As we move with Arizona State Senator Farnsworth’s Group on new HOA legislation, we also have elections coming up.
One of the institutions Arizona voters get to decide on statewide is the Corporations Commission.
It was only via the ACC web site in 2008, emanating from a minor dispute over the Crossings HOA in Prescott, that we discovered the “round tripping” one HOA Management Company was doing. In this case HOAMCO, a small local company in Prescott. Round tripping in that they were aggregating HOA deposits under their management into a bank, in this case Desert Hills Bank, which then somehow lent those moneys back to Justin Scott, HOAMCO President, for “other” purposes. A bank which subsequently was bailed out by the FDIC costing taxpayers a “mere” $106million
Having once picked that up, we now see the pattern repeated, not just in Arizona, but nationwide. Another Arizona “HOA bank”, First National Bank of Arizona, similarly cost the FDIC in 2008, but in this case - $862million.
But it gets “better”. Now we see the largest nationwide HOA Management Company, FirstService, doing this on a much larger scale, gathering billions of dollars, investing them in US Bank and then borrowing $21mm from them at the parent company level. Remember these Management Companies are completely unlicensed with no oversight.
The ACC reporting requirement back in 2008, without which we would never have spotted this, required HOA’s to provide a summary balance sheet where you could see bank deposits detailed. This reporting requirement was deleted around 2008,
So, we’ve written to Andy Tobin who, as our state representative back then, and Tom O’Halloran, helped us out on what back then seemed a tiny issue.
To see that letter, copied broadly to the Commission, and aspiring candidates, go to www.arizonahoa.blogspot.com
The Arizona Homeowners Forum
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