HOA possible embezzlement

Get as many facts as you can and sue them for breach of contract (for violations of governing documents), breach of fiduciary duty (for acts that harmed the HOA and its members) and fraud.

Criminal prosecution is tough- the police won't want to act. If your state allows "private prosecutions" you can try that, but don't mix that in with civil litigation as threatening criminal prosecution in connection with a civil suit could be considered blackmail.

But the easiest and cheapest way to fix things is just to get enough owner signatures to call a special meeting of owners and vote them out of office.

-- The HOA attorney is paid to represent the board and will not be impartial on this matter. With some caveats, the law actually requires the HOA attorney to be partial and fight tooth and nail for his/her client. The "client" is technically the corporation, but practically speaking, it is the board. Some HOA attorneys thrive on dissent and will exploit this. Promoting dissent among HOA members pays for the heat for the HOA attorney's pool.

-- I think it is below the belt to attack the policemen who evidently are off-duty when they patrol your neighborhood. The sarcastic remarks you made on same just cloud the issue. Neighborhood security is vital to property values. If you think what the HOA is paying is excessive, then this is a valid issue. But leave the cops alone. (I write this as someone who is often not a fan of the police. Then again, I am not out there risking my life day-to-day for people's safety. AFAIC, the police have an incredibly tough job.)

-- Embezzlement does happen at HOAs, and I think it happens more often than people like to think. The news stations do report on it. But I do not think you have the sort of evidence at this point that would make this newsworthy. You do not want to be seen as a person crying wolf and emoting over your own personal experience rather than something that is truly criminal. Barring better evidence, I agree with PaulJ6 that it is unlikely the police or district attorney will get involved.

-- I also agree with PaulJ6 that your best chance for change is organizing your neighbors to elect a new board. This would include taking legal steps to ensure a fair election happened. Because your board may very well break the law to get themselves re-elected.

-- You will not be effective as long as you are putting emotion into this and, for example, writing with the use of exclamation points (or capitol letters, or any other kind of grammatical emphasis).

-- This will likely cost you years of your life. Moving should be considered as an option.

1. For several years our board has prevented other members to join the board by rigging votes, at least that is my opinion. - Rigging votes is a big deal - hopefully you have proof?

2. They also just awarded $158,000 to supposedly replace and repair sprinkler system in 13 zones where flower are planted in various entrances to the neighborhood. I have asked for documentation of the other bids they said they had, but none has been presented to us. - You must formally request this sort of information, and it could take significant time for response. Is there a property manager or are you self managed? Are you asking as a property owner or a board member?

3. After doing my due diligence, the highest bids I have received based on the specification for the company that won the bid for $158,000.00 was for $13,000! Two other bids for the same specifications were $9750.00 and another for $11,100.00. This is a huge difference. - this is not actually due diligence. Did you make up a statement of work without seeing the Board's statement of work for the replacement effort? If not, it isn't apples to apples - it is just another bid or two for something that could be substantively different. Or, perhaps you have the original bid and asked other companies for their bids?

4. Two years ago we asked the board for an official audit report and none has been provided! - when you say "we" - same questions - are you on the Board, are you a property owner? Is there a requirement for there to be an official audit?

5. During a meeting two months ago, I asked if the audit had been done where they told me that it had so I asked for a copy which again was not provided. - was your request per your governing docs, and/or Texas statute?

6. During the last meeting, I asked again for this report and the board members were quite nervous. - not sure how you could tell - pretty subjective?

7. Finally the board president told me that the they were waiting for the bookkeeper to review the audited CPA report! Why would they want to have the right to modify the Audit? - uh, you said review, then you said modify???

8. We have some $3,000,000 in our account and I feel that little by little the funds are being misused and perhaps embezzled. I cannot and will not accuse anyone of such act but if it sounds like a duck.... - do you have any proof? Are you assisting the Board in any way, or are you going to Board meetings and tossing around accusations?

9. They have spent $87,000 this year on entrance signs that did not need to be changed. - again, an opinion - have you volunteered to assist the Board or are you on the Board?

10. The cost per set of sign? $40,000!! - clearly, we have no idea if this is a lot - some signage at neighborhoods cost $500K

11. By the end of this year, they will have paid two Harris county police officers $84,500.00 each ($169,000.00 for both) for patrol for 8 hours a day. That is on top of what they get paid by the city of Houston as police officers! I guess they drink a lot of 5 hour energy drinks to work 16 hour days! The sad thing is that we hardly see these officers. - this is a nonsensical and offensive thing to say - again, complaining, but no real information?

12. I have contacted the Harris County District Attorney's office and plan to contact a couple of TV stations to look into this matter. - I hope you are prepared for your property values to decrease, or your neighbors to ask you what you are doing?

13. I also would like to recall the board. - I am assuming you have read and understand your governing docs and Texas statute?

14. What suggestion could you provide to me and other homeowners with this matter. Is there an attorney which we can contact? The HOA has an attorney but I do not know if they will look into this matter since the board has chosen them as well. - you need to do substantive research on these many topics before you start considering spending your money on an attorney - they will gladly take it, but you will not be happy with the return

15. They are not willing to allow any home owners to vote on companies chosen for landscaping, choosing attorney firm, the management company or any other contracts. - of course not. This would be silly - the reason you pay so much :-) for the Board is so they can make decisions like this. Are you trying to help the Board manage the community?

16. They have also told us that if we want any documentation that the management company which happens to be friends with the HOA president, will charge us for their time and cost to make copies of documents. - of course they will - very common, especially with a management company

17. perhaps I am way off but other homeowners feel the same. - you sound like you are way off. You need to collaborate with the other owners and develop a path forward.

The old management way to silence a union pain in their side was to promote him. Before we owners took over, the Declarant had an appointed Advisory BOD (I was one). A disgruntled owner (Jim) started an anti-Declarant/BOD news letter which he prepared and manually distributed. We was egged on by a fellow neighbor (Bill). After several editions the Declarant invited Jim to be on the advisory BOD. He soon changed his opinions and he even went toe to toe with Bill on a few issues.

Sigh .... the OP lays out a long and confused summary, parts of which show a significant lack of knowledge re HOAs ... then the offered advice from Paul is for the OP to sue the association?

Sheesh.

@kooroshV

Some of the advise in spot on.

Did you have the original scope of work that the board gave to companies to bid on? without that, the bids you received can't be compared. However, that does sound like a huge difference. All contracts of the hoa are considered records of the hoa. every owner has a right to review all records of the hoa. Your bylaws will spell out exactly how to request the documents. Be warned, If the board is actually corrupt, they could ignore your written requests. You should always send letters to the board registered , you should also send the letter to the hoa attorneys. The attorney's wont talk to you, usually. But, they do open registered mail. And HOA's in texas are required to provide financial records ,contracts and documents to an owner upon request.

Yikes, I see you are in houston.. I would like to know what neighborhood. Also. what management company.? . We use Creative Property Management. I did some a basic google search for reviews and lo and behold..creative property management has the lowest ratings on google reviews and yelp of any other management company with more than 10 reviews.

I am currently on an HOA board, the owners removed 2 previous board in the span of 1 year. Both boards fought tooth and nail to not follow the bylaws. They tried to not accept our petitions. Each petition required 60% of the owners to sign the petition. and this was just to get a meeting.! Anyway, I still have issues with the board. However, I've come to this site and gotten excellent perspective and advise.
Our current HOA board are all honest people. There's just some power play's going on. However, the previous board was absolutely incompetent, and some were self dealing.
You mention you have 3 million in the reserves. That is a lot!. How many homes in your neighborhood.?? what are your dues?? I ask beacause,,that is a ton of money to hold in reserves. But if your HOA is 5000 homes, i guess it's not a lot.

Based on your description . The board hemming and hawing when asking for documents. This is so basic a right of any homeowner,, that when they are denying access to records, I would definitely be concerned. MAKE SURE YOU FOLLOW the written procedure on how to request documents.. It will be in your bylaws., if not, see the 2015 changes that texas made to hoa laws. There are a lot of requirements that are now law.. reading these could help you.

also.. the 2015 changes have quite a few new protections for owners in hoas. here's a good place to start. https://www.texashoalaw.com/hoa-resources/ starting at the middle of the page there are links to all the texas laws that affect HOA.'s.

Lastly, it's the end of the year,, your annual elections will be coming up in february..first,, do you have enough like minded owners that would be willing to serve.? If the current board is misspending or embezzling, the absolute best thing you can do is to vote them out.. that's the only way to cut off their access to the money...

Laska,
I have enjoyed your recent posts. I am not ever going to criticize anyone's grammar as my degree is only in Common Sense and has severed me well over the years.

My only correction would be that Reserve Funds have special uses and Law Suits are not one of them. If a Lawsuit was filed the expenses would probably come out of operating accounts and owners pockets with a special assessments. If I am wrong I am sure I will be corrected by someone who is much smarter than you and I.

Speaking as someone who has sued a HOA:

Suing a HOA is NOT suing yourself.

Generally the HOA's insurance covers the cost of defending the lawsuit and the cost of payment to the plaintiff. The HOA's insurance premiums likely will go up after a lawsuit, though.

To the extent that insurance doesn't cover those amounts, individual directors and officers and other individuals could be on the hook for those amounts, particularly if those persons did particularly bad things.

It's generally the board's decision as to whether or not to fight the lawsuit. The board can certainly decide immediately to settle the lawsuit, which minimizes or eliminates costs of defending the lawsuit, too.

Suing a HOA is suing people who may have done something worth suing over. The unfortunate thing is that those people may be able to pass some of the costs of their actions onto innocent owners. Those people may have to pay those costs themselves. But a lawsuit can be ended quickly if the board wants that.

Hi Melissa, if bad people are doing bad things that harm the HOA, they need to be stopped, and there are ways to do that and put liability on the bad people.

Even if the HOA has to incur some cost in connection with the lawsuit, if the bad people doing bad things are stopped, then the damage to the HOA can be stopped, so the HOA and its members will come out ahead.

Spot on correct.

Regarding the comment about the hoa insurance covering the legal fees of the board members, that's why I suggested voting them out first. You stop the bleeding. You will have access to all of the records and documents.

Before you go after former board members civilly . I recommend you pursue criminal charges first. If there was actual embezzlement. If you get a conviction against one or some of the former board members. The hoa insurance is much less likely to cover the former board's legal fees. If you sue the the board before you get the criminal complaint and conviction, the hoa insurance company will likely still represent the former board members. The hoa insurance companies work very hard to not have to pay claims for breach of fiduciary duty. I was told this by our former hoa attorney. He told me about several cases that were so clear cut outright fraud, or theft of hoa funds. Yet the insurance companies still used the hoa policy to defend the former board member. This reduces the amount of funds that could or would have been available to pay out claims. As stated earlier, It also raises the premiums the hoa must pay. That's if the insurance company doesn't drop the hoa outright. Also.. the message regarding a 1 million dollar policy having a limit of appprox 80,000 for claims is spot on. The attorney I referred to , told me the exact same thing.