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HOA scheme victims say plea deals ignore them
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Steve Wark
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LAS VEGAS REVIEW-JOURNAL
Vistana homeowners are mounting a letter-writing campaign in federal court seeking restitution for the millions of dollars they say they lost in a massive scheme to take over homeowners associations around the Las Vegas Valley.
The homeowners have been filing letters portraying themselves as victims in the criminal cases of the Vistana-linked defendants who have pleaded guilty in the scheme.
"These people are responsible for millions of dollars going away," said Lynn Williams, a retired federal agent who serves as president of the five-member Vistana board. "They basically looted the treasury. They've got to make the true victims whole."
However, in the 10 plea deals that so far have been reached in the high-profile investigation, federal prosecutors have primarily sought restitution for banks and mortgage companies caught up in the scheme -- not the homeowners.
Take the case of Steve Wark, a longtime political strategist who was the first defendant to plead guilty in the far-reaching investigation.
Wark has admitted becoming a "straw purchaser" of a Vistana condominium in southwest Las Vegas to get elected to its board and look out for the financial interests of his co-conspirators. He agreed to pay up to $94,000 in restitution to the bank that held his phony mortgage, but no money to the homeowners he also admitted defrauding while serving on the board.
One Vistana board member who wished to remain anonymous said all of the plea deals appear aimed at protecting big business at the expense of the homeowners, many of whom are senior citizens struggling on fixed incomes.
"This is a travesty of justice truly beyond belief," the board member said.
Tony Kneip, a retired contractor and board member who has lived through the corruption scandal that first surfaced in 2003, shares that view.
"I'm just utterly amazed," he said. "How can they ignore the injury the homeowners suffered?
"It's like you break into my house and steal $200,000 and then dent your rental car leaving the property, and the powers that be say, 'Pay the rental car company for the damage you did to the car.' Isn't that ludicrous?"
All 10 defendants who have pleaded guilty, including those tied to Vistana, have agreed to cooperate with Justice Department prosecutors seeking to file charges against higher-level players in the investigation, which has targeted lawyers, judges and former police officers at a dozen homeowners associations. More plea deals are expected.
The scheme involved stacking homeowners association boards with members who pushed for construction defect lawsuits against builders, according to court documents and the cooperating witnesses. The boards then steered legal and construction repair work to the chief co-conspirators in the scheme, construction defects lawyer Nancy Quon and former construction company owner Leon Benzer. Both Quon and Benzer have not been charged in the investigation.
The plea deals are not binding on the judges who will sentence the defendants, and the Vistana homeowners are hoping that the judges will consider their letters when it comes time to hand out punishment.
Williams and Kneip said they would eventually like to see as many as 200 homeowners file letters to send a strong message to the judges. Many of the 732 homeowners at the condominium complex have unique stories to tell about how they have been victimized in the scheme, he said.
Christopher Blakesley, a University of Nevada, Las Vegas professor who specializes in criminal law, said the judges potentially have freedom under federal sentencing guidelines to add restitution for the homeowners, but out of fairness to the parties who struck the plea agreements, they might be reluctant to do it.
Justice Department lawyers spearheading the prosecution, however, can seek restitution for the homeowners from the yet-to-be charged, higher-level co-conspirators, Blakesley said.
In the meantime, the Justice Department is making an effort to open the lines of communication with homeowners.
It has informed Vistana board members that it is drafting a "comprehensive victim letter" that will address their concerns and updating a victims website that will keep Vistana and the other homeowner associations abreast of the latest developments in the case.
A Justice Department spokeswoman declined to comment, saying, "The investigation is continuing. "
According to Vistana board members, former members, community managers and others involved in the scheme squandered the association's share of a $19 million construction defects settlement won in 2007.
After lawyers fees and expenses were deducted, the homeowners association got about $8.1 million to do repair work, the board members said. Most of that money went to Benzer's Silver Lining Construction Co. and its subcontractors, which did "very limited" repairs and produced little required paperwork documenting its work.
The board members said leaking roofs were repaired and buildings were painted, but significant insulation, electrical and plumbing problems largely were ignored.
Larry Fitch, a newly elected board member, said he had to shell out $22,000 of his own money to fix a number of defects at his condominium. Those problems all should have been covered under the Vistana legal settlement, he said.
In civil litigation with Silver Lining Construction, Vistana lawyers alleged that the homeowners association overpaid the company more than $3 million.
At the same time, the former board members failed to keep up the property through the monthly assessments from the homeowners, causing property values to fall, the current board members alleged.
Property values also plummeted because of the "double whammy" of being tainted by the construction defect litigation in a declining real estate market, the board members said. It became nearly impossible to sell a home.
To bring Vistana back in shape, the new board members said, they had little choice but to raise monthly assessments, hitting homeowners in their pocketbooks at a time when they could least afford it. Association dues are now $60 to $100 higher than they were before the corruption scandal, forcing some homeowners to walk away from their condominiums.
Fewer than a dozen letters seeking restitution have been filed in court so far, and mostly in Wark's case, which is being handled by Senior U.S. District Judge Lloyd George.
Wark's lawyer, Angela Dows, declined to comment on the letter-writing campaign.
Prosecutors have moved to continue Wark's sentencing, set for Dec. 16, and the sentencings of the other nine defendants for eight months to allow investigators to pursue charges against the additional co-conspirators.
The delay could give more Vistana homeowners time to lodge their concerns in court about the restitution deal with Wark and the other cooperating witnesses. Their anger is expressed in the letters that already have been filed.
"Mr. Steven Wark ruined many ... lives, and I feel that his punishment should reflect the amount of damage he did to the Vistana community," wrote Dale and Sharon Hagin in a letter to George.
Julius Berezovsky added in a letter: "It is very alarming to me to hear that money recovered from this scheme will go to the bank, but not to his victims -- the homeowners. The bank is a company that will recover with a loss. Why have the victims been forgotten?"
Patricia Ester, who said she struggles every month to pay her bills as a divorced mother with two sons, wrote that she was told the scheme has cost each Vistana homeowner roughly $25,000 in lost property values.
"Why are the homeowners at Vistana supposed to bear all of the loss here? Exactly who should be punished here, the criminal or the innocent owners at Vistana?"
William and Maureen MacDonald wrote that the scheme has been a "severe economic hardship" for the homeowners and that Wark has an obligation to pay restitution to the homeowners.
In his letter, Lee Grissom said: "I wish to express how angry I am about this outright theft and deceit. I want our money back."
Williams told George in his letter that Wark and the other defendants who pleaded guilty thought they were "above the law," and had the "system on their side."
"They used the law against honest people and took their money," Williams wrote. "The least the government can do is try and get it back for them. I spent my entire federal career trying to do what is right, and I hope justice will prevail in this case."
Contact Jeff German at jgerman @reviewjournal.com or 702-380-8135.
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Uh guys who do you think these folks are in it for, to help you out? Bwah ha ha ha ha ha.
Good article. What a mess!
sage.sophos wrote on November 27, 2011 08:24 PM:
"What a whole bunch of crybabies. ... In the case of Vistana, after all is said and done, there was still $8.1 million left for the association to repair the most pressing defects which affect life and safety issues. After all, if the construction lawsuit was not filed, there would be no award for the associations, let alone the homeowners. It sounds to me the homeowners are just as greedy as they claim others are."
You seem to have missed the most pertinent point which is that for the $8.1 million received by Vistana, no more than an estimated $400,000 of actual Defect Repair work was performed by the SLC construction company. After 15 months, the Association was left with $2,000 out of the $8.1 million, and the community common area, amenities, and facilities were in a disgraceful state of disrepair. Virtually no Construction defects in owners' units were addressed. That part of the story, scheme, racket has yet to be told in Court.
sage.sophos also wrote on November 28, 2011 09:56 AM:
"...So the moral of this HOA fiasco is just like any other entities. One should focus making things better rather than having the blame game and the sour grape mentality – it is poisonous."
You sound as if you might be one of the crooked lawyers yourself: Stop blaming us crooks, it's unfair and poisonous"
I've only lived in a condo (in a different state) once in my life and guess what. The builder screwed up the fireplaces in all the units...did not properly respect the fire codes. The builder was gone by the time they found out and we each ended up paying $2,000 to get them fixed! The HOA had spent the monthly revenue on other things like snow removal, etc. Moral: If it has a HOA, don't buy it!!!
During the time of 2004, it was at the height of real estate boom. A lot of builders were building inferior structures so as many homeowners flipped houses to make a profit. To say that all builders would have fixed the defects as promised, most unlikely; perhaps minor repairs that does not cost them too much money- mediation often times is a waste of time and everybody’s money. So the moral of this HOA fiasco is just like any other entities. One should focus making things better rather than having the blame game and the sour grape mentality – it is poisonous.
"and why didn't the original builder in GOOD FAITH- repair what was needed in the first place?"
There was a mediation process in place with the association and developer (Rhodes) in place and a few months (2-3 at most) underway when the Silver Lining Construction-Nancy Quon led board of directors took over in 2004. Minor repairs were already taking place. The new board, however, worked to pull the matter out of mediation and into litigation almost immediately after taking over in late 2004. Why? It's a bigger payday for Quon, and an opportunity for Silver Lining (Benzer) to perform all of the repairs (or at least, get paid to do so should they have or not...and they clearly didn't).
To Truth Finder--I asked the same question- Who built Vistana? Must be a big secret---someone is trying to protect someone--sounds like it to me..and why didn't the original builder in GOOD FAITH- repair what was needed in the first place?
Who built the homes and condos? Shouldn't the DA go after those people too? It just seems if the contractor had done his/her job in the first time, none of this would have happened.
What a whole bunch of crybabies. No real estate investment has a clause written in the contract that it will guarantee to retain its value. How the investment performs strictly depends on many unforeseen circumstances and the knowledge of an investor. In many investments there is a warning that says past performance is no guarantee of future gain and stresses the importance of diversification….
I have stressed in the past that if the homebuilders built a quality structure to begin with, whether a stand-alone home or a condo, there will not be a need to have other professionals involved. The whole mess starts originally at the builder’s level. In the case of Vistana, after all is said and done, there was still $8.1 million left for the association to repair the most pressing defects which affect life and safety issues. After all, if the construction lawsuit was not filed, there would be no award for the associations, let alone the homeowners. It sounds to me the homeowners are just as greedy as they claim others are.