Monday, March 9, 2009

Corruption in Homeowner Associations - Las Vegas

If you read papers on the Internet, you may have stumbled across the corruption case in Las Vegas regarding Homeowner Associations.

How can this happen? I can tell you exactly how it happens because I managed one of those communities.

There are many people rallying together to form their "team." The team consists of attorney firms, board members, homeowners, management companies and contractors.

Once a Homeowner Association community goes into "construction defect" there are big bucks to be had. Some law suits bring a settlement of millions of dollars. A suit is filed against the builder/developer because of "defects" in the construction of homes or condos.

Once the "team" finds out there may be defects in a community, several are "given" units or homes so they can run for the Board of Directors. Most acquire their units by the construction company wishing to be awarded the multi-million contract for repairs of the defects. The construction company purchases the units/homes in the Homeowners Association and either deeds them to the upcoming want-to-be board members or sells them for five or ten dollars each.

Once the units are owned by the team players they run for a position on the Board. Most of them own the units but never live there. It is usually a requirement that one owns a unit in the community before they are able to run for a Board position.

Their nomination profiles, when running for office in the community, are phenomenal! They are police officers who can help serve the homeowners and protect them. They are accountants who can assure homeowners that the financial documents are scrutinized, ensuring that the management company is on the up-and-up. They are bi-lingual to interpret for homeowners who don't speak English. What perfect Board members for the Homeowners Association, or are they?

Upon being voted to the Board by unsuspecting homeowners, they then change management companies. Yep, the owner of the new company is a "team" player. If they need additional Board members to acquire a majority, the management company manipulates the voting process assuring more "team" board members are elected. This consists of discarding ballots or changing them.

They hire an attorney (team player again) to represent the law suit. The Board, after judgment is awarded, hires the construction company from which they acquire their units; a full circle of corruption.

Once the construction company is paid many millions of dollars, the Board members receive funds or bonuses from payroll. Who is their employer? The construction company is. Can you say kick-backs?

After everyone receives their piece of the pie, they are gone -- with the money. Repairs are not completed in the Association community and the homeowners wonder what just hit them.

One person accused in the Las Vegas plot has since committed suicide. Offices have been raided by the FBI. Arrest warrants have been issued.

This kind of thing went on for a period of approximately ten years in Vegas. There is only one reason the FBI became involved. There were homeowners who did their research. They found connections with all the team players; co-ownership in businesses and houses, one being married to another (using different last names), two living at the same residence, etc.

You can read about this in the Review Journal out of Las Vegas. Search for HOA, HOA Corruption, Homeowners Associations, or FBI on their website. This is still an on-going investigation but the Review Journal has done a great job with their coverage.

How can you protect your Homeowners Association? Do research on the Board members. First, make sure they own the unit. Find out how they acquired it from searching tax records on the address. Go to the assessor's website in your state to see if they own more than one home in the area. Look up marriage licenses and see if any are married to another. Look up all the public records in the state, including corporation division records, to see if any are officers or "agents" of a company together. Look up the vendors (contractors, landscapers, attorneys) for the Homeowners Association and see if any owners or agents are on the Board. If you begin finding suspicious items, there are places on the Internet to do a background check. Many charge $30-$70 for the service. You will need to know their name, address and approximate age; most of the time a social security number is not necessary.

Before hiring a management company, you can go to Community Association Institute and search their site. If a company is a member of CAI they usually have their managers acquire certifications through educational requirements. This is not a 100% guarantee that the management company will be totally legitimate, but with education and training you have a better chance with CAI members and managers. The website is

Now, go get involved with your homeowners association so you'll know what's going on in your community.

Remember, knowledge is power; especially in a homeowners association.