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Federal Probe Into HOA Fraud Scheme in Nevada - Who would have thunk it?!

By Lawrence B. Leff, Mark K. Payne, Suzanne M. Leff, Stan V. Jezierski

For a moment I thought I was reading an excerpt from a Sidney Sheldon thriller – instead of an article in the Las Vegas Review Journal ('Journal') reporting on an alleged fraud scheme centered on HOAs. 

The Journal was reporting on a federal investigation relating to an alleged 'scheme to rig homeowner association board elections to position conspirators, including former police officers, who would push the boards to file construction defect lawsuits against builders. Legal work and multimillion-dollar repair contracts then would be funneled to associated lawyers and companies.'

 

The co-conspirators, numbering as many as 100, include judges, attorneys and former police officers. The Journal reports that plea deals are expected this week for 25 to 30 individuals targeted in the investigation to secure their cooperation in prosecuting the key players.

This story is replete with allegations of leaks from the U.S. attorneys office in Las Vegas, destruction of evidence and even the suicide of a police officer named in the investigation.

 

While this scenario certainly seems extreme and unlikely to occur in Colorado, it does provide us with the following lessons:

 

? Boards of associations should strive for relationships built upon trust and integrity with their legal counsel, managing agent and other trusted advisors.

 

? In order to facilitate sound decision-making, directors should ask questions and obtain the information needed to ensure they are acting in the best interests of the associations they serve.

 

? Under Colorado law, every association is required to adopt and follow a policy relating to conflicts of interest of board members. Boards should revisit this policy, determine whether it needs updating and commit to following the requirements of the policy.

 

? Homeowners in associations must commit to the governance of their associations. This includes: (1) staying informed on issues; (2) attending board meetings; (3) attending annual meetings and special meetings; (4) taking time to review the qualifications of candidates running for the board before voting; and (5) ultimately serving the community by running for a position on the board. 

Full post as published by Colorado Homeowners Association Law Blog on March 07, 2011 (boomark / email).