Unfair BOD actions – Page 4

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 abdication. SCA 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.

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.

I need to correct the record distorted by Rex Weddle

Rex Weddle’s self-serving article “The Attempted Recall” in the December Spirit is a stunning, wrong-headed form of revisionist history. As President, Rex is the only one who can speak for the whole Board and in that role, he gets to speak for the Board in the monthly President’s Report in the Spirit.

In this case, Rex inappropriately, if not unlawfully, used the Spirit as a bully pulpit to try to intimidate his political opponents and to blame them for things that were actually his fault.

If Rex was speaking as an individual, can any individual have a full page of the Spirit to express her opinion about the recall?

Rex began by describing the recall as “an organized effort” that took five months to gather enough signatures to call for an election.

That’s not what I saw happening. Without any organized group, the recall movement just seemed to spring into existence. It seemed to be an almost organic movement of people whose only commonality seemed to be signing some petitions. Whoever they were, they were exercising their LEGAL right to call for a removal election, and those legal rights to vote are sacrosanct.

I heard owners were signing because of anger about changes for the worse since switching to self-management, like new requirements for the Clubs, the (lack of a) restaurant, the shabby treatment of the Foundation Assisting Seniors, the GM’s pay or her surprising owners with the loss or change of some amenity, such as the group exercise $45 card.

I also understand that the over 800 signatures were collected in less than five weeks over the summer when many of the owners are not even in residence. Such a significant statement of customer dissatisfaction should not be trivialized.

And yet, Rex purported to be perplexed as to why any owners would even try to recall four members of the Board (including Rex), saying

“NRS 116 makes the recall of executive board members extremely difficult”.

This is correct only insofar as it is a fact that the only LEGAL way to REMOVE a director from the Board is through the legally-defined, arduous process beginning with 10% of the owners calling for a recall election.

Rex seems oblivious to the irony that he violated this very section of NRS 116 when he voted to remove a Director from the Board whom ZERO owners signed a petition to recall.

“Since most of the allegations boiled down to simple a difference of opinion about past decisions made by the Board,…”

Actually, the petitions listed owner complaints and grievances (link is as reported on Anthem Opinions blog, but which were NEVER reported on the SCA website or at Board meeting or in the Spirit) that were not just “a simple difference of opinion”. They were stark differences between right and wrong.

The very first allegation in the petition – “an unprecedented number of violations of NRS 116 and SCA’s governing documents” – was certainly verifiable had an investigation been conducted and subjected to public scrutiny.

“…there was little evidence to suggest the targeted directors were guilty of any sort of high crimes and misdemeanors that would justify the widespread outrage needed for recall.“

Two things:

The petitioners were not required to give ANY reason, let alone evidence of guilt of “high crimes and misdemeanors”, to exercise their LEGAL right to call for a removal election and to collect signatures free from harassment. Removal can be with or without cause IF, and only IF, the arduous conditions required by NRS 116 and SCA bylaws are met (10% of owners sign petitions, 35% of ALL owners vote YES, and 50%+1 of those voting vote YES).
Neither Rex nor the other three Directors subject to recall nor the Board as a whole did any self-examination geared to satisfying the customer service concerns of some 800 owners. This is a crime in my book. The Board’s job is to serve ALL the owners. SCA is a monopoly. Dissatisfied owners can’t live here and join another HOA they like better. Homeowners’ only recourse is to vote out Directors who they think are not serving their interests well.

In what world would it be good business to blow off customer service complaints from more than 10% of your customers without any investigation?

“The real reasons behind this expensive failed attempt to recall half the Board are still not clear.”

Let me break it down for you, Rex. There are lots of owners that are dissatisfied with the way they have been treated by you, the Board and by the GM. Many want to change the direction the Association is headed on your watch.

While you acknowledge that there was “widespread outrage”, you don’t see that it is YOUR job to fix the problems, not just say they don’t exist. It is not, under any circumstances, correct for you to blame your customers for not liking your product nor to blame them for the expense of the CPA and attorney you wanted.

It is NOT responsible leadership to claim that the complaints of 800 people are not justified and don’t need to be seriously investigated. Owners are your customers. No matter what your name is, you are not their king.

“Those who worked for it denied being its organizers. To this day the leadership of the group behind the attempted recall has never stepped forward and publicly made itself known.”

Attempting to identify the leaders of the recall movement is an unacceptable form of harassment and threat of retaliation against owners who exercised their only LEGAL means to remove some Directors.

There is already substantial evidence that, if identified, anyone involved in the recall will be subjected to inappropriate abuse by those in power.

I can make this assertion on great personal authority as I have been threatened, harassed or had my character maligned for, among other things, my defending the LEGAL rights of the petitioners to collect signatures unmolested in the common areas and for my attempting to prevent election interference

Subjecting ANY owner to abuse for simply exercising their legal rights deserves ZERO tolerance.

For example, it is unconscionable that David Berman, head of OSCAR, has been given the names of the people who signed the petitions and that he has threatened that he would recommend against their serving on the Board for that reason. (Note that no official information about the petitions or the recall was ever formally given to the Board or the owners, and even though I was a Board member and the liaison to the Election Committee, I learned about the petitions being submitted from David Berman’s blog.)

No wonder dissatisfied owners don’t want to be identified because they are crucified for speaking up. It’s exactly the same reason many sexual harassment victims nationwide were silent for years.

“Because a majority of the Board was targeted for removal, recall proponents argued the Association’s Management and unaffected directors could not be trusted to run a recall process. So the SCA Election Committee was bypassed …”

This is TOTALLY WRONG to extend the complaints against Rex, management and the attorney to the Election Committee. To my knowledge, there was never any request by proponent of a fair removal election process to bypass the Election Committee.

In fact, I personally advised against the GM being involved for her poor judgment, as an example, by including Rex, a subject of the recall, in a meeting with Election Committee officials to develop plans for the recall election.

As the Board Liaison to the Election Committee, all my actions were designed to protect the integrity of the recall election process and to ensure the Election Committee could perform their normal chartered functions without interference.

As the excerpt below from an August 6 email I wrote to the chair of the Election Committee shows that, in my view, the absolutely least desirable action was to bypass the Election Committee.

The horrible waste of over $73,000+ unnecessary expenditure for the attorney and the CPA to muck up the process can be 100% attributable to Rex Weddle. As Board President, Rex is accountable for getting the Board to allow disempowering of the Election Committee (in violation of the bylaws, adopted Board policies and the budget) which in the end made the recall process more expensive, more divisive and less fair.

As a subject of the recall, Rex should also be held accountable for exerting undue influence over the process and taking actions to the detriment of the owners who were exercising their LEGAL rights to call for a vote to remove him.

“Purposeful misstatements, allegations of fraud and assertions of corruption were made, not only against the targeted directors, but the whole Board. Our own SCA Management team and Association counsel were also subject to these attacks. These allegations, without much in the way of factual support,…”

Rex’s treating such serious allegations so dismissively is irresponsible. His claiming the allegations are baseless without allowing any investigation or attempt at remediation is a complete failure of his, and the Board’s, duty of care to the owners.

Part 2 is coming soon.

I will continue rebutting Rex’s article in another blog. The amount of evidence I have to contradict Rex’s misrepresentations is overwhelming .

SCA’s Wasteful Loss of Foundation Assisting Seniors

The recent open letter attorney Clarkson wrote attempted to justify the SCA’s Board’s actions against the Foundation Assisting Seniors (FAS). It was very disheartening. It shows SCA is lacking a system that guarantees Board decisions actually will serve the best interests of the community. It also shows how the Board does not hold the GM accountable for ensuring mutually-beneficial and cost-effective resolutions to community disputes.

The GM did not do a competent job to collaborate with FAS on a solution beneficial to SCA owners.

The Board delegated the dispute to the GM for resolution, but she was incapable of developing a collaborative solution or to avoid escalating the conflict. Why doesn’t the Board hold her accountable for that failure? Why doesn’t the Board hold itself accountable for achieving a negotiated settlement that would maximize benefits of both organizations to the SCA membership?

Instead, the Board followed the unhealthy pattern of power politics where they forgot who they are representing and who they and the GM are supposed to be serving. Their “Board/GM must win/be right and Favil West must lose” strategy made the Foundation Assisting Seniors and all of SCA’s members and residents just collateral damage to their “fight fire with Napalm” approach.

We all lose when the Board and the GM don’t do their job

In the end, we all lose when the Board does not hold the GM accountable for preventing or minimizing disputes.

When neither the Board nor the GM hold themselves accountable for bringing the community together or for maximizing “neighbor-helping-neighbor” strategies, we all lose.

When the Board picks a side to throw their weight and our money into waging a war against owners perceived to be on the other “side”.

We all lose when the Board does not hold the GM accountable for the owner relations and “people” parts of the General Manager job as much as for the property management aspects of the GM job.

WHY are we paying her so much if she doesn’t exhibit sufficient leadership or collaboration skills to bring the community together synergistically or to negotiate mutually-beneficial arrangements that allow diverse groups to thrive here?

Evicting FAS was the unnecessary destruction of a community treasure

Escalation of this conflict should never have happened. Consider for a moment how Favil West described as the FAS’ beginnings:

In 2003 the Foundation submitted a grant proposal to Pulte for a community service building. Pulte accepted the proposal. The Foundation President negotiated the design of the building, a building worth more than $550,000, to house the Foundation and the services it started; SCA TV, Community Service, and Emergency Preparedness (all originally part of the Foundation). The end result was that the building would be provided to SCA in addition to Independence Center, with Pulte’s condition that space would be dedicated to FAS so long as it serves SCA seniors. This was evidenced by the original plans showing and referencing the Foundation space allocation. This term was accepted by SCA and was documented by a board resolution at the SCA April 2007 board meeting.

These statements were presented as documented facts so they should have been easy to verify. Why was there no simple, fair internal cost-effective process to ascertain their veracity?

Instead of collaboratively evaluating the facts where both sides were given an equal opportunity to present their side of the story, those in power wastefully decided to disregard these assertions, to ignore the good that was being done by FAS, and to dismantle a 15-year-old community service and destroy community relationships for no good purpose.

Attorney added cost, but no value in achieving a good solution

SCA Board spent a huge amount of money on attorneys to evict FAS, and yet they still managed to break a few laws while taking this completely disproportionate action that benefitted the community not one whit.

For example, NRS 116.31088 requires a member vote before initiating a civil action, but the Board ignored that and filed case A-17-760014-C to evict FAS. Please note that attorney Clarkson’s was paid both to file the civil action against the FAS AFTER Clarkson was paid to give the Board the self-serving advice that SCA did not have to follow NRS 116.31088 in this case.

Another example is the violation of NRS 116.31085 (executive session) where FAS was repeatedly discussed in secret long before SCA board decided to take legal action. Perhaps, had the Board allowed the community to listen to their deliberations, it might have been harder for the Board to settle on the most expensive and least beneficial final solution.

Jim Mayfield re annual budget mailer

Jim Mayfield writes:

We received the annual mandatory budget mailer in today’s mailer. I have reviewed the budget in detail as well as the materials sent with the budget mailer.

1. The “Summary Budget” does not contain any information that compares the 2018 draft budget to the adopted 2017 budget. Furthermore, a comparison is not provided of the 2018 draft budget to the projected actual financial statements for 2017. Without these comparisons, unit owners have no way access the expected actual to budget performance for 2017 OR to see how spending priorities are budgeted to change between 2017 and 2018.

2. The Budget mailer does not include a proxy form or return envelope for unit owners to use to vote for or against the budget. This is a change from prior years. Instead, the cover letter states that if a unit owner desires to vote for or against the budget, the unit owner should see NRS 116.311. (So much for transparency and encouraging unit owner participation in the governance of SCA.) The strategy is obvious: Don’t raise the dues and hope the unit owners don’t care how their money is spent and find it too hard to find out to bother.

3. The capital budget includes an authorization of $45k for “chairs, outlets, storage shed, BBQ tables and benches for the Pickleball court area.

Notes from Nona on saving some bucks

I haven’t received my budget mailer, but I want to address easier voting described in NRS 116.311 as they can be used as an example of how SCA could avoid most of our huge legal bills. The Board and the GM are not competent in preventing owner problems using the attorney as their sole guide. They should shift from paying for secret attorney opinions defining the legal minimum to asking owners to help develop popular “best practices”.

The NRS 116.311 code section is entitled,

“Voting by units’ owners; use of absentee ballots and proxies; voting by lessees of leased units; association prohibited from voting as owner of unit; voting without a meeting.”

This section offers ways in some situations that voting could be made easier on owners – like absentee ballots, proxies and voting electronically. Even though simpler, more convenient methods are available, doing things in the most “user-friendly” way doesn’t seem to be much of a priority for the Board or the GM even if not doing it the easy way is more costly.

The default seems to be just knee-jerk asking the attorney for an opinion. The attorney’s opinion generally veers toward advising the Board or GM what is the minimum that can be legally done. Conceptualizing a problem in terms of improving customer service is simply outside of the attorney’s paradigm, training and expertise – and yet he is their top-dollar “Go-To Guy”.

The GM does not seem to be inclined to focus on improving owner relations or utilizing owners’ expertise to research and recommend “best practices”. Instead, just handing over $325/hour for the attorney to rule on what the Board and GM can probably get away with is her counterproductive modus operandi. The Board has a total blind spot to this failing.

A better way of doing business would be to evaluate EVERY Board or management decision by asking owners BEFORE taking action,

“Is this action in the best interests of the membership?”

Then, if there are lots of owners who disagree, listen to them and remedy the problems. This could be done easily and systematically by utilizing the expertise of owners in a re-invigorated committee system. It certainly would be more cost-effective.

I believe that, had the Board and GM in 2017 followed the simple principle of acting SOLELY in the best interests of the membership, at least 90% of the $200,000 SCA is projected to spend this year for attorney’s fees could have been avoided, and there would have been a lot less community turmoil.

Elder Abuse: Part II – SCA Agents

We have another covert systemic type of elder abuse going on right here at SCA. We have all of the problems endemic to Nevada HOAs in general, but those generic problems have been fueled here by a historically divided community and exacerbated by a poorly-executed transition to “self-management.”

Our system fails to provide sufficient competent owner oversight and internal controls necessary to prevent abuse by professional agents who are supposed to be fiduciaries acting SOLELY in the best interests of the owners, but who are taking unfair advantage of us for their own unjust enrichment.

You are going to hear this same refrain from me repeatedly:

The biggest risk SCA owners face is being screwed over by unscrupulous agents who are supposed to be acting solely in our best interest, but who are not. They are actually unfairly acting in their own self-interest and profiting at our expense.

The reason “they” kicked me off the Board is they wanted to shut me up. They wanted to prevent me from telling owners what they are doing. They wanted me to stop publicly trying to force them to make system changes that would protect SCA owners from abuse by our own, highly-compensated, but unscrupulous, agents.

Who is “they”?

“They” are now (2016-now) GM Sandy Seddon and (May, 2017-now) association attorney/debt collector Adam Clarkson Law Group now.
Before (2009-2015), “they” were FirstService Residential (FSR)/formerly RMI, SCA’s managing agent, also licensed debt collector dba Red Rock Financial Services (RRFS).
In between (2015-2016), “they” were Alessi & Koenig, LLC attorney-debt collector that went into chapter 7 bankruptcy after being sued on 500 of the 800 HOA foreclosures they did between 2011-2015 and then…
“they” illegally morphed into HOA Lawyers Group, LLC (2016) but continued being SCA’s debt collector until replaced by Clarkson.

“They” are NOT necessarily the members of the Board, but “they” need to control the Board. “They”get their hands so far into our pockets only because the Board lets them do it. At least a majority of the Board has to negligently, maybe unwittingly, enable the attorney and management to take over the reins.

I believe the Directors are probably acting in good faith and trying to do their best, but are simply placing their faith in the wrong “experts”. However, even if the Directors are just innocently looking the other way, their ignorance is allowing SCA owners to be taken for an expensive ride.

So, what now?

Too bad for them.

“They”didn’t really get rid of me by unlawfully deeming my Board position vacant.

Now I have the time to tell you all about it. And I think I’ll start with what’s wrong with paying Sandy Seddon twice as much as we should be paying her.

$50,000 for the removal election and still counting

Last June I did not think passing around recall petitions was a good idea. I thought it was a fool’s errand – disruptive and doomed to fail.

However, I am a strong, some say overly-aggressive, defender of owners’ rights. I just hate it when people with power abuse ANY owner’s rights, but especially if they use dirty tricks or create an uneven playing field and make the little guy pay the price.

That’s what’s happening here now. The opponents of the removal election are making owners pay way more than we should, and they are trying to get us to blame the wrong people.

All the tens of thousands we will be paying for this removal election (above the less than $10,000 cost of an annual election) could have been avoided if the GM hadn’t blown me off by not even acknowledging my July 20 email:

Sandy Seddon didn’t answer me. Why should she? She knew that there was no one on the Board except me that cared one whit about maintaining the independence and neutrality of the Election Committee. Quite the opposite, she knew that she had the votes to approve anything she wanted to do make the removal election process difficult.

Who decided that these actions were in the best interest of owners?

Now, SCA owners are obligated to pay a bungling CPA firm $20,000 for the work done through September 30 no matter how poorly it was done. We will be on the hook for maybe triple that amount because their errors or omissions are significant enough that a second recall ballot may need to go out with Bob Burch’s name added to it.

Who made the decision to take away the Election Committee’s job?

Who decided that it was in the owners’ best interest to use an attorney and a CPA for the removal election when the attorney in five months is already billed $150,000 – FOUR times the $37,500 budget (In just September the attorney billed $43,873 and the CPA who replaced the volunteer Election Committee billed $20,000)?

Did I mention that there was:

no RFP for a CPA,
no approved CPA contract,
no Board approval to change the Election and Voting Manual,
no budget authorization for the CPA, and
the CPA has made so many mistakes that there might have to be a second removal ballot?

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:

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

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.
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.
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.
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.
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.)
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?
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.
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.

Owner concerns should never be ignored

The biggest reason Rex, Aletta, and Tom should be voted off the Board is that they chastise owners who have concerns about GM performance and adamantly refuse to hold the GM accountable for one of the most critical aspects of her job – owner satisfaction. And, they have spent thousands of our assessment dollars misusing the attorney in an attempt to silence criticism of the GM’s management style that many perceive as autocratic, divisive and unfair.

Refusal to listen

When over 800 people complained about how the GM is performing (by signing petitions) and stated that they have no confidence in her ability to lead our organization, the correct response by both the GM and the Board would have been to look at what the customers are complaining about and find a fix. However, the Board’s solution was to silence her detractors by yelling “Enough is enough!” and then give an irrelevant litany of her deferred maintenance accomplishments. I propose that during this recall election, Rex, Aletta, and Tom need to be held accountable for refusing to listen to, or correct, ANY of the extraordinarily high number of owners’ complaints about the GM.

Refusal to accept owner oversight

Before I was elected to the Board, I campaigned on the principle that there should be owner oversight in relation to personnel issues. I ran for the Board because of my expertise in HR and employee contract negotiations and proposed performance standards that would be linked to the GM compensation as well as, customer service ratings as part of the GM’s performance evaluation.

The Board’s reaction to my proposal was not only “NO,” It was “HELL, NO.” The Board refused to design a system that allowed ANY owner input into the GM’s evaluation and compensation. Additionally, President Rex’ strategy for keeping the decision-making overly consolidated and away from owner involvement is to refuse to have owner oversight committees even on an ad hoc basis.

I personally brought several recommendations to the Board to increase owner-involvement in oversight of insurance, investments, legal services and personnel, none of which got approved. The Board is steadily moving away from effective means for using owner expertise in governance and controlling costs. Rex simply uses his authority as President to appoint work groups of two Board members so he can exclude owners and Directors he does not agree with or he wants to punish. This politicizing control is, in my view, a Machiavellian abuse of power, and it prevents the creation of a system that would produce (significantly) better results for the membership.

Refusal to treat owners as customers

That, my fellow neighbors and homeowners, is the way your current HOA Board of Directors is refusing to utilize much-needed owner expertise while simultaneously dismissing your right to complain about the performance of staff that you pay to manage this community responsibly. Pay more. Get less.

How to avoid unnecessary election costs

Some people have told me they are voting no on the removal election because they are under the impression that it will cost between $50,000 and $100,000 to hold another election for replacement Board members.

Cost to replace

This cost estimate is both wrong, and a poor reason for keeping the current ineffective Directors that are costing the community even more money.

First, let’s address the cost. The GM removed the “volunteer” SCA Election Committee (chartered to handle all SCA elections) from the removal election process. Instead, a CPA was hired without any official Board action to take over the EC’s duties at an unbudgeted cost of $10,000. As I have stated before, the CPA’s contract was not approved at any open Board meeting, and therefore the unnecessary cost of his services skews the actual cost of the removal election.

As far as the election for replacement board members; the established “volunteer” Election Committee is experienced and fully capable of handling the same fair election process as we have had in the past, with very little overhead. Our 2017 annual election cost $11,900, and the budget for the 2018 election is $17,500.

Reporting a falsely-inflated cost is a scare tactic and is being used to make owners mad at the petitioners for exercising their legal rights to call for an election to remove Directors that are not serving us well. I read in Dan Folgeron’s message re-posted on AnthemToday.com that the Solera removal election cost $8,000.

Cost to keep

More importantly, the cost of an election is no reason to keep Directors in office who are not protecting the membership. The cost of an election pales in comparison to the cost of abdicating control of the Association policies, owner oversight and budget to the GM and attorney. These Directors have given a blank check to the attorney and are allowing the GM to disregard the budget when she unilaterally decides to make expenditures.

Cost of cheating

Rex, Aletta, and Tom should be removed from office because they didn’t let owners vote and didn’t follow our bylaws 3.6 when they appointed someone to fill my seat one month after they unlawfully removed me:

“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.” – SCA bylaws 3.6 (page 11)

Rex, Aletta, and Tom should be removed from office because they doubled down and compounded problems created by my removal. They shouldn’t have filled my board seat without waiting for my appeal to be adjudicated, and they shouldn’t have filled my seat without letting any owners compete for the position. No one knew they were recruiting so no owner could compete equally for a chance to be appointed to the board. Instead, they just picked a guy (Jim Coleman), decided to appoint him in secret and appointed him to my seat at the very next properly noticed Board meeting. It’s not Jim Coleman’s fault the Board acted unlawfully, both to remove me and to replace me without an owner vote. Why can’t the Board make decisions that fast and decisive when it comes to doing something good for the membership, like opening the restaurant?

Cost avoidance and karma
I have a suggestion that I think would treat everybody fairly. I don’t want to displace Jim if I am reinstated because, in my opinion, Jim will be much better than Rex as a board member, at least he will listen to and respect owners. However, a fair way to avoid the expense of another election would be to put Jim in Rex’ seat when I am reinstated by the Commission and Rex is either voted off during the recall election or removed by the Commission.

Cost of dirty tricks

Note that I was elected to serve until May 2019 for the same two-year term as Rex. Rex got his role as President by using dirty tricks, and he is doing a terrible job for the people. As such, I believe that Rex is the most important one to remove from the Board, and if he were the only director voted off, no election would be needed. Aletta’s and Tom’s terms end in May, 2018, and if they were voted off in the removal election, their seats could remain vacant until the normal election.

By the way, when Jim Coleman was appointed, I told the Board that they made a mistake by appointing him only until 2018 since my term expires in 2019, and the bylaws 3.6 say that the replacement of a director that is removed shall “… fill the vacancy for the remainder of the term of such director”. Rex insisted that appointing Jim only until May 2018 was intentional, but there is no legal authority for the Board to decide that the new director’s term will be a year less than the term of the director being replaced.

Cost of cherry-picking rules and karma

Rex should be removed for cherry-picking which governing documents he choses to comply with. He led the Board in the violation of SCA Bylaws 3.6 by usurping owners exclusive right to vote to determine whether a Director is removed from the Board. He is responsible of Bylaws 3.6 being being violated a second time by not giving owners the right to vote on the replacement of a Director who was removed. Rex insisted on violating SCA bylaws a third time by shortening Jim Coleman’s term again since the new Director is required by our governing documents to fill the remainder of the removed Director’s term. Appointing Jim only until 2018 unfairly gives Rex the benefit of not having to run against Jim (by Rex making their terms not end at the same time. Rex’ act is to the detriment of Jim Coleman who is an innocent owner/volunteer who should have been appointed, if at all, to the end of my term. This act exemplifies Rex’s pattern of cherry-picking which rules he chooses to follow. Rex acts benefit himself by consolidating political power and do not treat all owners, particularly political opponents, equitably. We deserve leadership that is better than that, not self-serving and that acts solely in the best interest of the membership by the consistent enforcement of the rules of the game.