Tony Cook

tony.cook@indystar.com

When Rep. Eric Turner worked behind the scenes to kill legislation that would have halted new nursing home development, he wasn't just helping his son's company.

An Indianapolis Star review of the lawmaker's personal business interests found that Turner has a stake in at least a half dozen companies that have been engaged in building, leasing or investing in nursing home properties.

Together, those companies potentially had millions of dollars at risk in the debate over the measure that would have put a temporary moratorium on new nursing home construction.

Moreover, The Star found that Turner did not list some of the companies on financial disclosure statements, which lawmakers are required to file each year to make public any potential conflicts.

Turner has denied breaking any House ethics rules and says the moratorium would have caused Indiana to miss out on new jobs and investment.

The Star's findings come as an Indiana House Ethics Committee is set to probe Turner's role in quashing the moratorium. Proponents of the legislation believe a moratorium is necessary because of low occupancy rates and concerns about the quality of care for Medicaid patients.

Turner, the second-highest ranking member of the House, abstained from voting on the measure in public. But during closed-door Republican caucus meetings he passionately urged his fellow lawmakers to kill the moratorium, according to several Republican lawmakers who spoke to The Star on condition of anonymity.

Some Republicans felt Turner's role constituted a conflict of interest because his son, a developer of senior care facilities, and daughter, a Statehouse lobbyist, led the opposition to the moratorium.

The precise extent of Turner's financial interests in the nursing home industry is difficult to determine, but records indicate he has been involved in at least 15 different companies with ties to the industry since 1997.

Experts say such deep and longstanding connections could be an important factor as the ethics committee prepares to hear the case, perhaps as early as next week.

"If he's helping his own financial interests," said David Orentlicher, a law professor at Indiana University, "that should make the ethics committee more troubled by what happened."

The Star's findings could also raise an entirely new issue for the committee. While Turner listed some companies on his House disclosure forms, legal documents obtained by The Star reveal that he had an ownership interest in at least four other companies that he did not list.

"This ups the ante," said Julia Vaughn, policy director for Common Cause Indiana, a good government advocacy group. "You're supposed to provide a picture of potential conflicts. It appears he failed to disclose the true extent of it."

Longstanding connections

Turner's connection to the industry goes back at least 17 years, when he listed a nursing home partnership and an assisted living company on his 1997 financial disclosure form. He sold his stake in one of those companies the following year and invested in another. By 1999, he was invested in at least four different limited liability companies that owned nursing home and senior living properties.

Turner and his family continued to invest in nursing home properties, often through a company called T3 Investments Corporation, where Turner is president and his father and brother are directors.

As the family's holdings grew, they established Mainstreet Capital Partners in 2002. His son Zeke, then 25, was listed as the company's registered agent.

The level of Eric Turner's involvement in the company is unclear. He has listed the company on his annual financial disclosure form every year, but in recent years — as the company's lobbying efforts at the Statehouse increased — Mainstreet has sought to downplay his role.

"He, along with a dozen or so others, were early investors," Kate Snedeker, a Mainstreet spokeswoman, told The Star last year. "Zeke Turner is the one and only founder of the company."

She declined to reveal the extent of Eric Turner's investment.

Turner also stopped listing T3 Investments' holdings after 2005.

In a prepared statement emailed to The Star through a spokesman, Eric Turner acknowledged an ownership interest in Mainstreet Capital Partners, which in turn has an interest in Mainstreet Property Group.

But he would not disclose the percentage of his ownership interests in the Mainstreet companies or T3 Investments. His financial disclosure form, however, suggests he receives more than a third of his non-legislative income from T3 Investments.

An active role

While Turner has painted a picture of himself as an indirect investor in the family's nursing home property business, court records reveal he has played a more active role.

In 2006, members of the Turner family created two companies — T-3 Martinsville LLC, which was set up by Eric Turner, and MS Martinsville LLC, set up by Zeke Turner. Together, the companies purchased Grandview Convalescent Center in Martinsville.

Within a few months, the company that leased the facility from the Turners stopped making payments, setting off a series of legal disputes — and providing a small glimpse of Turner's role in the family nursing home dealings.

According to an Indiana Court of Appeals case, Eric Turner met periodically with the leaseholders from 2006 to 2008, discussed the nonpayment issue with them, and in at least one case sent an email to the leaseholder demanding rent be paid.

The appeals court ruling notes that the two LLCs "are owned directly or indirectly by various members of the Turner family, including Paul Turner, Paul Eric Turner ('Eric'), Kyle Turner, and Paul Ezekiel Turner ('Zeke')."

Despite his ownership stake and active role in the companies, Eric Turner failed to list either of them on his annual financial disclosure forms during the years the litigation was pending.

In his emailed statement, Turner said he was not a member of the companies, even though he is listed as T-3 Martinsville's president in business filings.

Roger Harvey, a spokesman for Turner, said T3 Investments was the sole member. MS Martinsville was owned by Mainstreet Property Group, he said.

A lack of disclosure

The lack of disclosure raises questions about Turner's transparency and reveals a gaping hole in the House disclosure requirements, said Nicholas Georgakopoulos, a corporate law professor at Indiana University.

The disclosure form requires lawmakers to list "every partnership and limited liability company of which you or your spouse are a member."

The problem with that wording is that it could allow a lawmaker to set up a company over which he has sole control, then create a second company which is controlled solely by the first.

Under that scenario, the lawmaker would completely control both companies, but wouldn't have to list the second company because its sole "member" is the first company.

"If the disclosure form doesn't require elected officials to list entities they control indirectly, then its extremely easy to subvert the purpose of the disclosure rules," Georgakopoulos said. "It would be easy to hide the control of a (company)."

The Martinsville entities aren't the only ones Turner did not disclose in his annual filings.

Turner also had "membership interests" in three limited liability companies with ownership stakes in Portland, Ind., and Hartford City nursing home properties, according to a 2010 mediation agreement signed by Turner and obtained by The Star.

Under the agreement, Turner agrees to transfer his membership interests in all three LLCs to Larry New of Yorktown for $600,000.

Again, none of those companies appeared on Turner's annual disclosure statements that year.

Harvey, Turner's spokesman, said T3 Investments — not Turner — had ownership interests in those three companies.

In 2011, as a member of the House's powerful Ways and Means Committee, Turner said he planned to vote against a nursing home moratorium similar to the one that was debated this year.

The committee's chairman asked Turner to abstain from voting after The Star linked Turner to his son's company through the Mainstreet investment. Turner complied and the moratorium was defeated anyway.

But because of the lack of disclosures, Turner's true involvement in the nursing home property business was obscured. Nobody would have known about his involvement with the properties in Martinsville, Hartford City, or Portland.

"It sounds like appropriate disclosures weren't made," said Orentlicher, a former Democratic state lawmaker. "Sometimes you can tolerate certain conflicts if you can take them into account, but if you don't even know about the conflict, you can't take it into account."

Going public

In 2012, the Turners took Mainstreet Capital Partners, which had changed its name to Mainstreet Property Group, to a new level.

In an effort to raise money and further capitalize on the aging baby boomer population, Zeke Turner created HealthLease, a real estate investment trust specializing in upscale skilled nursing properties. Zeke is the company's chairman and CEO; Mainstreet is the largest shareholder.

The company went public on the Toronto Stock Exchange in June 2012, raising $110 million in a single day.

Its initial portfolio of 15 senior care properties included nine Mainstreet properties, three of which were under development at the time. The company projected those properties would generate $8.5 million in rent in 2013.

Eric Turner's stake in the six existing Mainstreet properties is not known, but it was significant enough to be mentioned in documents filed as part of the company's initial public offering.

"All of the entities have greater than 75% ownership by Paul Ezekiel Turner, the Companies' chief executive officer, Paul Eric Turner (the state representative), his father, and other members of the Turner family," documents filed before the public offering say.

According to Eric Turner's most recent financial disclosure form, he and his wife hold stock in HealthLease. Lawmakers don't have to disclose the exact amount, but only have to list stock holdings if they are valued at more than $10,000.

A big stake

HealthLease has continued to buy and develop senior care facilities at a brisk pace. Today, it owns 45 properties — triple what it started with.

HealthLease's most recent annual filing paints a picture of just what the company had at stake in the legislative debate over a proposed moratorium on new nursing home development during this year's legislative session.

The company advanced loans totaling $9.25 million for the development of six senior care properties — five of which are in Indiana. It also invested $20 million in Mainstreet-related entities for the development of 12 to 16 senior housing facilities in the United States over the next two years, according to HealthLease's 2013 annual information form, which was filed in March.

Turner downplayed the company's stake in the moratorium debate.

"It would have no significant effect," he said in the prepared statement. "If a moratorium had passed, investment dollars in new facilities would have likely gone to other states and Indiana would have missed out on new jobs, new investments, and a better living experience for seniors."

The House Ethics Committee hasn't set a date for Turner's hearing, but the committee's chairman, Rep. Greg Steuerwald, R-Avon, said he expects to hold a meeting sometime next week.

Call Star reporter Tony Cook at (317) 444-6081. Follow him on Twitter: @indystartony.