The CotoBuzz Journal : Laguna Woods GRF on Notice

LETTER

President Lloyd Foster

Golden Rain Foundation

Sir,

I’ll make this very short.

I respectfully suggest that you and your Board read Civil Code 1357.130. Notice of rule change. You can find it in the Condominium Bluebook page 118.

This section states that the Board of Directors shall provide written notice of a proposed rule change to the members at least 30 days before making the rule change. The key word here is WRITTEN. This was not done.

Civil Code 1357.110.Validity An operating rule is valid and enforceable ONLY if all the following requirements are satisfied.

(a) the rule is in writing.

The following statement by staff is wrong.

Legal advice from a non-lawyer?

Staff recommends that a motion be made and seconded to accept the resolution and allow discussion to ensure that the resolution reads to the satisfaction of the Board. Staff then recommends that a Board Member postpones the resolution to the next available Board Meeting no less than 30-days from the postponement to comply with Civil Code 1357.130. (there is nothing in 1357.130 about postponement)

Based upon the above, I suggest that this resolution is invalid and unenforceable.

Joe Fischler

Editor's Note:

State bars, including the California State Bar take a strong stand against persons who are not lawyers or licensed paralegals providing advice, filing forms, or preparing documents that affect a consumers’ legal rights.

California's Office of the Attorney General deems the unlicensed practice of law as a form of fraud and those engaged in it can be criminally prosecuted. Also note that because the unlicensed practice of law is a crime, insurance will not protect a manager from prosecution for such activity. As provided for in Civil Code §2773, "An agreement to indemnify a person against an act thereafter to be done is void, if the act be known by such person at the time of doing it to be unlawful." For example, if you intentionally claim that federal law, has no jurisdiction over your activity, your insurance company to pay for it. The same applies to dispensing legal advice.

The Business Judgment Rule requires that decisions by directors be in good faith, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances according to Corp. Code §7231(c).

Nothing in this letter is intended to give legal advice whether real or imagined.

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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 areno 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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Tuesday, July 03, 2012

Laguna Woods GRF on Notice

Le Cirque Du Directors & Lawyers at Laguna Woods Village

An Incentive Plan ACORN Would be Proud Of

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