Ex-director ponders suing over board’s alleged fraud
Question: It took me nearly 20 years to get elected to my association’s board of directors. This was because a rotating group of 10 out of nearly 40 owners dominated board elections and controlled ballots. Together they have been successful in keeping key documents out of the hands of homeowners.
I was removed from my board president position when I discovered that the extent of the gang of 10’s actions included a kickback scheme spanning at least 20 years. Board directors would vote for their pet projects, then implement special assessments to pay for them. The board directors would pay their share of the special assessment by personal check. There were special assessments for new garage doors, slump stone patio installations, gardening, railings and cement work all made to look like ongoing maintenance problems, but they weren’t. After each job was completed, the vendor gave board directors their payments back in cash.
While on the board, I obtained files from past attorneys and learned that the association paid lawyers to target owners they didn’t like by fabricating accusations against them. They caused certain owners indescribable grief and massive expenditures in defending their innocence.
This group was so effective in their political bashing of me that owners to this day still believe I’m the bad guy. Is there a way I can expose any of this without getting sued?
Answer: Whether or not you get sued, it appears you may have grounds for a lawsuit against the board.
The kickbacks are both a breach of fiduciary duty and a form of conversion, and may even be fraud. The directors’ incentive to receive the kickbacks could have led to their failure to negotiate the best price with the best contractors, which also amounts to a breach of fiduciary duty. Since statements were made to homeowners convincing them that projects and assessments were necessary, the representations may be considered to be false with the intent to mislead. In short, the board made fraudulent representations to the titleholders regarding the taking of money to fulfill what may be nonessential projects.
The board’s actions resulting in receiving their money back can fall under embezzlement since the funds received belonged to the association.
If the documents obtained from former attorneys show that the charges filed or instigated against certain owners were without any basis in law or fact, report those attorneys to the bar association.
There is enough here to consider filing a lawsuit, which may ultimately lead to a judgment. You might even be able to raise the ire of the district attorney and get a criminal prosecution going.
Send questions to P.O. Box 10490, Marina del Rey, CA 90295 or e-mail noexit@mindspring.com.
