Sequel Youth & Family Services: Palo Alto, CA Investment Firm Owns Controlling Interest in Sequel

December 19, 2020

PALO ALTO, CA — A Palo Alto investment firm owns a majority stake in a for-profit youth behavioral health company that is now under intense scrutiny amid documented allegations that the company's staff has engaged in systemic abuse of children it was responsible for caring for, NBC News reports.

Altamont Capital Partners acquired a controlling stake in Sequel Youth & Family Services in 2017 and has invested $40 million into the company over the last three years according to the report.

At least 40 states at one point sent their most vulnerable children to taxpayer-funded Sequel facilities according to American Public Media, which has conducted a yearlong investigation into living conditions at Sequel facilities.

Sequel operates 44 programs in 19 states including a Michigan facility where a 16-year-old boy died in April after being restrained by staff members.

The circumstances surrounding Frederick's death led to disability rights and child advocacy groups along with lawmakers in at least six states questioning whether Sequel is putting profits before rehabilitative care, APM reports.

Sequel started out operating a single facility around two decades ago and arose from Youth Services International, a for-profit youth corrections company launched by Jiffy Lube founder Jim Hindman.

An investigator for Alabama Disabilities Advocacy Program, a federally funded watchdog group authorized to monitor facilities such as Sequel's, described horrific conditions at the Courtland facility Sequel operates in northern Alabama, NBC News reports.

“There was a particular room," Christy Johnson said, "I recall walking in and the stench was overwhelming. There were feces on the floor, stuck inside the doorframe, stuck around the window."

A 14-year-old boy with a bloody gash below his hairline told Johnson that staffers at Sequel's Courtland facility had shoved him into a wall, headfirst.

The advocacy group interviewed around 100 children, including some as young as 12, who described physical, verbal and emotional abuse in Sequel facilities that were documented in a report ADAP released over the summer.

The report described "squalid living conditions and a disturbing cultural and programmatic environment that further traumatizes extremely vulnerable children."

The report said children were housed in hazardous conditions, sleeping on thin mattresses with worn and dirty bedding. The report includes photos documenting feces seen on a bedroom floor and blood smeared on a window.

"Every single resident who spoke to ADAP discussed the squalid physical conditions of the Courtland facility," the report said, noting the complaints included filthy conditions, concrete slabs used as beds, having to drink water from a sink and roaches and rodents in the housing units and gym, among others.

Staff made fun of a boy who had a horrific history of sexual abuse, and told a boy who said he was going to kill himself, "go ahead" according to the report.

An Alabama Department of Human Resources director wrote in an email to the agency's top staff members she'd learned staffers at the Courtland facility engaged in and encouraged violence among the residents according to the NBC News report.

Sondra Landers cited a report from a former Sequel employee in her email to administrators.

According to the report, the employee told Landers that "40 different residents/students that are consistently choked, body slammed, tortured, emotionally abused, football tackled, held up to the wall by their neck, dragged out of their beds, punch children in face, break their glasses, and encouraged to harass and fight other residents."

The Courtland facility was described by local police as a "death trap," the former employee told Landers.

Tristan Broderick and his wife Laurie, who both spent time as children at Alabama facilities run by Sequel, described a pattern of abuse at the facility in an interview with Kate Snow broadcast on NBC Nightly News.

"I seen a lot of stuff that probably shouldn't have went down as far as staff abusing kids," Laurie Broderick said.

Said Tristan Broderick: "If they can get you in a room, or in a blind spot where there's no camera, they can sneak in a little punches, but if you're in a room they'll just straight out beat the hell out of you."

Asked if he'd witnessed such incidents, Broderick said "It's happened to me."

Sequel Chairman and Co-Founder Jay Ripley appears in a video describing the company's business model during a 2015 business school presentation.

“So, you have to have enough staffing to have an excellent program, but you can't have too much staffing to eat up your profit," Ripley said in the video.

The business model Ripley describes has enriched Sequel and its investors. The company raked in around $30 million in profit from about $200 in revenue the previous year, Ripley said in the video.

Published reports documenting the conditions at Sequel-run facilities have not been good for the company's bottom line.

At least six states have already announced that they will no longer send children to Sequel-run facilities, APM reports. California, Ohio and Washington cut ties with the Sequel earlier this month. Minnesota, Oregon and Maryland announced such plans earlier this year.

The state of Michigan pulled the contract and license of Sequel's Lakeside Academy facility in Kalamazoo after details surrounding the death of Frederick, the 16-year-old boy, surfaced, The Detroit Free Press reports.

Sequel now operates 28 residential treatment centers in 14 states after the Ohio's decision according to the APM report.

Altamont Capital Partners, the Palo Alto investment firm, vouched for the health operator's business practices in a news release announcing it had acquired a major stake in the company.

"The Sequel team has impressed us with their ability to provide the highest quality of care in addressing behavioral health needs across a range of populations," Altamont Managing Director Casey Lynch said in a statement.

"We believe there are tremendous continued growth opportunities ahead via both organic expansion and acquisition of new programs, and Altamont is excited to partner with the Sequel team to support this next phase of growth."

Altamont Capital has over $2.5 billion in capital under its management according to its website.

Lynch completed graduate and undergraduate degrees at Stanford, where he obtained a Masters of Science in Management and a B.A. in Public Policy, according to his company bio.

He did not immediately reply to a message from Patch.

The news release announcing the deal did not describe the extent to which Altamont Capital would be involved in the Sequel's business operations, if any. It said the company would continue to be led by CEO John Stupak.

In a description of its investing approach on its website, Altamont Capital gives the impression that it does its due diligence examining the business practices of companies in which invests.

"Shared success, collaboration and openness are core tenets of our culture and our philosophical approach to business, and they guide all of our interactions. We believe our strong relationships with management are fundamental to our success," Altamont Capital says on its website.

Altamont Capital cites "integrity" to be among the qualities it values in its partnerships.

"Our culture demands collaboration, integrity, transparency, and a passion for results," its website says.

Oregon State Senator Sara Gelser is among the legislatures advocating that governments sever ties with Sequel.

"Institutional abuse is a hard topic. It's a dark place to go in hearings, in our minds or in our hearts. Yet for children, disabled ppl, mentally ill ppl & elderly ppl, this isn't just a theory. It isn't just a nightmare. It is real life," she wrote on Twitter.

Source: “Palo Alto Firm Has Major Stake In Profitable 'Death Trap': Report,” Patch Palo Alto, Dec. 17, 2020, URL: https://patch.com/california/paloalto/palo-alto-firm-has-major-stake-profitable-death-trap-report