Tag Archives: HOA Embezzlement

HOA Embezzlement Hits All, From High & Mighty to Small & Weak

guest blog by Deborah Goonan

Some readers may be under the impression that embezzlement of HOA funds only happens to Homeowners’ Associations (HOAs) with hundreds or thousands of units and elaborate amenities that translate to big operating budgets. I’ve talked to some people that think these cases are limited to certain parts of the country such as the Sunbelt states or major cities.

Nothing could be further from the truth. Even modest HOA communities in small towns are at risk for theft of funds by rogue Board members, community managers, or Developers.

Take Skyview Estates, for example. Skyview is a relatively small townhouse community of a few dozen homes located in Richland, PA, a town with a population of less than 1600. The nearest city is Johnstown, PA, with a population of about 20,000. There are no amenities such as a pool, and houses are located on one street named after the company that developed the community.

Three members of the family owned business, Julz Development Group LLC, were recently arrested for stealing nearly $80,000 in HOA assessments over a period of five years. Dennis Michaels, his wife Julie Michaels, and daughter Juliana Zamias constructed Skyview Estates beginning in 2006. As is typical of HOAs, the developer controlled its Board of Directors during construction. Homeowners elected a Board of volunteer owners beginning in 2013, and that’s when Board President, David Mishler, discovered that money was missing. The Board authorized a forensic audit, which resulted in charges being filed against Juliana Zamias and her parents. The audit found that numerous checks were written for “cash” and money was transferred to personal accounts with no explanation.

Active real estate listings for homes in Skyview Estates, priced between $130,000 – $160,000, note HOA fees of $125 per month, to cover lawn maintenance and snow removal.  For an HOA of less than 50 homes, $80,000 probably exceeds the amount of assessments it collects in an entire year.

As is often the case, theft of HOA funds can occur for several years before it is discovered, and those perpetrating the crime are usually considered to be trustworthy. (See Characteristics of Embezzlers, linked below)

The management and political structure of HOAs provides ample opportunity for mishandling of funds, because only a few individuals have access to the collective assessments of the community. In the case of Skyview, it was the Developers. But even after the developer turns over control to volunteer homeowners, it is all too common for the Board of Directors to place control of the money in the hands of one Officer or a hired Community Manager. In some cases, two or more people can work together to defraud homeowners, a little bit at a time, over many months or years.

In Pennsylvania, where Skyview Estates is located, the penalty for embezzlement of cash or property worth more than $2000 is a fine of up to $15,000, up to 7 years in prison, or both. (18 Penn. Con. Stat. § 3903.)

However, most local law enforcement agencies lack adequate funding and training to fully investigate white-collar crime. That means quite often, even after discovered and prosecuted, those who steal from HOA coffers end up with light sentences. Although convicted individuals may be required to provide restitution, the HOA is often unable to fully recover the loss. Even if the HOA carries a valid fidelity insurance policy to cover loss from theft, there is usually a deductible and a subsequent increase in insurance premiums. Sometimes insurance companies drop coverage altogether, leaving the neighborhood completely unprotected.

By contrast, embezzlement of more than $1000 from the federal government or a federal agency results in a fine of $250,000, up to 10 years in prison, or both. For amounts under $1000, the fine can be up to $100,000, up to a year in prison, or both. (USCA §641)

Small communities provide big opportunities for embezzlers, mainly because everyone knows and trusts the individual or individuals with access to HOA bank accounts. And with relatively little accountability, even after being caught, it is no wonder we read several reports of HOA embezzlement on a weekly basis.

(link to WJAC TV report of HOA embezzlement charges)

(characteristics of embezzlers)

(link to Pennsylvania embezzlement laws)

(link to federal embezzlement laws)

Dallas Jews Face Yet Another First Amendment Fight

guest blog by Deborah Goonan

About a month ago, I wrote about Congregation Toras Chaim (CTC).  With the help of Liberty Institute, CTC prevailed in a lawsuit filed by their HOA with regard to a dispute over deed restrictions limiting HOA homes to “single family use.” Based upon two Texas laws protecting religious freedom, a Colin County judge threw out an HOA’s case against owners of a home used as an Orthodox Jewish synagogue.

But that’s not the end of the story.

On March 2, 2015, the City of Dallas filed suit against CTC and the owners of the property at 7103 Mumford St, Mark B. and Judith D. Gothelf. The petition claims that the defendants have failed to obtain a Certificate of Occupancy (CO) required by the City of Dallas for all non-residential uses of property. The City insists that the property be brought into compliance with local ordinances before they will issue a CO for the property.

Specifically, the City explains:

Currently, Defendants’ only permissible use of the Property is a single family use. Any other use of the Property that would require a CO [Certificate of Occupancy], such as the proposed use as a synagogue, without first obtaining a CO and complying with the life-safety requirements entailed therein, presents a substantial danger of injury or adverse health impact to persons and/or property of persons other than the Defendants.”

Curiously, the dispute over the CO and ordinance requirements stretches back to November 2013, not long after homeowner David R. Schneider filed his first lawsuit against the Gothelfs on the matter of deed restrictions in the McKamy IV and V HOA.

The City is now requiring that multiple modifications be made to the property, including adding 13 parking spaces, adding a firewall barrier between the first and second floors of the dwelling, and handicap accessible features including 2 wheelchair accessible restrooms on the first floor. The estimated cost to bring the Mumford Street home into compliance: roughly $200,000.

Attorneys from Liberty Institute, representing the Gothelfs and CTC have been back and forth with the City of Dallas for 18 months, initially arguing that the CTC is exempt from the City’s bureaucratic ordinance requirements based upon state and federal laws governing religious freedom.  After all, they argue, the congregation of Orthodox Jewish families is smaller than most Christian Bible Study groups that meet in residential homes, without being required to comply with cost-prohibitive and unnecessary city codes.

The City claims they are within their legal rights to insist upon CO requirements, despite religious use status, state and federal law. The Congregation, through their attorney, then proposed a modification of their request, to ensure a maximum capacity of less than 50 occupants, but despite the good faith effort to compromise, the City has refused to back down on its requirements. In fact, every attempt of the CTC to compromise and avoid litigation has been rejected, or the City has changed the requirements yet again. The City now claims it will allow the defendants to formally request a special exception or variance, however if that request is denied, the modifications will have to be made within 14 days. If the deadlines are not met, CTC faces $1,000 per day fines for non-compliance.

According to the Rabbi, about 10 people attend daily religious study, and about 30 attend on the Sabbath, arriving on foot since their faith forbids driving on the Sabbath.

Also according to the Rabbi, the cost of extensive modifications combined with the cost of daily fines threatens the very existence of the Congregation. Its members would have to move to a different location within walking distance of their gathering place for weekly services.

Is it the City’s intent to protect religious freedom or to circumvent First Amendment rights by way of unreasonable enforcement of ordinances? And why has the City chosen to stop working with the Congregation and property owners now, on the heels of dismissal of the HOA’s case against them?

This battle for First Amendment rights is not over. The Liberty Institute has issued a statement that it plans to aggressively defend the religious rights of CTC.

“This outcome matters,” said Kelly Shackelford, Liberty Institute President & CEO.

“Any verdict that does not protect this congregation would be tragic. Not only for them, not only for Dallas, but for America. If small meetings by people of faith are not allowed in their homes, that would greatly damage religious freedom for all.”

(link to previous blog)

(link to WFAA TV news coverage of suit filed by City of Dallas)

(link to Dallas News article coverage of news conference)

(link to statement from Liberty Institute)

Benzer Testimony Gets Interesting!

Guns? Organized crime? Fear of winding up in the desert? Major law firms involved? The HOA racketeering trial in Nevada is producing some interesting testimony from witnesses in the scheme to takeover Homeowners Associations across the valley.

This trial continues to be a travesty because 37 of the criminals involved were allowed to plead guilty in order to get lighter sentences. The sentences won’t be announced until after the current trial is over. But I’ll take a reporter’s wild guess that the average sentence for these mobsters won’t be greater than 18 months, with much of that time off for good behavior.

This is the one instance where I’d be all in favor of debtors’ prisons. Keep these animals locked up until every Nevada homeowner is made whole.

That’ll never happen.

I know there are some FBI people who read this blog. Have some guts and start investigating racketeering in HOAs all over the country!

(link to ReviewJournal article on Las Vegas HOA racketeering)

 

A Mini-Love Canal in a Pennsylvania HOA

guest blog by Andy Ostrowski (former PA Congressional Candidate)

The Wilson School District was going to purchase a tract of land adjacent to the Hidden Valley condominium. They are both part of the same parcel in the “Lincoln Park” area of West Lawn, Spring Township, Berks County, Pennsylvania. Ironically, you cannot even find the Hidden Valley Condominiums at 1334 West Wyomissing Boulevard address on google maps – it is hidden, indeed. Google map it.

The School District did not go through on the purchase because battery waste was found on the property. The owner of that property, Al Barg, who was also once a President of the Hidden Valley Condominium Owners’ Association, and an owner of several units at Hidden Valley, then sold the property to Weiner Development, which, it is my understanding, is affiliated with Pinnacle Development. In the mid-2000s, Pinnacle constructed Penn’s Crossing on the property, which is a low income retirement apartment building containing 52 units.

The land upon which both are built has been referred to by one Environmental Protection Agency representative as “The Love Canal,” except for the amount of waste involved, which became the subject of national attention when the presence of toxic waste on that site was revealed in the 1970s, after having been concealed for decades. Accordingly, at least the 26 unit owners at the Hidden Valley Condominium, and the 52-plus residents at Penn’s Crossing may be living on contaminated land.

There were two fires at Hidden Valley, one in 1999 and one in 2011, both of which are believed to be electrical in origin. The one in 1999 affected 6 to 8 units. The 2011 fire resulted in the death of one of the residents, after over 80% of his body was burned. Although the Pennsylvania State Police are supposed to have exclusive jurisdiction in the investigation of fires resulting in injuries and death, the Township of Spring Fire Marshall did a report labeling the cause of the fire as “undetermined.” There was allegedly a statement made by the man who died, and a photograph of the burnt inside of an electrical box that were not mentioned in the report.

During my campaign, I began to be contacted by many people from across the country who are residents of Homeowner’s Associations (HOAs), with all manner of horror stories about their experiences. I see these as being core civil rights issues – affecting the very essence of people’s lives – the right to live and raise families in safe, secure, peaceable homes. I wrote a couple pieces about my view of these constitutional issues, i.e., the usurpation of basic government functions, by these private entities, who rely on their money for access and control of legislative initiatives, and their access to the courts, and posted them on my campaign site.

I met a woman who bought a unit at Hidden Valley when she was 26 years old – in 1999. She worked on my campaign. Hers was one of the units affected by the 1999 fire – the bottom, left unit of the building, for those who have seen the photos on http://hiddenvalleyhiddentruths.webs.com/. I learned much more about the situation, and the fifteen years of litigation in which this homeowner had been involved. I will cover more of that story down the road, but the bottom line is that, despite the clear, unequivocal proof of the deplorable conditions of that building, and the failure of the HVCOA and Township of Spring to do and/or enforce the proper repairs, nothing was done. Instead, the litigation turned into a years-long assault on the character and person of the homeowner.

I note that this particular homeowner has shown a character, resolve, and moral fiber that is possessed by only the rarest of breeds of people in this world. She realized what she had come upon, and the number of people who were at risk because of what she learned, and she has fought, against all odds, on the principles involved in this situation – all over a $40,000, 800 square foot condo. As you learn more about this, and as I continue to reveal more of the truths that have been, and continue to be, hidden, ask yourselves “would I have done what this homeowner did? Do I have that strength?”

After relying on lawyers, and getting mistreated by them, for years, the homeowner lost her trial in the Berks County Court. How? Why? This will be another facet of the story along the lines of what I have discussed for the past few years about problems in the courts. More to be revealed. I note that the EPA representative did tell her it was “political,” and he, along with almost all others along the way, told her to “just sell the unit,” i.e., don’t disclose these known hazardous conditions, and put others in harm’s way, and try to move on with your life, and live in peace. She was actually told to get out of the state, or even the country (why would he suggest Belize?).

Not just this, but she was told to “just get out,” “they want you to have a fire and burn the fuck up,” and many frightening, intriguing things along these lines, like turning over a stack of documents containing information about environmental contamination, insurance fraud, and sundry other misconduct, and warning her that “once I turn over these documents, there is no backing out. You must go all the way now, and I will be killed if they find out.” There are two dead former HVCOA Board members. This one, and the one who burned in the 2011 fire, who also was allegedly about to blow the whistle on the HVCOA. More to be revealed.

After she lost her court case in 2009, and had her lawyer mishandle her appeals, and commit egregious malpractice (or deliberate malfeasance), she did not go away. She continued to fight. She continued on her own, with just a few trusted friends along the way, to gather evidence, talk to witnesses, and fight the fight that her heart and conscience motivated her to fight. It was a truly remarkable effort by a truly remarkable person. Again, more to be revealed.

After years of relying on lawyers, not finding anyone who would go down to this property, having her proof cut off at trial, having her personal work product stolen by her own attorneys, being denied any access to justice, and being followed, defamed, harassed, and abused all along, she did finally find a highly-credentialed structural engineer to do a report on the property.

That report was finalized on February 5, 2015. That report confirms everything this homeowner has said all along. That report talks about severe moisture infiltration, subsurface conditions, fire hazards, an entire electrical system in need of evaluation, needed environmental testing, suspicious missing documentation for the Department of Labor and Industry, changed documents, the battery acid meeting minutes, a reference by our EPA friend to this place as a “contaminated condo,” and the fact that “major demolition” is needed to even do any type of full and proper investigation.

On Monday, February 23, 2015, I attended a Spring Township Board of Supervisors meeting with Stephen Runyeon, a friend, and loyal supporter, of the homeowner (more to be revealed). Stephen presented the report and some other information to the Board of Supervisors who, at least in the past, had ample and abundant knowledge of the problems at the Hidden Valley. Stephen did so in a very professional and appropriate manner, supporting the homeowner’s contentions all along. (A Board member communicated that the HVCOA got their lawyer through the Township – more to be revealed). He made a passionate appeal that the Board of Supervisors perform their public duties, and enforce appropriate action to have these issues properly addressed, and to protect the residents of Spring Township who are in harm’s way.

I got up after Stephen, and talked directly about the people in harm’s way, and my motivations in taking an interest in this case, and the extent of the information about the contamination issues, and the HOA issues implicated by this situation, and the problems that occur when government functions are ceded to private, corrupt, money-driven entities. I also asked that this place be condemned, and that steps be taken immediately to address the safety and security of the people at Hidden Valley, at Penn’s Crossing, and in Lincoln Park, where two elementary schools were recently torn down for some vague reason, one specifically on an adjacent tract of land.

Upon advisement, the homeowner did not attend, citing the history of abuse and defamation, and the recent information she learned from her EPA contact after discussions with Township officials that “they” wanted a “pound of flesh” from her, that she would not get off “scot-free” (completely free from obligation, harm, or penalty), among continuing defamatory remarks.

Interestingly, and very sadly, she was also told by this EPA representative that she should just put Hondurans, or Mexicans, or some other people in her unit who would be used to those conditions, and would just be happy to have a roof over their head. Of course, this is unacceptable to this homeowner, as she has always been motivated by the protection of the many lives at risk at this “contaminated condo,” with its mold and fire hazards, and her demand has always been the same – the truth. The truth has been hidden for many years. It is now being revealed.

We need all of your continued assistance. We do not expect the Township to come in and do what they should do, and we are cautious about the other law enforcement authorities taking this case and running with it – read about the effort that was required at the Love Canal. We need this information proliferated. We need the people at Penn’s Crossing contacted. We need the Township contacted. We need to fill the meeting rooms, and use the phone lines of the Attorney General, the U.S. Attorney, the Township of Spring, and Governor of Pennsylvania, and anyone else we can think of to get some attention, and immediate action, on these issues. We need to show the power of the people, and the strength in numbers, and we need to make sure that there are no more hidden truths at Hidden Valley. We need to show that this is what is demanded by our Constitutional right to life, liberty, and the pursuit of happiness.

You may tell them that you got the information from Andy Ostrowski, and that I asked you to call.

Yet Another HOA Embezzling Case

These stories come to us daily. Sometimes the loss is $28,000. Some are over a million dollars. Even when convicted there’s rarely any restitution from the embezzlers. And that means that every member of the Homeowners Association is going to be hit with a special assessment to cover the losses. Embezzling, kickbacks. And sometimes these crimes are so organized and so massive that they bankrupt entire neighborhoods.

Someday homeowners will wake up.

(link to another embezzlement in Tennessee)