HOA, condo & co-op corruption, fraud & theft roundup (Aug. 2018)

By Deborah Goonan, Independent American Communities


Lawsuit filed in condo association theft case

By JOHN BURNETT Hawaii Tribune-Herald | Sunday, August 19, 2018, 12:05 a.m.

HILO — A Hilo condominium owners’ association is suing a former vice chairman of the state Real Estate Commission and his wife for allegedly embezzling about $120,000 in funds.

The civil lawsuit was filed Monday in Hilo Circuit Court by Hilo attorney Steven Strauss on behalf of Kawili Regency Association of Unit Owners. The defendants are Scott A. Sherley, Penny T. Sherley, SRH Inc., a Maui real estate company doing business as ERA Pacific Properties, and Stephen W. Hogin, SRH’s president.

The suit claims conversion, theft, fraud, breach of fiduciary duty and negligence and seeks general and special damages, including costs of investigation, accounting and legal services.

Both Sherleys were indicted in December on two counts each of first-degree theft for the alleged embezzlement at the Kawili Regency, which is at 34 E. Kawili St. in Hilo and the revocable living trust of Edward G. Pereira and Frances G. Pereira, which are not plaintiffs on the civil suit. According to police, the amount allegedly misappropriated from the Pereira trust, owner of Pereira Apartments, was $135,633.

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Lawsuit filed in condo association theft case

If the allegations in this case are proven, a long-trusted Real Estate Broker and his wife, a Real Estate agent, face 10 or more years in prison for theft of more than $120,000 from a condo association they formerly managed. The Broker is also accused of not performing required audits in the past five years. 

The indictment has put a halt to the couple’s education and training business. An online campaign for donations to help with legal defense has raised more than $11,000. 

Audit report money theft fraud

I-Team: Mastermind behind Las Vegas HOA defraud scheme sentenced

By: George Knapp Matt Adams
Posted: Aug 17, 2018 07:16 PM PDT
Updated: Aug 17, 2018 07:44 PM PDT

LAS VEGAS – The largest political corruption case in southern Nevada came to an end Friday with the re-sentencing of the ringleader.

The scheme focused of seizing control of local homeowner associations and involved dozens of co-conspirators including lawyers, retired police officers, and others.

Former construction company owner Leon Benzer will serve 12 more years in federal prison for crimes that were first reported by the I-Team.

Las Vegas has seen a lot of political corruption cases, but never something this big.

Forty defendants were sentenced. Most of them pleaded guilty, Leon Benzer, the ringleader, was the last to be sentenced, and in the front row of the courtroom Friday were the two investigators who started the ball rolling — a Metro detective and a former FBI agent. They wanted to be there for the end.

Benzer pleaded guilty in 2015 but appealed his sentence. Friday, federal Judge James Mahan heard a sobbing Benzer apologize for his misdeeds and heard an emotional plea on video from Benzer’s struggling wife and children, but prosecutors reminded the court of the thousands of homeowners who were victimized, many of them frail, elderly, and now destitute.

Benzer will have to serve 12 more years in prison and is responsible for millions of dollars in restitution, money that likely will never be repaid.

As big as this was — with 40 defendants — the reality is there were dozens of others who could have been charged but weren’t, including public officials. It’s unknown if those names will ever be made public. Though at this point it is too late to press charges.

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The ring leader in a massive condominium election and insurance fraud schemes will reportedly serve an additional 12 years in prison. Leon Benzer is currently serving 15 1/2 years behind bars for leading a conspiracy that involved at least 40 co-defendants. See this previous post on Nevada condo fraud for the back story.  

(Pixabay.com free image)

Judge Will Appoint Receiver Over Ocean Towers Co-Op Apartments in Santa Monica (CA)

Prestige property at 201 Ocean Ave. has completed three years of litigation

June 24, 2018
Santa Monica Observer

A dispute between two members of the Board of Directors of Santa Monica’s only co-op, may put the prestigious property into receivership on Wednesday.

In a hearing conducted on June 13, Los Angeles Superior Court Judge Lisa Hart Cole said that she was inclined to appoint a receiver. “there is sufficient evidence to show misappropriation of funds,” she said. She continued the hearing to June 27 and recommended that the two parties, John Spahi and Michael Reach, attempt to settle their dispute.

The lawsuit alleges that Spahi, who now owns a controlling interest and 40 units in the property, misappropriated $11 million out of $50 million FEMA paid Ocean Towers to make repairs after the 1994 Northridge earthquake.

“That $11 million has never been accounted for,” one resident told us. “We believe that he used the money to acquire more units for himself because he appointed himself CEO of the co-op corporation and could do whatever he wanted or felt he could. And anyone who challenges him is immediately sued,” she said.

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There’s sometimes a perception that co-op associations are immune to financial mismanagement and corruption. This lawsuit challenges that assumption. One board member is accused of misappropriating $11 million in FEMA funds disbursed to make repairs following an earthquake in 1994. The opposing board member and other shareholders claim that the funds were used to purchase a controlling interest in shares of the cooperative association. 

Under the cloud of litigation, sales of the Santa Monica multimillion dollar co-ops have come to a screeching halt. 

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