What kind of HOA do we want SCA to be?

And what owners can do to make it that way

Taking a cue from Jim Mayfield’s article “Distinctions between Governance and Management” re-published below, here are a few action items.
In italics: how I see things are currently being done around here.

  1. Encourage owners to run for the Board who are willing to contribute to creating more transparent, competent and accountable governance, or volunteer to serve yourself.
    There is a battle for control of the Board between those who want a fair and open system created that’s good for all owners vs. those in power who want to keep centralized control by excluding anyone who has complained about this GM or who signed a recall petition. 
  2. Utilize the expertise of residents on a Personnel Committee to protect SCA against employer liability, to propose GM performance standards using customer ratings and  objective measures to prevent excessive executive compensation.
    These functions currently are done, if at all, by 1-2 Board members who don’t have the requisite skills, and the Board and GM have acted unlawfully to block necessary owner oversight.
  3. Require the GM to utilize an inclusive process and resident expertise to recommend goals and strategic plans to bring SCA back to be #1 Active Adult Community in USA.
    SCA had this #1 rating in 2011, but has slipped, and we currently have no adopted goals or shared vision about how to get SCA back on top.  Instead, the Board abdicates to a GM who has not evidenced any strategic approach to lessening owner dissatisfactions or community divisions.
  4. Demand that governance be completely transparent to owners.
    Right now, the Board pays lip service to improving owner communications, but allows the GM to use the attorney to conceal SCA records for reasons other than serving the best interests of the association. This secrecy allows SCA owners to be put at risk of being bilked by SCA agents, and it inhibits the SCA Board from being held fully accountable for its duty of care to owners.
  5. Get control of the budget out of the hands of the GM. Although the law prohibits the Board from delegating policy decisions about the budget and prohibits the GM from expending funds for unbudgeted purposes, the blurring of the lines of authority regularly occurs, and owners just have to pay the bill.
Former Director thinks SCA Board chose wrong path
Jim Mayfield served six years as an independent voice on the SCA Board. His experience with fractured governance in the last couple of years had some interesting parallels to what I  suffered during my short tenure:
  • President, GM, and attorney exerting excessive self-interested power;
  • Board rejecting any owner oversight and
  • punishing owners or individual Board members who complained.

Jim’s comments in his article, published in the November issue of the Community Association Institute magazine is re-published here with his permission.   – Nona

“Two and a half years ago, the Board was offered a clear choice between two forms of governance.
One form was the legal model embedded in NRS 116 and approved by CAI.  This form is based upon a model in which all elected Board members are considered equals and participate in a transparent, collaborative relationship, and the President (CEO) is directed by the Board and speaks only for the Board.  It also establishes the major responsibility is to protect homeowner rights and to establish processes for oversight of management.  This is the model described in the above article that was published in November.
The second form is a dictatorship that empowers the President (CEO) to exercise dictatorial powers, makes decisions, imposes his/her decisions on the Board (the Board reports to the President).  This model sees its primary responsibility to represent and protect management from the homeowners.  The model also expands the ability of the President, Board, and GM to operate in secret meetings and to empower its attorneys to use legal process to accomplish its objectives and those of the GM.
SCA is now reaping the fruits of this decision.  I hope all persons thinking about running for the Board in 2018 will read the article and commit to the principles outline therein.” -Jim Mayfield (see Page 10 in link below.)

Is SCA Board retaining lawful control of the budget?

Just saying that the Board acted “on the advice of counsel” doesn’t cut it

If the Board learned and followed these simple legal requirements, the GM and the attorney would be prevented from taking control of our budget and spending our money for something other than our benefit:

NRS 116.31151 (1)(a) requires the Board to prepare and distribute to owners a “budget for the daily operations of the association” which per CC&Rs 8.1(d) is deemed ratified “Unless 90% of all Owners reject the budget…”
The budget is distributed as required and is always ratified. No surprise. Hard to imagine 90% of all owners being mobilized to object to any budget the Board puts forward, but at least everybody knows what expenditures the Board has approved. 

NRS 116A.620 (1)(i) requires any management agreement to define spending limits for the GM.
Here’s the start of the slippery slope toward abdicationSCA Board and GM did not execute a management agreement nor have spending limits for the GM been defined. Pretty easy to rob Peter to pay Paul and then blame Peter for the missing money.

Per SCA bylaws 3.20, the SCA Board is prohibited from delegating policy control over the budget or, for that matter, deciding the amount of assessments, or deciding who can open bank accounts or sign checks or enforce the governing documents.
Here’s where SCA is really careening down that slippery slope. SCA is unprotected by not the Board not defining GM spending limits or service-level expectations in the legally-mandated terms of a management agreement.
Of course, without an agreement, the GM is not legally protected either. She is just an “at-will” employee, meaning she can be fired for any reason or no reason, just not a discriminatory reason. Her terms & conditions of employment are defined in the SCA Personnel Handbook and nowhere else.
But, don’t feel sorry for her. Not only does the Board coddle her, the SCA attorney has
 magically , albeit unethically, created “rights” for the GM that do not exist in black letter law and which are in direct conflict to the interests of the membership.

SCA bylaws 4.6 requires two Board members must sign all checks for any amount, and bylaws 3.25 requires that directors act on an informed basis while carrying out this duty, i.e., sign a check only if it is for something that has been approved in the budget.
Two Board members do sign all checks, but they may as well let the GM use a rubber stamp.

SCA Board Policy Manual 4.10 limits authority to request legal opinions to the Board as a whole or, in narrowly defined circumstances, to the President for the purpose of “…assessing the legal risks on actions under consideration…”. This provision specifically limits the GM’s authority to “…contact legal counsel regarding NRS 116 or other compliance issues…” not to act only “on the advice of counsel”. The SCA-Clarkson Law Group legal services agreement ONLY allows the attorney to provide legal opinions in response to specific Board requests. The attorney has NO decision-making authority over SCA policies.
Previous Boards had enough common sense to govern SCA without having to spend four times the budget to get the attorney to bless every action before it’s taken.
But then, Clarkson is a bully who has, using tactics bordering on elder abuse, and in clear violation of his professional standards of conduct, convinced the Board that it is a violation of their fiduciary duty to act without consulting him even in areas outside his firm’s practice specialty.
As a result, the President and the GM blithely use the attorney far in excess of what is legally permissible for self-serving purposes and in defiance of all common sense.

In conclusion…

The GM’s takeover of the SCA budget is happening on a grand scale because the attorney has blessed it (thereby being unjustly enriched), and the Board (who thereby gets to stay in power) self-righteously allows such foolishness as:

  • Spending an unbudgeted $85,000 for a CPA to do the Election Committee’s normal job to mess up the recall election was allowed by the GM solely “upon the advice of counsel”, but absent the inconvenience of legal Board action.
  • Six months spending for legal services was approved in the budget to cap at $45,000, but four times that amount, $185,000, was spent by the GM without any formal Board action to approve it and without conforming to the laws governing civil actions (NRS 116.31088), or sanctions for violations of governing documents (NRS 116.31085, CC&Rs 7.4) or limits on authority of the Board (NRS 116.3103, NRS 116.31036, NRS 116.31084) or owners rights (NRS 116.1104, NRS 116.31083, NRS 116.31175), or good faith  (NRS 116.1113, NRS 116.1112), and prohibition against harassment and retaliation (NRS 116.31183, NRS 116.31184).

I’m as amazed as you are at their gall.

Who benefits from spending SCA homeowners’ money?

Assessments levied against the unit owners’ property can only be used for the sole and exclusive benefit of the membership of the Association, e.g., maintenance of the common areas, actions to protect the property values of all our homes, preserving amenities and high quality lifestyle.

It is not ever acceptable for the Board, the GM or the attorney to put their personal, financial or political interests ahead of the interests of owners AKA “the common good“.

Therefore, allowing SCA management or agents to spend owners’ money for highly controversial and unbudgeted purposes that provide no benefit to SCA membership should not be tolerated.

Board decisions must always be evaluated against the standard of “Who benefits by it?
If the answer is anybody or anything other than “the common good“, don’t do it.

Here are some examples where no benefit accrued to “the common good“, but they did it anyway.

  • The SCA membership lost when the Board vindictively evicted the Foundation Assisting Seniors after the GM failed to mediate a mutually-acceptable solution to CSG’s problems, blamed the Foundation President, and made up a silly story to justify forcing members to pay more after damaging a valued community resource.
  • Paying $85,000 for a CPA to conduct the recall election in a manner designed to keep the current Board majority from being recalled for cause provided no benefit to the association. It was more than a waste of owners’ money to keep those Board members in power. It allowed the attorney and the GM to keep their over-compensated jobs, too.
  • Paying untold thousands of dollars to make repeated threats of frivolous litigation of defamation against a Board member and unlawful orders for her to  cease & desist making inquiries regarding GM compensation clearly wasted owners’ money. It’s easy to see how using the attorney this way was protecting the GM and her fat paycheck. But, it’s impossible to see how such extreme action was protecting the association.
  • There is no benefit to the association for the Board to unlawfully remove an elected Board member on the false charge that she is making a profit from her Board position. It is simply a power trip and a nasty way of showing 2,000 voters that their votes don’t matter.

The cautionary tale of the City of Bell

What we can learn from The City of Bell Scandal

The Bell scandal involved the misappropriation of public funds in Bell, California, United States over a period of several years in the first decade of the 21st century. In July 2010, the Los Angeles Times published an investigative article on possible malfeasance in the neighboring city of Maywood, revealing that the city officials of Bell received salaries that were reported as the highest in the nation.[1] Subsequent investigations found atypically high property tax rates, allegations of voter fraud in municipal elections and other irregularities which heightened the ensuing scandal.[2] These and other reports led to widespread criticism and a demand for city officials to resign.[3][4]

In the end, seven Bell city officials, including former mayor Oscar Hernandez, former city administrator Robert Rizzo, assistant city administrator Angela Spaccia, and four city council members were convicted on graft and corruption charges, and were given sentences ranging from probation to twelve years in prison.[5] – Wikipedia City of Bell Scandal

In order to pull this scam off, step one was to conduct a fraudulent election to become a charter city so controls on salaries imposed by the state would no longer apply. The voters were poor and 90% Latino which made them easy marks. The City Council gave themselves salaries and so they turned a blind eye when the Manager authorized excessive compensation to the Attorney, Police Chief  and other top managers Manager Rizzo’s salary during the final year of the scam was $1.5 million, five times what the L.A. country executive earned.  Rizzo was unapologetic for years, falsely claiming he could have made that amount in the private sector.

Could that happen at SCA? Or does SCA have adequate internal controls to prevent such corruption?

Let’s see, how would we know if adequate protections are in place?

The Board, GM and attorney claim that unit owners cannot access information needed to evaluate the adequacy of internal fraud prevention controls.  They put lipstick on this pig by claiming it is their fiduciary duty to keep confidential whatever they say is confidential – even if there are specific provisions in the law that prohibit SCA records being withheld by SCA agents from owners or individual members of the Board.

It is an abuse of privilege to demand that routine business correspondence/emails or training sessions must be treated as “confidential”. To prevent owners from knowing about these Board or GM actions that are supposed to be exclusively for the benefit of the owners violates both the spirit and the letter of the law.

It’s particularly troubling when the attorney gives the bizarre interpretation of SCA bylaws 6.4c to falsely claim that the attorney has the authority to restrict an individual Board member from inspecting ANY SCA records. While I was a Board member, I was ORDERED to stop asking questions about GM compensation and denied access to ANY SCA documents until they were partially released a month after I was kicked off the Board on false charges.

It doesn’t take a genius to figure out why concealing records from a Board member who is trying to ascertain the adequacy of fraud prevention controls looks a little suspicious.

Excessive secrecy is a giant red flag.

Owners have a right to know:

  • Does SCA pay extraordinarily high executive salaries without using a process that would justify them as a rebuttable assumption?
  • Have there been failed attempts to remove elected officials followed by allegations of election interference by the highly compensated GM?
  • Are board actions taken in secret without tolerating any owner involvement?
  • Do SCA agents make policy decisions which NRS and SCA bylaws prohibit the Board from delegating?
  • Has the system for owner oversight been decimated under Self-Management?

My conclusions

Prior Boards should be congratulated for the excellent start toward a good governance system that they accomplished by the creation of the Board Policy Manual. It’s tragic that the current Board President led the Board away from the simple task of following it.

As a result, SCA is now swinging without a net. We do not have a fair and open system. Owners must be involved to strengthen the system so the rules apply equally to us all and the rules protect us all equally. And we certainly don’t need an attorney to charge us $325/hr to tell us how to do it wrong.

It is a waste of time to keep bickering over whether the individuals on the Board are corrupt or not. It is enough to say that the Board is not exercising enough competent control over SCA’s agents to adequately protect owners from the negative consequences of their actions, intentional or not.

Make your vote count

We simply need to elect people who are willing to be trained to ensure that a governance system is established that is transparent, FAIR, and strong enough to protect owners no matter who is in charge. This process cannot simply be delegated to the GM for a “recommendation”.

But, even if it such delegation were appropriate, the GM has not demonstrated that she would have the necessary leadership or analytical skills to lead an inclusive, collaborative process to a satisfactory conclusion that meets the needs of the SCA membership.

Is SCA Board protecting owners from scams?

Owner oversight, the bedrock of good HOA governance, has been decimated by this Board

SCA Board has gone a step further than just emasculating owner oversight by committees. It has also developed a self-righteous strategy to delegitimize ALL owner complaints about Board members, the attorney, and the GM (performance, pay, and recall election interference).

Their claim,

“It’s just CAVE (Complainers About Virtually Everything) people”,

has worked well for the Board (kept the majority in power). But, there is a huge downside. Marginalizing a large segment of the community has not been good for SCA as a whole and has divided the community into factions.

SCA Board refuses to listen to both sides of the story and acts according to their own spin

The Board puts the entire SCA community at risk by arrogantly ignoring well-substantiated complaints simply because they don’t agree with the complaint, or don’t like the person who complained. They’re not doing their job if they don’t address these issues fairly:

  • Paying the GM $100,000+ over the market rate for the job without having done any due diligence;
  • Allowing the GM to compensate at least two other managers double the going rate for their jobs;
  • Refusing to allow ANY owner oversight of personnel matters;
  • Having no system for GM accountability – no management agreement, no performance standards, no salary survey or bonus criteria, no spending limits, no insurance requirements, no written terms & conditions of employment;
  • Allowing the GM & attorney to unfairly influence the recall election in their favor;
  • Abdicating control of the budget to highly compensated agents;
  • Blaming the recall proponents for the GM expending $85,000 for an incompetent execution of the petition counting and ballot distribution/collection which benefitted at least one Board member unfairly;
  • Making unbudgeted expenditures of more than $150,000 in six months over the normal budget for Legal Services which is in conflict with NRS and SCA bylaws provisions as well as defies good common sense.

The Board either has refused to respond AT ALL to these issues, or worse, has used SCA official communications (as well as its sympathetic blogger) to viciously attack whoever speaks up about these Board failures to properly govern.

Worse still, the attorney enables the Board’s dysfunctional (lack of) response to owner complaints by wrongly advising that the Board and the GM don’t have to answer.

Good governance = a fair and open system

Good governance depends on a fair and open system that SCA has yet to develop.

Good governance can best (and perhaps only) be guaranteed if there is a transparent system of checks and balances to prevent fraud, errors, and omissions.

Owner oversight is the bedrock of a good governance system in any public agency or in any non-profit corporation like SCA is.  Owners (like taxpayers or donors) are ultimately responsible for footing the bill.

Agents and elected officials are there to serve the owners and not the other way around.

SCA Board, GM and attorney have a lot to learn before they can claim SCA has a system of good governance. They act as if SCA agents and the Board are co-equal branches of the association/government and that the owners are like wards of the court. This is nuts.

What if you contracted with a Realtor to sell your house, and he refused a great offer without telling you? What if he failed to disclose a relationship with a different potential buyer that he was pushing? I imagine you’d fire him and get somebody that would work SOLELY to get you the best deal.

It’s the same with SCA agents. It is their duty work SOLELY and EXCLUSIVELY in the best interest of the SCA membership. It is unlawful for them to put their self-interest before the best interests of the owners, but it’s a little harder to see what’s going on if the Board is helping (even if unwittingly) the agents  to act in ways that are not the best for the owners.

It is a major failure of the Board’s duty of care to the membership to abdicate, i.e., just hand over to SCA agents independent authority, power and rights over SCA policy and our wallets that neither you nor I would so cavalierly hand over to agents in our personal lives.

 

Bernie Madoff and how NRED risks being like the SEC

What’s up with the Ombudsman?

Several people have told me that their NRED complaints of GM election interference were summarily rejected without satisfactory investigation or explanation. They feel the rejections were unfair as the complaints were rejected for reasons unrelated to the substance of the issue raised.

For example, they reported that NRED did not independently verify the accuracy of the allegation that two pages of valid petition signatures were not counted  which caused Bob Burch to be wrongly left off the recall ballot. I was told that NRED’s rationale for the rejection was the unrelated reason that the Ombudsman had validated the vote counting process for the other three directors who were on the ballot. 

Limitations of enforcement agencies

We have to educate the NRED investigators on the specifics of the violations alleged in SCA owners’ complaints so investigators can understand the complaints within the context of needed homeowner protections.

We must not get overly discouraged even if it appears there is “zero enforcement” rather than “zero tolerance”. As we’ve seen nationally with response to sexual harassment complaints, that can change in a heartbeat.

NRED has all the problems faced by other enforcement agencies, like you’ll see below were exhibited by the SEC, – an inability to see the forest for the trees. Even if there is no corruption in NRED, they have  limited authority, limited funding, and have to balance competing interests between monied stakeholders (attorneys, management companies, debt collectors, etc.) and the people who are supposed to be served (homeowners). NRED’s problems are compounded in Nevada by historic complicity in HOA corruption by attorneys and judges and the fear people have to speak up and be whistleblowers.

But, just as Rana Goodman helped to expose how guardianship abuses depended on complicity between attorneys and judges and unscrupulous public guardians, we have to shine a light on what is happening at SCA because Board/GM misconduct too requires lack of transparency and complicity by legal authorities to be sustained.

 

Why I am publishing my complaints in full

While I haven’t seen the other owner  complaints or the rejection notices they received, this action by NRED raises a red flag for me. So far, I have received no word from NRED about the status of my complaints, but I am not willing to leave NRED’s investigative thoroughness to chance.

In light of this disappointing development, I am going to emphasize the way I use this website to expose evidence substantiating my claims. I am doing this primarily so the allegations and supporting evidence are in a usable format to assist the investigators. I believe that will reduce the chance that my complaints will be dismissed without a full investigation and a fair hearing. 

As far as the chance of influencing the beliefs of the readers of this blog, I have low expectations. I don’t believe people who think I deserved what happened to me will easily change their minds, and when you read below about cognitive dissonance, I think you’ll see why. 

What happened to me sets a bad precedent for ALL Nevada HOAs.

Kicking me off the Board was based on false and defamatory accusations and was simply a continuation of their retaliation against me for speaking out.

Such flagrant disregard of homeowners’ right to vote and choose who represents them on the Board absolutely cannot be tolerated or ignored.

Throughout my days on the Board, I was harassed, defamed and retaliated against for my having:

  • recommended that the attorney be terminated,
  • warned them about the theft and fraud of SCA’s former agents,
  • requested information about excessive management compensation and for
  • complained about violations of NRS and SCA governing documents, particularly in the areas of GM/CAM threatening frivolous litigation, abuse of privilege, misuse of attorney, concealing information and recall election interference.

 


If my removal from the Board is upheld, it will set the unhealthy precedent in Nevada that ANY majority of ANY Nevada HOA Board can remove any HOA Board member whose views they don’t like simply by falsely accusing her and then deeming her position vacant.
  • Good-bye, due process.
  • Good-bye, owner control of Nevada HOA.
  • Hello, unjust enrichment by attorneys and other HOA agents.
  • Hello, corruption.

 

Bernie Madoff’s Ponzi scheme

The Securities and Exchange Commission (SEC) let Bernie Madoff’s fake hedge fund grow to over $50 billion over decades despite repeated credible complaints.

Let’s hope NRED is more responsive than the SEC was to warnings and does not allow SCA Board, GM and attorney to act unlawfully in ways which allow SCA agents to be unjustly enriched or which allow a majority of a HOA Board to act unfairly for personal political advantage.

Remember Bernie Madoff?

Probably everyone does. Bernie was the former chairman of the NASDAC securities exchange. He had an impeccable reputation that allowed him to operate a hedge fund that grew over decades to $50 billion by 2008. Although it was a just a low-tech Ponzi scheme, it was successful as an affinity scam among wealthy Jewish communities, Madoff remained untouched by the regulatory Securities Exchange Commission (SEC) for decades.

But you probably haven’t heard of Harry Markopolos, the financial analyst who figured out Bernie Madoff’s fraudulent hedge fund at least a decade before Bernie turned himself in. Marcopolis submitted at least five formal written complaints to the SEC which the enforcement agency failed to investigate.

SEC’s enforcement failure cost victims $50 Billion

Had SEC done its job in 2000 when Markopolos told them Madoff  was a fraud, less than $7 Billion would have been lost, and many fewer people would have been victimized. SEC still didn’t listen in 2001 when the fund had doubled. SEC still didn’t listen in 2005 when Markopolos documented 29 red flags on the then-$25 Billion fund. In 2008 as the global economy was in meltdown, and the Madoff fund had ballooned to $50 Billion or more, Bernie turned himself in to spare his family, never having been investigated, much less found guilty, by the SEC.

Markopolos’ book is aptly entitled, “Nobody Would Listen: A True Financial Thriller” as the true story of how the regulatory agency SEC was over-lawyered and using lawyers in areas outside their expertise. SEC, therefore, did not have adequately trained investigators who knew diddly squat about financial markets.

The SEC failed to act repeatedly on Markopolos’ extremely precise directions on what sources to check or what single phone call to make and what question to ask to verify the accuracy of Markopolos’ analysis. 

Why didn’t SEC investigate thoroughly? Congressman Gary Ackerman grilled SEC attorneys after Bernie turned himself in to find out why SEC blew off credible complaints for a decade in this interesting CNN clip of the Madoff Congressional hearings.

Ackerman Scolds SEC for Not Stopping Bernie Madoff Scheme Despite Being Warned for 10 yrs

What were they thinking?

  • Maybe lawyers were the wrong people were doing the job.
  • Maybe it’s was the financial conflicts of interest regulators had with the industry they were regulating.
  • Maybe the theory of cognitive dissonance explains why nobody could believe that Bernie Madoff was anything other than he appeared to be.
  • Maybe Madoff’s reputation was so stellar and everybody was making money, no one wanted to question how he alone could get such stellar returns year after year.
  • But, whatever the reason, SEC investigators couldn’t see what was right in front of their face.
How does all this about Bernie Madoff and the SEC relate to SCA owner complaints being given short shrift by NRED?

Remember SEC’s failures and expect to find similar problems with NRED investigations.

Remember the SEC’s failure to listen to Harry Markopolos for a decade cost victims $50 Billion, and the SEC attorney still tried to weasel out of it, claiming “executive branch privilege“.

Remember nobody believed Bernie Madoff was running a scam. If you find yourself not believing what I tell you is happening at SCA is true, it might be simply because it is unimaginable, or it might be because it creates a lot of cognitive dissonance to think I might be right.

Remember that, while there are limits on what we can expect enforcement agencies to accomplish, a lot can change if a critical mass of people speak up.

We’ve just seen nationally how the pendulum swings when a tipping point is reached. The way sexual harassment complaints are now addressed has gone from zero enforcement to zero tolerance seemingly overnight.

A critical mass of SCA homeowners must insist that at SCA, there will be zero tolerance of misconduct by SCA Board members or SCA Agents, and zero tolerance of their harassment of, or retaliation against, whistleblowers.

 

December 7 Board meeting: Part 4 Penny wise, pound foolish

SCA agreed to pay $55,000 to settle dispute over $4,400 delinquent dues

In his President’s report, Rex reported the Release and Settlement of A-14-702071-C.  SCA agreed to pay Citi Mortgage  $55,000 as full and final settlement of all claims in a case where the homeowner defaulted and so the fight was between SCA and a bank. This is an example of how the Board is very wasteful by not avoiding problems or solving them when they are small. The excessive use of attorneys is a core failing of this Board under Rex.

Rex stated that Citi insisted on confidentiality and so he could not comment further. I seriously doubt that because what I’m going to tell you is in the public record. I happen to be familiar with this case from before I went on the Board. I learned nothing about it as a Board member because I was forced to recuse myself from ANY SCA collection matter “so as to prevent even the appearance of impropriety” regardless of whether it had any bearing on my quiet title case whatsoever.

Long story short.

In 2014, SCA’s agent RRFS refused to accept Citi ’s tender of the $825 super-priority portion of SCA’s lien for delinquent assessments claiming it was less than the full super-priority amount due. After four years of nonpayment of assessments ($275/quarter x 16 quarters = $4,400), RRFS claimed Citi owed $17,591.81. Citi paid it under protest, and RRFS cancelled the SCA foreclosure sale. Citi filed to get $16,766.81 back from RRFS that the NV Supreme Court said it was unlawful to force Citi to pay more than $825, the amount that has “super-priority” over the bank’s loan.

The Court ruled in Citi ’s favor against SCA, a year ago, stating:

…(SCA’s) position ignores the question presented in this action, whether a homeowners’ association can force a first-security lienholder, or agent acting on its behalf, to satisfy the entirety of its lien, rather than pay the super-priority piece to protect its secured interest. The Court concludes it cannot.

Even though this overcharging was done by SCA’s former agent’s, SCA was on the hook for it since RRFS was acting on SCA’s behalf. I don’t know why SCA even stayed in the fight. Why didn’t they make RRFS pay it and get out of the litigation years ago? Anyway, SCA deposited $5,000 with the court last December toward the $16,766.81 the Court ordered SCA to pay Citi . Then,  Citi demanded $51,000+ in attorney fees and court costs.

Bottom line:

SCA owners are on the hook for $55,000 to settle with a bank over the misdeeds SCA’s former agent in collecting delinquent assessments of less than $5,000.

  • Wouldn’t writing off $3,575 in delinquent assessments have made more sense?
  • Or even better, shouldn’t SCA handle assessment collection in house rather than being on the hook for the wrongdoing of unscrupulous attorneys and debt collectors?
  • Can you see any risk SCA homeowners face by my telling you about all this?
  • Can you see any way I would profit by sharing this information with owners?

I guess you can see that the real risk is to the attorney’s profits. That’s why attorney Clarkson (SCA’s current legal counsel and debt collector) insisted that I be forced to recuse myself from all SCA collection issues even if they are not remotely connected to my quiet title action. 

Cost of collections and fraud by SCA agents are other reasons SCA needs to be (better) self-managed.

Here is another reason SCA needed to go to self-management that Tom didn’t mention and probably isn’t even aware of. FSR was actually unfairly profiting from failing to pay SCA asset enhancement fees and new owner set up fees when there was a foreclosure. This happened twice with my late fiance’s house so it’s a better than even bet that this scam was done when other houses were snatched for a few dollars of delinquent assessments.

October Financial Report

This issue is also connected to a good reason why SCA needs to be self-managed, but also needs to have better control over its agents and managers.

The CFO reported that the revenue from Asset Enhancement Fees are $103,268 over budget. SCA gets 1/3 of 1% of the sale price when a home is sold, and other fees associated with home sales are up a similar amount. This is due to an increase in the number of sales reported to SCA which is, in small part, due to SCA’s former agents not crediting SCA with these fees upon sale of foreclosed properties. Title to my late fiance’s house was transferred three times in country property records, and FSR twice failed to record that SCA was paid any of those fees as if two of those three sales never happened. Those two incidences can’t be the only times that SCA was shorted fees due to us.

I mention this not just because it’s something nobody else would notice, but SCA’s way of handling collections is flawed and when I offered evidence of it, I was seriously and wrongfully attacked. I reported this problem to Lori Martin and Rex Weddle before I decided to run for the Board and they refused to even talk to me about it, let alone assess the degree of loss to SCA. I included it in my court filings in the quiet title case, and our current attorney (who is also SCA’s debt collector) used it as a bogus justification for kicking me off the Board (putting matters before the Board from which I could make a profit) rather than looking at how SCA was getting ripped off by our agents who are supposed to be fiduciaries.

CFO Jim also reported that there are 45 cases in collections with $77,000 outstanding. This is a small amount, a fraction of the nearly $9 million in annual assessment revenue, but it is a completely unsatisfactory level of accounting and reporting to prevent problems. This level of Board control/owner oversight is insufficient to prevent possible mismanagement, theft or fraud by SCA agents.

Turning collections over to attorneys when there is only a budgeted projection of having to write off $12,000 in 2018 is a gross waste of money. It is truly fighting fire with Napalm, and then making owners pay for all the collateral damage.