Friday, September 28, 2012

Judge: Money lost to Vegas HOA fraud likely gone - San Jose Mercury News

Judge: Money lost to Vegas HOA fraud likely gone - San Jose Mercury News:
During the court proceeding, a retired Air Force colonel hailed by La Bella as one of two honest board members at the Vistana development in 2007 said none of the more than $8 million the board received in a construction defect lawsuit settlement went for needed repairs at the 732-home community southwest of Las Vegas.
"Within six months that money was gone," Bruce "Wiley" Wallace told the judge. "It was all a matter of $300,000 here and $300,000 there. The swimming pool was not fixed—one of 100 things not done. By the end of 2008, there was $450,000 left in the construction defect account."
Two other board members withdrew the remaining money in December 2008 and disappeared, Wallace said.
Virtually nobody who buys into an HOA or condo association considers how vulnerable they are to economic mismanagement, garden variety embezzlement, or, as in the Las Vegas situation, outright fraud.  At the end of the Las Vegas saga, no matter who goes to jail or commits suicide, here is the bottom line: the money is gone. And yet it seems that local governments can't be bothered to do anything by way of protecting or even warning people.  Some state legislatures have tried to reform the internal procedures of these private governments, but what we never seem to see is a serious look at the structure of this whole institution. There is too much reliance placed on the resources of individual owners--their money, time, energy, knowledge, ability to make collective decisions, and loyalty--and too little institutional support.  And the practice of mandating this form of housing, which has been going on in the Las Vegas area for almost twenty years, guarantees that many people will be virtually conscripted into a complex form of common ownership that they do not actually want or understand. Taken together, these public policies must inevitably lead to problems.

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