Sunday, December 20, 2015

HOA fraud king Leon Benzer gets 15 1/2 years in prison

"Former construction company boss Leon Benzer, the man behind the massive scheme to take over and defraud Las Vegas-area homeowners associations, was sentenced Thursday to 15 ½ years in federal prison.  U.S. District Judge James Mahan also ordered Benzer to serve five years of supervised release after prison and pay $13.4 million in restitution. Benzer, 48, who pleaded guilty to conspiracy, fraud and tax evasion charges, is to surrender to prison authorities Nov. 6."

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So ends the biggest white collar crime prosecution in the history of Las Vegas--eleven HOA taken over by a fraud ring and used to steal millions of dollars. But (see post below) we are not going to see the evidence, which remains sealed by virtue of the US Attorney's office and the federal judiciary. My view is the public needs to learn from this case. We have here the worst example ever seen of HOA private governments being taken over by vendors--contractors and lawyers, mainly--who used them like ATMs. These were people who knew the HOA industry from the inside--who knew how easy it can be for a small group of self-interested people to take over an HOA board of directors, because of the culture of non-participation that prevails in far too many common interest developments. This is a serious problem all over the country--in fact, all over the world.  Nothing is going to change this situation--most people just don't want to be bothered with paying attention to the affairs of their HOA. Their lives are too busy already.  The day will never come when owners live up to the ridiculous expectations that this institution imposes on them. The people who own units in CIDS are just consumers of a mass-produced product, and they need to be protected against the possibility that predatory industry insiders might take advantage of them. I realize that most lawyers, managers, and contractors are trustworthy, but owners have insufficient protection against those who are not. The prosecutors and judges need to open these files so the public and the media and the academy can see exactly how this scheme worked. Then legislators can take the necessary steps to fix this--starting with mandatory full public disclosure of the financial status of every single HOA and condo association.

http://www.reviewjournal.com/news/las-vegas/vegas-hoa-crime-kingpin-leon-benzer-sentenced-15-12-years-prison#st_refDomain=www.facebook.com&st_refQuery=/

4 comments:

robert @ colorado hoa . com said...

“The people who own units in CIDS are just consumers of a mass-produced product, and they need to be protected against the possibility that predatory industry insiders might take advantage of them.”

According to my congress-critter, Jared Polis (Democrat), protecting consumers of H.O.A.-burdened housing is not a proper role of the federal government. I guess we can disband the Federal Trade Commission’s Bureau of Consumer Protection, the Consumer Financial Protection Bureau (established in 2010 by the Dodd-Frank Act), and who knows how many other federal consumer protection agencies.

After 3 1/2 years of bringing the H.O.A. issue to his attention — he knows who I am — I received this response from his office a few days ago (which I also posted at “What HOA Issues Are Appropriate For Federal Intervention?”, but nobody’s going to go back and read an old blog post from 2013, so here it is again) :

Fri, Dec 18, 2015 at 9:43 AM

I wanted to thank you for dropping off your material about your concern with HOA’s. I apologize it has taken this long to reply. I did share the information with my legislative counterpart in D.C. As you are aware currently HOA’s are regulated by the states not the federal government. House ethic rules prevent our office from getting involved in issues that fall under the jurisdiction of state and local governments. There have been some interest in years past at the state to explore how the state can better regulate HOA’s and I strongly suggest you contact your state senator or state representative to express your interest in the subject.

In the meantime, should anything come before the floor of the house that might impact how HOA’s operate we will keep your thoughts in mind and reach out to you at that time.

Best,

Danielle Henry
District Advocate
Housing/ Labor/ Econmic Development
Congressman Jared Polis (CO-02)
1644 Walnut St Boulder, CO 80302
Office: 303-484-9596
Fax: 303-568-9007

Deborah Goonan said...

Evan, agree on all counts. I would add that CID owners and non-owner reisdents also need protection from exploitation by their volunteer HOA/Condo/Cooperative Boards.

It's not always industry insiders (attorneys, management companies, collection companies, etc.) behind abuse. Sometimes it's just ordinary Board members that take advantage of the opportunity to scam or harass their neighbors.

robert @ colorado hoa . com said...

“the culture of non-participation that prevails in far too many common interest developments. This is a serious problem all over the country -- in fact, all over the world. Nothing is going to change this situation -- most people just don't want to be bothered with paying attention to the affairs of their HOA. Their lives are too busy already. The day will never come when owners live up to the ridiculous expectations that this institution imposes on them.”

It is fashionable to blame homeowner “apathy” for the problems of H.O.A. corporations. But this was foreseeable. "Local elections pose a particularly perplexing problem: an individual vote is more likely to affect a local election than a national one, but turnout for local elections often is dismally low" (Barbara Coyle McCabe. "Homeowners Associations As Private Governments: What We Know, What We Don't Know, And Why It Matters". 2011). Why did anyone expect it to be different with privatized H.O.A. corporate governance?

Besides, as Shu Bartholomew has repeatedly pointed out, H.O.A living is sold to consumers as “care free living”. The H.O.A. corporation will take care of the maintenance, trash removal, etc, and all the owners are required to do is pay their dues and obey a few rules. The entire point of representative governance is so that every person doesn’t have to attend the board meetings, read the financial statements, or approve the contracts. As law professor Glenn "Instapundit" Reynolds recently observed about the current presidential campaign, "Populism, like Trump, is a symptom. Most people prefer not to think about politics, and to let things be run by reasonably competent people who are reasonably motivated by the public good. Populism arises when that’s not the case. Like heavy turnout at a condo association meeting, it’s a sign of trouble at the top."

Sure, we can abolish the current corporate structure of H.O.A.s and require the home owners to attend every meeting, read and approve every financial statement, receipt, and check, and read over and approve every contract. But the first people to oppose that would be the same industry apologists who blame the owners for their “apathy”. For example, H.O.A. attorney Tyler Berding told Shu that “There’s no way you could have 100 owners directly involved in every management decision that has to be made . . . You couldn’t run an association asking the members every month what you should do, you know, if you need to hire a new landscaper, you’re going to go shopping for insurance rates. It would just be impractical to do it.” ( "On the Commons". April 20 2013).

In spite of what H.O.A. apologists say publicly, the absolute last thing the industry wants is owner involvement. The H.O.A. industry does everything possible to discourage true home owner involvement, because it wants the owners to be as powerless as possible.

Which explains the flip side to the “apathy” — the systemic abuse, alienation, disenfranchisement, and marginalization of the home owners that H.O.A. corporations have perfected so well. While a lot can be written on that topic, Mike Reardon summed it up when he observed that

"Most normal people shun association meetings after discovering what a sham they are. The folks angry enough to come to a meeting and endure the patented 'abuse them till they leave' routine....well most normal people want even less to do with that! It really is a remarkable pathology!"

robert @ colorado hoa . com said...

“The people who own units in CIDS are just consumers of a mass-produced product, and they need to be protected against the possibility that predatory industry insiders might take advantage of them.”

Speaking of consumer protection, or the lack thereof, this gem from 2012 bears repeating:

Until those holes are fixed and consumer protections are made stronger, Bill Brauch, who heads the state attorney general’s consumer protection division, told me he would never join a homeowners’ association. “You have so little control over the many negative things that can happen to you,” he said. “And then you become trapped in a situation beyond your control that only continues to deteriorate.” (Des Moines Register. August 18, 2012)

Think about that! An assistant attorney general, who was (until he retired a few months ago) the Director of the Consumer Protection Division for the Iowa Attorney General's Office, admitted that he would be essentially powerless as a consumer of H.O.A.-burdened housing. Imagine how much more powerless average home owners are, especially those who are not an assistant attorney general empowered to enforce consumer protection laws. Unfortunately, some of us don’t have to imagine . . .