Las Vegas Sun

November 28, 2015

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Sun Editorial:

The ‘king’ of scandals

Legislature should address HOA laws, add more clarity, accountability

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Homeowners associations are ubiquitous in Southern Nevada, so the unfolding HOA scandal has garnered plenty of attention. It’s troubling.

So far, more than 25 people have pleaded guilty in a case that has been stunning for the brazenness and scope of the crimes, and prosecutors expect to indict more people in their federal corruption probe.

The investigation centers on an attorney and a contractor who allegedly referred work to each other in construction defect cases. But as Steve Green reported in the Sun last week, the allegations blossom from there. Prosecutors have outlined a major scheme to control HOAs and line the pockets of those involved.

Bloomberg Businessweek last year called it “The king of all Vegas real estate scams,” and that’s not an overstatement. The facts that have been revealed so far are almost too much to believe. For several years, HOA boards were allegedly stacked through dubious means, including fraudulent ballots and straw purchases so those buyers could be elected to the boards to benefit those involved. Some management companies even went along with it all as the HOAs were overbilled for repairs and sometimes charged for work that didn’t get done.

Before anyone turns this scandal into something bigger than it is, there is no evidence that this type of behavior is pervasive. Court documents name just 12 of the 2,356 HOAs in Southern Nevada, so this case shouldn’t be used to tarnish the many upstanding associations and management companies.

However, this case is important not only because of the breadth of the conspiracy but also because of those who pulled it off. Although there are a few high-profile people involved, the indictments largely target people who could have been your next door neighbor and in many cases purportedly were. They include attorneys, management company employees and three retired police officers — a captain and two lieutenants.

It is shameful that those involved targeted average homeowners who had entrusted them to run their HOAs. They have upended the concept of a “common interest” community.

It’s notable that the case was broken open due to the persistence of some condo owners who suspected and then rooted out the problems. Some residents knew there were serious problems, but they had a difficult time getting the authorities’ attention.

In 2008, after the investigation by the FBI and Metro Police became public, condo owner Wanda Murray told Sun columnist Jon Ralston that originally the FBI “wouldn’t even talk to us.”

“They said it was a civil matter,” she said. “They said go to the district attorney. So we went to the district attorney. We were turned away. They said, ‘We don’t want it.’ We called and talked and sent messages and emails to every state official we could find. We begged and pleaded all the way to the legislators, and nothing happened.”

Thankfully, something finally changed and law enforcement took the matter seriously as it should have. This case reminds us that too often, HOAs aren’t often taken seriously enough. The laws governing HOAs have been widely criticized by both advocates and detractors as being ineffective and complex, and it’s time to see that change.

The Legislature should work next session to clarify and simplify the law. HOAs should have the ability to carry out their work, but there should also be more transparency and accountability. As well, homeowners should have a clear way to address problems, and hopefully after this, authorities will listen to their complaints.

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