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September 2008 ISSUE
We do not make jokes, we simply watch the LA Times, the Orange County Register and CID/HOA board of directors and report the facts!
LETTERS
Public Relations for LWV or for Service Providers - The Golden Age or the Golden Parachute?
August
13,
2008
By
LWV,
Maxwell Bendarien
PCM
of California, the management company for Laguna Woods
Village, demanded management fee increases which
raised the fee from $363,700 in 2006 to $654,100 in
2008. In
just two years, the management fee has increased by
79.8%. What
could possibly justify this sort of increase when the
annual inflation rate was running just above 2% over
the same time frame.
Of course PCM has a perfectly good rationale
for this increase.
PCM’s explanation?
“The largest
portion of the increase in the management fee is due
to the additional costs that are incurred by PCM of CA
due to lawsuits and community activists exercising
their rights. The increase of almost $200,000 was
negotiated by PCM of CA to cover increased legal fees,
increased insurance premiums for Errors and Omissions
(E&O) insurance, and Directors and Officers
(D&O) insurance, and increased public relations
related costs, ”
according to statements contained in a local newspaper
- I’m sure that the fact Mr. John’s, the
managing agent for LWV, recent divorce settlement, had
no impact on his need for additional funds.
If
we rationalize this statement step by step, we must
first ask what lawsuits are pending.
This is a difficult question since the boards
of LWV have repeated that there are no
lawsuits pending.
If this is true, then what lawsuits are
anticipated? And,
of course, why are they anticipating lawsuits?
Is this a tacit admission of malfeasance and
impending judgment?
Is there some conspiracy that would prompt a
RICO investigation?
It simply boggles the mind to speculate.
Next
we must consider community activists who are
exercising their rights.
I believe that this refers to increasing
requests for financial documents.
Several directors have stated that they are
often refused access to documents or they receive them
so heavily “redacted” that the documents they
receive are useless.
You could argue that residents might only have
access to heavily edited documents (although that
flies in the face of at least the spirit of Davis/Stirling
and the governing documents of LWV.)
But directors are covered by confidentiality
requirements and should have free and full access to
all financial records.
If PCM actively interferes with free access,
they are preventing the directors from exercising
their fiduciary responsibility.
In fact, this is why Davis/ Stirling
specifically grants them free access to these records.
Has PCM created a different state with some
unique set of laws?
Why
is there a large increase in errors and omissions
insurance? If
increased requests for financial documents were
coupled with anticipated lawsuits, the logical
explanation would suggest that PCM is trying to hide
the horrendous lack of oversight that past mutual
boards have exercised—giving PCM free rein over
spending up to and including haircuts, lavish gifts,
parties, and questionable “business meals” that
are approved without question. That would suggest an
increase in insurance rates is a logical consequence.
It
is certainly reasonable to say that LWV needs
increased public relations.
Several residents have pointed out that while
Leisure World was a readily recognized senior CID,
Laguna Woods Village has abandoned that recognition
and has had virtually no presence on the internet.
Up to a month ago, it was virtually impossible
to bring up LWV by searching for senior communities or
retirement communities.
This is a readily identifiable current need.
However, the only entity that required better
PR in 2007 and 2008 was PCM which has increasingly
come under fire from concerned residents demanding
access to financial records.
PCM suffered serious damage to its image when
two years of credit card records showed the extent of
co-mingled funds, haircuts, Starbucks visits, On the
Boarder meals, Las Brisas fetes, premium Angels
tickets, $400 earrings, and on and on.
PCM, though, is a for-profit corporation while
the housing mutuals are nonprofits. Rumor has it that the recent attempt to survey residents’
satisfaction with PCM turned out so abysmally that the
survey was scrapped over a technicality.
All of this questionable activity has resulted
in PCM hiring a full time PR specialist
(Rasmussen)—using resident member money of course.
One
must note a few additional fascinating aspects of this
increased management fee.
The increased fee is now totally controlled by
PCM, a private for-profit company owned by Disbrow and
Olsen. PCM
has steadfastly refused to allow access to details of
employee salaries due to privacy rights and the
private nature of PCM itself.
Thus we can expect less oversight of management
expenses which now include staff support and,
according to Janet Price at a committee meeting, is
another term for parties, free lunches, gifts, and
incentives, To
make matters worse, unspent budgeted monies used to be
carried over to the subsequent year’s budget and
used to reduce any increase in assessments.
With the monies buried under management fees,
spent or unspent, this money is now a gift to PCM with
a no-return stipulation.
The
quandary for concerned LWV residents and concerned
directors is the near impossibility to oversee PCM.
In addition to indecipherable records, PCM
regularly moves budgeted items from one budget line to
another. Thus
it is impossible to look at budgets from year to year
and accurately review each expense.
It appears reasonable that some expenses will
increase while others decrease, but moving expenses
from account to account effectively hides the
activity. It
would take a forensic audit to decipher the actual
transactions, much less determine if they are usual
and reasonable in accounting terms.
And this does not address issues such as the
many for-profit subsidiaries of PCM and their
financial involvement in virtually every operational
area of LWV from internet services to real estate.
It does not address the question of whether PCM
is running subsidiary businesses out of the LWV
Community Center, rent-free, which are not support
activities for LWV.
Nor
does it address the apparent violation of California
Civil Code 1363.2 which states that all moneys
deposited by the managing agent must be covered by
insurance provided by an agency of the federal
government. Of
course this last may be petty, but with the recent
failure of two area banks, it would seem that
fiduciary responsibility and prudence would dictate a
more conservative approach.
But then again, it’s not as if it were
PCM’s money; there is always more where that came
from—out of our pockets.
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