Hidden Valley Lake Association Homeowner Association Fraud: Foreclosure fraud, contractor kickbacks, skimming, breach of fiduciary duty, deception re Assn. operational & financial condition Hidden Valley Lake California

The Members of Hidden Valley Lake Association (approx. 3,200 property owners) have been the victims of continuous financial fraud and injustice since at least 2000.  These acts of wrong-doing have materially and substantially injured the Members.  This injury has taken the form of misappropriation and misuse of millions of dollars of Members assessment dues, deception of Members regarding the overall Association financial and operational conditions, and Breach of Fiduciary Duty (CA Corp. Code; Davis-Stirling Act).  There is a very large body of evidence, well-documented and circumstantial.

Together, these indicate an extremely high likelihood of wrong-doing, thus, appropriateness for investigation.  We further believe it can be validly asserted that these factors cannot be dismissed as simply due to ignorance, lack of ability, or beyond what could ordinarily be expected in terms of business-judgment or due diligence.  The chronic failure of normal due diligence to correct these problems, in and of itself, is singularly noteworthy, and invariably points to willfulness.

Critical irregularities in accounting and fiscal controls:  Lack of food & beverage inventory controls; Inadequate controls on Assn. credit card usage; Excessive "Golf Welfare"; Directors/Managers chronically NOT given full access to financial data; Investments procured through "friend" of a Director; Recent Controller/Dir. of Admin., reportedly purchased four (4) foreclosures by blocking owner efforts to salvage their property, then obtained rehab. construction loans on each, then declared bankruptcy in each instance (four times) (source:  common knowledge); Three (3) years of sales taxes not paid on Food & Beverage Ops. in early 2000's, resulting in fines; Acceptance of “cash” in numerous aspects of Association operation until 2015; 2014 Auditor had to reverse-engineer calculations on several past budget categories in order to determine how they were calculated:  Because past Controllers did not keep record of methods used; Chronic cash shortages in 4th Qtr. compensated by borrowing from reserves, without ever correcting the root problem; Recent Dir. of Admin., misused maintenance/repair funds by only partially completing planned projects, thus creating end-of-year left-over monies that she used to give herself and selected other employees discretionary bonuses; Historical use of hand-written receipt-book until 2015.

Major irregularities in delinquent accounts:  $569K under-reporting of delinquent accounts (2014 Audit); 160+ previously unknown delinquent assessment files found (Spring 2015); Chronic lack or inconsistent use of standard collection methods; Serious problems with assessment delinquencies going back to at least 1994.

Reserves under-funded by $10-13 Million (Browning Reserve Study 2015):  Repeated false claims by several Treasurers/Controllers of adequate reserves.

History of audits not including Accounts Payable or Accounts Receivable. 

History of questionable contracting procedures:  Reports of one manager having a “shell corporation” that obtained contracts with HVLA, then sub-contracted the work at lower costs and split the balance between said manager and sub-contractor(s); Lack of review of contractor performance prior to 2015; Multiple reports of contractors paid for excessive/padded billings; Multiple reports of cronyism in contract awards; Pattern of revealing other bids to "favored" contractors, allowing them to under-bid and secure contracts; Non-favored contractors discouraged from bidding; Project management often assigned to under-skilled staff; No RFP’s at times; Board Officers making unilateral plans with contractors; Board Committees shut-out of process; $65K loss (est.) over past 5 years due to failure to explore competitive pricing of phone/internet services (discovered 2015); Frequent use of uninsured/unbonded contractors.

Lack of adequate Personnel Standards:  Extensive, repeated nepotism in staff hiring; No performance review standards; No written salary scale; No written job descriptions; Chronic retention of under-performing managers/supervisors; 2009-14, several middle-management staff “allowed” to abuse their authority, e.g., lax work performance, abuse of subordinates; 2014 - two middle-management employees changed the locks on their own office doors to avoid being questioned by the GM about their inappropriate conduct; Lack of routine drug testing; Lack of routine background checks; Chronic failure to follow chain-of-command by many managers; Reports of two specific managers being socially/emotionally abusive to many employees; Inadequate/incompetent performance of HR Mgr. noted by many knowledgeable, well-informed individuals on staff, past Boards and within Assn. membership.

Expenditure of at least $450K on just architectural/engineering plans for various buildings from about 2001 to 2014, with no actual construction done.

Multiple reports of:  $10K bonuses given to several managers by recent GM (March 2014); 27 weeks of payroll for an actual 26 weeks work (2013 and prior); Routine acceptance of padded contractor billings; Highly questionable credit card receipts, e.g., one claim, $200, "gas" (2014); Reports of funds allocated for amenity repair but work not done; Equipment and supplies purchased with Assn. funds and earmarked for Assn. use, but later appropriated by employees for personal use/possession; Insurance being purchased through “friends” of managers and directors, with subsequent discovery by one GM that said insurance was inadequate for Assn. needs; Additional worker’s comp. and additional liability insurance being purchased by one recent manager just prior to a relative’s resignation and that relative’s subsequent filing of a W/C claim.

Deception with the Possible Intent to Defraud re the Actual Fiscal/Operational Condition of the Association: 

From 2000-2014, frequent misleading, inaccurate and false claims made by Treasurers/Presidents at open Board Meetings and in Official publications re the Assn. being in "good financial health", and, re "improvements" in various aspects of Assn. fiscal functioning/performance.  These repeated messages directly led the majority of Assn. members to assume that there were few/no problems and that those that did exist were being resolved.  Furthermore, the fact that so many other Assn. members were able to “see” that something was amiss, leading them to research further argues against the notion that awareness of Assn. problems was beyond ordinary business-judgment or ordinary due diligence.   Seven (7) specific individuals were consistently in positions of “authority” during 2010-14.

Continuous operation, for 20+ years, of private/public "businesses" (Golf, Restaurant, Bar), that incurred enormous losses annually - $9.6Million in losses from 2000-14 - without any major revision of business-model and without any major, significant, successful endeavor toward narrowing the enormous expenses-revenue gap.  In addition, during this time repeated discussions, official and unofficial, occurred among staff, Board and Assn. members re the need for changes to the business-model as well as the need for narrowing the expenses-revenue gap, nevertheless no significant, successful change-actions ever actually took place.  Furthermore, and again, the argument that somehow full awareness of this and/or the ability to make meaningful changes was beyond what could be expected from ordinary business-judgment or ordinary due-diligence, is completely fallacious.

Gross neglect of amenities for 20+ years (direct violation of Davis-Stirling Act) allowed to remain largely unchallenged until 2015.  Meanwhile, during this time, many official publication stories attested to "how nice" all the amenities were.  Again, awareness of this or the capacity to make meaningful changes cannot be deemed beyond the abilities of ordinary business-judgment or ordinary due-diligence  -  10+ years of denied requests from Lake Committee re sediment removal; Marina dock left in disrepair for at least 2-3 years - major ins. liability issue; Equestrian Center facilities left in gross disrepair for years; Need for “Youth Center” discussed since at least 2003 without any significant action until 2015; ALL amenities allowed to deteriorate, some beyond repair; Repeated "upgrades" made to entry-gates, e.g., 1998 major upgrade, with claims such as, "HVL now has the #1 gate security system in California…"  By 2015 HVLA still had marginally functioning gates, e.g., 2015 IT Audit revealed that entire IT system had antiquated technology, was unreliable, wired inappropriately and had an insufficient firewall; Major, toxic mold condition in a major building identified in 2007, never properly completely corrected; recurred in 2014 requiring facility shut-down for repairs.

Other – Reports of collaboration among two specific managers and several other past employees to submit fraudulent W/C Claims, and/or Unemployment Comp. Claims, e.g., calls were reportedly made to other employees asking that they join in the plan; Requests for financial docs. denied or obfuscated repeatedly; Requests for other Assn. documents denied or obfuscated repeatedly; Complaints of election irregularities year after year without investigation, despite highly questionable election data results; Chronic lax and inconsistent enforcement of CC&R's (One particular Environ. Control Mgr. from 9/03-2/15); Same Mgr. plus EC Committee Chair obstructed EC Committee functioning on multiple occasions by making and implementing plans on their own (i.e., without the Committee); Reported concealment and/or destruction of Assn. documents/files by specific ex-staff in order to hide their wrong-doings; Repeated denial of member vote from at least 2003 onward (despite multiple requests) on major capital construction, e.g., replacement of Hartmann Bldg., Community Center (old Country Club) and Admin. Bldg.; Human Resource Director recently “re-accepted” to her former position after reportedly resigning or being terminated, and, despite multiple reports from multiple sources over several years regarding her incompetence . 

Repeated comments re problematic situations within the Assn., made in official publications and at public Association meetings, with minimal successful attempts to significantly correct:  Problems in communication between Board and Membership; Problems with staff morale and professionalism; Problems with ambience and food quality in Restaurant; Problems with "Board stability"; Amenities being neglected; Prolongation and excessiveness of golf, restaurant and bar losses.

Social media abuse of recently departed GM by several Assn. members.  Abuse was well

beyond "Free Speech" norms, e.g., threats of harm, printing of private phone number, email, photo of home and photo of deceased (by 32 years) x-husband.  No action taken by HVLA.