Why did it take years to discover a $2.5 million HOA fraud scheme?

By Deborah Goonan, Independent American Communities

 

Maryland Attorney General Brain Frosh filed a complaint in April against Evergreen Management, LLC, and its owner, Jason Barry Oseroff. The AG alleges a whopping $2.5 million fraud scheme against thirteen homeowners and condominium associations.

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How could such egregious fraud escape detection for more than ten years?

 

About Evergreen Management

Evergreen Management, LLC, was founded in December 2005 and stopped doing business in early 2018. The company was co-owned by Jason Barry Oseroff and his late father Ivan Oseroff, who died in April 2017.

According to the AG complaint, Evergreen Management was hired by 13 different associations, to provide the following services:

  • manage the books and records of HOAs,
  • deposit all monies collected on behalf of HOAs,
  • arrange and pay for contractors such as landscapers, utilities, and insurance companies,
  • produce financial reports and budgets,
  • prepare tax returns,
  • provide notice of and attend meetings.

 

Management-controlled bank accounts

According to the allegations detailed by the AG, Jason and Ivan Oseroff managed banks accounts for Associations at several local banks, including The Columbia Bank, Old Line Bank, and PNC Bank.

In several of these Associations, the pair were the only two people who could write and sign checks against HOA accounts. The banks mailed statements directly to the Oseroffs.

Perhaps that explains how Oseroffs were able to get away with more than 1,300 alleged acts of embezzlement?

With no one from Association boards keeping an eye on Evergreen’s activities, Oseroffs had the perfect opportunity to write themselves checks for “cash,” use HOA funds to make payments on their personal credit card accounts, and make payments by check to Ivan’s company, IYO.

It’s also disturbing to learn that any bank would open an account for a homeowners’ or condo association, without insisting that at least two current board members have signatory authority on the account.

After all, it’s the Association’s money, not the management company’s money.

It seems like common sense. Bank statements must be delivered to condo and HOA board members, not the community association managers.

And board members need to actually review and reconcile bank statements with disbursements each month. Had that happened sooner, it could have put a stop to unauthorized withdrawals of money from HOA accounts.

 

Managers overpaid themselves

Auditors for the victimized HOAs found that Oseroff grossly overpaid himself for contracted services. In fact, AG charges allege that overpayments to Evergreen Management amounted to nearly $1.4 million of the total estimated $2.5 million in fraudulent misappropriations.

That’s a huge chunk of change. And it’s amazing that no one noticed the missing money sooner.

Eventually, these recurring management overpayments led HOAs to fall behind in paying their legitimate bills.

To cover up missing money, investigators say Oseroff transferred money from one HOA account to cover the debts of another.

HOA board members didn’t notice the scam for years, because, apparently, no one on the board was signing checks to pay for Evergreen’s management services.

 

Vanishing HOA savings, CD accounts

Not surprisingly, management company overpayments didn’t satisfy the Oseroff’s apparent greed.

The management agent also allegedly drained a combined total of $486,000 in HOA savings accounts and cashed in CDs. The money was used for either personal use, or to funnel money to cover up budget shortfalls in other HOAs.

The AG says Oseroff then created false financial reports and fake bank statements. Those bogus documents were intended to give Association board members the impression that their accounts still contained the missing money.

And, apparently for year, some naive board members accepted these false reports without question.

Most HOAs fired the Oseroffs when they discovered misappropriation of funds. However, it’s not clear whether any of those Associations filed criminal complaints with local police.

And, quite notably, the AG report does not specify when the other HOAs terminated Evergreen’s services. Nor does it inform consumers about any formal complaints filed against Evergreen or the Oseroffs prior to 2018.

Had the public been made aware of consumer complaints or criminal charges, perhaps several of the Associations named in the AG lawsuit could have avoided being scammed and victimized by Evergreen.

 

Brandywine HOA gives Evergreen a second chance?

Incredibly, one HOA continued its contract with Evergreen after discovering evidence of fraud in 2013.

Brandywine HOA retained Evergreen Management Company from 2013 – 2018, although the HOA did remove the management company’s signatory authority from its HOA bank accounts.

Unwisely, the HOA still allowed Oseroffs to collect assessments and other deposits on its behalf.

Brandywine HOA finally terminated Evergreen’s services, when it discovered, after 5 years, that the managers were depositing HOA funds into their personal bank accounts.

 

Evergreen hides financial records

Of course, some homeowners and board members were smart enough to know something wasn’t right. So they demanded to see bank statements, invoices, and other relevant financial records.

Of course, Oseroffs either ignored requests or produced incomplete or falsified records.

Maryland statute gives homeowners the right to access HOA records. But who actually enforces the law?

I wonder, how many Maryland homeowners filed a complaint against Evergreen or Oseroff between the years of 2005 and 2018?

Well, probably none, because the Maryland Commission on Common Ownership Communities does not take complaints against managers.

Maryland CCOC no complaints against managers
(Screen capture May 6, 2019)

 

It’s true that the Maryland AG takes consumer complaints against businesses, but the agency does not have a division dedicated to community association management. And I couldn’t find a searchable public database of consumer complaints against businesses on the AG’s website.

So what can an HOA consumer to do, other than conduct an audit and hope to get the local police interested in investigating suspected theft?

 

Expired CMCA certification

Curiously, Oseroff was a Certified Manager of Community Associations (CMCA) until 2012, but misrepresented himself as CMCA certified from 2013 to 2017.

The AG report does not explain why Oseroff’s CMCA certification expired in 2012.

How is it that boards of at least thirteen HOAs never bothered to verify the CMCA certification with trade group Community Associations Institute (CAI)?

Why doesn’t CAI provide a reliable method of authenticating its certification credentials? More importantly, how is it that CAI could certify a community association manager that would engage in such egregious fraud?

More unanswered questions!

Stay tuned for more news on this story, as it becomes available. ♦

 

Summary of charges against Evergreen Management, LLC, and Jason Barry Oseroff

Failure to provide services for which it was paid. Instead, the Defendants used the money for personal benefit.

Refusal to provide bank records and invoices to owners who requested them, in violation of Maryland Homeowners Associations and Condominium statutes.

Failure to provide timely notice of meetings.

Provided victimized Associations with false balance sheets, expense and income reports.

Read details of the AG’s charges of “unfair or deceptive trade practices” and alleged violations of the Maryland Consumer Protection Act, Maryland Condominium Act, Maryland Homeowners Association Act:

Consumer Protection Division, Office of the Attorney General (Maryland) v.
Jason Barry Oseroff and Evergreen Management LLC

 

News Source:

Maryland property management company accused of misusing nearly $2.5 million in HOA, condo fees
Posted: 5:14 PM, May 01, 2019, WMAR, Mallory Sofastaii
Updated: May 2, 2019