Monday, February 20, 2017

Transparency in HOAs

Many people don't realize that the legislators were and have been extremely keen to apply the same principles of open governance to HOA's as to regular government.
To dispel any doubts on this, just click HERE and listed to a short debate in 20011 by the House on Bill 2609. Its enlightening.

Monday, February 13, 2017

HOA Attorneys and HOA Insurers

We had two hearings down at the Office of Administrative Hearings this week. The issue was access by homeowners to HOA bank accounts on a read only basis. So that any homeowner can log in, check things out, but not transact. Whatever the result, there was no doubting that’s feasible. We were not allowed to bring it into evidence, but even CAI advertises this as good practice for fraud prevention. Nor did the bankers turn up. Click HERE
The two cases couldn’t have been different. Six hours of slogging it out with TWO Carpenter Hazlewood attorneys. The usual allegations. Except this time, banks are feeling so “harassed”, they’re closing bank accounts because of “regulators”. The shocking thing of course, the bill for Grayhawk must have run up mightily. All over a $500 filing fee, even though Curtis Ekmark seemed to have forgotten that’s the only award the Judge can order to the prevailing Petitioner.
In the second case, no attorneys for either side, no big deal. Except for FirstService’s attorney –  for a witness, John Kemper, who as Arizona President, seemed not to know much about anything. Although they did drop their objection to the subpoena on the grounds they’re in a foreign country – Salt River Reservation. The Vintage at Grayhawk Board having done their utmost to get records out of FirstService, I dropped that petition, foregoing the filing fee.
But not before I thought I saw the penny drop with the Judge – you mean you don’t have any Board Members signing on the bank accounts?
Finally, in Grayhawk’s case, it was the insurers paying. My guess - $35,000.
See the letter below to the insurers
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Dear (HOA Insurer – see LIST)                                                                                                                       February 13, 2017
I am part of an Arizona homeowners group exposing serious risks to the financial system because of financial malpractice in the HOA industry. But we are also fighting legal terrorism on homeowners by their HOA’s via their attorneys if they dare ask questions, especially about money. See the list in Attachment 1.
You are financing much of this.  In 2007 legislators instigated an Administrative Law process via the Office of Administrative Hearings (“OAH”) designed to prevent disputes over garbage cans escalating, leading to $hundreds of thousands of legal bills in Superior Court, and occasionally foreclosures.
Arizona Superior Court data has confirmed that Court actions since 2007 involving HOA’s and these attorneys numbered 16,744 compared to 150 at the OAH. It also indicates 90% of these stem from HOA’s. So much for Alternative Dispute Resolution. Lawsuits and debt collection, see Attachment 2, are major sources of revenue for these attorneys. The other is defending OAH and other cases paid for by you.
My wife and I are members of 4 HOA’s and big believers in using the administrative process. We have had 5 prior OAH cases, all of which involved transparency issues. The first case we won was constitutionally challenged in Superior Court in 2008 by HOA attorneys. Thanks to the then Senator O’Halleran, the HOA blinked, and withdrew its appeal. Ekmark & Ekmark then “resigned” leaving the HOA to fight for reimbursement from CNA of almost $40,000 of legal fees fighting a simple records request.
Standard practice for these attorneys is to intervene with you on the HOA’s behalf. See a recent case in Attachment 3. They argue this is the start of a lawsuit because an unfavorable Administrative decision compromises a subsequent Superior Court appeal by the Administrative ruling. BUT AN ADMINISTRATIVE HEARING IS NOT AN “ACTION”. The claim is simply enforcement of regulations with the maximum cost being a $500 filing fee. Note this may become abundantly explicit pursuant to two bills, SB-1289 & SB-1072, the latter part of a national constitutional group’s efforts to reinforce the separation of powers. See Attachment 4. The goal being to uncouple completely the OAH process and Superior Court so that any appeal would be close to a nuevo trial. Consequently, the need to defend an Administrative proceeding disappears, if it ever existed anyway. As insurers, you might ask to be notified of such proceedings but, properly worded, you would not be obliged to defend something where you cannot recover attorney’s costs. Please support these bills.
Furthermore, as a banker and risk manager, and with your significant risk to the HOA industry, I would be remiss if I did not alert you to one of the biggest financials swamps I’ve seen working on Wall Street. This affects the 68 million of American homeowners who pay $75billion annually to a totally unregulated group of players – HOA Management Companies acting as shadow banks. See more below.
We’d welcome a dialogue.
Sincerely
John Sellers
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FINANCIAL FACTS PERTINENT TO THE HOA INDUSTRY
$1BILLION was needed from taxpayers via the FDIC in two Arizona HOA banks in 2008. Future risks include:
1.       Failures by certain banks to respect the Patriot Act anti-Money Laundering regulations as Management Co.’s harvest HOA deposits as unlicensed intermediaries create a shadow banking stem. The banks have no idea in most cases who the owners of the deposits are.
2.       FDIC insurance may also not be flowing through to HOA Deposits because Mgmt Cos, acting as mere agents rather than as fiduciaries, do not meet the FDIC’s requirements as stated to us, regardless of the deposit amount.
3.       Management Companies are accepting direct debit authorities from members in their name. This evokes serious risks to the $27 Trillion ACH payment system, in a worst case by ISIS intrusion.
Nationally, this raises the risk of a repeat of 2008.
This is all documented on my personal blog at http://arizonahoa.blogspot.com/p/a.html
We have obtained banking records covering possibly 1,000 Arizona HOA’s. We personally also have three OAH hearings in the coming weeks over the denial of basic banking records. 6 senior HOA Bank Executives and 3 CFO’s of Mgmt Co.’s. have been subpoenaed to testify. For full details click HERE

REASONS WHY AN ADMINISTRATIVE HEARING IS NOT A “LAWSUIT”
1.       The Arizona legislators enabled the OAH process for simple no frills resolution of disputes.
2.       AZDRE and the OAH are part of the Executive Branch. As such, the separation of powers applies:
3.       Numerous consequences follow:
·         The first Amendment kicks in.
·         The petition documentation does not say “Complaint” which would apply to a lawsuit.
·         It says “Petition” as in the “right to petition government”.
·         Anti-SLAPP protections therefore apply.
·         OAH Administrative Law Judges are part of the Executive Branch and not subject to Judicial Branch procedures or discipline in any way.
·         The Arizona Rules of Civil Procedure do not apply, as would be the case in Superior Court.
·         No damages can be awarded.
·         No attorney’s fees can be awarded by the OAH. The Arizona Appeals Court has said so- TWICE
·   Semple vs Tri-City Drywall ruling that an Administrative Hearing was not an “Action”.
·   Brown vs Terravita.

·         If one attempts to enforce an administrative order in Superior Court they will not accept it with a formal complaint being filed.

Saturday, February 4, 2017

To Kill or Not to Kill All the (HOA) Lawyers? That Is the Question

SUMMARY
There have been 16,744 LAWSUITS between HOA’S and homeowners in Arizona since 2007 with 90% of them being initiated by Associations. In the same period by comparison, there have been only 150 cases heard before the Office of Administrative Hearings under the now direction of the Arizona Dept of Real Estate.   This is appalling. Think of the cost and trauma

Arizona Senate Bill 1289 simply confirms what we know already. There is, by existing case precedent, no provision for attorney’s fees to be awarded at the Office of the Administrative Hearings for HOA disputes. But that does not prevent HOA attorneys intimidating by claiming them. Hence this bill for abundant clarity. Or prevent CAI, relying mistakenly on the Magna Carta, to argue that “frivolous OAH claims” by homeowners hurt HOA’s by increasing assessments. When in fact insurers are paying, but being misled into defending OAH cases by describing an administrative Hearing as “litigation” – when it most certainly is not. This is all about attorney’s fees.

For a video of the debate where this bill passed the first committee this week overwhelmingly, click HERE     ABC News also lent its support. Click HERE
To also learn how FirstService is hiding on the Salt River Reservation to avoid a subpoena to testify before the OAH, and how their big city attorneys phreaked out with claims of defamation when compared with Enron, click HERE.
More Shakespeare anyone?
See below details for insomniacs

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From: John Sellers [mailto:jasellers123@gmail.com]
Sent: Friday, February 3, 2017 1:07 PM
To: Senator Kavanagh - Jkavanagh@azleg.gov
Cc:  Bill Sponsors; Senate Government Committee
Subject: SB 1289 HOA Administrative Hearings Attorney's Fees

Dear Senator Kavanagh
Thank you for allowing me to speak yesterday.
In reviewing the video, two brief comments if I may.
  1. I did a bad job of explaining the insurance linkage. The point is that insurers are being induced into defending cases unnecessarily by being persuaded that an OAH Hearing is litigation when I think we all agree it’s not. See the ATTACHED recently obtained via Carpenter Hazlewood on one of the three OAH cases we have pending. Another of their attorneys in another subdivision we own in is amusingly still claiming these records are privileged.
  2. Your comment about “hotshot attorneys”, innocently I know, does a grave disservice to 19 brave firefighters. They are really debt collectors dressed up as attorneys. See ATTACHED. I’m a member of CAI and was told they are looking at hiring Fennemore Craig rather than any of their CAI attorney members. What does that tell us?  

I’m sure they will disabuse me if I misspoke
Sincerely
Copy
Kathe Barnes, Jason Barraza, Kayte Comes, Kevin DeMenna, Ryan DeMenna, Mary Jo Edel, Carolyn, Jeff Sandquist, Vicki Sears, Adrianne Speas, Mark Wade.

Regards
John Sellers
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Dear Senator Kavanagh
Copies: Senate Government Committee & SB 1289 Sponsors
As a member of the Arizona Homeowners Coalition, I wanted to register strong support of this bill and look forward to testifying personally on Wednesday.
BACKGROUND
  1. My wife and I are big believers in using the administrative process. But we had to win the first anti-SLAPP case in California in 2004 to preserve those rights after being sued for petitioning the Contractors Licensing Board over a crooked contractor
  2. We are members of four HOA’s
  3. We have had 5 prior OAH cases and, with one exception, our experience has been good
  4. All our cases have involved transparency issues – no disputes over garbage can colors
  5. The first OAH case we won was constitutionally challenged in Superior Court in 2008 by HOA attorneys. Thanks to the then Senator O’Halleran, the HOA blinked, and withdrew its appeal
  6. Others were not so lucky
  7. We currently have an AZDRE Default Order over HOA books and records.
  8. But our attorneys are now having to enforce this in Yavapai Superior Court, because AZDRE does not have the powers itself to enforce its own orders
  9. There are serious financial issues looming in Arizona HOA’s which could lead to another real estate crisis. See our letter today to Governor Ducey HERE on this, highlighting failures to respect Patriot Act anti-Money Laundering regulations, potential we believe for terrorist incursion into the money transfer system, and possible unavailability of FDIC insurance for HOA deposits.  This is all documented on my personal blog at www.arizonahoa.blogspot.com
  10. Our Coalition team members have painstakingly obtained basic banking records which might cover as many as 1,000 Arizona HOA’s
  11. We are involved in three new OAH cases set in the coming weeks over the denial of some of these basic records.
  12. Pursuant to subpoenas issued, we hope to cross examine 6 senior HOA Bank Executives and 3 CFO’s of major Management Co.’s. Click HERE Taped testimony will be available to the FDIC.  
  13. This option is only available because of the AZDRE/OAH system
SUPERIOR COURT vs OAH: LAWSUITS vs HEARINGS
  1. We just completed last week our compilation of Public Rule 123 Records requests for bulk data by the three Arizona Superior Court systems
  2. The numbers are staggering
  3. Statewide there were at least 16,744 Superior Court cases since 2007 involving HOA’s and members. Click HERE
  4. For court records where plaintiffs and defendants were distinguishable, HOA’s as plaintiffs outnumbered homeowners 9 to 1
  5. In a similar period, there were 150 cases at the OAH where HOA attorneys continue to intimidate by asking for attorney’s fees
  6. So who’s filing frivolous lawsuits???
  7. So this system need improving
  8. Getting these Public Records from Superior Court has been like pulling teeth, as there is no Ombudsman for the Judicial Branch, which, unlike the OAH, which has been a model of transparency
WHAT’S THE DIFFERENCE BETWEEEN SUPERIOR COURT AND ADMINISTRATIVE HEARINGS:
  1. OAH Hearings are not LAWSUITS. That’s a boogeyman invented by attorneys
  2. The Arizona legislators wanted separation in enabling the whole OAH process for simple no frills resolution of piddling disputes without federalizing them
  3. AZDRE and the OAH are part of the Executive Branch. As such, the separation of powers under the US Constitution applies
  4. Numerous consequences flow from that
    • The First Amendment kicks in
    • The petition documentation does not say “Complaint” which would apply to a lawsuit.
    • It says “Petition”, as in the “right to petition government”, one of the fundamental and oldest five tenets of the First Amendment.
    • Anti-SLAPP protections therefore apply
    • OAH Administrative Law Judges, being part of the Executive Branch, are therefore not subject to Judicial Branch procedures.
    • The Arizona Rules of Civil Procedure do not apply as would be the case in Superior Court with a lawsuit
    • The Superior Court will not even recognize the case number of an administrative ruling for enforcement purposes.  
  5. No damages can be awarded.
  6. No attorney’s fees can be awarded by the OAH
  7. WHY?
  8. The Arizona Appeals Court has said so - TWICE
    •  Once in the Semple vs Tri-City Drywall case which decided that an Administrative Hearing was not an “Action” (or a lawsuit) and therefore no attorney’s fees could be awarded.
    • Again in the Appeals Court last year in Brown vs Terravita
  9. This does not prevent HOA attorney firms intimidating by claiming them, even though they know they can never be awarded.
WHY ALL THESE ATTORNEYS COSTS AT THE OAH – IT’S THE INSURANCE STUPID!!!!!
  1. The typical tactic of HOA attorneys is to scare the insurers and Boards with the bogey of a “lawsuit”
  2. Based on amassing case documents, these attorneys are mostly legal terrorists and debt collectors posing as attorneys. See our submission to the Arizona debt collectors Association HERE
  3. Even CAI Central Arizona will not use these attorneys as recently discovered, even though they are Board members of CAI
  4. The HOA attorneys argue an unfavorable OAH result against a homeowner might induce them to appeal
  5. The result – if you don’t defend the OAH case now, you compromise the eventual appeal Superior Court proceeding
  6. So, thousands are being spent financed by insurers probably trying to do the right thing
  7. Estimates of $29,000 per OAH case
  8. HENCE - Our approach to the INSURERS. Click HERE
Recommendation
Pass the bill to enhance the role of the OAH in simple dispute resolution procedures
Please also consider some suggested amendments supported by our Coalition:
  1. Extend Arizona’s anti-SLAPP protection to homeowners petitioning their Boards. Click HERE for text
  2. Add enforcement rights to give AZDRE the option to enforce its own orders. Click HERE for text
  3. Amend ARS 14-1371 to allow the Ombudsman’s Office to intervene with HOA’s but only for transparency issues. Click HERE
Regards

John Sellers