The CotoBuzz Journal, Community Journalism

Another CAI Myth Bust - The Case of the Laguna Woods Village Dueling Lawyer Letters

According to its website, the Community Associations Institute (CAI) is an “organization dedicated to fostering vibrant, competent, harmonious community associations. For more than 30 years, CAI has been the leader in providing education and resources to the volunteer homeowners who govern community associations and the professionals who support them”.

Indeed, the CAI is an influential trade association and special interest group, dominated by lawyers and community managers that petitions for legislative beneficence for its members. According to Evan McKenzie, the author of a book critical of common-interest developments, the CAI has been able to shape legislative and judicial policy making, prevent meaningful regulation of CID activity, and keep the discourse on such matters largely private.

The CAI in undated article titled Community Association Conflict, available online from the Community Associations Institute (CAI) asserts that “Rather than David-versus-Goliath conflicts, as occasionally portrayed in the media, disputes in community associations are disagreements among people. Differences of opinion among homeowners, or between individual homeowners and their community associations, often reflect the challenge of balancing the preferences of the individual homeowner with the best interests of the community as a whole”. To underscore this point, the most frequent answer to homeowner’s complaints we often hear from public servants is: “why don’t you throw the bums out”? Part of the answer is provided by McKenzie “in the absence of meaningful legislative regulation or oversight, the idea of residential private government later dominated by lawyers and property managers through CAI has resulted in the institutionalization of a heavy–handed managerial focus in CID governance.” He says.

Our own research shows that McKenzie has a point. In the piece titled Lowering the Bar – A Kinder Gentler California Bar we conclude that in most complaints against attorney’s representing residents in common interest development communities, the California Bar “ even when the complaints have been taken all the way up to the Supreme Court, the Bar's typical response is “If you file a lawsuit against the attorney and you win, we may then get involved” – and this is precisely what property management companies and CAI prompters and supporters are counting on – residents in most cases are either afraid and or do not have the means to mount a protracted legal battle, whereas a property management company aided and abetted by a board of directors can turn a common interested development community into a private fiefdom and an ATM with endless funding.

Just this past Friday, the past president of the Villa Point Condominium Association in Newport Beach proved how easy it is for the CID establishment to hide theft: Peter Kontos was sentenced to two years in state prison for embezzling over $500,000 from a condominium association To hide the theft, Kontos simply recruited busy homeowners to sit on the Board of Directors with him, knowing they would not be able to attend meetings. In addition to the theft of association funds, Kontos caused thousands of dollars in damage to the association's property by personally undertaking unauthorized property improvements, which later had to be fixed by the association.

The Coto de Caza board of directors in defiance of the 2006 California legislature initiative aimed at bringing direct democracy to common interest development communities continues to hold on to an arcane delegate system critics call most corrupt “Let’s face it. CZ’s delegate electoral process is about as corrupt as exists in Communist China, Vietnam and Cuba. We have no democracy in Coto de Caza, only elections that have brought us three dues increases in five years and Reserves at less than 30% when they should be at 70% or higher. Facts are facts and those are the facts. And, those feeding at the trough will continue to support the current system” writes Joseph Morabito, a successful entrepreneur and former member of the CZ master association board of directors.

It is generally assumed that due diligence and best business judgment is used in the dispensing of association affairs, contrary to the use of unprecedented legal resources to squelch free speech, or to spend $2 million/year for a new security company without due diligence, or to fire the CHP, then “forget” to certify streets for law enforcement pro-active traffic patrol, to fire a security committee chairperson for refusing to place personal priorities over safety. These actions by the Coto de Caza board of directors have not only led to three dues increases in five years and reserves at less than 30%, the fourth website in five years, but also the tragic death of two residents directly traceable to traffic enforcement, or lack thereof.

Hans Strupat, publisher of SaveMarinaHills.org noted that the board of directors approved audited financials with Keystone, the property management company's approval, even though he had many mostly obvious but unanswered questions.

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In Laguna Woods Village, after numerous complaints about fiscal mismanagement, including allegations of misuse of credit card and charges of improper incentive plans for the property management company, including questionable sale of corporate assets, the most vocal critics have found that it is indeed very difficult o fight city hall. Katie McDaniel, Third Mutual director was politically assassinated -

removed without cause. Ms McDaniel continues to fight the move. In this case, the Third Laguna Hills Mutual filed a Notice of Appeal of the Superior Court order issuing the preliminary injunction preventing the board from filling Ms. McDaniel’s seat; Also, the Third Laguna Hills Mutual filed a Motion to Stay Discovery pending the appeal. The motion will be heard on July 20,2009 at 1:30 p.m. Whereas Ms. McDaniel’s attorney has filed three Motions to Compel attendance at deposition against three members of the board of directors of Third for failing to attend their properly noticed depositions. These motions will also be heard on July 20, 2009 in Department C31 of the Orange County Superior Court. The court has set a settlement conference with the parties on July 20, 2009 at 9:00 a.m. in Department C31 of the Orange County Superior Court.

Laguna Woods Village United Mutual director Michael Curtis has been on a fiscal transparency crusade for some time with predicable consequences. The property management company in efforts to discredit him, has gone to extraordinary lengths, including efforts to get him in trouble with his employer. That case ended up being settled in court. Mr. Curtis has been asking for documents for the last 5 years from the Laguna Woods Village boards and the managing agent, PCM. These documents have been denied Recently, Mr. Curtis has been leading a recall effort to remove four directors: Foster, McNulty, Rubin and Wilson. Such efforts seem to be yielding some fruit despite the existent machinery being mobilized to mislead and or misinform. June 10, 2009 Mr. Curtis writes to fellow director Marvin Rosenhaft " Marv - As a Director (really anyone, including PCM), you cannot use resources of the community, including petition signatures and their personal information, to interfere or tamper with the will of the petitioners, in an effort to stop this recall (ref Civ Code 798.50-52). The petitioners did not sign the petition and so agree to be solicited by you or PCM to change their mind. It is clear you are violating Corporations Codes by using your position as a Director to organize people to "get those people's names off the petition" as you said - what ever that means (Going out to break a few knee caps are you?) What a stupid remark for you to make. Both you and PCM must stop your interference with this election". To PCM Legal Affairs Manager Cristine Tarp, Mr. Curtis writes "Cris Trapp - Do you understand these issues and my requests? 1) Depending on your response, we may move to stop PCM's interference and misuse of petition records through a court order... I demand that you stop PCM's involvement with this recall and also advise directors to stop their interference with this recall". Mr. Curtis has also been keeping tabs of TrueBallot, the company managing he re-election voting process: "Verification is not a lengthy process, ...I inquired of Cris Trapp, via email, the status of verification. At noon on June 11th, Cris Trapp sent out a 1-sentence email saying the petition was qualified. A few minutes later, I sent a return message asking for specifics regarding the verification count. My concern was that PCM had been actively helping opponents of the recall to possibly remove petitioner's names (ref United Board Meeting video), and also had planted a paragraph in the Laguna Woods Globe soliciting petitioners to remove their names by calling PCM. So, it was not clear just exactly how many names remained on the Petition. Although required by the law and fairness to all sides to respond, Cris Trapp did not respond further with any details," writes Mr. Curtis

Peter Nitschke, Mr Curtis' attorney, in a cease and desist letter to Bill Hart, United's legal counsel writes, "as you well know, the use of United's assets and resources to engage in electioneering activities violates both the California Civil Code and the California Corporations Code and must immediately stop". Then on June 25, because of the questionable activity surrounding the process is prompted to write a rules letter to clarify the ground rules in effect for the Town Hall Meeting scheduled for tomorrow.

For his part, Bill Hart responds with a lawyer letter of his own echoing charging Mr. Curtis of engaging in "a daily series of vitriolic, rude and possibly defamatory communication with individual United Board members, PCM employees and independent contractors in an apparent effort to exercise control over the Recall procedures that are currently under way." So if, Mr. Curtis communication is characterized as vitriolic, rude and defamatory" by Mr. Hart, how does he characterize the behavior of GRF president Erwin Stuller and other board members toward Mr. Curtis? We already know how uber-sensitive PCM employees are, so we are not going there.

Perhaps CAI Lawyers are right: You cannot make 100% of the residents in a CID environment happy, so forget about it. On the other hand, this clearly shows that given the same facts, people end up with different conclusions. For instance, there has not been a successful recall in Mr. Curtis community for over 45 years. CAI attorneys may be quick to point out this fact as evidence that CAI has been successful. Others like Mr. Curtis will point out that contrary to the CAI 's assertion that the David-versus-Goliath conflicts, as occasionally portrayed in the media, disputes in community associations are merely disagreements among people, these incidents are not occasional in nature, and these are usually between disgusted residents and the CAI industry.

For instance, so sure was Mr. Curtis of his case that he thought the recall process would be swift, successful, relatively inexpensive and painless. It has been everything but, on all counts. If you want to contribute to Mr. Curtis's Legal Defense Fund, contact the writer.

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Visit the Recall Legal Defense Fund Website: Our message is simple:

PCM admitted to millions in secret payouts, Boards have refused their legal duty, Members want their money back with interest and fees, and Members want the PCM "make work" projects to stop so our 2010 assessments go down.