Arizona HOA managers accused of stealing nearly $1.3M from groups: "Federal prosecutors are accusing the owners of Phoenix-based Eagle Property Management of taking almost $1.3 million from several Valley homeowners associations."
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Why does this happen so often? Perhaps because of the lack of regulation and oversight of the property management industry, and the fact that HOA/condo association directors and officers are often not willing or able keep an eagle eye on things.
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It's due in part to the fact that the management company presents itself as a professional and points to self accreditation "credentials" given out by a well known trade group whose members are those same management companies. However, instead of working as a professional for their client - they have extremely predatory contracts which the boards rely on those same professionals to provide. Worse, the management companies are aided by attorneys who are members of the same trade group. Instead of working in the best interests of their client, these two vendors collude to take advantage of their client like grifters who found a pigeon. No business would allow a single person/vendor to handle banking, accounts receivable, accounts payable, vendor contracts, insurance, and financial reporting. Also most professionals are not permitted to have their clients indemnify them. Clients of professionals also do not typically purchase insurance coverage under a policy owned by the "professional" or its parent holding company. The opportunity for control fraud and embezzlement is ensured and the outcome is guaranteed. The trade group lobbies to ensure the embezzlement and opportunity for other criminal activity is preserved and that the HOA has little recourse when and if the financial offenses are discovered other than getting rid of the management company. Of course it's difficult to do that when the insurance coverage is dependent upon maintaining the management company under contract - and no insurance policy provides coverage for one named insured suing another....
As a followup, these are not "property managers". They are HOA corporation or condo corporation managers.
IC_deLight said… “Worse, the management companies are aided by attorneys who are members of the same trade group [ the Community Associations Institute ]. Instead of working in the best interests of their client, these two vendors collude to take advantage of their client like grifters who found a pigeon” . . . “The trade group [ C.A.I. ] lobbies to ensure the embezzlement and opportunity for other criminal activity is preserved and that the HOA has little recourse when and if the financial offenses are discovered other than getting rid of the management company”
Plus, an H.O.A. corporation may be reluctant to take legal action if such action may reveal complicity and/or negligence on the part of the H.O.A. corporation’s Officers.
IC_deLight said… “Worse, the management companies are aided by attorneys who are members of the same trade group [ the Community Associations Institute ]. Instead of working in the best interests of their client, these two vendors collude to take advantage of their client like grifters who found a pigeon” . . . “The trade group [ C.A.I. ] lobbies to ensure the embezzlement and opportunity for other criminal activity is preserved and that the HOA has little recourse when and if the financial offenses are discovered other than getting rid of the management company”
Plus, an H.O.A. corporation may be reluctant to take legal action if such action may reveal complicity and/or negligence on the part of the H.O.A. corporation’s Officers.
IC_deLight said… “Worse, the management companies are aided by attorneys who are members of the same trade group [ the Community Associations Institute ]. Instead of working in the best interests of their client, these two vendors collude to take advantage of their client like grifters who found a pigeon” . . . “The trade group [ C.A.I. ] lobbies to ensure the embezzlement and opportunity for other criminal activity is preserved and that the HOA has little recourse when and if the financial offenses are discovered other than getting rid of the management company”
I am not a lawyer, so correct me if I’m wrong, but . . .
Even worse, the individual home owners have very little, if any, recourse. Because as far as the law is concerned the “victim” of these types of crimes is not the home owners, but the H.O.A. corporation, a legal entity separate and distinct from the home owners.
If there is a case of individual home owner(s) suing the management company, I am not aware of it.
Should a home owner decide to sue the management company and/or law firm, a hostile H.O.A. corporation — even when it’s not a named defendant — will expend resources to thwart the plaintiff home owner (ask me how I know this. In one case, the H.O.A. corporation repeatedly denied my requests for records and document I needed to prosecute my case against their law firm. In another, I was offered $4,000 of homeowners’ money if I agreed to not sue their law firm for an F.D.C.P.A. violation).
In theory, the individual home owner(s) may take legal action against the H.O.A. corporation and/or its Officers, but is disincentivized in several ways from actually doing so:
1) most home owners can’t afford to do so
2) the home owners will be paying the costs to defend the H.O.A. corporation and/or the corporation’s Officers
3) the board members will have Directors & Officers insurance (paid for by the home owners)
4) the only “contractual” obligation the H.O.A. corporation may have is to collect assessments from home owners, making a breach of fiduciary case difficult to prosecute
5) the home owner may be bound to an arbitration agreement, and prohibited by so-called “contract” from going to court
6) a hostile judge may presume that the home owner is represented by the H.O.A. corporation (ask me how I know this).
The triumvirate of H.O.A corporation, C.A.I. management company, and C.A.I. law firm ensures that not only are individual directors and managers hiding behind the corporate veil, but that there are corporations hiding behind layers of other corporations. This unholy trinity makes it nearly impossible for any one of them to be held accountable in a civil court. Ask me how I know this…
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