Tuesday, July 03, 2012

Hey, Hey, Ho, Ho, Coto de Caza’s Varo Board must go


Coto de Caza's Declaration of Independence, July 4, 2012


 



Posted by CotoBlogzz    


















Coto de Caza, CA - The June 2006  issue of the CotoBuzz Journal includes a letter to the CZ Master Association members from former CZ master Board of  directors Joseph Morabito reading in part:   


In July, 2006 the new state law governing HOA elections will take effect.  That means that shortly thereafter, the Board should send out information concerning the mechanisms the Board intends to implement in 2007 to comply with this law.   I believe this law requires automatic revision of our governing documents to comply with the law as has occurred in the past when our governing documents conflicted with a new law.  My hope is that our suppliers and the Board will not attempt to play games with this new law trying to retain our Delegate system, cumulative voting etc. when the law clearly requires direct popular elections for HOA's after July, 2006.  If there are any games, I believe we should organize and raise money to go to court to get compliance.  I certainly would be willing to start writing checks because I believe direct popular elections for CZ are critical.  So, I would say that by no later than the end of September, we should have information from the CZ Board concerning implementation of this new law so we can begin to properly get ready for next year's election.”   



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While hope’s eternal Mr. Morabito’s wishes have yet to be realized and in fact, it is worse.  In the April 2008 issue of the CotoBuzz Journal we authored a piece titled   Coto de Caza's New Math in 2008 Elections where we noted:

I am familiar with a number of advanced math concept – this one I cannot figure out.·         If 70% of the members who voted support Direct Popular Elections, and·         69% of Delegates who voted support Direct Popular Elections and·         If  the majority on the Board supports Direct Popular Elections, and·         The Coto de Caza (CZ) board of directors supported-media determined everything was above board, even though critics say the reported did not get the story right 
"The story that I saw from Mark Eades (Orange County Register )  is really incorrect.  He did not get it right.  What he should have said is that in spite of overwhelming support for Direct Popular Elections in Coto, the developer installed governing documents, which were intentionally designed to disenfranchise CZ Homeowner/Members prevented the passage of the initiative.  He should have gone on to report that 70% of homeowners who voted were in favor of the amendment and that 69% of Delegates present also voted to support the Amendment", writes Joseph Morabito, former member CZ master association board of directors”



Including these  rhetorical questions:
 Why did the Direct Popular Elections amendment failed Is this some sort of New CZ Math?  Is this incompetent legal counsel?  Is it an incompetent board?For a simple minded resident if the figures above are correct, it would have been rather simple and inexpensive to compose a Direct Popular Elections amendment without any delegate involvement – yet this was not done

Mr. Morabito opined:


Real Simple.  The Amendment failed because that  Bob Varo led a small group of Delegates to oppose it.  And that cabal was just enough to have this particular vote fall below 1,787 votes cast by the Delegates that would have been needed to pass it.  The vote was 1,381 in favor, however it is critical to understand that just a few more Delegates at the meeting would have done it.  That is why the Board should schedule the DO OVER to get it done during the May election in keeping with the will of the people and to avoid the litigation that will otherwise occur.  Joseph Morabito, former member CZ master association board of directors


Photo courtesy  Ed Caruso



The short story is that those of us concerned with the Varo stranglehold on the CZ community have tried reasoning, begging and pleading for the board to abide by state law – All has failed, and in fact, the Varo board has consolidated its power by extending the delegates’ term from one to two years.  Without other viable options,   we have notified the CZ board of our intent to take up the issue with the Small Claims court.  We are  planning to ask the Court to invalidate the recent CA Master Association’s  election for the board’s failure to comply with SB-61, SB1560 and  failure to abide by the business judgment, which has allowed Bob Varo et al to rule the community with impunity for over ten years.

Although optional under Corp. Code §7615(a), the Davis-Stirling Act makes cumulative voting mandatory if called for in an association's governing documents. Civil Code §1363.03(b), the spirit of  SB-61 and SB-1560 is for direct popular election of the board of directors.

This is how cumulative voting works:


If there are 5 directors who serve 1-year terms, then all 5 come up for election each year. Under cumulative voting, members have 5 votes which may be distributed in any manner they choose (so long as no more than 5 votes are cast):
5 votes for one candidate, or
4 votes for one candidate and 1 for another, or
3 votes for one candidate and 2 for another, or
2 votes for one candidate, 2 for another, and 1 for a 3rd, or
1 vote each for 5 candidates.


According to all the experts we have talked to, ( see for example )  not only there are no true benefits to cumulative voting but they also recommend associations amend  governing documents to eliminate cumulative voting to make elections easier to conduct and to makes it easier to replace dysfunctional directors. 

Also, consider that  there is not a single municipal, county, state, or federal election that uses it. Cumulative  voting was intended for stock corporations so small shareholders would have a voice. Otherwise, companies would be completely dominated by large shareholders. Cumulative voting is automatically included in a new homeowners association's bylaws so as to give owners a voice when the association is controlled by the developer. Once the developer is out of the picture, there is no need for cumulative voting.

The problems with cumulative voting far outweigh any theoretical benefit related to minority interests. Cumulative voting makes it easy for disruptive, fringe, and single-issue candidates to get on the board. Moreover, once a bad director has been elected, cumulative voting makes it almost impossible to  remove that director from the board. With conventional voting, i.e., casting one vote for each candidate, candidates must seek a broader base of support thereby increasing the likelihood that more moderate, business-like candidates are elected. If a director is dysfunctional out of control, a conventional (non-cumulative) voting system allows the membership to more easily remove and replace that director.

Should the board not reconsider its position on direct elections, we  shall make the argument to CZ members  that it is time to remove the entire CA Master Association board:  The Varo boards, aided and abetted by Keystone Pacific and Cane, Walker & Harkins LLP,  have been operating under the assumption that they are beyond the jurisdiction of local, regional, state and federal laws and regulations, for example – that is being reckless and dysfunctional.  Plenty of specific examples to illustrate the latter point can be provided.

While removing individual directors may be troublesome, particularly under the cumulative voting rules, removing the entire board is fairly clear-cut because cumulative voting is not factored into the analysis. It is a straight up or down vote.


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