While the HOA industry trade group fights to repeal the Corporate Transparency Act, reports of HOA theft and fraud strongly suggest that community associations are high-risk entities for money laundering.
By Deborah Goonan, Independent American Communities deborahgoonan@gmail.com
Corporate Transparency Act (CTA): HOA-industry opposition update
The latest twist to the HOA industry’s attempts to exempt community associations from CTA: trying to convince FinCEN that homeowners and condominium associations are “low risk entities.”
In FinCEN’s appeal in Smith v. U.S. Department of the Treasury, the agency notes that the court is likely to allow the collection of Beneficial Ownership Information (BOI) from corporations.
However, FinCEN now says that it will extend the deadline for initial filing by 30 days. Also, during that 30-day delay of enforcement, the agency apparently plans to take a second look at its BOI filing requirements, possibly exempting low-risk entities from compliance with CTA.
Here’s the direct quote from FinCEN.
If this Court grants the stay, FinCEN intends to announce that it will extend the compliance deadline for thirty days. During that period, FinCEN will assess whether it is appropriate to modify the CTA’s reporting requirements to alleviate the burden on low-risk entities while prioritizing enforcement to address the most significant risks to U.S. national security. (SOURCE: JDSUPRA)
Predictably, prominent HOA attorneys at CAI-affiliated law firms are grasping at straws. Community Associations Institute, a trade group based in Falls Church, VA, will attempt to get FinCen to agree that homeowners and condominium associations are low-risk entities, unlikely to engage in money laundering or hiding ill-gotten cash in real estate.
Do you find that hard to believe?
Well, here’s the source article as proof. I ‘ve included the relevant excerpt directly quoted from the author.
“Of interest to community associations is that the Community Associations Institute met with FinCen last year asking that community associations be exempt from Reporting Companies because they are low-risk entities. FinCen, at the time, rejected that approach. It appears that FinCen is now reconsidering whether low-risk entities are required to file BOI Reports.”
Perhaps FinCEN might want to consider that “community associations” also known as common interest communities, are rife with opportunities for corruption, fraud, and theft. That makes them high-risk real estate entities for money laundering.
And it doesn’t matter whether common interest communities are large or small. Corruption of HOA board members and management agents is all too common.
This post highlights just a few examples of HOA corruption under investigation right now in the U.S. Keep in mind that, most of the time, HOA criminal activity is not publicly reported to law enforcement. Many HOAs will do anything to avoid tarnishing their reputation, including coverup of financial crimes.
Want to know more? See my related IAC post on CTA here.
And check out scores of previous IAC posts on HOA corruption, theft, and fraud.
HOA fraud investigations
Former condo President allegedly stole $1 million over a decade, and recently moved out ‘in a hurry’ (FL)
Julius Buggeman, 76, has been under investigation since April 2024. As former President of the Smyrna Beach Condo, he allegedly used $1,000 per month for personal expenses, over and above his salary of $70,000.
Florida law is clear: HOA board members are not to be financially compensated.
Additionally, Buggeman used HOA funds to pay for health insurance for board members, who are reportedly his friends and allies. Investigators say that Buggeman also purchased electronics and made repairs to private condo units using funds from the condominium associations bank account. Then he pocketed the money he collected from those unit owners.
Buggeman currently faces charges of grand theft, scheme to defraud and racketeering, to the tune of $1 million. Unfortunately, condo owner fees have doubled to cover the shortfall in their budget.
The former condo president moved out ‘in a hurry’ a few weeks ago, initiating a nationwide manhunt for Buggeman.
Source:
‘Total control:’ $1 million Florida condo scandal sparks manhunt, fee spikes for residents
California AG charges long-time HOA board members with $5.7 million fraud
Former Ocean Towers Housing Corporation President, Joseph Orlando, his wife, Dorothy (now deceased), and former board member John Spahi, along with his son Omar Spahi, have been charged with grand theft, identity theft and money laundering.
The alleged offenses occurred over the span of a decade. During that time, condo owners filed multiple lawsuits against John Spahi over condo election irregularities, inside dealing, and using HOA funds to fight personal lawsuits.
Last year, a grand jury indicted the Orlandos and the Spahis. Charges allege that the pair conspired to bill the homeowners’ association for construction projects that were never done. The money was funneled through a fake company created by John Spahi.
Sio far, the Attorney General’s investigation has uncovered $5.7 million in HOA fraud.
The 15-page article below delves deep in the details of nearly 25 years of abuse of power and corruption in the 2 condo towers in San Deigo.
Sources:
Follow more news from California from CCHAL
Biden commutes sentence of Las Vegas HOA fraud takeover ringleader
HOA fraud and takeover schemes are nothing new. They’ve been going on for decades.
Leon Benzer was one convicted fraudster who worked with dozens of accomplices to take over several condo boards in the Las Vegas area. The organized crime involved using straw buyers to purchase condo units, who would then takeover condo boards via rigged elections. Once the fraudsters controlled the HOAs, they initiated bogus construction defect lawsuits, and, working with a complicit attorney and judge, secured millions of dollars in awards for their fake construction firm.
The nefarious acts occurred between 2003 and 2009. Condo owners suspected foul play as early as 2005, but law enforcement dismissed their concerns. The FBI didn’t take action to investigate fraud allegations until 2008.
Benzer was the ringleader of this highly sophisticated scheme, which bilked the public of more than $58 million. All in all, 42 individuals were convicted for their crimes. Several alleged participants in the scheme died under suspicious circumstances or committed suicide.
Sources from news archives:
Las Vegas HOA takeover ringleader has sentence commuted by President Biden
Developer sues property manager arrested on felony charges; alleges at least $750K in HOA funds missing (UT)
Blake Floyd Cozzens, 35, owner of Stress Free Management Company, was arrested in January 2025 on 10 counts of unlawful fiduciary dealing, each a second-degree felony charge.
Cozzens served as a property manager for Cedarbend Homeowners Association during the development phase. The community was developed by Velocity Holdings LLC. Financial irregularities were discovered in December 2024, as homeowners began the process of transitioning the HOA from developer to homeowner control.
Investigators have identified up to $1.9 million in HOA funds that have been misappropriated to several bank accounts held in Cozzens name only. Normally, HOA board members are co-signors on their Association’s bank accounts. When homeowners discovered they could not access the Association’s bank records, they contacted local police, launching an investigation.
Cozzens remains in jail without bond. Court records cite that Cozzens is a flight risk and also that he allegedly threatened physical harm on his accusers.
Sources:
Cedar City property manager faces civil lawsuit following felony charges | News | stgeorgeutah.com
HOA management company owners previously involved in financial theft created a new company under a different name (CO)
In spring of 2024, a judge ruled that Mastino Management Company’s owner, Kim Bacon, stole $700,000 from Traditions HOA between 2018 and 2020. In that case, it was proven that Kim Bacon diverted HOA fees collected in an online portal directly to a bank account that she used for personal expenses.
Homeowners in Shadow Creek were alarmed when they learned of Mastino Management’s history, because Kim Bacon was managing their community, too. Coincidentally, several owners had complaints about the management company’s online payment portal as well as a special assessment that was invoiced in the past year.
Not surprisingly, in 2024, homeowners demanded that their HOA board fire Mastino Management and obtain a new manager. The HOA board then announced it was terminating Mastino and contracting with a new company called CCMA.
However, upon deeper investigation of public records, the owners in Shadow Creek discovered that new management company, CCMA, was owned by none other than Kim Bacon, along with her husband. Shortly after this discovery was made, CCMA filed for bankruptcy.
Shadow Creek is currently managed by Kim Bacon’s daughter.
In December 2024, Shadow Creek HOA issued a special assessment for roof replacements, amounting to $31,000 per home. And their HOA isn’t providing sufficient documentation to support its special assessment.
More coverup?
Source:
HOAs that lack transparency are often hiding fraud and corruption
As the examples above clearly show, HOAs that operate in the shadows, keeping homeowners in the dark and uninformed about HOA finances, are likely to be hiding financial crimes.
Given the scope of HOA fraud and mismanagement that often goes on for years before discovery, it’s not a stretch to conclude that money laundering is not only possible in HOAs, but also likely to occur in communities with HOA leaders and managers that don’t value transparency.
Therefore, it is my view that the Corporate Transparency Act should apply to HOAs of all types and sizes, from now and into the foreseeable future.
Share this:
Discover more from Independent American Communities
Subscribe to get the latest posts sent to your email.