Question: I manage a very large homeowner association in Southern California. Homeowners make legitimate requests to access association budgets, financial statements, bank accounts, minutes, reports, accounts payable and receivables, assets, liabilities and more. The board tells me not to comply with these requests because it might affect sales. My company's owner affirms not cooperating with owners and instructs me to keep putting them off until they stop asking. When the board gets sued, directors and my supervisor doctor the real documents and create documents they want me to present as evidence against the owners who sue. This places me in an uncomfortable position because many of these owners are very nice to me. I feel like I'm letting them down. I don't want to lose my job. Can I get in trouble for doing any of this?
Answer: You are not just in an uncomfortable position, you are in an illegal one. California Corporations Code section 8215 makes directors, employees and association agents jointly and severally liable for the damages suffered by any person who relied on the issuance of false information. That includes making, issuing, delivering or publishing any prospectus, report, circular, certificate, financial statement, balance sheet or document pertaining to the association or its memberships, assets, liabilities, capital, dividends, business, earnings or accounts that is false in any material respect, knowing it to be false, or participating in the making, issuance, delivery or publication with knowledge that the same is false.
It is illegal to make or cause to be made in the books, minutes, records or accounts of an association any entry that is false in any material particular, knowing such entry is false. It is illegal to remove, erase, alter or cancel any entry in any books or records of the association with intent to deceive.
Joint and several liability means that everyone involved is equally responsible for any injuries caused as well as the repayment of any resulting judgment from litigation. If a lawsuit is filed and you are named as a defendant, a homeowner can choose to collect 100% of the resulting judgment from you alone.
It is natural to want to keep your job, but participating in unlawful activities can make you civilly and criminally liable for the fraud perpetrated on the association's owners. False or fabricated evidence is usually created to influence a judge or jury in determining the outcome of a case. Creating or doctoring documents to be used as evidence while knowing those items will be filed in a court of law is perpetrating a fraud upon the court. These actions are illegal.
It is possible that the information you help to fabricate and falsify may ultimately be used by a potential buyer of a property in your association. If these "records" contain false information that may be material to the decision of an investor, then your participation could lead to liability for any individual or entity that relies on your misrepresentations, including buyers, brokers, banks and other financial institutions.
If it is found that you participated in this unlawful act you may also be charged with another crime, "conspiracy."
If you report this misconduct to the authorities and you are terminated, you may have a claim for wrongful termination against the management company and its owner.
You have an obligation to the association to look out for its best interests, you have an obligation to those individuals who may rely on these affidavits, you have an obligation to the community to report illegal activity, and you have an obligation to yourself to avoid getting mixed up in anything that exposes you to this much risk.
Zachary Levine, a partner at Wolk & Levine, a business and intellectual property law firm, co-wrote this column. Vanitzian is an arbitrator and mediator. Send questions to Donie Vanitzian, JD, P.O. Box 10490, Marina del Rey, CA 90295 or firstname.lastname@example.org.