Tiny Mice Gang Up On Big Rats in California

Homeowners usually get the raw end of the deal when they try to fight the “Bigs” in the HOA industry. Some Homeowners in California are trying to turn that trend around. An HOA in Riverside County has sued three former property managers for “fraud, conspiracy to defraud, breach of contract, and breach of fiduciary duty.”  They had employed the management companies for eight years.

Canyon Lake Association then sued its own law firm, Fiore, Racobs & Powers, accusing them of “fraud and malpractice.” They say a lengthy investigation found “no cash management, no separation of accounting duties, credit card abuse by employees, employee salary increases that were not approved by the board.”

The lawsuit further claims that three HOA managers “created and concealed a secret, systemic pattern of conversion and theft of (HOA) assets and funds…and made representations to the board that were not true and were a cover up designed..to delay discovery of the cover-up.”

By the way, this information comes to us from the CCHAL organization in California. It’s dedicated to helping out the “tiny mice” in the HOA movement, and it’s an outstanding organization that every homeowner should join.

One final thought comes to mind here.  We haven’t heard much from the federal investigators in Las Vegas. We hope the widespread corruption they found in the Vegas HOA industry hasn’t depressed them to the point that they want to throw in the towel. Actually, we hope the opposite is true.  We hope they take a look around the country and discover that the legal scams in Las Vegas are as identical and numerous as the legal scams in Riverside County, and Modesto, and Weld County,  Colorado. and Dallas and Houston and Miami, and North Carolina.

If you don’t think it’s happening in your own community, you are either naive or dumber than a box of rocks. When we signed those CC&Rs, we stepped into an entirely new form of government with no checks and no balances. We essentially told law firms and property managers, “It’s OK to steal from us.” And then we whine when they steal from us. What gives?

Ward Lucas, author of Neighbors At War! The Creepy Case Against Your Homeowners Association

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17 Comments

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17 responses to “Tiny Mice Gang Up On Big Rats in California

  1. When we signed those CC&Rs, we stepped into an entirely new form of government with no checks and no balances.

    Ah, but you see, most of us were thinking about mortgages, mortgage payments and where to place the couch when we signed those CC&Rs, especially if they weren’t handed to us till the closing. And nowhere in those 50 pages of single-spaced legalese, do they warn us that this new government doesn’t include Constitutional rights, and that paying the mortgage will soon become the least of our problems. Silly us, we were looking for a new home, not a new government.

    • Lawrence Neigel

      I took great pleasure in participating in the investigation that brought about the filing of a lawsuit against our corporate attorney! The suit against the three former managers came after that. The mice have the rats on the run here at Canyon Lake, Ca. If you want to be free from this type of greed on the part of your HOA management and general counsel, elect board members who possess integrity and courage to oppose the good ol’ boys that created this mess!

      • Wow! Congratulations. You’ve got to have incredible courage to take on a challenge like that. Finding board members with integrity is OK the first year or two they’re in office. But there are some axioms to always keep in mind: power corrupts, and absolute power corrupts absolutely. A previous writer suggested no more than one two year board membership once every ten years. While it’s not a total solution, it sure feels good to say it.

        Once again, my congratulations to you for your courage.

      • Mike Reardon

        Really? And how do we know about your integrity and courage? Why should we have to even worry about it.
        How about we elect board members where we (homeowners) can watch their every move, and where their powers are strictly limited to an executive only function.
        Let only homeowners make the “law” (rules ect.) and let the independant and impartial courts determine “guilt and innocence” (fines).
        Bet that doesn’t sit so well with the folks who just know how to make the trains run on time and need all of those powers to make it happen.
        Nothing will change in oppresive HOA land until the boards power to harm their neighbors is eliminated.

  2. “We essentially told law firms and property managers, “It’s OK to steal from us.” And then we whine when they steal from us.”

    Maybe I had a different set of CC&Rs. Not only does fraud violate my CC&Rs – it violates the law – but, hey, who’s enforcing?

    How can defrauded homeowners ever get justice when Nevada federal judge/s are being investigated by FBI and Nevada Police arrest HOA fraud whistle-blowers?

    I believe there could be anarchy in this country if the laws remain unenforced.

    • If your set of CC&Rs didn’t say the Constitution was an overriding authority, then fraud is A-OK under the system.

      BTW, has anyone come across a set of CC&Rs that contain an ethics code? Just wondering.

      • Please do not consider this legal advice.

        Good news for homeowners – HOAs must worry about fraud not being “ok”, because, otherwise, why do most hold fidelity insurance? Given the successful multimillion-dollar lawsuits like the one in Hawaii, it gives HOAs something to worry about.

        The U.S. Constitution is incorporated into Nevada law and when a nonprofit HOA incorporates, it is bound by the laws of Nevada per NRS 82, et seq.

        HOAs are, essentially, corporations. Corporations (and individuals), generally, are not immune to fraud. Just ask Bernie Madoff if he was immune to fraud (in spite of corporate veil).

        Finally, there is Equal Protection / 14th Amendment. The U.S. Supreme Court acknowledged in Bray v. Alexandria Women’s Health Clinic, 506 US (S.Ct.1993) that the standard announced in Griffin v. Breckridge, 403 U.S. 88, 102 (1971) [interpretation of the Equal Protection] was not restricted to “race” discrimination.

        HOA homeowners and non-HOA homeowners could each be construed as “classes” within the meaning of Equal Protection. If the State were to deprive equal protections from one class over the other class, it would, likely, be in violation of the U.S. Constitution.

        14th Amendment: “No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

        A friend of ours (pro se) was able to dismiss out most all of a frivolous federal lawsuit by a local HOA attorney by arguing Equal Protection violations, Free Speech violations (under 1st. Amendment, Anti-SLAPP, Noerr-Pennington immunities). The remaining one claim is up for appeal with Ninth Circuit.

        We would love to buy a book. Thank you very much.

  3. Ed Brooks

    Quasi government entities! Those are the magic words that give hem the power.

    • I wish we could make the “quasi government entity” stick. Then, sooner or later they would become de facto governments, subject to the Constitution. HOAs, though, like the protection they get from calling themselves non-profit private corporations. Now THAT is how they get the power.

  4. The following is not to be construed as legal advice.

    Another point regarding fraud/unequal enforcement/deprived Equal Protection of the law:

    In Shelley v. Kraemer, 334 U.S. 1 (1948), the Supreme Court noted:
    The difference between judicial enforcement and nonenforcement of the restrictive covenants is the difference between . . . being denied rights of property available to other members of the community and being accorded full enjoyment of those rights on an equal footing.” See also Hansberry v. Lee, 311 US 32 (S.Ct. 1940); Harmon v. Tyler, 273 U.S. 668 (1927).

    Here’s an great article how HOAs are seeking Free Speech / First Amendment protections: http://blogs.sun-sentinel.com/condoblog/2012/07/more-states-seek-to-protect-first-amendment-rights-in-associations-will-florida-follow-suit.html

    “[T]he New Jersey Supreme Court ruled 5-1 that a condominium owner could place election signs on his front door and side window of his townhome over the objections of his association.”

  5. anonymous

    “When we signed those CC&Rs”

    I suspect that in many cases, consumers did not actually “sign those CC&Rs”, but that the CC&Rs were filed with the county, meeting the legal requirement (legal fiction) of “public notice”.

    Maybe there was some fine-print in the home purchase documents stating that the homeowner agrees to abide by the CC&Rs filed with the county. But that is not the same as “signing” the CC&Rs.

    Please stop perpetuating the myth that homeowners “signed the CC&Rs”. That is a Big Lie that must be killed, not perpetuated.

    • In many cases the Realtor hands the CC&Rs to the home buyer during the one-hour closing. I suspect the vast majority of homeowners get their first chance to read them AFTER they’ve signed the paper.

      • Ed brooks

        In my case we, (my wife and I) were well aware of the CC&r’s, but what we didn’t bargin for was corrupt management and legal council.
        They ( corporate council) and HOA board lying in court and having a judge in their pocket. (admitted by a former Mayor and board member) Marty Gibson used to brag about having them in his pocket.
        Now tell me, how can an average Joe like me have a say in what is done in my community with odds like that?

      • Ed, you’re completely correct. Reading the CC&Rs is a complete waste of time, when they can be changed or reinterpreted by whim. And corruption? LOL! Google the phrase “HOA embezzle” or Homeowner Association embezzle” and entertain yourself with the number of hits you get. With a system as corrupt as the current Homeowners Association Movement appears to be, a homeowner innocently reading the CC&Rs doesn’t have a chance.

  6. Ann

    My husband is on the board of our HOA. He exposed fraud by another board member. The other board member has managed to get the other three on his side leaving my husband to fight for the homeowners alone. As a result, we have received two death threats and two lawsuits..,..AGAINST ME! since my husband is indemnified, I’m the one they are going after! Even if you stand up to corruption, they’ll find a way to screw you over anyway.

    • Ann, God bless you and your husband for your courage! Just remember that every man who signed the Declaration of Independence faced a death sentence by the British government. But where would we be without those heroes?

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