Return to Today's Anthem View The Art of the Con, Part 1 The Art of the Con, Part 2

THE ART OF THE CON, PART 3

Liar, Liar, Pants on Fire

Let’s review. Cons involve deception and money. Cons are adopted to put something over on persons who are vulnerable and are at risk of losing something of value. In the case of Sun City’s board-orchestrated con, those persons at risk were Villa Neighborhood homeowners. The potential risk was substantial, involving the loss of their potential entitlement to hundreds of thousands of dollars in reserves that should have been on the books and banked and protected by the board but were not.

In order to achieve the objectives of a con, the perpetrators must resort to lies of one type or another. In Sun City’s case, the opportunity to lie came at a board-called meeting with Villa homeowners in July 2007. That meeting was ostensibly intended to convey correct information about the status of their reserve funds. While the information presented was intended to be relied upon as accurate, key facts were nothing more than a well laid foundation based on a tissue of lies.

Here are some of the more important lies told at that meeting:

• Lie No. 1.  Implied, that Villa homeowners could reasonably place their trust in board officers to tell them the truth about their entitlement to and the level of transition reserves. Wrong, board officers lied on matters affecting transition reserves, thereby misleading homeowners on the critical issue of funding of their reserve accounts.  
• Lie No. 2.  That the purpose of the Villa Neighborhood homeowners meeting was to answer homeowners questions about their reserves. False, while under the guise of meeting the needs of the homeowners, the central purpose of the meeting was to deceive homeowners into believing something important about their reserves that was not true. That important something that was not true was that the developer Pulte had met all of their reserve obligations to the Villa homeowners.
• Lie No. 3.  That board officers had authority to declare and present any particular amount as the amount of fully funded reserves at the time of transition. In simplest terms, they had no such authority although they would have homeowners believe otherwise. Months later, the board would concoct an even more devious scheme that would allow them to dictate the outcome of the so called look-back reserve study on transition reserves for the Villa Neighborhoods in order to demonstrate that no additional reserve monies were owed.
• Lie No. 4.  While board officers had an opportunity to convey reasonably based information about the level of fully-funded reserves at transition, they chose not to do so. Instead, by presenting grossly lower and fabricated amounts on Villa reserves, board officers relied on the good faith and naiveté of homeowners to accept their figures as fact when such figures were not only baseless and could not be verified but were designed to deceive homeowners on a matter of great importance. After all, what was more important to Villa homeowners than reserves money that should be in their reserves bank accounts but was not. The board’s actions were designed to prevent Villa homeowners from engaging in any efforts to recovery additional monies owed.
• Lie No. 5.  Also implied, that the board had met their fiduciary duty to the Villa Neighborhood homeowners. While the board’s duty was to protect the financial interests of the Villa homeowners, they clearly decided to abandon that duty in the case of the Villa homeowners.  

What was motivating the Dixon-Berman board so intensely that they felt the need to lie so greatly on matters of Villa Neighborhood reserves? Clearly, the board had their reasons to lie. But, regardless of their reasons, can there ever be any justification for board officers to lie so blatantly to the those they were ostensibly pledged to serve? After all, the effect of their actions was to deny Villa homeowners any entitlement under Nevada statutes to pursue hundreds of thousands of dollars in reserves they believed were owed. How could this have happened?

It happened, in great part, because of three connected events:

• First, the April '07 Favil West/Kay Dwyer settlement had agreed to let the developer off the hook for any additional Neighborhood transition reserves that might be owed under the statue. Say, for example, the agreement resulted in a settlement amounting to 50% of the 100% level of fully-funded reserves. Allegedly, under the terms of the agreement, Pulte would be free from any future or additional liability for the remaining 50%.
• Second, that agreement transferred acceptance of any future claims that might be brought regarding reserves funding to the Association for it to handle.
• Third, the month following the settlement, the Dixon-Berman board was faced with a potential demand from Neighborhood homeowners for the reserves that West/Dwyer had failed to secure. Rather than dealing honestly with that potential liability and negotiating with the Neighborhoods, Roz Berman embarked on an elaborate con to deceive Neighborhood homeowners that there was no money due. That tactic had the effect of telling the Neighborhood homeowners that the West/Dwyer agreement had secured no less than 100% of what was due.  

It would be no exaggeration to state that the West/Dwyer settlement agreement had a profound and devastating impact on the aspirations and goals of the Neighborhood homeowners to be treated fairly and honestly on the issue of reserves. It was equally clear that the Dixon-Berman board cared little about their duty as fiduciaries in meeting the reasonable needs of these several hundred homeowners.

Recounting some of these events, the stage for the grand Sun City con was set in motion just a few months earlier in April ’07 on the eve of the final action of the Favil West controlled board. On this occasion, the West-Dwyer settlement agreement with Pulte provided the platform on which the subsequent Dixon-Berman board would eventually slam their fiscal axe to cut the hopes of the Villa homeowners. While that agreement provided a partial settlement of monies Pulte owed for Neighborhood reserves, estimated by some at around 50 percent of what was owed, by others even more, the agreement appeared to keep the door ajar a bit for a future and final settlement of the remaining monies that homeowners believed were owed. Some might be tempted to argue that that partial opening of opportunity was merely a ploy designed to distract the attention of Neighborhood homeowners away from the disappointing results achieved in that settlement agreement. Whatever its purpose, the existence of that opening prompted the Dixon-Berman board to take drastic steps to seal that opportunity door shut.

Whether the board had authority to give the developer a pass on future reserve claims is disputed since that was a statutory requirement, presumably not subject to any developer/Association agreement to waive such rights. One needs to understand that technically at least the settlement agreement left an important and potentially viable out for Neighborhood homeowners to resolve any disputed amounts believed owed that were not covered by that April '07 agreement. On the other hand, the mere existence of that opportunity evidently motivated the Dixon-Berman board to employ their con scheme against the legitimate interests of the Villa homeowners.

By July ’07, one assumes that Roz Berman found a way to close that door forever, or so she likely assumed. She would do so by devising a scheme to publish fabricated data that would have the effect of defrauding Villa homeowners. The initial scheme was more blatant and straight forward than it was clever. We would have to wait another 6 months to witness the workings of the fraud against the Villa homeowners in a much more cleverly devised scheme to defraud that would confound even observant homeowners. But that’s another story that I’ll not repeat here.

For now at least, the con entailed the publication of fabricated data on Villa Neighborhood reserves. That July ’07 publication and the Villa owners meeting conveyed two important lies for those homeowners to carry back to their homes:

• That there were no more reserve monies due, thereby potentially relieving homeowners of any needless concern over the status of their reserves;  and
• That the Favil West-Kay Dwyer settlement agreement managed to resolve all outstanding reserve issues since that settlement agreement resulted in a net balance of excess reserves, the equivalent of a paid-in-full finding.

Factually, Berman’s declarations on Villa reserves was based on falsified data to portray facts that were not and could never be supported under any accounting principles, notwithstanding Berman’s accounting background. Moreover, the West-Dwyer agreement never claimed to finally settle the Neighborhood reserves matter. And significantly, that agreement made no claim whatsoever on the percent of fully-funded transition reserves resolved as a result of those negotiations. That outrageous claim, false as it was, would later be asserted as a fact by the Dixon-Berman board.

Just how outrageous was Berman’s claim on the level of fully-funded Villa transition reserves? With an unsupported and, frankly, fabricated claim of $300,000 in fully-funded reserves for the Villa Neighborhoods Berman claimed in July ’07 compared to $1.3+ million based on the then available 2006 Reserve Study, that leaves a million dollar difference unaccounted for. To those who might suggest "so what,"  that difference effectively represents the potential of additional monies owed by the developer to the Villa homeowners reserve accounts. While Roz was obviously pleased to report an overall Villa Neighborhood excess in overall developer contributions of about $20,000, after taking all payments and offsets into consideration, actually there was a huge and unreported shortfall in fully-funded transition reserves, even after the payments resulting from the West-Dwyer settlement agreement.

The board officers’ con to fabricate fully-funded reserve data was viewed as necessary if they wanted to falsely demonstrate to the Villa homeowners that no additional monies were owed. On the other hand, had Berman done otherwise and reported honestly what was likely owed based on available reserve study information, the developer would end up appearing to owe the Neighborhoods hundreds of thousands of dollars more, and not as Berman had falsely claimed, nothing more was owed. Roz Berman simply refused to be honest with Villa homeowners. The con to deceive those homeowners was the direct result of her personal failure to those homeowners to convey correct information honesty.
 
Ronald Johnson, 10 July 2009