Wow! You don’t see stories like this every day. But an HOA management company is being sued by an HOA over a minor little infraction of the law… the embezzlement of 3.4 million dollars.
The Edge at Grayhawk Condo Association in Scottsdale thinks embezzling is a crime. These homeowners pay dues of $300 a month. But they just felt that their money was going down a rat hole. And the rat, they think, is Eagle Property Management.
The cops are looking into the matter, and the company president is refusing to talk to anyone.
With embezzlement from HOAs the largest unreported crime in America, how dare these rich homeowners complain because they got ripped off?
If you live in an HOA, you’re gonna get ripped off.
Live with it.
(link to Arizona embezzlement story)
Here’s another case in tamarac, Florida, where the former Board President wrote bogus checks totaling nearly $200,000. When her former fellow Board members started investigating financial records, they were threatened with a fraudulent lawsuit.
“While Changar-Coe was President, Sisson, along with former treasurer Nancy Ballhorn, were investigating discrepancies in the association’s finances in early 2012, when a fraudulent court document was presented demanding that that they both resign immediately or face a $1 million lawsuit.”
http://tamaractalk.com/former-hoa-president-arrested-for-grand-theft-13568
And in Ocala, Florida, state officials are investigating charges against a management company involving five different HOAs.
Allegations filed against Property Management Consultants include:
“That S. Wesley Herren continued to perform the duties of a licensed community association manager after voluntarily relinquishing his license on Oct. 31.
That Deborah Herren aids her husband in performing unlicensed duties.
That the company, also known as PMC Inc., improperly conducts board meetings and elections.
That PMC has misappropriated funds belonging to homeowners’ associations.
That PMC has engaged in “gross negligence and misconduct.”
http://www.ocala.com/article/20140802/ARTICLES/140809951?p=1&tc=pg
Darn those malcontented homeowners, those complainers! Can’t they see this is just business as usual?
Funny – there are some in the industry that would call those owners ‘complainers’…now, which government entity is going to investigate and make sure other HOAs they managed get audits to protect themselves? The alleged misappropriation of 3.4 million dollars is a perfect example of why the industry needs licensing and substantial regulations, created by the owners not trade groups. There will be more to this huge story…it should be a wake up call to all owners about the reality of the HOA industry. I dare you all to visit your court houses each week and find more juicy new lawsuits.
This story is far from over. Let’s take a look at what’s in store for these fine homeowners. If this HOA thinks a lawsuit will get them their 3.4 million bucks back, they are dead wrong.
Most of these management companies only have a 1 million dollar bond, not nearly enough to cover their 3.4 million dollar loss. If history repeats itself, and if this management company was stealing from one HOA, they were probably stealing from the others they manage.
Now I’m sure those other HOAs Eagle Property Management represents are scurrying to have their books audited. No doubt that 1 million dollar bond may have to be split many ways.
Now let’s add up the legal fees to the HOA attorneys, who will be attempting to recover the “missing funds.” This HOA might be lucky if their loss is only but a measly 3.6 million dollars.
If this HOA would have done a yearly audit for around $1,200 – $1,800 this theft may have never happened, or would have been discovered much earlier. The Arizona State Law has somewhat of a requirement to do these audits however, the law has no teeth. There is absoutly no penality if an HOA fails to do them.
I’m sure the bond company will use this HOAs lack of audits as just reason not to pay the claim. “After all judge, if this HOA would have done their audits, we wouldent be here today.” The lawyers will make a fortune off of this mess and the homeowners will pick up the tab.
I didn’t see Deborah’s post when I posted mine…and we both brought up the way ‘the powerful’ term us as ‘complainers’. A Mesa HOA mgmt co reimbursed appx 38k allegedly to a President for baby wipes, vodka, dinners, etc (however the news didn’t even bring up the term mgmt co). An employee at a Phoenix mgmt co created false pay requests with no investigation if it happened at any of the other communities that person managed (the news didn’t cover this). Communities are not being maintained and reserves are severely underfunded in many hoas, leavings owners who will face huge special assessments – rarely makes the news!
But Dave, surely you realize that “the vast majority of Board members good people volunteering their time, and Managers are professionals.” These situations are “outliers.”
Or so we’ve been told.
Florida also has laws that are not enforceable without – drum roll, please – hiring an attorney. Very few cases are investigated by the State (DBPR) let alone resolved favorably.
Deborah,
Lack of board member training, again. I’m sure this company managed the entire HOA including their own HOA Manager.
Your right, most HOA laws have absoutly no consequences if you violate them. Thanks to the special interest groups, the CAI, AACM and the Arizona Association of Realtors, we’ll probably be seeing a lot more of these story’s here in Arizona.
Until our sellouts down at the Arizona Legislatue stop listening to these special interest groups, homeowners are doomed!