Board kingpins left a royal mess
Question: Four kingpin directors dominated our association for 22 years. Until their deaths, not one owner stood up to them or questioned their actions, including me.
A director’s wife wanted a new garage door and brick patio, so the board passed resolutions that everybody needed new doors and patios. They made owners pay full price for purchases that directors got free. Several large, back-to-back special assessments and fee increases paid for inferior materials and cheap labor.
We were told vendors were licensed, but they weren’t. The overpriced landscape architect, who we were told graduated with honors from a big university, doesn’t even have a high school degree or business license, but the kingpins signed his contract.
After the kingpins’ deaths, our treasurer sold her condo below market price and moved out of state, taking key association records with her.
We current directors found executive-session notes on how to manipulate and intimidate owners, and wording “to insert into minutes, newsletters, flyers, ballots and proxies” in order to ensure director reelection and passage of board projects.
Other communications outline documents to destroy if the board got sued and how to “fabricate votes and destroy evidence so owners can’t challenge the board.” We learned the board amended documents twice and never told owners they received advice “against doing it.”
Most distressing are files showing that certain owners were intentionally ridiculed and accused of fabricating complaints against the association. Those owners were forced to spend thousands of dollars needlessly, while directors continued to misrepresent board actions to members.
The actions of these directors substantially increased our costs and imposed undesirable restrictions on our quality of life. Should we directors tell owners the truth, and can we go after the late directors’ estates to recover?
Answer: Part of the present board’s due diligence includes damage control, and that begins with being honest with homeowners and telling them the truth.
Bring these problems to the surface so owners can understand firsthand what went wrong, why, who caused it and how to prevent it from happening again. Assure owners they will be apprised of everything that is done to rectify this matter, then take steps to do so.
Each board has a fiduciary duty to act in good faith, the breach of which is actionable in a court of law. Each successive board that learns of these egregious acts against owners has an equal duty to rectify the damage with a sense of urgency; to do otherwise makes that board equally culpable.
In recent lawsuits, association boards of directors who breached their fiduciary duty found that they were not covered under the “directors and officers” (D&O;) portion of the complex’s insurance policy, leaving these board members to pay for their own attorneys as well as any damages against them. Owners who were sued for aiding or abetting the board were also left to pay their own legal fees and settlement costs.
Titleholders whose money financed their board’s acts have a right to know the truth regarding how association funds are handled and spent. Directors may have a duty to pursue the wrongdoers and should consult with an attorney specializing in such suits.
Proving damages and collecting a money judgment from the wrongdoers are separate issues. Assuming the former board members are held liable, collecting from them or their estates might be challenging but not impossible.
An attorney can make a demand on the ex-treasurer for immediate return of all association records. Without delay, locate and review all contracts the previous boards entered into. Past work performed by contractors, whether licensed or not, must be reinspected for safety and quality. Inspection results may determine whether money can be recovered from the contractors.
All board meeting minutes during that time should be scrutinized for motions, resolutions and voting to determine whether proper procedures were followed and actions taken were valid. Amended or rewritten documents can be “undone.” Owners who were “targeted” should be revisited and where apologies are needed this board must unabashedly be forthcoming. To do otherwise condones dissension created by prior boards.
Questions can be sent to P.O. Box 11843, Marina del Rey, CA 90295 or e-mailed to noexit@mindspring.com.
