Board of Directors Self Dealing and concealing

I am on the Board of Directors. I discovered the president was using executive information for his personal gain. The president knew who was falling behind on dues. Through is sister, a real estate agent, he made all cash offers to purchase the units. He made a motion in the next meeting to "forgive" the dues without ever disclosing his interest in the unit to the board. After he owned the unit, there was a slab leak (not reported to management company), his contractors performed the upgrades at a cost of $50K, he approved the invoices and signed the checks. This happened in 3 units so far. After I confronted him, he Quit Claimed the properties. The remaining board members (even after seeing the evidencce) do not believe this is a problem. They view him as their own son so I have no one to support me. They have majority. The association's attorney is also friends with him. They have been protecting him and concealing information. They created an executive legal committee and included the president on the committee. I took them to ADR and had to pay myself. They decided in mediation that they would not agree to anything because they didnt want to potentially admit any guilt. I can legally go to litigation but unfortunately, it will have to come out of my own pocket for legal fees and they will be covered under D & O insurance. I had a fiduciary responsibility in bringing this evidence forward and now I am being punished for it. It's really difficult for me to get anything accomplished since they have majority. It's also difficult with all the mortgage fraud in our state to get the DA to take the case due to the amount of cases they already have. What can I do?

Oh, Irene, accepting your narrative at face value, this sounds like a terrible situation. I hope someone can get started with replies here that may spark yet others to reply.

Are you saying that your HOA paid to repair/replace the slabs???

Offhand, though, I do not think that the D&O insurance would cover directors who knowingly conceal the president's unethical, at best, behavior. And even if the HOA attorney is a buddy of the prez, make an appt. with him/her, carefully explain the situation with documentation if possible, and ask for a written opinion for the Board. The attorney can be liable for damages if s/he has knowledge of illegal or unethical activities and fails to properly advise the Board.

Get your own opinion in the executive session minutes so that you personally will not be liable.

Would this still work if the are client friends?

Thank you for the valuable information. I do have the police reports for all incidents. I filed complaints with the ca contractors license board but the attorney demanded the file per the open records act. After they got the records they called the contractors board and told them the majority board did not wish to file a complaint. I have met with the watchdog reporter of our newspaper. She tried to attend our meeting last night and they called the police on her. I have a copy of the insurance policy and I will review it tonight. I'm going to see about filing an injunction in small claims and also ask about a restraining order against the contractor who has been harassing me. I have every item documenting my allegations. The minutes do show the president made the motions regarding his units. Luckily our minutes are accurate. I have made motions in the executive sessions but they have not recorded them because they state it wasn't on the agenda even though I asked a week in advance for it to be on the agenda. I will keep up the fight. I don't know if justice will prevail. I hope it does

So basically, I am on my own and will have to pay out of my own pocket to protect myself from involvement in their alleged crime? I had a feeling this would be the case. If I didnt say anything, I would have been an "accomplice" and by bringing it forward, it seems like I am the defendant. I hope this doesnt happen to anyone else. Honestly, who would step up to volunteer if they knew this could happen to them?

Maybe I am not seeing the illegal issue of what the president did or is doing. Knowing the process and being a past president, I know what information is available about houses. Seems this information is PUBLIC knowledge and is in the newspaper in the legals sections. It's not really "Inside knowledge" on the property on who is in trouble. It is kind of public just needing the understanding of how to find it.

The slab of a condo situation may indeed be the responsibility of the HOA to repair regardless of who owns it. So I am not getting why this is a problem either as there was a leak and it needed fixed. There are other board members who are also HOA members who understand it's their money too being spent.

When I hear people claim that the HOA is a "Friend" of the HOA's president or board member etc...I want to scream. Of course they are friendly with each other. It is a business relationship and doing business with an enemy is just stupid. I'd rather hirer a lawyer I knew would do a good job for me and what I am responsible for. The President has to sign the checks for paying the lawyer on the HOA's behalf so I would just assume they would be on the legal committee. I know I would be as I am NOT signing a check on the behalf of my membership without knowing what it was about.

Suing your HOA is suing yourself and your neighbors. So you may want to double think your lawsuit bringing. Your just digging a deeper hole for yourself and your members...

Go to davis-sterling.com, Irene, to read about director removal. Generally it only can be done by homeowner voting for a recall or, I believe, by court order.

To protect yourself, make certain that your objections to the president's actions are recorded in the meeting minutes.

Melissa makes one good point: are you certain that slab repair is NOT the HOA's responsibility? If it's the HOA's responsibility, it seems the prez is in the clear.

New buyers do not pay the delinquent dues of pervious owners, so I don't know why the prez made a motion to that effect.

The prez used info from executive session for his own personal gain. But I don't know if that's illegal.

We have around 6-8 slab leaks per month in the community. We have strict guidelines procedures for documenting the leaks. This is mainly because of the amount we have each month and invoice control. Slab leak repairs are the association responsibility inside the walls only. We have 416 units and our CC&R's state homeowners must have insurance for all interior repairs. I have personally had four myself and it was not even an option for me to consider asking the HOA to pay for my floors or vanities. There have been no other homeowners who have gotten $40K in upgrades (or for that matter $10 in upgrades)paid for by the associaton other than the president. This didnt happen one time, it happened 5 times in less than one year. We have homeowners who are living on concrete because their insurance company dropped them due to the number of leaks they had. This is a lawsuit waiting to happen if we dont make this right. Presidents or any board member should not get any type of special benefit from serving on the board. In California self-dealing is illegal. I understand what you're saying about some of the allegations, however, the information was absolutely not public knowledge at that point. When the homeowner was approached, the association did not file a lien and the homeowner was not behind on the mortgage yet. The owner was falling behind in dues but the associaton did not take action yet. The president did not pay for the late dues, but he promised the seller that he could get the dues "forgiven" and he voted to write it off as bad debt and uncollectible without disclosing his interest to the board. I really dont care if he owned 100 units in the community. Its' the fact that he denies it and then Quitclaimed them the next day. If there is nothing wrong, why hide your purchases? As far as his friendship with the contractors, it's much more than just an associate. The main contractor involved is a close family friend of over 25 years. He lounges at the pool during work hours (in his swimtrunks) and homeowenrs began complaining. His work is not the best quality and homeowners are afraid to complain because they know he is a close friend. His contractors license was expired and he continued to work. To top it all off, he had a seizure last week in a rented Home Depot truck and crashed into the main entrance of the community where kids were waiting for the bus. We had rented the truck for him which is something we would never do for another contractor. We are four months into our fiscal year and we are over budget by $168,000 for leak repairs due to the upgrades on the presidents' 5 units. $150,200 of this money was paid to this contractor. There is absolutely no reason to hide the purchases and certainly no reason why I would receive threats if nothing was wrong. also, I want to say that I have not filed a lawsuit. We went to Alternative Dispute Resolution and the fees were shared 50/50. MY ADR demand was that the prez pay back the associaton for the upgrades to his units. He still maintains that he does not own the units. I had the titles pulled and he is definately the owner for all of them. It just didnt need to get to thsi point but he continues to lie so it was escalated.

I am still not seeing anything illegal here...However, threats are a criminal offense and deserve a phone call to the police NOT a lawyer. There is a difference between individual behavior and representing the HOA. Personal behavior is still subjected to the law. Don't know why the ned to sue your ENTIRE HOA over the matter as YOU and the rest of your neighbors will be sued then as well. I'd be upset to if I was getting grouped together with some supposed crokked peron's lawsuit and I ain't got a thing to so with it.

Why the big deal any way? He is paying his dues on the properties? So it is his dues money as well that is being used here. I would be upset if he was NOT paying his fair share of dues. In a HOA that is all that really matters NOT how you obtained house ownership. It is IF you pay your dues or special assessments.

I say step back and STOP seeing the forrest for the trees...Otherwise you are taking down a ship your currently a passenger on for a member that got cavier instead of shrimp cocktail like the rest of ya...Put it in perspective before wasting every ones dime...