By Ben Butler and Leonie Wood
NURSING home leader Japara Holdings is being ''closely monitored'' by the Department of Health and Ageing after serious allegations of mismanagement were raised during a bitter legal stoush over control of the company.
In an affidavit filed with the Supreme Court, former chief executive Arnan Rouse alleges Japara, which has about 2800 aged-care beds across Australia and is worth up to $500 million, has ''on more than one occasion'' broken aged-care regulations covering the amount of cash the company must keep on hand.
Mr Rouse also alleges a related property trust, which owns the homes managed by the group, failed to pass on to Japara $7.83 million in accommodation bonds paid by residents as required by management agreements.
In addition, he alleges the $100 million Japara Aged Care and Retirement Property Trust borrowed money from the group in order to pay distributions to unit holders despite telling investors all such payments were made from cash earnings.
Other Japara directors and shareholders, including millionaire poker player Julius Colman, accuse Mr Rouse of trying to stall the sale of the business and set up his own operation in competition with it.
In affidavits filed with the court, each side vigorously denies doing anything wrong. Japara declined to comment. A spokeswoman for the Department of Health and Ageing said senior Japara management had assured officials ''of the continuity of high-quality care to all residents of Japara aged-care services''.
''The department is continuing to closely monitor the situation with Japara and if there is any evidence to suggest breaches of the Aged Care Act a full investigation will be undertaken,'' she said.
She declined to comment on the specific allegations made by Mr Rouse because the matter is before the courts and ''relate to the internal management of the company''.
In August 2008, the department moved to revoke accreditation of Japara's Ballarat nursing home, Kirralee, after an investigation found 28 breaches of standards including health services, infection control and medication management.
The decision was later reversed and the home continues to operate.
At a hearing before Justice Jennifer Davies on Thursday, Japara agreed to pay Mr Rouse about $68,000, representing wages since Mr Rouse was sacked as CEO last month, in return for him agreeing not to work in the aged-care industry until the case returns to court next month.
Counsel for Japara, Norman O'Bryan, SC, said Mr Rouse had engaged in ''misbehaviour'' and there was evidence he was trying to set up a rival business and was making inducements to key personnel to join him.
Mr O'Bryan showed the court an email drafted by Mr Rouse intended for ''buyer A'', one of the potential bidders for the business in a sale process run by the ANZ and UBS.
The May email invites buyer A to join forces with him in setting up a joint venture and says Japara systems would be used for the joint venture, Mr O'Bryan said. ''He's going to use his inside knowledge of the business to cherry-pick [aspects of Japara's business].''
Mr Rouse's lawyer, Ian Waller, SC, denied the allegations. 'The commercial relationship has irretrievably broken down,'' he said.