Rating Rex’s Self-Management Report Card

Demonstrating all the transparency and humility we have come to expect from our supreme leader, Rex Weddle once again used SCA’s official house organ, the Spirit, to stroke the ego of the Board and GM by giving a glowing Self-management Report  Card. Although Rex didn’t give any letter grades, let’s fact-check his assertions of outstanding performance, and I’ll offer the letter grade I think is warranted:

SCA made the right decision to be self managed.

True. The former Boards’ grade should be a B for taking action based on specific plans and goals to correct deficiencies.
The current Board should get an F for failing to follow through on good work done by prior Boards.

SCA’s management company FSR needed to be replaced, but for more reasons than either Board acknowledges. FSR was double dealing by being both the managing agent and the debt collector following the collapse of the real estate market.

Even with a solid management agreement, previous Boards did not keep FSR from grabbing profits from abusive collection practices. Prior Boards were unaware of the negative impact these abuses had on owners’ property values. Their attention was overly focused on deterioration of property values caused by excessive deferred maintenance of the common areas.

The current Board has also over-emphasized catching up on deferred maintenance, and has not held itself or the GM accountable for other critical areas (customer service, owner relations, transparent communications, fair and open culture, strategic planning, protection of individual property values, and maintenance of high quality amenities and other lifestyle options). Ultimately, this Board has a failing grade because their lack of accountability to owners is supported by paying an attorney to say that the rules don’t apply to them.

According to Rex, a Human Resources model was included as part of the transition.

False. This Board scores an unequivocal F.

Adequate human resource systems are not in place needed to protect SCA from “employer liability”. It is a disgrace that since 2015, the GM has not presented ANY plans or timetables for developing these internal controls or for incorporating essential expert owner oversight. The most important feature of transitioning to self-management is that SCA is now an employer. This failure has already resulted in:

  • excessive management compensation (the GM gets $100,000+ more than the market requires and three other managers annually take in more than a quarter million dollars more than SCA should be paying);
  • lack of performance standards (GM bonuses provided without justification despite massive owner dissatisfaction with her performance);
  • lack of contractual service level expectations (they remain undefined and unmeasured);
  • lack of written terms and conditions controlling GM employment (no management agreement makes her an “at-will employee” who is subject to the SCA Personnel Handbook. Unfortunately for SCA owners, SCA’s attorney has fabricated imaginary“rights” for her that she has asserted against SCA in threats of frivolous litigation and that allow her to act like a “super Board member” rather than as staff).

No 2018 assessment increase.

True, but the grade is still D.

Assessments were increased without clear justification in 2017, and those excess funds have been repeatedly used as validation of the quality of self-management. But, many questions remain unanswered:

  • Why were rates increased in 2017 if $300,000 in budgeted transition costs were saved by reducing the 9 of the 12-month budgeted overlap of the GM and FSR?
  • Why was a 12-month overlap of the GM and FSR budgeted anyway?
  • Why was the entire 2017 rate increase transferred to reserves? If the assessment increase was intended to reserve for walls & fences, what happened to the construction defects settlement for the walls if there was no remediation of the defects?
  • Was the 2017 increase intended to bring up the reserves funding level? If so, that has nothing to do with the difference in operating costs between using a management company and being self managed.
  • Was it for the Liberty Center? If so, why was it not a one-time assessment?

Whatever the reason the 2017 assessments were increased by over 10%, it can’t be ignored while the Board congratulates itself and the GM for not having another assessment increase in 2018.

Per Rex, Tom Nissen’s December Board report comparing SCA to other self-managed HOAs, shows the transition is going well.

False. The grade is D.

Tom should be given credit for researching other HOAs, but should be given no credit for answering the wrong question and deserves no credit for  timeliness and no credit for owner participation.

Tom’s report simply reaffirms that going to self-management was the correct thing to do. It might also support the idea that it was good that the Board adopted a policy to increase the reserves by increasing assessments in 2017. Regardless, neither of these have anything to do with whether the Board and the GM are doing a good job in the transition to self-management.

Showing that SCA’s assessments are relatively low says nothing about cost-effectiveness or about any differences between using a management agent and being self managed. Further, comparing assessments with other HOAs is not really informative unless you eliminate all gated communities from the comparison.

“The Board has made it clear that the complete transition would take a minimum of three years. There is still much to do and more culture change to undergo.” -Rex

True, and yet, the grade is still a big, fat F.

If there is another 1 ½ years to complete the transition, what specifically is planned?

  • Why are there no written plans and timetables?
  • Why is there no transparency and no standards for GM accountability?
  • Why is this Board resisting the necessary culture change by treating owners who are even mildly critical of the Board or GM with such disdain?
  • Why has the Board strenuously rejected developing the committee structure needed to provide expert owner oversight over HR, legal services, insurance and other amenities that has been successful in other self-managed HOAs?
  • What steps has the Board or GM taken to change SCA’s culture to be more inclusive, fair and transparent?
  • What steps has the Board taken to ensure that SCA owners won’t be taken advantage of by unscrupulous agents?

The transition to self-management is very successful in handling deferred maintenance.

True. The grade could be an A, but since there is no transparency, no way of measuring cost effectiveness, and no standard for defining priorities, I can’t be that generous. But remember, no matter how well this portion of property management is done, the grade for it should count only as about 25% of an overall grade for a successful transition to self management, not be given the nearly 100% weight the Board has given it. 

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.

 

Missing in Action

Stuff that should be on the Board agenda, but is not…

GM performance and compensation is not on the open agenda but it is on the Dec. 7 @ 9 AM executive session agenda

Here is what I predict will happen tomorrow. The Board will:

  1.  continue to overpay the GM, including possibly another unjustifiable $20,000 bonus, without transparency or accountability to the owners
  2. fall prey to the Halo effect to give excessively high ratings by giving her a pass on failing to adequately perform significant aspects of her job.
  3. refuse to consider that customer service ratings might diverge greatly from their assessment of the job she is doing.
  4. continue to ignore that there have been multiple incidents of actions on her part which would be just cause for her termination as a violation of her duty to the membership and violations of the standards of practice of her license.
  5. fail to hold themselves accountable for paying her over $100,000 over the value of that job and allowing her to  pay other SCA managers at excessive rates.
  6. continue to refuse to allow appropriate owner oversight over the personnel system in favor of less qualified “Board work groups” controlling policy or abdicating too much authority to the GM.
  7. continue to dismiss and trivialize the concerns of the 836 residents who gave the GM  an “F” for owner relations and signed a petition of no confidence against the GM. The Board did not seriously evaluate one single criticism by owners to attempt to improve the division in the community. Instead, the petitioners were insulted and marginalized as if they were not  members of the community of equal value. The Board treated them like just a bunch of whiners and malcontents and discarded the petition was if it was just unwarranted “negativity from small vocal elements“.

I hope I’m wrong.

Not even a recommendation regarding the restaurant space

SCA CC&Rs 7.2(b) requires that the restaurant (or any other amenity) shall not be discontinued without the written authorization of 75% of the owners. CC&Rs 7.9 define the process by which the Board can change the use of the space. Neither of these provisions have been followed.

The Board locked up the restaurant right about the time the GM was hired. Ignoring the owner vote needed per 7.2(b) to lawfully discontinue operation of the restaurant and giving the GM over a year to just come up with a recommendation for the space was bad enough. Then, Rex made it worse by paying the attorney to opine in yet another no-good-for-owners violation of Board Policy Manual 4.10 that a temporary use of the space would require a vote of the owners. Then, the Board made it worse by letting her hire an unbudgeted consultant for an unknown amount of money to do the one job, by the one deadline the Board actually gave her.

So, what are we waiting for? How many excuses do we have to listen to? And how many people are we going to pay to not get the job done?

December 7 Board meeting items of interest

The last SCA Board meeting of the year is tomorrow at 1:30 PM. I’d like to point out a few things that you might not notice immediately, but which are important to for owners to know the full story.

Click here for full agenda.          Click here for draft Board Book.

Financial Report for October

Two things mar an otherwise brilliant job of bean counting:

  1. How much are we paying for who to do what?     SCA is now an employer with 80 employees costing $3.5 million -over 40% of operating budget, there should be a clearer accounting of cost of staffing by budget objective. The Board cannot hold the GM properly accountable nor can the owners be protected from such failures as excessive management compensation or featherbedding, if the accounting obfuscates these facts. And, more importantly, the Board is not holding itself properly accountable to the owners by letting the GM hide what SCA employees (particularly managers) are being paid and what they are being paid for.
  2. Since Adam Clarkson became SCA Legal Counsel on May 1, there have been $185,010 expended for legal fees which was 411% 0f the $45,000 budgeted for legal fees over half a year. This is the same attorney
    • who told the Board the GM did not need its authorization to expend SCA funds for unbudgeted purposes.
    • who does SCA’s debt collection function in the least cost-effective and most draconian way available.
    • who, along with the GM, is responsible for additional unnecessary expenses of at least $73,000 for the recall election which were STRONGLY objected to by the proponents of the recall.
    • who is being paid $325/hour to cause or allow the Board to take unlawful actions against political opponents of the GM and certain members of the Board.

 

Election and Voting Manual Revisions

Reviewing policies on voting may be really boring, but it is important to protect homeowner control over who represents us on the Board. There has to be a sound, uniformly administered system in place to prevent ANY election interference from tampering with ballots, abuse of power, or even unfair communications.

The largest HOA board election rigging scandal in Southern Nevada involved primarily attorneys who were supposed to be neutral outsiders who stacked HOA Boards to channel construction defects litigation.  This Election and Voting Manual is intended to ensure that the SCA homeowners actually control who sits on the Board and that those Board members actually work SOLELY for the benefit of the homeowners.

Yet, it doesn’t matter what is in this or any other SCA policy manual if the Board doesn’t follow SCA’s own rules or if it allows the GM and/or the attorney to manipulate the process in favor or against certain owners.

Cherry-picking which laws to follow is a slippery slope

There are several areas where our election process is not in conformity with NRS or the SCA Bylaws. For example, SCA Board does not have a nominating committee as required by SCA bylaws 3.4a below. While there may be good reasons to not want to have such a committee, this is an example of how problematic it is to simply disregard a provision. The bylaws must be uniformly enforced and not simply disregarded. The narrow exception is when the bylaws explicitly conflict with a mandate in a Federal or state law.

Filling Board vacancies after a director is removed.

The final clause of SCA bylaws 3.6. requires a vote by the unit owner to fill a Board vacancy caused by a Board member being removed.

“Upon removal of a director, a successor shall be elected by the Owners entitled to elect the director so removed to fill the vacancy for the remainder of the term of such director.”

The proposed change to the Election Manual, below in green, apparently attempts to justify retroactively how Jim Coleman was appointed, but even the new provision doesn’t allow for an appointment to be made without any notice to owners, any candidate nominations, or the required vote of owners.

Note that there is nothing in either the existing nor the proposed versions of the Election Manual that gives the Board legal cover for what they actually did to remove me nor what they did to replace me nor what they might be contemplating to do in the next election (keep me off the ballot).

  • How they removed me from the Board by simply declaring my position vacant is not authorized in NRS 116, NRS 82, SCA governing documents or any existing or proposed Board policy.
  • By extension, that also means that there is no legal means by which the GM, the Board or the attorney could refuse to allow me to be a candidate for, or to serve on, the Board should I choose to run again.
  • Also, note that this manual includes the NRS provisions which the Board President and GM violated by using the Spirit to publish their one-sided argument regarding the recall without permitting equal time and access to the opposition. Complaints of these violations are currently being investigated by NRED.

These proposed changes don’t describe what the Board actually did nor do they conform to the bylaws. The Board is simply pretending they have the authority to act against laws and policies “upon the advice of Counsel”. We’ll see.

Complaints to the Election Committee are not fairly handled

The Election Committee complaint process is to informal and allows for problems at both ends of the spectrum. On one end of the spectrum, informal complaints may be submitted without evidence or substance which could just waste the committee’s time .

On the other end, there is substantial risk of unequal treatment occurring, or even being merely perceived, if there isn’t a good enough procedure defining accountability, investigation, documentation and notice requirements. It’s sloppy management, and it reduces the community’s trust of the election process. It also allows interference in the independence and neutrality of the Election Committee.

In the proposed draft, there is still no standard format for resolving complaints, no required documentation to be maintained in the official SCA record, and no notice of the disposition formally given to the complainant.

I recommend the process defined in the SCA CC&Rs and utilized by the Covenants Committee would be a good model for the Election Committee to employ to fairly investigate and document complaints regarding Board elections.


Board Communications Task Force

In June, I proposed a resolution to improve Board-owner communications , but couldn’t even get a second to the motion. Now, five months later, nothing has been done to increase transparency or meaningful utilization of owner expertise in governance.

Rex appointed a couple of Directors to be a Board Communications “task force” (with no owner involvement)  and here are their recommendations:

Here’s what should be done immediately:
  1.  Either use SCA-TV to video broadcast Board meetings live or use some service like GoToMeeting.com to make the Board meetings accessible online in real time and interactive.
  2. Take the password off the website.
  3. Make the eblast mailing list opt-out instead of opt-in
  4. Follow the lead of Sun City Summerlin’s new GM in attitude.
  5. Stop using Board work groups that withhold information from owners.
  6. Expand the committee structure to utilize expertise of residents and have meaningful owner oversight and influence in governance.

Item 15B “Self-Management” is listed as New Business to be presented by Tom Nissen rather than the GM. The paragraph above the total back-up in the Board book to let owners know what the Self-Management item is about.

This raises a lot of questions about the Board’s failure to protect homeowners by hiring a GM without ANY of the defined terms and conditions of employment required in a management agreement.

  • Why is a Board member making a presentation on the transition?
  • Why doesn’t the GM whose compensation is $100,000 greater than other GMs at comparable Sun Cities like Summerlin make the presentation?
  • Why hasn’t the GM been held accountable for the development of the complete policy framework needed to protect SCA from legitimate risks and potential liability associated with becoming an employer or
  • Why hasn’t the GM held accountable for AT LEAST having written plans and timetables for getting the job done?
  • How will the Board – let alone the owners  – even know if the job is done right and on time?
  • Why did the Board let the GM unlawfully conceal SCA records on the transition to self-management from one Board member in violation of our bylaws 6.4c when this information should have been easily available to any unit owner?

After the Board meeting, I’ll let you know if any of these questions have been answered. Or if there are just new ones.

October 26 SCA Board meeting wrap-up

Here are a few highlights from the October 26 SCA Board meeting that will give you a perspective that the Board tries to suppress.

GM Compensation is a really big concern
Rex made the almost off-hand comment during the President’s report that the BOD discussed “GM performance” in executive session, but gave no further details. My next post will be about GM compensation since my trying to get the board to handle GM compensation correctly is one of the main reasons they kicked me off the Board.  The issue of GM compensation is really important because seeing how the Board mis-handled it will show you that the real threat to SCA owners is the GM and the attorney duping the Board into handing over our wallets – not that my service on the Board was going to change the outcome of quiet title litigation.

Foundation Assisting Seniors
Rex noted the Foundation Assisting Seniors was being ordered evicted as the court agreed that no SCA Board in the past would have had the authority to transfer that space to FAS in perpetuity. (I thought it had been transferred to FAS by Del Webb before the entire property was taken over by the Association, but I could be wrong.) Rex said that Sandy would make a recommendation about the use of the space.

Restaurant Consultant RFP is Out
Sandy will be hiring a consultant according to some unknown RFP for some unknown amount of unbudgeted money to give us the answer to the question “Just what’s it gonna take to have a successful restaurant”. You already know how I feel about her spending unbudgeted funds to pay a consultant to answer the wrong question after she’s left a major amenity out of service the entire time she’s been on the job.

Opinions about the recall proponents destroying our property values
Rex broke his silence about the recall in the paternalistic tone I find so grating, reprimanding the small cadre of negative proponents of the recall who have defined SCA’s character over the years with their history of unwarranted vitriolic attacks. These “people” will force a death knell to volunteerism, and these malcontents are responsible for SCA’s negative reputation and the destruction of our property values. The attorney says their rhetoric is actionable defamation even if the most horrible attacks have been “scrubbed” from their online posts.

In my view, Rex should be more introspective. Rex seems blind to his own personal contribution to the community schism and to sustaining the unhealthy divide. But then, there were more comments on the subject at different points on the agenda.

Apparently some helpful soul decided that it would be good for the community cohesiveness to incite Art with 54 pages of diatribe from some unnamed blog. Art was predictably upset by it, stunned by the negativity and unfairness of it. Art has developed a total respect for the other board members who he sees as competent and blameless. (He didn’t mention me because I have become invisible. It’s as if they feel so utterly justified in taking the law into their own hands to erase me and 2000 owners’ votes, it’s as if I never happened.) Art blamed instead that unknown blogger’s disinformation, errors and false charges to be the prime contributor to a major loss of our reputation and property values.

I am irritated with the “helpful” individual who baited Art. If it was who I think it was, he’s been helpful like that in the past, and I believe he too should be more self-aware in terms of the impact he has on perpetuating a toxic culture and on enabling the Board’s unlawful actions against me.

It’s hard to say whether our property values have actually taken a hit by virtue of SCA’s negative reputation (which all seem to agree exists now as well as in the past), and if they have gone down, who is to blame. In the Financial Report, revenue of $103,000 over budget from asset enhancement fees was described as being caused by an unexpectedly high number of home sales. Although no information about home price was given, the fact that the number of sales is up which would lead one to the opposite conclusion about the impact of our reputation on prospective purchasers.

Three more spoke in this echo chamber, not surprisingly all representing the same point of view.
I didn’t catch the name of the man who demanded that the owners be given the names of the originators of the petition and that the names of those who signed the petition should be posted on the association’s website. Sandy helpfully said that anyone could have the names of those who signed the petitions by filling out the proper form.

Yes, this is the same Sandy who authorized expenditure of thousands of your assessment dollars for the attorney to conceal SCA records from me, a sitting board member. She threatened SCA and me personally with litigation saying “employer liability”would be created if I could see SCA records related to her compensation and the transition to self-management.

Is it fair for the GM to gleefully release information that could be used to harass and intimidate petitioners who oppose her management style at the same time she spends large chunks of unbudgeted SCA funds to prevent my review of her compensation with the ludicrous claim that I was violating her privacy rights?

It is my prediction that SCA will have no peace as long as the Board forces the community into two camps. The definitions of the camps may have been different in the past, but now, they seem to be camps of Sandy’s friends vs. Sandy’s foes.  I imagine you can see why I have a little bit of trouble being silent watching the two faces of our leading lady as she inconsistently enforces the rules, bestowing blessings on the one camp and curses on the other.

Next speaker to chastise the petitioners was Jean Capilupo who stated that she had made a commitment to come to each board meeting to say something positive to help the unfairly maligned directors buck up under the strain. Clearly, she identifies completely with the directors in a “there but for” sense and so her sentiments are myopic, but understandable.

Where I get off the train is having to listen every month to the criticism of the people who don’t come to the Board meetings. I am amazed at the current and former directors’ self-righteous disdain for a large chunk of the community and their utter lack of comprehension about why those people would find the constant self-congratulation vs denigration, us vs. them, patter to be quite alienating.

The grand finale was brought home by none other than David Berman who claimed he only decided to speak after being inspired by Jean’s profound remarks. He expressed confidence that the recall will fail (no surprise, recalls usually fail at the petition stage even without overt interference), and foretold ominously, “When this is over, the originators will find they have awoken a sleeping tiger!”  Catchy turn of phrase, but I’m not sure what it meant.

 

Defending the GM and her excessive compensation is a slippery slope

I have heard many SCA homeowners talk about the recall election and their main focus of concern seems to be the cost of removing Rex, Aletta, and Tom from office.

However, the real issue of this recall election should be the unnecessary costs these Directors have created, and insist homeowners continue to pay, rather than admit they are wrong. Their visceral hostility to my professional assessment of how to address excessive executive compensation is what got me excluded from meetings and decisions and is the real reason they kicked me off the board.

Refusal to utilize professional compensation standards for GM is unacceptable.

Excessive executive compensation may be justified in the eyes of the board members who approved it when the GM was hired in November, 2015, but they erred significantly in the compensation for the GM going forward which is easily $100,000/year too high.

The problem needs to be corrected by using expertise within our community, but instead, it was exacerbated by Rex appointing Tom Nissen and Bob Burch, a Board work group, and excluding me with threats of legal action regardless of my expertise. There are professional standards and practices governing compensation in the public and/or non-profit sectors that cannot be legitimately dismissed, but have been. Compensation for a job class is based on a number of factors normally determined by a classification and compensation survey of comparable agencies within the geographic job market conducted by trained and independent persons. SCA lacks a needed professional protocol for this.

 As delineated in our Articles of Incorporation, SCA was incorporated in 1998 as “a non-profit corporation organized under Chapter 82, Nevada Revised Statutes”. As such, the Board, contrary to what they believe, must operate under the good governance principles of a non-profit even though we are not a non-profit in the sense of a charity under IRC 501c3.

An easy-to-read article, WHAT IS “REASONABLE” COMPENSATION FOR A NON-PROFIT EXECUTIVE? describes one professional method for addressing GM compensation issues:
“Establish a Good Governance Framework
As a preliminary matter, non-profit Boards must establish good governance processes and procedures.  As suggested by the Treasury Department, good non-profit governance in the area of executive compensation starts with the following basic framework:

  1.  Set and follow established procedures for determining compensation;
  2.  Use responsible effort to determine appropriate or reasonable levels of executive compensation; and
  3.  Maintain appropriate oversight of executive compensation levels.

Owner complaints of GM compensation should not be treated as beneath the Board’s notice.

The hot-button GM compensation issues listed below involve major deviations from standard compensation principles. I wanted the Board to take back policy control and be accountable to the homeowners. The other Board members wanted to pay the GM whatever they decided without having to listen to me ‘bitch’ about it or to my insisting that they explain their rationale to owners.

  1. The GM was hired at $250,000 which was $100,000 more than Sun City Summerlin paid to hire their Executive Director in 2015, and both SCA and SCS recruitments occurred at about the same time.
  2. We also pay for $100,000 for a CAM Lori Martin (recently replaced), so in essence, we are paying two people $400,000 (including increases, bonuses and benefits) for the work that other HOAs pay a single person under $200,000 on contract to accomplish. I have found that other larger and more complex HOAs pay for a top executive to operate the HOA under their own CAM license.
  3. In addition, Rex and the rest of the Board Members, gave the GM a $20,000 bonus, six months after she took over duties from FSR, the management company. However, to date, Rex has not been able to give a good justification for the bonus. The Board has refused to publicly adopt any GM performance standards.
  4. They cannot explain why there was a need for a 10% increase in owner assessments when we were moving to self-management as a more cost-effective form of operations.
  5. They claim that the GM’s big compensation was justified by the saving she accomplished when taking over early from FSR (a savings which was not known or predicted when she was hired in 2015 at such an exorbitant salary.)
  6. Why didn’t the $30,000/month for nine months that was supposedly saved by her early transition show up in the bottom line in the 2016 audit?
  7. The GM hired a CFO at $190,000 + benefits to handle our comparatively small $10 million budget. This compensation is also way out of line with the proper pay for that job class, maybe as much as double what others pay in this market for comparable work.
  8. The same problem of compensation rates based on a total disconnect with the local market rates for comparable jobs occurred again with the Facilities Manager compensation at $154,000, again double what other Sun City HOAs are paying in our region.

The combined compensation of four executives unreasonably takes up about 10% of the operating budget. However, but before I could finish my analysis, they ordered me to cease & desist asking questions. After prohibiting me from researching this subject further, they illegally removed me from my position on the Board on completely unrelated, bogus charges.  This is the Board’s fatal step off the cliff, and SCA is still tumbling down the slippery slope of an unfair, overly-politicized system.

Transparency and accountability to owners is essential, but inadequate at SCA.

As fiduciaries, the Board should be much more transparent and accountable to the homeowners as they fund all employee salaries. Compensation practices in organizations that are funded by taxpayers, donors, or assessment payers are necessarily different than compensation practices permitted in the private for-profit sector. The extreme resistance to this notion of transparency, accountability and homeowner oversight of GM compensation and performance standards has been a major source of contention between me and the other Board members who are overly protective of the GM to the detriment of the effective governance of the association as a whole

Sound personnel and salary administration requires formal policies which should NOT be delegated to the GM without competent owner oversight.

Coming from for-profit and military backgrounds, the current Board members don’t see a problem operating without strict policy control of positions, classification, and compensation. Nor do they see that this oversight can be provided more effectively and consistently by owners with relevant professional skills BETTER than the function can be performed by the Board which may or may not have members with the proper expertise. They don’t see the problem they create by abdicating complete control over position control, performance expectations, and compensation, a third of the budget, to the GM without an adequate system of accountability.

Just as there is a Finance Committee, SCA should be a Personnel Committee which includes owners, and at least one Board member,  as required by NRS 82.206(3) to utilize the expertise of owners with backgrounds in HR, with an emphasis in the public and non-profit sectors, to oversee the development of personnel policies appropriate to a self-managed Sun City. I submitted a proposal for such a committee to the SCA Board at the January 26, 2017 Board meeting, but it was given zero consideration and, despite my request to have my written comments included in the Board Book, it’s as if it never happened.

Once the salary is set for the job classification, performance standards, and measurements must be publicly adopted to determine any bonus. Absent customer-service ratings and other performance measured against publicly-adopted standards, any compensation increase by the board is irresponsible.

Contrary to what I believe is in the best interests of the membership and my literal interpretation of NRS 116.31085, Rex has aggressively blocked the PUBLIC adoption of GM performance standards to a ludicrous level. He claims that the law does not require members to know what factors or measurements control GM compensation. Further, unit owners haven’t been informed how many of your assessment dollars have gone to the attorney to prevent me as a Director from seeing documents showing what performance expectations the Board had adopted in executive session (if any). In my view, this skewed interpretation of the law benefits no one except the GM, attorney, and Rex, the man who would be king.

 

Refusal to use my expertise to address owner concerns about GM compensation was only the beginning. SCA’s system of accountability has been seriously damaged by how the Board mis-handled the GM’s frivolous threats of litigation.

This dispute is the real impetus for my being unfairly kicked me off the Board. Rex has allowed the GM to use the attorney to block ANY audit of the GM’s compensation and performance by me as an individual Director. This politically-motivated act could only be  accomplished by paying the association attorney literally thousands of dollars to conceal SCA documents from me and bless violating SCA Bylaws 6.4c:

Bylaws 6.4 ( c) Inspection by Directors. Every director shall have the absolute right at any reasonable time to inspect all books, records, and documents of the Association and the physical properties owned or controlled by the Association. The right of inspection by a director includes the right to make a copy of relevant documents at the Association’s expense.

Concealing records and unequal treatment of independent Board members are two of SCA’s BIG unacceptable governance practices.

Whether the GM’s salary is correct or too high is not the critical issue. The huge problem is the kind of system that’s created when when the Board tolerates the GM throwing a hissy-fit because I did a salary verification with her former employer, and then claims I am not authorized to identify myself as an SCA Director or ask questions about GM compensation, and then orders SCA’s official records be sealed from my view. I was threatened with litigation, accused of violating my fiduciary duty, and many other humiliations, including shunning, for refusing to just shut-up.

In what world is it justifiable to treat a volunteer Director in such a horrific manner?

In what world is there any possible way I could have used GM compensation information to make a profit in unrelated quiet title litigation as they claimed?

SCA’s system of accountability and responsible governance has been seriously damaged by how the Board mis-handled the GM’s frivolous threats of litigation.

The GM’s actions, to prevent me from interfering with her gravy train, and to shut me up about demanding higher performance and responsiveness to homeowners to qualify for her high level of compensation were acts so egregious that, in my book, she should have been fired for her vindictive and retaliatory acts alone.

11 Reasons Why We Need To Recall The Board Members

  1. Tale of two faces – The Board members subject to recall should be removed because they refuse to tolerate any criticism (from the homeowners) of Sandy Seddon, the General Manager (GM) and berate those who dare to speak in less than glowing terms about her performance. The board is thrilled with Sandy Seddon. Their experience with her is that she quickly handled the deferred maintenance issue, quickly transitioned away from the prior management company, responds fully to their requests, and is just an all-around great gal. However, the Sandy Seddon that the Board members see and experience is quite the opposite of what many homeowners experience and which was described to the Board in a petition signed by 836 homeowners and residents. The Board has refused to hold her accountable to address the problems identified in the petition against her or to take any action to improve homeowner relations and customer satisfaction. During the September Board meeting, Bob Burch yelled out, “Enough is enough!” and two pages of his diatribe about why no one should criticize the GM is in the Board Book. They should be removed as directors because they are protecting the Sandy Seddon more than they are protecting the homeowners paying the assessments.
  2. Not fair to owners. The Board takes actions without hearing both sides, does not uniformly enforce the CC&Rs and By-Laws if it is outside issues like the color a house can be painted or how many trees must be planted. They fail to prevent problems and resist solving them, so the homeowners end up paying for the pound of cure. Look at all the bureaucratic hassles the Board has created for the clubs by requiring bizarre business license requirements and vendor insurance. They allow the GM to create bureaucratic hassles for owners and clubs and to set paid staff up as competitors to the clubs for booking dates.
  3. Usurp authority of the owners to initiate lawsuits. Owners voted against SCA filing litigation on Liberty Center construction defects, but the Board ignored that and filed a lawsuit anyway. NRS 16.31088 requires an owner majority vote before SCA can initiate a lawsuit, but they did not ask owners to vote before they acted to evict the Foundation Assisting Seniors or to sue the Foundation for $40,000.
  4. Transition to self-management is flawed. No adequate policy framework is in place to protect SCA, particularly as a first-time employer, and there are no written plans or timetables to complete the transition. Despite my areas of expertise in HR and municipal management, the Board unfairly excluded me from participation in any personnel policy discussions and claimed I was “not authorized” to see records relating to prior decisions of the Board or to examine such questions as:
    1. Why is the GM paid  $100,000+ over the appropriate salary for that job?
    2. Why does the compensation for four managers eat up about 10% of the 2017 operating budget?
    3. Why don’t we have performance standards and customer service ratings linked to GM compensation?
  5. Board does not act lawfully. They have tolerated the restaurant being closed for nearly two years in violation of CC&Rs 7.2(b).They have issued several unlawful cease & desist letters against me to stop me from inspecting ANY association records, but there are numerous other examples included in the documents filed with the state enforcement officials.
  6. Lack of method for requiring GM accountability. These board members should be removed because they have abdicated too much authority to the GM with no system for accountability. It is unlawful to hire a GM without a management agreement, but no agreement is currently in place. Without a management agreement, the GM is an at-will employee covered only by the personnel handbook. Poor business judgment to employ her without the specification of the required provision of NRS 116A.620. These directors should be removed, not just because they have failed to hold the GM accountable in areas beyond facilities maintenance, but because they have allowed her to threaten frivolous litigation against SCA and to falsely accuse me as a Director of defamation because I criticized her performance. She has also falsely accused me of violating her privacy rights and creating “employer liability” for asking about her compensation with her former employer.
  7. Abuse by attorney. Why do we even need a Board if the attorney calls all the shots? The HOA attorney (Clarkson) makes quite a profit by getting the Board to believe that the budget does not have to be amended to spend, spend, spend. The Board refused to have board training conducted by the Ombudsman, and Clarkson conducted the training in a closed workshop, deemed it attorney-client privilege, was abusive to me and gave biased instructions, e.g., that the Board MUST get attorney approval before making any major decision, and it is an unauthorized practice of law (for me) to tell them they don’t need to go to an attorney for so much but to use their common sense.
  8. Loss of control over the budget. The Board should be removed because they are allowing the attorney to represent the GM and not the association membership as a whole. For example, this attorney advised the Board (in violation of NRS 116.3106 and By-Laws 3.18 a and 3.20), that the GM can expend SCA funds for purposes other than what they were budgeted for without board approval. Clarkson’s legal fees for the first four months have amounted to $103,000, and much of that was expended for legal actions that never should have been taken. This does not account for how much the Board has spent to have him take over the Removal Election Process and strip the SCA Election Committee of their duties defined in the adopted Election & Voting Manual.
  9. Lack of transparency. The Board allows the GM to refuse to give access to information in an easy, user-friendly way. They take the attitude that they are only required to provide the legal minimum, and you have to jump through hoops to get that if you are not considered an ally or if you are being punished because they think you MIGHT misuse the information.
  10. Owner involvement in governance is diminished. The Board refused to adopt the proposed owner-oversight committees for Legal Services, Personnel, Insurance, or Investments even though these are areas where the expertise of community members is greatly needed and could be cost-effectively employed. They abolished the Fitness Committee, the Property & Grounds Committee, and the Golf Course Liaison Committee. Meanwhile, the Communication Committee is in limbo. There is a plan (only discussed in private so far) to have Pinnacle, Villas, and the service groups report to the GM instead of having a Board liaison. No attempt is being made to promote customer satisfaction or to institute “best practices” to improve residents’ quality of life or build a sense of belonging in the community. These Board members do not respect owners and abdicate to the GM.
  11. Abuse of privilege. NRS 116.31085 (3) and SCA By-Laws 3.15A define the only permissible topics that an HOA Board can discuss in executive session. These directors should be removed because they circumvent this by making decisions in closed “workshops,” by using email for deliberations (despite having been issued a letter of instruction prohibiting it), and, at times, by unlawfully excluding a director from the deliberation and action (myself and Jim Mayfield before me). Rex and Sandy make excessive claims for confidentiality on ALL their SCA business emails even when the discussion is just about leaking pipes.