The 2010 Sun City Anthem Falsified Records Cover-Up
I recently had a chance encounter with former board president Mike Dixon while shopping at Vons. Mike said he observed that I had been quiet recently, suggesting to him that I thought all was well with this year’s board. While Mike was right about my publishing frequency, there continues to be a number of important concerns. One such issue was this board’s effort to cover up their prior wrongdoing.
To place this cover-up matter in perspective, the wrongdoing referred to is currently the subject of the state’s ongoing investigation into alleged financial wrongdoing involving the disposition of Villa Neighborhood reserves. That occurred under Mike Dixon's watchful eye. This article, however, does not address that matter. What this article addresses is the actions of the 2010 board in their efforts to cover up that prior wrongdoing.
So what action did the board take to cover up their wrongdoing? The answer is: nothing at all. But, as you will learn, doing nothing is often the very nature of a cover-up.
What exactly is a “cover-up?”
Briefly, a cover-up is an attempt to conceal evidence of wrong-doing or other embarrassing information by people in authority who abuse their power to avoid responsibility for their actions. What's important to understand is that the most common form of cover-up is one of non-action. It is the conscious failure to release incriminating information. This type of cover-up is often justified by the motive of not wanting to embarrass the wrongdoers or expose them to face the consequences of their actions or even the belief that the cover-up is justified by protecting the greater community from scandal.
When did the cover-up start?
On March 11, 2010, the board voted to approve the award of a contract for the 2010 Reserve Study to Association Reserve Consultants, Inc., or ARC. Likely unaware to a majority of board members, that routine act signaled the start of the cover-up, although some may say it was the decision of the board to conduct the 2010 Reserve Study. The precise date is unimportant. What is important is that the award to ARC had the effect of perpetuating an ongoing fraud on Villa Neighborhood homeowners. How come? The award resulted in ARC’s production of a reserve study that relied on 2008 reserve data that had been deliberately fabricated to portray a critical reserve measure for Villa Neighborhoods that was not merely false but was also materially significant. The false data that was board generated affected the figures for the size of 81 Villa duplex buildings needing exterior painting.
As required by statute, the board provided ARC with a schedule of Sun City Anthem assets, in this instance, consisting of a copy of the 2008 Reserve Study. As a result, the 2008 Reserve Study formed the basis on which the reserve specialist ARC relied in the production of the 2010 Reserve Study. The completed 2010 Reserve Study was unanimously accepted by all seven members of the board on September 23, 2010.
The falsified database.
Few would attach any significance to the fact that ARC utilized the same database that was reported in the 2008 Reserve Study. Ordinarily, that would not pose a problem, assuming that the database upon which the 2010 RS relied had been accurate. However, in case of the four reserve studies for the Villa Neighborhoods, the 2008 RS was far from being accurate. In fact, that database had been substantially altered, actually falsified through the efforts of Jack Troia and Roz Berman. As to why they falsified the financial records of the association, that subject has been covered elsewhere in some detail. What is important here is that Jack Troia and Roz Berman had knowledge of those past events and they as board directors in 2010 chose to do nothing to correct the record for the purpose of the 2010 Reserve Study.
Failure to perform financial and fiduciary duty.
Knowing that the schedule of assets on which ARC relied had been fabricated in 2008, the 2010 board had a financial and fiduciary duty to inform ARC that the schedule of assets relied upon had a material error. The board’s failure to notify ARC of this error constituted not merely a breach of fiduciary duty but also gross financial malfeasance that was contrary to the business judgment rule, a refuge that the board can fall back on to justify bad decisions. The BJR does not justify the falsification of association financial records. The board simply lacked discretion to ignore the fact that there was no data to support the conclusion that the size of a Villa building had suddenly and without any supporting documentation changed from 5,715 sf. to 3,865 sf., thereby throwing all financial data resulting from the use of 3,865 sf. out the window.
With knowledge of wrongful prior acts.
That key board officers Rosalyn Berman and Jack Troia knew that the reserve data had been falsified was well known since they were the ones in 2007-08 responsible for initiating and implementing that fraudulent change from 5,715 sf. to 3,865 sf., when Roz Berman was vice president and Jack Troia was in charge of the 2005 Reserve Study Task Group. That Group met publically in 2008 through March.
Self-interest is no justification for not performing one’s duty.
One can argue that Troia-Berman had no desire to uncover their prior scheme to subvert the “Look-Back” and 2008 Reserve Studies in the case of the Villa Neighborhoods. While Troia-Berman had a self interest in not making such disclosures, that fact did not relieve them from the duty to correct the financial database for the planned 2010 Reserve Study.
Perpetuating financial mismanagement having a substantial impact on Villa homeowners is not a compelling or sufficient reason to ignore their fiduciary and financial duty. Are we to understand that it’s OK to doctor financial records in 2008 and then two years later proceed by omission to cover up the crime of doing so?
Ron Johnson, 7 January 2011