Nevada HOA Fraud - Could it Have Been Avoided?
In March, Molly Foley-Healy blogged on the Nevada crime ring that conspired to steer homeowners associations to certain law firms and contractors in exchange for kickbacks. On Tuesday, one of the "hired" Board members pled guilty to one count of conspiracy to commit mail and wire fraud.
Darryl Scott Nichols used funds from other conspirators to become a strawman purchaser, and eventually was elected to the Boards of Directors of two different condominium associations. As a Director, Nichols used his influence to send association business and money to other parties. These parties compensated Nichols for his assistance, a fatal conflict of interest.
Check out your association's conflict of interest policy to see when a conflict may arise. Association board members should always be careful to avoid conflicts, or even the appearance of impropriety, because actions that seem fishy can result in community dissent even if the actions were legal. We always recommend transparency and sunshine for all association business that is not properly the subject of an executive session.
While it appears the conspiracy in Nevada was extremely sophisticated, an active and interested board member or association member may have noticed discrepancies or questionable transactions and saved the associations involved from the headaches they are dealing with today.
Of course, no person should make unfounded accusations of fraud, misdealing, conflicts of interest, or similar malfeasance - that sort of thing will just get a person sued for defamation! But by paying attention to your association's actions, and getting to understand how things should work, you can help protect your neighbors and yourself from actions that could impair your association's financial solvency.