If they had only known… Part 3

Owners pay a high price for Board ignorance

Basic ground rules the Board must learn by heart
  1. Association exists to serve the owners.
  2. Board exists to speak for the owners.
  3. Board may hire agents to act on behalf of owners.
  4. Association does not exist to serve the Board or management.
  5. Owners pay even when the Board or SCA agents make mistakes.
  6. Agents, including SCA employees, have no rights superior to owners’ rights.
  7. Rules exist to protect owners.
  8. Board must protect owners.
  9. The Board needs to learn the rules and follow them.

How can NRED training help the Board do right?

  1. Without proper training, the Board is ignorant.
  2. The Clarkson Law Group trained the Board to consult attorneys before ANY decision to the point of letting attorneys decide.
  3. Being ignorant, the Board has failed to protect owners from agents’ actions.
  4. Board needs to learn the rules set up to protect owners and follow them.

The process determines the result

Poor process = poor results

Board failures of the “duty of care”

The costly mistakes described below could have been avoided had the Board taken the training about the proper way to hire experts:

  1. The GM did not sign a management agreement with terms required by NRS 116A.620.
  2. The Clarkson Law Group hired as SCA debt collector without an RFP for  debt collector issued.
  3.  CPAs Ovist & Howard were paid $85,000+ to replace the volunteer Election Committee on the 2017 removal election without legal authority:
  4. HOA Lawyers Group LLC hired as SCA debt collector to replace the defunct and bankrupt Alessi & Koenig LLC
      1. without an RFP,
      2. without a Board-approved contract
      3. without competing with NRS 649 licensed vendors.

Board must learn the rules

Click here for the NRED training all directors should take to know how to prevent SCA being controlled by agents instead of by the elected Board: Hiring Experts and Professionals


Lessons the Board has yet to learn

1. When SCA became “self-managed”, the GM/CAM were hired without of a management agreement.
Not okay.

Absent a management agreement, the GM is an “at-will” employee and has no other rights than those bestowed by the SCA Employee Handbook.

2. RFPs are required for professional services not just construction or maintenance contracts per NRS 116.31086.

2.  The GM wasted $85,000+ for an unknown CPA, Ovist & Howard, to take over the recall election:

  1. without an RFP,
  2. without a Board-approved contract,
  3. without funding to pay for a CPA to do the recall in the adopted budget,
  4. without the Board amending the Election & Voting Manual to strip the Election Committee of its duties, and
  5. after the GM and attorney were both the subjects of active complaints that they were interfering with the independence of the Election Committee
  6. which resulted in diminishing the integrity of the election process.

Guess who benefitted. (P.S. It wasn’t the owners.)

  1. Four of the six Board members who allowed the GM to usurp the Board’s authority benefitted personally from unlawfully hiring a CPA to replace the Election Committee.
  2. Owners’ right to lawfully petition for a removal election was besmirched by the subjects of the petitions who wrongfully blamed the owners who petitioned for their recall for the huge cost of hiring a CPA that was done solely, 100%, by the GM under their watchful, grateful eye.

“For every action, there is an equal and opposite reaction.”   – Newton’s 3rd law

Hiring a CPA wasn’t the only way the GM sashayed in to usurp the authority of the Board, but to really take over, all dissent had to be crushed. These are things a properly trained Board would never have tolerated.

Action
As the liaison to the Election Committee,  I tried to get the GM, President Rex, and the attorney to leave the Election Committee independent and neutral to do their normal job during the recall.

Reaction
I was removed as the Board liaison to the Election Committee by the very people accused of interfering with the Election Committee’s independence.

Action
As a non-conflicted Director (not one signature, not one petition against me), I was one of the three Directors who should have decided

  • how the recall election was to be conducted,
  • whether the Election Manual should be amended for this one election
  • how best to protect the integrity of the election process

Reaction
The GM and the attorney decided to relieve the Election Committee from its duties despite having no legal authority to do so.

Action
I gave the Board notice of my intent to file a complaint of harassment and retaliation for all the actions they had taken against me in retribution for my recommending that the attorney and the GM be fired.

Reaction
The Board took the law into their own hands and kicked me off the Board without notice, process or appeal.

Kinda the same way Putin handled the one serious challenger to his re-election.

3. Restaurant RFP mistakes

  1. GM and one Director met with one competitor to give a leg up prior to RFP.
  2. Board was not informed of GM + director actions until it was a fait accompli.
  3. RFP issued to a hand-picked group of possible bidders
  4. Bids were not opened at a Board meeting.
  5. Bids were not not submitted on the same terms.
  6. After the number of vendors dropped to two, the “operating parameters” were adopted.
  7. Winning bidder who negotiated with GM in advance was allowed to change bid after the other bidder dropped out because the terms had been changed.
  8. No other bids were sought nor considered.

4. Last two debt collectors shouldn’t have been hired without RFPs

Doesn’t it seem like it’s a problem that

  1. HOA Lawyers Group became SCA’s debt collector without issuing an RFP to replace the defunct Alessi & Koenig, LLC?
  2. The Clarkson Law Group became the SCA debt collector without a RFP?
  3. The Clarkson Law Group, hired via the RFP issued to replace the Leach law firm as SCA legal counsel, used its “authority” as the SCA legal counsel to  “rule” that its own selection as the SCA debt collector did not require a separate RFP?

Who cares about debt collection?

We all should. Debt collectors are the source of huge expenses for HOA owners because of the weird way the Nevada courts allow HOA foreclosures to extinguish the bank’s security interest. While you might think this is good for HOAs, it is actually only good for the debt collector.

Remember, abdicating debt collection is:

  • a huge cost to owners
  • a violation of SCA bylaws 3.20 and 3.18(a)
  • foolish
  1. The cost of collection exceeds the amount recovered.
  2. HOA homeowners pay for the debt collectors’ fight with the banks.
  3. The loss of property value to each and every home in a Nevada HOA is, according to the UNLV 2017 study commissioned by the Nevada Association of Realtors, is 1.7% per foreclosure for delinquent dues.

 

 

 

If they had only known…Part 2

Board training is a MUST

NRED Power points are available for anyone to view on the training section of the NRED website. Check them out all out there or though future blogs.

Why be trained by NRED?

Learning from these FREE resources will reduce costly mistakes and transgressions by the current Board. In contrast, the attorney Clarkson trained the 2017 Board into handing over OUR wallets.

Look at this NRED training below that clarifies the Board’s job as the ounce of prevention that will save SCA a pound of excessive legal fees. A well-trained Board is a big – and necessary- step toward bridging the community divide.

Willful ignorance is a failure of duty of care

Here are two essential governance lessons that the 2017 Board REFUSED to learn.

  1. The buck stops with the Board. The Board MUST learn what its job is. The Board is not relieved of accountability by pretending  that management or the attorney have decision-making authority.
  2. The Board is restricted by law from delegating ultimate  accountability. The Board MUST define IN WRITING limits on the authority and actions of management and agents.

What’s wrong now?

Now, blurred lines allow the GM, the attorney, and individual directors (rather than the whole Board acting officially) to make decisions that ONLY the Board acting as a unit has the legal authority to make.

Requirements for a Board vote to be valid

Skip any of these steps, and no official Board action has been taken
Board action = motion, resolution, OR Board action item (BAI)
  • Notice to all Directors who ALL get to vote
  • Notice to all members who get a chance to speak
  • Agenda that clearly defines the action the Board is voting on
  • Minutes that say how each director voted

What if the GM says, “the Board decided…”,

but it didn’t follow the rules required for a valid Board decision?

THIS IS A VERY SERIOUS FAILURE TO ACT AS A FIDUCIARY

Here in SCA, these actions the GM took during the recall election diminished the integrity of the removal election process and could have biased the outcome in favor of the Directors who support her.

The modus operandi of malfeasance

  1. GM served the four Directors facing recall by removing people from the process who were dedicated to protecting the integrity of the recall election process (me as a Board member and the entire Election Committee).
  2. GM took away the authority of the volunteer Election Committee without approval by the only legal authority, i.e., vote by the non-conflicted Directors was required to change the Election Manual and spend un-budgeted funds.
  3. Rex worked with OSCAR to lie to the Election Committee to get them to remove me, a non-conflicted Director, as the liaison to the Election Committee after I attempted to protect the integrity of the election process.
  4. GM spent >$100,000 on a CPA and attorneys to do the volunteers’ job.
  5. GM allowed the paid interlopers to “lose” two pages of signatures which would have put Bob Burch on the recall ballot.
  6. GM disenfranchised the 2,001 voters who voted for me and kicked me off the Board without an official Board vote (on fake charges) at the EXACT SAME TIME as the recall process should have been controlled by me and the two other non-conflicted Directors.
  7. GM never officially notified the Board of the receipt of petitions to call for a removal election of four Directors who approved the GM’s double-the-market pay.
  8. GM never officially notified the Board of the receipt of a petition of no confidence against her.
  9. Right after the GM refused to notify the Board the petitions had been received,
    1. the GM used the association attorney to quash a subpoena in her divorce to prevent the petitions from being released in discovery
    2. AT THE EXACT SAME TIME that those petitions were released to OSCAR, the opponents of the recall of the Directors who support her excessive pay.
There is no end to this cycle without a properly trained Board.
Click here for the Powerpoint:
Executive Board Responsibilities & Fiduciary Duties
Click here for Powerpoint
Responsibilities of the Community Manager
Without training, SCA is doomed to repeat history.
  1. 2015 Board, including Rex and Tom, hired the GM at double the market pay.
  2. Rex claims that, as President, he has the right to control which directors get to participate in Board decisions and routinely excluded Directors with dissenting opinions.
  3. Rex appointed Aletta and Bob to study committees.
  4. On the advice of the GM and without consulting owners, Aletta and Bob decided that owner committees should be weakened or abolished under self-management.
  5. GM’s power isn’t controlled by written executive limits.
  6. Independent candidates are discouraged from running for the Board.
  7. Independent Directors will not run for officer positions.
  8. Rex and Bob keep the leadership roles.
  9. Rinse and repeat.

 

If only they had known…Part 1

New Director training

NRED Power points are available for anyone to view on the NRED website. Check them out all out there or though future blogs.

Learning from these free resources will reduce unhealthy over-dependence on attorneys.

Click here to link to blog:
Why SCA now pays so much in legal fees

Click here for NRED presentation:
Welcome to the Board 

If the 2017 Board had taken this class from NRED instead of being trained by attorney Adam Clarkson, would directors still have acted outside authority granted by NRS and the SCA governing documents?

Why SCA now pays so much in unnecessary legal fees

Adam Clarkson trained the Board,

and he has convinced them that the budget doesn’t matter when it comes to legal fees.

The Board, following Rex’s leadership, foolishly insisted that the 2017 Board training be conducted in secret by Adam Clarkson.

Despite the excellent free training programs available through NRED, the Board refused to allow owners to see how they were being trained to abdicate their decision-making authority.

And the the Board certainly didn’t want owners to be able to comment on the self-serving training that was provided by Clarkson so it was deemed “attorney-client confidential” even though the training packet began with a legal disclaimer.

NRED complaint still pending

The secret Clarkson training was a self-dealing disaster. It bordered on elder abuse, and my complaints about the abusive conduct at that July 25, 2017 “attorney-client-privileged, not-an-executive-session workshop” are still under investigation by NRED.

Naturally, Adam Clarkson is billing the association ($325/hour, thank you very much) to defend himself and the other perps from my complaints about being bullied and harassed in that session in retribution for my telling the lot of them that they needed to straighten up and follow the spirit as well as the letter of the law.

What was wrong with the way Clarkson trained the Board?

Setting aside the for the moment the attorney-led misconduct of the participants (shunning, threatening and bullying me), Adam Clarkson twisted the interpretation of the law so far as to assert that it was a violation of the Board’s fiduciary duty to act ON ANYTHING without the attorney’s blessing.

Reward for complicity

Adam Clarkson rewarded the Board members who fell for his money grab, by creating a punitive cone of silence around non-confidential, discoverable SCA records against the non-compliant Director. Clarkson has also given his blessing to the unlawful claims that

  • the GM controls which owner or Board member can access SCA records and can withhold records at will, including in violation of a court order
  • the GM, President or Secretary
    • can exclude a Board member from Board meetings, and
    • can prevent a Director from voting,
    • and can block a Director from placing items on a Board meeting agenda
    • and can falsify the minutes of those meetings
  • the President does not have to follow Parliamentary procedures and
    • can magically use non-existent “substitute motions” and
    • can block a vote on a Director’s seconded motion and
    • can prevent a nomination for an officer position that would compete with the President’s pre-selected slate.
  • Annual reporting of gifts is voluntary

What does “fiduciary duty” mean?

Adam Clarkson actually gave this self-dealing definition of fiduciary duty saying that being guided by legal professionals was required by law AS IF only lawyers were experts on every subject.

The legal requirement is actually to consult with appropriate experts of all types (not just attorneys) when it is prudent to do so. This means reserve specialists, HR experts, accountants, construction experts, not just attorneys. There is no legal requirement for a Board to delegate its decision-making authority to attorneys. In fact, it is prohibited by both NRS 116.3106 and SCA bylaws.

“Consult with appropriate professionals as necessary before making major decisions…”

And the definition of fiduciary really is focused on the duty of care that the fiduciary has to ACT SOLELY AND EXCLUSIVELY IN THE BEST INTEREST OF THE MEMBERSHIP.

A fiduciary is personally accountable for a duty of care and using good judgment to serve owners, not oneself.

It does not cut it to do (or not do) something that hurts the membership and then claim,

“The attorney made me do it.”

Defy the ruling of Judge (and jury) Adam Clarkson at your peril!!!

According to Adam Clarkson, attorneys are justified in verbally attacking and threatening a Director who tells the other members of the Board that:

  1. attorneys don’t have the expertise to assist on ALL Board decisions and that
  2. it is the individual Director’s responsibility to use common sense and ethical principles to evaluate courses of action to decide how to vote.

Give me a break. That’s idiotic.

We are actually paying $325/hour for that type of inane self-dealing pronouncement against a Director who tells the attorney to knock it off.

Guilty until proven innocent

“Unauthorized practice of law” for “advising other members that legal counsel is not necessary”????

“… will be deemed to have committed a prima facie violation of NRS 116.3103”?????

Prima facie”  =  fact presumed to be true unless it is disproved.

Quid pro quo = “something for something”

Quid

“Guilty until proven innocent” is the Clarkson pro forma edict he uses to bully Board members who are not in his or the GM’s pocket.

Quo

At the same time, Clarkson has protected the interests and defended the unlawful actions of the GM and those Board members who unquestioningly have agreed to pay whatever he bills with OPM (other people’s money).

“Prima facie” = “presumed guilty”

Here’s what NRS 116.3103 actually says

Clarkson is wrong

Telling the Board that the buck stops with it, and not with the attorney, is NOT a violation of a director’s fiduciary duty.

It is a true statement made on an informed basis, in good faith, and in the honest belief that

  • getting attorneys out making decisions for management or the Board, and
  • preventing attorneys from self-dealing or
  • serving the personal interests of a few individuals over the interests of the membership

is acting in the best interests of the association.