FBI: Financial Fraud Inside the Investigation of a Las Vegas Construction Boss

"When a federal judge sentenced former Las Vegas construction boss Leon Benzer to nearly 16 years in prison in August, it marked a final chapter in a $58 million fraud scheme that took investigators nearly a decade to unravel. Over a period of many years, Benzer brazenly sought to gain control of numerous condominium homeowners associations (HOAs) in the Las Vegas area to secure lucrative construction and other contracts for himself and additional conspirators. To date, 44 individuals, including numerous state officials, have been convicted of crimes in connection with the fraud—which has been described as one of the largest public corruption cases in Nevada history."

https://www.fbi.gov/news/stories/2015/october/financial-fraud/financial-fraud

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This is a summary of the Benzer HOA takeover fraud investigation. The photo above is an undercover operative receiving a $20,000 bribe from one of the principals in the fraud. It was in a baby wipes box. How domestic.

Illinois condo law author arrested for 1973 murder

 "He helped craft laws on which hundreds of condominium associations in Illinois are based but he is also a suspect in two murders. On Monday afternoon, Dr. Donnie Rudd, age 75, will be in a courtroom in Rolling Meadows, northwest of the Loop, for his first hearing since being extradited from Texas."
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Donnie Rudd is a man of many parts--lawyer, scientist, maybe murderer?  At one time he had a law practice in the Chicago area with 2000 clients, most of them HOAs. He was one of the co-authors of Illinois condo law:  "Rudd has degrees in law, bioscience, bioengineering, and chemical engineering. He has more than 40 patents, mostly related to cell regeneration, repair of human tissue, and curing diseases to vital organs. He has written 15 books and more than 160 professional publications. In 1983, with state representative Ellis Levin, he co-wrote amendments to the Illinois Condominium Property Act."

However, the police also think that he murdered two people, so there's that.

http://www.loopnorth.com/news/mobi/murder1221.htm

Isolated example number 12,345

DENVER - The owner of an Aurora-based community association management company voluntarily surrendered his license after there were complaints he was diverting homeowner association funds for his personal benefit, the Colorado Division of Real Estate announced Friday.

David W. Martin is the owner and designated manager of PMG Enterprises Inc., a community association management company. 

http://www.9news.com/story/news/local/2015/12/19/owner-of-aurora-hoa-management-company-allegedly-diverted-funds/77631880/

Massive HOA faces claims of assessment collection abuse

"Poinciana Villages, with nearly 70,000 residents and 23,000 homes, would be one of the largest cities in Central Florida if it were a municipality. Instead, it's one of the largest private homeowners associations (HOA) in the United States. But now the HOA is under fire for what residents say is a persistent and ongoing effort by outsourced debt-collection agencies to inflate back dues with thousands of additional dollars in legal fees and late charges. Some of the estimated 4,000-plus homeowners whose debt was sold — more than 1 of every 6 homes in the association — say they've never received a line-by-line breakdown of what those fees actually are. And by the time they're able reach someone at the agency, their late fees and legal fees have doubled, tripled, quadrupled and more. At issue, residents say, is the possibility of thousands of owners losing their homes because of ballooning debts that were originally only in the hundreds of dollars."

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Because there aren't enough stories of individual owners losing their homes in HOA foreclosures with bogus charges, so it is time for mass-production foreclosure, using private debt-collection agencies.

http://www.orlandosentinel.com/news/osceola/os-poinciana-hoa-turmoil-20151219-story.html

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=/

Evidence in Las Vegas HOA prosecution remains sealed

"A total of 43 defendants either pleaded guilty or were convicted at trial in what prosecutors say is the largest public corruption case ever in Nevada. Prosecutors opposed dissolving the two protective orders — especially the one that covers the leak investigation, which focused on concerns that Quon was getting confidential information from the Nevada U.S. attorney's office and possibly elsewhere. The Justice Department in Washington took the reins of the HOA investigation after those allegations surfaced. The leak investigation delved into personal and romantic relationships of public officials who have not been charged criminally or disciplined administratively, Justice Department prosecutors argued. Foley shared the government's concerns in his order. "The government has made a sufficient showing that disclosure of these documents would potentially cause unfair prejudice to the individuals who were the subjects of the investigation, but to whom no charges, criminal or administrative, were ever brought," he wrote."

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It has been reported since the start of the prosecution that Washington took over the prosecution because people in the local US attorney's office, and possibly one or more judges, were passing information to attorney Nancy Quon, one of the principals in the fraud ring. She committed suicide. And now the US attorney's office and the federal judiciary have decided that nobody gets to see the evidence in the HOA fraud case--6 million pages of documents.  Is that because it includes evidence that might make the US attorney's office and the federal judiciary look bad?

http://www.reviewjournal.com/news/las-vegas/mass-evidence-huge-hoa-scheme-remains-under-wraps

Police bust weekly mahjong game played by elederly women

http://tampa.cbslocal.com/2015/11/24/police-bust-weekly-mahjong-game-played-by-elderly-women/

Local cops, having solved all the other crimes, decided to bust a mahjong game. The perpetrators range in age from 87 to 95. Who called the cops?  Condo management. It would appear that in fact they didn't violate any law, but I suppose the giant wheel of justice will have to grind all this into dust and answer that question.

When residents clash with homeowner associations, some states step in

"Has your homeowner association fined you for painting your house purple? Have you ignored requests to pay annual maintenance fees for your condo’s clubhouse and swimming pool? Has your association refused to let you see its financial documents These are the types of conflicts that frequently erupt between residents and homeowner or condo associations. Some can get quite heated – or downright nasty. A small, but growing number of states are trying to tackle the problem by creating ombudsman or homeowner information offices to handle the deluge of complaints that often land at state and local agencies. The goal is to educate residents and association board members about their rights and responsibilities under the law and help settle disputes before they wind up in court."

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More state oversight of HOAs and especially condo associations is necessary, but it isn't clear what form it should take. I think ombudsperson offices are a good start, but not everybody agrees with that approach.

Read more here: http://www.myrtlebeachonline.com/news/business/real-estate-news/article41217018.html#storylink=cpy

http://www.myrtlebeachonline.com/news/business/real-estate-news/article41217018.html

SO MUCH FOR THE DEATH OF SPRAWL: AMERICA'S EXURBS ARE BOOMING

Joel Kotkin shows that sprawl and the exurban lifestyle are as popular as ever. This means more new HOAs and condos, so the die-hards who think they are going to abolish CID housing may want to read this.

"It’s time to put an end to the urban legend of the impending death of America’s suburbs. With the aging of the millennial generation, and growing interest from minorities and immigrants, these communities are getting a fresh infusion of residents looking for child-friendly, affordable, lower-density living."

New Jersey: More accountability for HOAs?

"More than 1 million New Jersey residents live in communities with homeowners associations. The top Republican in the state Senate said people pay hard-earned money in dues to these associations, and they deserve some transparency. Senate Republican Leader Tom Kean (R-Westfield) said he is pushing to expand and update the “Planned Real Estate Development Full Disclosure Act,” which hasn’t been changed since 1993.

“This legislation focuses on accountability as well as transparency,” Kean said. “It’s time to update a 22-year-old law.”

Kean has introduced the “Association Homeowners’ Protection Act of 2015″ (S3235). The measure would require:

• Homeowners associations to provide a copy of homeowners’ association insurance policies, which are needed to start personal home insurance claims processes. The association member would have to request the copy and it would have to be sent via email within 24 hours, or hard copy within 48 hours.
• Homeowners associations to offer a 24-hour emergency phone number for members.
• Homeowners associations to provide information including contact numbers for board members, as well as the most recent budget and all insurance information.

“That should be a transparent flow of information, so people have access to how their money is being spent,” Kean said. “The over 1 million New Jersey residents who are part of these associations pay hundreds, if not thousands, of dollars every year to be part of these associations. It’s simple common sense that they should have access to timely information.”

http://nj1015.com/do-you-like-your-homeowners-association/

Is that what you call R-E-S-P-E-C-T?

"Pontiac — A Bloomfield Township condominium association wants to foreclose on a property owned by legendary soul singer Aretha Franklin for non-payment of more than $11,563 in fees and maintenance assessments. The lawsuit, filed by the Hills of Lone Pine Association, an exclusive gated community in Bloomfield Hills, names Franklin, Ally Financial Inc. and CitiMortgage Inc. as responsible for the unpaid assessments on a 4,148-square-foot condo valued at $695,380."

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State condo ombudsperson offices becoming "a thing"

"Has your homeowner association fined you for painting your house purple? Have you ignored requests to pay annual maintenance fees for your condo’s clubhouse and swimming pool? Has your association refused to let you see its financial documents?

These are the types of conflicts that frequently erupt between residents and homeowner or condo associations. Some can get quite heated — or downright nasty.

A small, but growing number of states are trying to tackle the problem by creating ombudsman or homeowner information offices to handle the deluge of complaints that often land at state and local agencies."

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Yes, they are. Because the old model--no regulation of the relationship between BODs and members except civil litigation--is failing.

http://www.columbian.com/news/2015/oct/25/states-stepping-in-to-help-resolve-hoa-conflicts/

Active duty sailor loses home to unpaid HOA fees

Here we go again:

"JACKSONVILLE, Fla. -- The home Mark Bryant purchased in 2006 is modest but he loves it. "I worked real hard for my house," he said. While stationed at Mayport, the gunner's mate purchased the house in the Creekside subdivision with hopes of returning to Jacksonville when he retires.  "Now it is being taken away from me due to a wrongful foreclosure," he said. Bryant is still active duty in the Navy, stationed in Virginia. He lost his home because of $750 in unpaid homeowners association fees. "It has been stressful," said Bryant. How did this happen? His documents show he was stationed in Bahrain during the two years the fees went unpaid -- 2012-2014. Bryant said he was never notified. Court records show an unnamed woman was served in Virginia at a previous address. Bryant said the unnamed woman in the record is not his ex-wife. "When I got back from deployment October 2014," said Bryant, "there was an eviction notice on the property, and that is the first time me actually knowing." The HOA fees went from $750, but when you add interests, late fees, court costs, attorneys fees, it jumped to $4,734.03. The property was foreclosed and sold for $10,300."


http://www.firstcoastnews.com/story/news/local/consumer/on-your-side/2015/10/16/i-was-in-bahrain-and-never-got-a-notice/74078256/

Concord (VA) homeowners struggle to get roads paved

"The Holiday Forest subdivision in Concord has been fighting a 40-year battle to get all of the neighborhood’s roads paved."

Yes--but the state doesn't want to do it because they are private roads.  The picture concerning who is responsible for the hefty price tag now is complicated:

"A 1975 letter from VDOT to the then county administrator stated “I was amazed to find a number of streets constructed in a rather haphazard manner with apparently no regard for proper drainage design.” To pay for maintenance of the unpaved roads, the homeowners’ association collects $100 per house or $90 from an undeveloped lot. Goldman said they have an annual budget of $15,000 to $17,000 to maintain the roads. If the association were to raise rates, homeowners can cancel their membership in the association, as stated in association’s by-laws. The by-laws also state the association will dissolve in 2025, he said. When the subdivision was created in the 1970s, the old subdivision ordinance stated if all new lots were five acres or more, all roads within the subdivision were privately maintained and not maintained by VDOT. The subdivision was developed by Holiday Forest Corporation. “Also over the years, the homeowners have complained about the roads and decided they would rather have state maintained (roads),” said Campbell County Community Development Director Paul Harvey. About half of the roads in Holiday Forest have been taken over by VDOT but five miles still remain unpaved and under the care of the property owners’ association."


http://www.newsadvance.com/news/local/concord-homeowners-struggle-to-get-roads-paved/article_0a4905df-0318-5aaa-8ce8-0ca284d65a6f.html

As flood recedes, skinflint South Carolina faces huge infrastructure tab, limited federal aid

"COLUMBIA, S.C. (AP) — Long before the historic floods of the past week, crumbling roads, bridges and dams and aging drinking water systems plagued South Carolina — a poor state that didn't spend much on them in the first place and has been loath to raise taxes for upkeep. Now the state faces hundreds of millions if not billions of dollars' worth of additional bills to fix or replace key pieces of its devastated infrastructure."

http://www.usnews.com/news/us/articles/2015/10/07/flood-slams-south-carolinas-already-shoddy-infrastructure

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Here we have before us the best evidence to date that the current rage for privatization of infrastructure is a terrible idea.  South Carolina has gone the full magilla with this approach and where has it left them?  

Halloween yard displays go over the top

It's that time of year again, when people decorate their homes in traditional fashion with simulated bloody torture victims wrapped in plastic. Nothing says Halloween like somebody nailed to a cross upside down in the front yard, with syringes jabbed into his neck. At least, that's what some people think. And then the neighbors freak out. No doubt the HOAs will soon swing into action. Personally I generally settle for a few pumpkins, which makes me popular with the squirrels.

http://www.complex.com/pop-culture/2015/10/graphic-halloween-decorations-too-real?utm_source=fijifrost%20facebook&utm_medium=social&utm_campaign=cmcm&utm_content=inf_20_19_2 

Private dams = bad infrastructure

The US media love to run any story from anti-government propagandists about anything a local government does wrong. But look how they ignore the failures of privatization. Most of the nation's dams are privately owned and many of them are supposed to be maintained by HOAs. Here's a rare story where, if you read down far enough, you can get to the point. Developers built thousands of dams, didn't build them right, and private associations have been maintaining them, with results that are not impressive, as evidence by recent events in South Carolina: "...while states might pay or contribute to the repairs of those dams that are publicly-owned, most dams in the country are privately owned, which puts the onus on private parties and associations."

http://www.npr.org/2015/10/11/447181629/aging-and-underfunded-americas-dam-safety-problem-in-4-charts utm_source=facebook.com&utm_medium=social&utm_campaign=npr&utm_term=nprnews&utm_content=2036

Condo owners to dump Trump

Trust fund baby and pseudo-populist charlatan Donald Trump is involved in lots of condo deals. Some say that he is no longer a real estate developer in the true sense of the word, and hasn't been since the early 1990s. Now he makes big bucks renting his name for other people's projects, which leads lots of ignorant, gullible rubes to buy in (probably the same dunces who think he'd make a great president).  If things go south and the project never gets built out, and the lawsuits rain down, he just says he was only paid to put his name on the development and has no responsibility. Here's another lawsuit with some troubling allegations:

http://talkingpointsmemo.com/news/florda-condo-owners-trump

"The building's residents and condo owners had invested in the namesake, a 70-story waterfront tower along Panama Bay, on the strength of Trump's reputation. But during the four years that Trump Panama Condominium Management LLC had managed the property, Central America's largest building, a team installed by the Trump family was accused of running up more than $2 million in unauthorized debts, paying its executives undisclosed bonuses and withholding basic financial information from owners.

The Trumps had done all of this through fine-print chicanery, the board said. A clause in many residents' purchase agreements prevented them from voting against the Trump company's wishes. That allowed the Trumps to install their top employee as chairman and the residents' representative on the board — even though the Trumps' actual stake in the building's residential area was merely a storage closet on the 15th floor."

Why I've been off the air

I've been keeping up this blog since 2003, but this summer I went off the air for several months because of some events that absorbed a great deal of my time and energy.  My mother died in July at the age of 93, in Pasadena, California. I became the executor of her affairs, there have been many things to attend to, and the emotional side of a loss like that is never easy, as I'm sure you know.

At the same time, through a chain of unusual circumstances I ended up teaching an intensive summer course on urban politics at UIC. Then on the heels of that, I went to Australia for a week to give the keynote address at a conference on condominium housing (which they call "strata title").  This was a fantastic conference in an amazing country, but by the time I returned I was behind in my work. To add the final straw, I was made head of the Political Science Department at the University of Illinois at Chicago, and I've been on the learning curve with those additional responsibilities, in addition to teaching two Fall courses with a total of 172 students.

All three of my children started at new universities--two as freshmen and one as a graduate student--and that meant move-outs and move-ins.  I certainly logged some travel miles--this summer I had trips to Israel, Australia, Phoenix (driving back with my oldest son in a 1997 Nissan Pathfinder with 200,000 miles and no air conditioning, in July), Los Angeles, and Springfield, IL.

So that is why I haven't been able to stay current with this blog--but I hope people will continue to send me items, because I'm back on the air.

Is living in a steel box the future of housing?

Coming to a condo association near you, someday?

http://www.theguardian.com/cities/2015/oct/09/living-steel-box-shipping-containers-future-housing