Just a Currious Question

More is coming out about the local HOA condo complex with the water and sewer issues.

As it turns out the PMC took the HOA's money and ran, POOF!!

Does the HOA's insurance company pay out the losses from the looted bank accounts?

Is there two individual insurance policies? a D&O policy and a general liability?

Would the D&O policy cover the board's screw up for not taking care of the water and sewer issues, and will the
general liability cover the looted cash?

The courts will be involved in a civil case. Potentially criminal.

Does anyone have any experience with this?

I knew of a case where for a construction project the owner handed the check to developer for the construction. The lumber was delivered and the project was completed. Except for one thing the lumber company was not paid and the developer disappeared to another state. The owner was sued in court. The owner proved the check went out and funds were paid out to the developer. Case went nowhere.

And if the bank didn’t follow its own procedures, they can sue the bank who would likely settle.

California requires employee fidelity insurance in the amount if total reserve account amount plus three month's assessments.

Most, if not all of those questions may depend on the association's master insurance policy, so I hope someone is reading it. A lawsuit (maybe two or three) could get a judgement, but then there's the matter of collection, which could take more time and money. This is also why it's recommended HOAs get a bond covering embezzlement and fraud like this.

I dont remember if you live in this community (if memory serves, you don't), so whether you're on the board or not, you and your neighbors would do well to urge your board to pay attention to how this plays out and start talking to the association's master policy carrier about a risk assessment. Your association may need to take steps to reduce risk, including reviewing current policies and controls of the bank accounts.

Sometimes these things serve as a good example or a horrible warning. I just hope this HOA can get coverage after all this - the failure to address the water and sewer issues doesn't bode well for them, especially since it's getting more difficult for HOAs to get coverage, even when they're well run.

I agree. However, this can be done with a bond or with insurance (our crime insurance policy provided the same protection and, at the time, was less expensive).

If I had to guess, I'd say that this troubled condo association was not doing things properly, so it's questionable whether they had a fidelity bond or insurance. I would bet good money that their boards were "keeping assessments low" and "cutting unnecessary expenses" and otherwise deluding themselves and the membership that this was savvy business operation.

Didn't you say that they were in receivership now? Or at least headed that way. The receiver could opt to file a lawsuit against the former manager who took off with the money. But it costs money to go that route - and depending on how much money was lost and how likely it is that the manager would be able to cough it up, a lawsuit may be a non-starter.

Do you think a bank employee has ever violated a bank policy?

Poster said bank accounts were looted. There are bank policies to prevent looting in its various forms from bank accounts that would apply to HOA or any other account holder.

How payments are made is HOA-specific unless there is a law; for example reserve account transfers require 2 director signatures in CA.

I have not read where they are in receivership, the board was just sadly misguided.

The article quoted one lady who’s lived there for 25 years – she said when she moved in, the grass was plush, the pool was full and landscaping well-kept, but now “My condo is paid for and now I’m going through all this crap because the association can’t handle money right,” she said. “It’s not our fault, but we’re the ones who are going to have to pay the price if they turn the water off on us.”

There was also a married couple who just bought their home – they knew the community was a bit run down, but said they weren’t told about the water problems when they bought the unit. “I just bought this house, and none of this was disclosed to me…The letter is the first we’ve heard of it.” He was told the current management company inherited the property from another association that was plagued by financial mismanagement. (That might by a typo – I think the reporter meant property management company.)

This is why you trust but verify – unfortunately, we no longer live in a world (if we ever did) when people tended to say what they meant and meant what they said. I suspect the previous owner knew what was coming and decided to get out while the getting was good. That may not necessarily mean he/she wasn’t responsible for disclosing certain information – I hope that couple can get some low cost legal advice to see if they can hold the previous owner responsible.

So, as to how this happened? The property didn’t go to pot overnight – let’s start with the previous boards who clearly didn’t do enough due diligence and oversight. LetA may be correct in saying they were misguided because you don’t always know what you don’t know. Once again, you trust but verify – having a property manager doesn’t mean they should do your thinking for you, nor should you believe whatever BS they say.
When you see stuff isn’t being done or the numbers aren’t adding up, that’s when you start asking your own questions and if that means getting someone else to audit the records, so be it. If you have to get another property manager, do it. If you want to go the self-management route, do your homework before you decide if that’s for your association.

On the other end, what were the homeowners thinking when they voted for board members (assuming they participated?) Did they only vote in people who kept saying “we’ll keep assessments low?” How often did they go to meetings or review the documents to see what the board was supposed to do and what their rights and responsibilities were as homeowners? Did they demand answers when problems began to develop with the pool or the grass grew to knee length? It shouldn’t take 25 years before one notices something’s really wrong with the property’s appearance.

And now the city will help fix the water system and file liens on the property – say bye-bye to property values because that won’t be cheap. This may be a situation where the community may have to consider shutting down the HOA and selling the houses and land to the city (which will essentially own it anyway). I don’t know what the implications are for the taxpayers or the pocketbooks of the homeowners, but depending on the lien amounts, they may have no other choice.

To add to Tim: Board presidents can also get away with a lot of bad things if directors are lazy or ignornant or too trusting of the prez.

directors need to remember that they are liable for bad things that any director or th president might do.

Yes to the above, but I have been reading other local new sources, KTNV and KLAS One station reported that the PMC took off with the money, another
reported that NV RED revoked the PMC's license, both the RJ and local news said that the PMC company is defunct all without following up with the
5 important W's .

Sheila to answer your this, HOA ownership requires homeowner participation.

The lady that has lived there for 25 years likely has no clue what's going on.
In the last 25 years the law was changed to make grass illegal. "lets kill all the oxygen producing and carbon dioxide consuming
landscape and scratch our heads as to why there is this thing called global warming.

To the guy that just bought his unit and is now surprised, Gee, that's a good question for the home inspector you hired to inspect your
home before close. Ask your realtor, ask your title company. With all the checks and balances that are supposed to be in place. what happened??

Why did the SNWA water police let this drag on this far. so much precious water was wasted for this nonsense yet the water police will
fine you for watering your lawn, HOGWASH.

If water is your priority, avoid Lake Mead.

I agree with the forestry comment re 60 years.