itself from Pacific Homes. Said a church attorney about the relationship between the two entities: "It is connectional, not hierarchical."

The seniors disagreed. And eventually, after four years of litigation, the Methodist Church paid $21 million to settle their claims.

Since 1979, Desert Crest has been owned by the Foundation for Senior Adult Living (FSAL), which is controlled by another corporation, the Foundation for Senior Living (FSL). That, in turn, is controlled by the Roman Catholic Diocese of Phoenix.

The church appoints FSL's board of directors. FSL appoints the board of directors for FSAL. Guy Mikkelsen is a member of both boards as well as executive director of FSL and president of FSAL. He says that the arrangement assures the independence of the two foundations from the diocese.

That's echoed by the diocese directory, which lists the Foundation for Senior Living as a diocesan office but with the disclaimer that FSL is "a separate corporation."

But connections between the two are strong. Residents of Desert Crest gather for meetings in the Bishop Rausch Fellowship Hall. Old promotional materials refer to the foundation as "a non-profit agency of the Roman Catholic Diocese of Phoenix." And until recently, the foundation used letterhead which described FSL as "a program of the . . . Diocese."

In 1979, United California Bank loaned FSAL $4.4 million to purchase Desert Crest. The loan was insured by the federal Housing and Urban Development department, which put several restrictions on the deed and required that Desert Crest reserve a certain number (about half) of its apartments as Section 8 units for low-income seniors receiving federal assistance. Those contracts governing Section 8 housing have been renewed numerous times and are still in effect, at least for two more years.

In court papers, FSAL claims that under its ownership, Desert Crest thrived. It received high scores in annual inspections of its health facilities, and the retirement home was never late on its monthly $29,000 mortgage payment.

Then, in 1989, the troubles began. The U.S. Army Corps of Engineers decided to beef up a nearby irrigation canal, triggering a string of financial setbacks for the retirement community.

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Tony Ortega
Contact: Tony Ortega