Klaassen Steps Down As Sunrise CEO

By Zachary A. Goldfarb

Paul J. Klaassen, the chief executive of McLean-based Sunrise Senior Living, announced Wednesday night he is stepping down, more than a quarter-century after he founded a company that became the nation's largest senior living provider.

He is being replaced by Mark Ordan, a founder of Fresh Fields food markets and a former chief executive of Chevy Chase real estate firm Mills Corp. Ordan joined Sunrise as chief administrative and investment officer four months ago.

The change, which will take effect at the company's annual meeting in November, comes after Sunrise has discussed the possibility of selling itself. Ordan sold Fresh Fields to Whole Foods Market in 1996 and Mills Corp. to Simon Property Group in 2007. But Klaassen and Ordan say any speculation that Ordan was brought in to arrange a sale is off target.

"I didn't come here to sell the company," Ordan said.

Klaassen's decision to step down follows three years of turbulence at the company. Sunrise is nearly complete with a financial restatement that has lowered earnings by $173 million. The company has been the target of criticism by shareholder activists, who have alleged insider trading, improper stock option backdating and cronyism in the company's management.
Internal investigations cleared the company of those charges, but uncovered "inappropriate accounting," and several senior executives were let go. Sunrise recently concluded a bitter lawsuit with its former chief financial officer.

Klaassen, 50, said the challenges were unrelated to his decision to step down.

"There's not a time when you're really ready to go," he said in an interview. "I've had it on my mind for a while. I wanted to see the company through this restatement process."

Nevertheless, Klaassen said the troubles have been painful.

"Like any founder, you hate to see what you birthed" attacked, he said. "I probably take it too personally. Founder-entrepreneurs have an attachment to their company that's different. That's clearly been an unpleasant thing."

Klaassen, in blue shirt and open collar, spoke in his sun-filled corner at the firm's McLean's headquarters. An antique-looking "Sunrise Terrace Retirement Home" sign decorated his office, a memento from the first senior living home he and his wife and co-founder, Teresa, set up in Oakton in 1981. Through an office window, he can look into her office, where she helps oversee the design and operation of homes.

Paul Klaassen will become the company's chairman, a title he gave up earlier this year as part of the series of governance changes announced in response to Sunrise's accounting problems. Current chairman Lynn Krominga, a director who joined the company last year at the urging of a major shareholder, will become the lead independent director. Ordan will join the board.

"It was Paul's decision, fully endorsed by the board," Krominga said.

In his new role, Klaassen said he would seek to expand his role as a lobbyist for changing how the United States handles senior care, tapping an activist perspective he said he has channeled since his time as a student organizer at Georgetown University
.
"Way too many times the U.S. response has been to send people to nursing homes for care," he said. "We have a lot of work to do there."

Ordan, 49, said he expects Klaassen to continue to play a major role in the company. He said as an outsider he brings a unique set of skills -- in particular experience with real estate and the nuts and bolts of running companies.

"The way we approach this is we're partners," he said. "Each one is dedicated to the same mission but they come at it with different backgrounds."

Ordan said he is confident the accounting problems that Sunrise experienced over the past few years will not be repeated. Sunrise' chief financial officer is Richard Nadeau, who worked with Ordan in the same capacity at Mills Corp. when it was sold.

Yesterday Sunrise's stock closed at $18.44, up 41 cents (2.27 percent). It is down by half over the last year, however.

Together, Klaassen and Ordan hope to oversee the construction of about 350 new senior living communities across the nation in the next 10 years. Sunrise currently houses about 50,000 seniors in the United States and four other countries.

Klaassen said there is a lot of work to do to improve the senior experience, especially for seniors who have Alzheimer's Disease and other memory problems. He has imported a version of treatment for these people known as Snoezelen, a practice in his homeland of Holland for stimulating the senses.

These days, he is also making preparations to move his own mother and father into a Sunrise community this December that is being built in Bethesda. And even after he steps down, he plans to continue bringing every new facility manager to his home for dinner.

"We've told everybody [that] even if I do one thing, it'll be hosting these regular dinners," he said.

By Dan Beyers  |  July 16, 2008; 8:06 PM ET  | Category:  Sunrise Senior Living
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