"Federal prosecutors have charged nearly 40 conspirators in the scheme to take over Las Vegas Valley homeowners associations. But more than four years after the investigation became public, they still haven't revealed the full extent of the massive scheme. New details likely will surface as prosecutors prepare for the next phase of the long-running investigation: the trial of Leon Benzer, accused of being the "architect" of the corruption scheme, and 10 other defendants indicted with him in January."
I was on Nevada Public Radio the other day with the state ombudsperson, an HOA lawyer, and an owner advocate. It was a good conversation. But there was something that kept going through my mind that I never got a chance to say, so here it is.
Nevada is one of the few states that has any state-level oversight of HOAs and condos. They have the ombudsperson and a state commission, and they have a pretty comprehensive statutory scheme that was the result of also having a legislator, state Senator Mike Schneider, who knows a lot about this issue area and cares about it. Compared with the almost-total absence of oversight that is the norm in nearly all other states, Nevada is at the forefront of regulation of CIDs. I mean, in nearly every other state, if you report something like this, there is nowhere to turn except the courts. Every state and local government official will just tell you to go file a civil suit, which few people can afford to do. And if somebody does that, after 7 years of litigation and $100,000 in legal fees they will have...what? Maybe a declaratory judgment? Maybe small damages, and an appeal by the association? Maybe a big fat goose egg? It is unpredictable. And everybody in the neighborhood will hate you for making them pay the association's attorney fees. Private litigation may be necessary and can be effective in some cases, but clearly it can't be the only answer.
But in Nevada, there are other avenues. However, despite all that Nevada has put in place, the biggest HOA corruption ring ever discovered in the United States was running a gigantic, multi-million dollar fraud operation involving at least 11 associations. They took over these associations and turned them into ATMs, using association funds to pay themselves and shake down developers and insurance companies. And it was the US Attorney's office and the FBI, not state officials, that brought down this empire of corruption.
So, I have to ask myself what the prospects are for effective regulation of CIDs, if something of this magnitude can happen right under the noses of state officials whose job it was to provide oversight. I am not blaming or even criticizing these officials. As the attorney on the KNPR radio show said, maybe there is no way (under the current laws) to prevent something like this from happening. That is a scary thought.
And if that is true, as it may well be, I am saying that maybe we need to take a much more comprehensive look at what would really need to be put in place, if we were to take seriously the job of protecting CID unit owners and others against inappropriate, illegal, and even felonious actions of CID boards and their professionals. If an oversight commission, an ombudsperson, and a detailed statutory scheme are inadequate to prevent multi-million dollar takeovers and ripoffs, what is needed? Or are our state legislatures content to allow these predations to continue?
Maybe the time has come for federal congressional hearings. Maybe we need national legislation mandating much more public disclosure, transparency, and accountability from developers, local governments, CIDs, and the professionals who profit from their proliferation. Maybe more.
I would be interested in hearing what readers have to say. However, I will say at the outset that those who keep saying they want to "abolish HOAs" need to understand that it isn't that simple, and they need to educate themselves about why this institution has spread so fast. Local governments and developers are very dependent on this form of housing, and that isn't going to change anytime soon. So...what is to be done?