Nursing home firm, ex-executive settle
Orange County CA Register 1Jan99
By Penni Crabtree: Orange County Register

LITIGATION: Suit said money was diverted for Laguna Beach home.

A San Juan Capistrano nursing home company and a former executive, Stephen Edward Samuelian, a founding director and shareholder of Covenant Care, have settled a $2 million suit that accused the executive of fraudulently diverting funds and using them to build his Laguna Beach home. The amount of the settlement is undisclosed

Samuelian, who is also the bishop of the Laguna Beach Ward in California, said the settlement closes a "hurtful" episode. The local LDS church leadership was aware of the legal dispute and "supportive," he said.

However, the Covenant suit isn't the first time that Samuelian has faced similar allegations. In 1995, an Orange County jury found him liable for wrongfully diverting construction funds from another client, Fuji Natural Foods.

Samuelian, who denied any wrongdoing in both cases, had filed lawsuits against Covenant and Fuji for breach of contract. Samuelian sought developer fees that he felt that Covenant and Fuji owed him. As part of the settlement, both suits were dropped. Samuelian termed the disputes a "discrepancy over construction profits."

Covenant claims that Samuelian, who oversaw real estate development projects for Covenant, which operates about 40 nursing homes in several states, failed to disclose "secret contracts and side deals" he had with Pacific Medcon Company Inc. Pacific, which landed the construction contract for the Las Vegas nursing homes, is partly owned by Samuelian.

Samuelian said he fulfilled his duties as developer, and recommended that Pacific be removed from the construction job after the company submitted unwarranted charges.

Covenant alleged that Samuelian, through Pacific, inflated estimates on the two projects by at least $1.4 million. When Pacific's contract was terminated, they claim that Samuelian accepted a $125,000 kickback from another company in exchange for the construction job.

Samuelian denied that any Covenant funds were used to build his home or enrich himself. He said Covenant knew of his relationship with Pacific Medcon before the fact.