Citizens
Against Private Government HOAs, Inc
Scottsdale, AZ
602-228-2891 / 602-996-3007
info@pvtgov.org http://pvtgov.org
Contact: George K. Staropoli, Pres.
June 21, 2004
I read with great interest the Dana James article, "The Phoenix Job", in the May-June issue of CAI's On Common Ground magazine. It covered incidents involving two Arizona HOAs, Lago Estancia in Gilbert and Entrada in Glendale in the second half of 2002 to 2003. It describes the unblemished role of two CAI member firms, Tri-City Property management and Rossmar & Graham, and two CAI member attorneys, Scott Carpenter of Hazelwood, Carpenter and Curtis Ekmark of Ekmark & Ekmark.
However, there is another side of the story regarding the incident at Lago Estancia based not only on public info, but on materials from Tri-City, Mr. Shaw of Hazelwood Carpenter, the president of the HOA, and correspondence from a homeowner, all dating from the October 2002 - January 2003.
In a Dec. 30, 2002 letter from Chip Wilder, signed as president of the HOA, to the homeowners (my emphasis) said:
"Our scheduled annual meeting was held October 17, 2002 ... At that meeting, in good faith, the decision was made not to honor his [Jason Hope's] proxies[149], and not to allow three owners from the same lot to be placed on the ballot.... Because six people left the meeting believing they held three seats on the board, there were ambiguities and an unclear election result from that meeting."
"Based on the advice from the Association's attorneys, Carpenter Hazelwood, PLC, a second annual meeting was held on November 14, 2002 ... At this meeting, an amendment to the Bylaws was voted on and approved, which prohibits more than one owner per lot from serving on the Board of Directors concurrently".
The readers of the CAI article, which does refer to the vote to amend the bylaws, need to ask why was the advice given to the original board by Hazelwood, Carpenter to amend the bylaws which was taken, presumably prior to the new election since Mr. Hopes is reported to have had 100 proxies of some 200+ voters. The meeting was called and run by an illegally constituted board. This is the only interpretation that can be given for the vote on an amendment at the second annual meeting, and that the HOA attorney was not acting in the best interest of the HOA, but of the old board.
Further, in the December 30, 2002 letter to homeowners from Augustus Shaw of Hazelwood, Carpenter, the homeowners are told,
"We do not represent Tri-City Property Management ... Our sole responsibility is to represent the best interests of the members of the Association ... Tri-City ... is the only entity authorized by the board to act on behalf of the association".
Why was this statement by the HOA attorney necessary? Unless, of course, there were concerns about a conflict of interest between Tri-City and the HOA attorney. Was it the fact that Tri-City shows a Phyllis and a Doris Carpenter as President and Secretary? This letter from Shaw also makes it clear that Tri-City is the management firm and homeowners are to ignore any Orion Management correspondence, Jason Hopes' firm. Homeowners are urged to call Tri-City and not the president or a board member.
A question arises as to who was in control of the HOA? It appears that the CAI member management firm and attorney were. In mid-January, prior to the January 22nd article in The Arizona Republic by Walsh, a homeowner wrote,
"The board never sent anything about this court decision [referring to a reported, but unseen East Valley Tribune article] nor the fact that the association now has to elect about 5 more board members"
"Members of Lago Estancia are continually directed to direct all correspondence etc. to Dawn ... of the Management Company ... the board decided to direct all information ... to her. My opinion is that she is really in charge of it all. A few neighbors complained about this. Is this the way this is supposed to run?"
"This should not happen in a democratic society. I personally find this appalling".
And, after the January 21st board meeting. the homeowner again wrote,
"Several of them already knew about 'Carpenters' owning Tri-City. There were several angry at the meeting last week .... They said S. Carpenter and Dawn Stone of Tri-City just took over and controlled every question and answer-mostly cutting off all questions in mid-air. One neighbor went to Tri-City this Monday(1-27) and Dawn Stoner [Tri-City manager] never would answer the question as to ownership other than 'a lot of people have asked that same question' and 'no S. Carpenter has no personal interest in Tri-City' She did say that the books had been currently sent to the auditor."
And yet, Scott Carpenter doesn't address these concerns when quoted in January 22nd and 23rd articles:
"'There is no evidence of thievery,' said Scott Carpenter, the association's attorney" (Arizona Republic).
"But Lago Estancia association attorney Scott Carpenter said the deal was the least painful solution to what would have been a long and costly fight. 'This settlement was not about what was right or what was wrong, it was about how to get this behind us,' Carpenter said. The association maintains fraud in Hope’s actions, Carpenter said, but taking him to court would likely have cost $75,000 or more. By settling, the association expects to spend $20,000 in legal fees" (EV Tribune).
What was at stake here? The homeowners? The old board? Tri-City versus Orion Management? Lago Estancia was sitting on over $160,000 in cash at the end of 2002 and a 2003 budget showed another excess of some $130,000 over expenditures. Budgeted revenues amounted to some $323,000 before a $36,000 reserve setoff. The cash position of Lago Estancia, as reported to the Arizona Corporation Commission was:
2000: $146,104
2001: $147,900
2002: $162,000
2003: $143,240
Tri-City was aware of these figures through 2002. Why was it necessary to raise homeowner dues, as stated in a November 25 letter from Tri-City, $18 per lot per year, amounting to a mere $13,000 increase that is part of the budgeted $130,000 cash position? No reason for the increase was given except to say that the governing documents allow the board, not the homeowners, to do so. Why the increase, one must ask? While Arizona law does not prohibit the accumulation of cash for planned communities, it does require excess cash in condo associations to be returned to the owners.
It's understandable that these issues were not reported by the media because in that time period CAI controlled the media and the legitimate grievances by homeowner rights advocates were still viewed with suspicion. Regardless of any allegations against Mr. Hopes at that time period, there are a number of questions raised as to the conduct of Hazelwood, Carpenter and Tri-City Property Management that go unreported in this article, some 18 months later.
Further attesting to the spin in favor of HOAs, only pro-HOA quotes from homeowners are included in these articles, including an Arizona Republic comment on a pending HOA bill, HB2307, that sought to clamp down on the severe HOA foreclosure practices that benefit the HOA attorneys.
And still, why were the civil cases settled (Entrada) and dismissed (Lago Estancia) if there was indeed wrong doing by Mr. Hopes alone? The alleged fraud in the Lago Estancia HOA was never even filed. In response to a police charge that Hope was hiding some $120,000 in Entrada money and commingling it with a personal account, according to an Arizona Republic article, Hopes' lawyer filed a 36 page statement accounting of all the monies.
Why was the criminal case, relating to Entrada alone, dismissed for probable cause in July 2003, and why did the police make that statement of "a continuing investigation" in view of all these court decisions? All these questions go unanswered in this CAI article.
Why do the authorities not act on claims of fraud, embezzlement and misuse of funds by homeowners against HOA boards and unlicensed management firms? Are these just the ramblings of a disgruntled minority? No, the answer lies in the lack of access to records that are continually denied to homeowners in spite of state laws to the contrary. It is widely reported that homeowner calls and requests go unanswered and ignored or the homeowner is told that the HOA records do not exist. Additional obstacles are the result of the requirements in these laws that allow for a denial of the homeowner request, such as, in part, "for a reasonable purpose", "contemplated litigation". etc.
In these two incidents, which were really over disputed control of the HOAs, the incumbents, their attorneys and management firms all had access to such detailed information and could claim some sort of evidence of wrong doing that is denied to the homeowner because of laws that protect the incumbent HOA boards. Yet, in spite of this access to the records, nothing has come of these allegations.
The winds of change are blowing stronger and stronger. As the media reaches out in a fair presentation of the facts, the public and the policy makers will react to give back control of the associations to the homeowners and to remove the self-serving interests of the "hired hands" in making decisions for the association.