ROYDEN HOA CONFIRMS CASH SHORTFALL
ROYDEN HOA BOD’S CONFIRMS CASH SHORTFALL, AFTER RAUCOUS ANNUAL MEETING
In a stunning new development, the Royden HOA Board of Directors, have confirmed over $20,000.00 of Cash was apparently miss-appropriated as of May 15, 2016 and unconfirmed greater amounts in prior years, as far back as 2004. Also shown, in the most recent, prior year financial results, posted on the HOA’s website as of 9/3/16, were statistics that show the miss-appropriation of cash traced back to May 31, 2012 as well, in amounts well over $20,000.00.
Royden is a non-=profit organization operating under NC General Statute 55A. The community of predominantly Bankers and Lawyers are todays’ version of HOA lemmings, with “more money than sense” totally apathetic and oblivious to obvious violation of the HOA’s basic founding by-laws and covenants, controls and restrictions.
These new developments, were an outgrowth of a member’s challenge, to the Royden Board President Mr. KC Brechnitz, the treasurer Mr. Ben Bleune and Vice President Jon Nance(absent), at a June 18, 2016 Board meeting. Rinaldi is the HOA’s former founding vice president, subsequent President and Treasurer of the HOA for for 7 years during periods up to 2004. Acting as a whistleblower to the abuses to the covenants by subsequent boards, Rinaldi was the subject of libelous Board emails and the object of fallacious rebuke through an email from the Charlotte Observers resident HOA legal opinion writer Michael Hunter. In an email to all members, Hunter admonished Rinaldi as a troublemaker whose actions were detrimental to the Royden Community. In the same email, he falsely alludes to an incorrect Annual Assessment rate, clearly not provided for in the covenants. Rinaldi went on to sue the HOA, but lost, earning him the title of “vexatious litigant”. The Website’s disclosure of the fraudulent financial information is a sweet moral victory, albeit a costly one. Here’s what caused the HOA confession.
At the meeting, the Member, Richard A. Rinaldi, challenged the financial data presented for May 31, 2016 as being deliberately missing a cash flow statement as required by NC law. The glitzy, professionally bound, plastic covered binder contained, as required by the covenants, three pages, purported to be the 2015-2016 Financial Report. Which they were not! The annual meeting date of June 18, 2016, would have given the treasurer, Mr. Ben Pleune, ample time to prepare the May 31, 2016 Year End Financial Report. But no May 31, 2016 Financial Report was presented, as required by Law and the Covenants.
Instead, what was presented, in 4 or 6 Font size, a trick began in 2011 to mask the data, were three totally meaningless sheets of information: 2015-2016 Budget vs. Estimated Actual Statement of Income and expenses, 2016-2017 Budget of Income and Expense and a third page labelled: Supplemental Financial Disclosure????? A first such entry in recorded Financial Reporting History. What should have been presented was a simple Income Statement showing Cash Receipts less Cash Disbursements and the Years’ Profit or (Loss), and a Cash Flow Statement showing the May 31, 2015 Cash (Fiscal Reserve) Balance, plus or minus the Year Profit or Loss and the May 31, 2016 ending Cash (Fiscal Reserve) Balance.
As Rinaldi repeatedly pointed out to the attendees, there was NO CASH FLOW REPORTING of CASH RECONCILIATION REPORTING!!!!!!. With Cash being reported as only $743.30, fully more than $20,000.00 less than what should have been available if properly constructed Financial Statements were presented at the June 18m 2016 Annual Meeting.
As the Annual Meeting Minutes will show, Rinaldi openly stated that the Royden BOD was CORRUPT, and has consistently maintained this position in his Newsletter “COUNTERPOINT” and blog, associationbusters.com under the titles. “ROYDEN SCANDAL, COVER-UP, LIES AND CORRUPTION. The Newsletter had been actively seeking, for years, the publishing of prior year financial information but to no avail. Until the fateful website posting as of 9/3/16.
Apparently, after the meeting, the Royden Board of Directors, at the suggestion of a former Royden HOA secretary, Ms. Caroline Weiss, attempted to cover up their mistake and revise the false financial information, presented at the June 18, 2016 Annual meeting (2 members in attendance), by posting, revised data on the Royden website.
The subsequent Website entries, unequivocally confirm the fraudulent conduct of the Royden Board serving as of May 31, 2016, as well as the history of fraudulent conduct by prior Royden BOD’s as far back as 2004. Here’s what the new Financial Reports on the Website reveals.
In FY 2016, a cash shortfall of over $20,000.00 was confirmed, with Cash being reported as only $714.30. Missing was $20,000.00 that should have been in a CD. To mask the Cash Shortfall, the Treasurer, with the Board’s complicity, changed the closing, or cutoff dates for key data. The correct cutoff dates for the RHA Fiscal year, should have been June 1, (beginning) and May 31 (ending). Simple check book level accounting system. However, the Expense data ending closing date, for the prior year was incorrectly reported as May 11, 2015, wherein the correct closing date should have been May 31, 2015. The beginning closing dates used, for 2015 and 2016 was June 1, not May 31, as basic check book accounting requires. This practice allowed for fraudulent entries of future year income, to mask prior year cash shortfall or miss-appropriation of funds. Also missing was another key entry. Namely accounts receivables.
For example, the RHA had court an imposed sanction against a member for repeated lawsuits involving HOA breach of contract claims and violation of Article IV-Covenant for Maintenance Assessments. The unapproved sanctions, against Rinaldi, amounted to over $6,330.00, payable Sept. 3, 2016. This amount is a reportable accounts receivable that was not recorded on the RHA Financial Statements. WHY? This concealment accounting was done, in 2016 and in prior years, to avoid discussion of sensitive topics with the membership. such as the 3 year Constructive Fraud lawsuit and the failed easement lawsuit. Selective accounting practices, used to deceive, yes lie, to the members.
The RHA BOD operates as a closed society!!! No announcement of meeting dates, no open meetings and NO MINUTES! Between 2006-2009, The Charlton Owensby Board and Treasurer also utilized the “concealment accounting” practice. Here, they funded, an unapproved Special Assessment Lawsuit, related to a front entrance easement, costing homeowners over $200,000.00 in legal fee assessments. The HOA conspired with the attorneys, to not report, monthly legal bills, and deferring all legal fee billing for over 3 years. In this way, the Board, and treasurer concealed significant monetary exposure by not reporting the, massive, growing and unapproved, “accounts payable” deferred legal fees billing. Another violation of annual GAAP accounting…NO BILL, NO REPORT=FRAUD, PLAIN AND SIMPLE!!!!
The final crushing admission of total incompetence was the website reporting of “missing checks”, “Checks Issued but not cleared before the meeting”. No year was noted but it was probably for the prior year of 2015, which essentially rendered the prior2015 and current year 2016 Financial Statements totally meaningless. Imagine, Mr. Pleune, a lawyer, failed to have a full accounting of ALL OUTSTANDING CHECKS. But he did include a”Supplemental Financial Disclosure” statement. Again, this community is loaded with Bankers and Lawyers and this guy can’t even balance a checkbook. But that is the history of Royden Treasurers, the can’t balance a check book….OR won’t balance the check book for fear of exposing massive miss-appropriation of funds. The Website DUMP confirms the latter is truth!
In question, is the Royden HOAs’, over ten year history of failing to meet covenant Financial Reporting requirements and the suspicious inability to balance the Royden checkbook? As everyone knows, but obviously, not this group, a simple check book reconciliation entails a starting cash balance, plus income, minus disbursements and ending cash balance. This simple calculation has been consistently manipulated, as has cash reserve, such as to provide a breeding ground for fraudulent behavior. The website data also shows the fraud reaching as far back as 2004’2009, under the Presidency of Dr. Charlton Owensby.
The website postings, for every year including 2016, 2015, 2014, 2013 and 2012, displays total incompetence, fraudulent financial reporting or both conditions. The website Labor Day 2016 Data Dump, more importantly confirms violations of NC Law and behavior tantamount to a gross breach of fiduciary responsibility and Constructive Fraud (google it). The evidence of a cover-up is clear. The Vice President, now President, Jon Nance, has deceptively and incorrectly stated, in a court affidavit, during a three year legal action in District Court that “all financial information for every year, had been made available to all members”. The RHA Labor Day 2016 Website Data Dump confirms the Cover-Up continues and that his affidavit was a blatant lie on several levels:
Let’s go back to the Website Financial Reports and itemize the fraudulent accounting by year.
The 2015 and 2016 reports were obviously incorrect, as discussed and did not meet the minimum standards of GAAP (Generally Accepted Accounting Procedures).For several years NO financial reports were presented…and in all years, financial information, if the data can even be called that, did not meet the minimum standards required under simple checkbook reporting much less under GAAP accounting.
For 2013-2014, again the Font size distraction, two identical reports, no Income Statement as of May 31, 2014, just Budget vs. Actual gobble-di-gook and “estimates”. More importantly and a consistent major concern for over 10 years!!!!, NO CASH FLOW REPORTING OR PRIOR YEAR CASH RECONCILIATION. Then there is, on the website, for 2014, an unlabeled entry that speaks of “Opening Balance Equity”?????????”Net Cash provided by Financial Activities”??????????? Total Gibberish!!!!! Cash at the end of the Period was also noted as $15,955.01!!!!!!!!!!! The actual number, noted in the treasurer’s comments was in excess of $40,000.00, earlier in May 2014.What happened to the CASH????
Ditto the above comments for 2012-2013. Terms such as “projected” on the Income Statement, not FINAL…NO CASH FLOW REPORTING OR PRIOR YEAR CASH RECONCILIATION!!. But wait!!!There is a BAR CHART!! Oh no!!! This reveals that the Royden BOD spent over $13,000.00 on “NEIGHBORHOOD SIGN IMPROVEMENT! (NEARLY $30,000.00 OVER 3 YEARS). But WAIT…The Covenants dictate that only Common Area maintenance can be drawn from the Annual Assessment. Capital Projects need SPECIAL ASSESSMENT SEPARATE APPROVAL……WHICH WAS NOT VOTED UPON!!!!!ANOTHER GROSS VIOLATION OF THE COVENANTS!!!!
In conclusion, the conduct of the Royden Board of Directors, for over 10 years, stands as an embarrassment to a once elite community. Since 2004, self-serving BOD’s, with essentially the same directors, some serving, uncontested with the miss-use of rigged proxies, for over 9-12 years (Ms. Gressette), complicit with a lawless attorney relationship, have used a “Ballot Annual Reporting System” to extract power from the (apathetic) Royden Homeowners.
The RHA has basically two powers under the covenants and by-laws. Annual Assessments and Architectural Control. This latter activity also has been totally neglected, with no member involvement in a standing committee, or basic reporting on the architectural approvals given out during the past 10 years, under the absolute control of a single board member (ideal pay for play situation). Major architectural façade changes, such as painted brick facades, were allowed to prevail in the neighborhood, without a single homeowner’s involvement.
The second power, or taxing power, is given to this quasi private government in the Consolidated Covenants, Article IV-Covenant for Maintenance Assessments-Creation of Lien and Personal Obligation. An all-encompassing covenant, that calls for Annual Assessments (Common Area Maintenance ONLY) and Special Assessments (All Other Capital Projects). Social programs such as catered parties for the BOD and their friends are specifically excluded, as non-common area expenses. In the “Ballot” system, a non-compliant expense, can be included in the ballot budget and exceeded, with no accountability, With a Special Assessment based covenant, only the funds, approved for the Special Assessment, can be used, “each year only”. So, what happens….The Board pads the Ballot Budget, increases the fiscal reserves above the 10% Contingency Reserve(roughly $3,000.00) then has upwards of $40,000.00…yes $40,000.00 at year end, that was not distributed back to members as a credit.
NOTE: The Article IV Covenant was the subject of a three year lawsuit with the D&O Attorneys claiming a NC Rules of Conduct Violation -12(B)(6)-failure to state a claim upon which relief can be sought. Essentially the court, as is typical in other states, refused to hear a homeowner complaint against an HOA since the covenants are deemed “a contract not recognized under the law”.
Article IV has been violated for over 10 years and exposes the Royden HOA to significant Directors and Officers Liability Claims in the past and going forward. With a constructive fraud statute of limitations, this liability would encompass over $200,000.00 of unapproved legal expenses, improperly assessed in a failed easement lawsuit. The current Royden Board is now saddled with the “sins” of the past and must continue using non-compliant accounting mechanisms to avoid further legal action.
The only remaining course of action, open to the Homeowners of Royden, now that the fraudulent activity has been exposed to members, on the website (and the general public on our blog, associationbusters.com) is as follows:
1) ELECTION OF A TOTALLY NEW BOARD OF DIRECTOR’S,
2) APPOINTMENT OF AN INDEPENDENT AUDITING FIRM TO CORRECTLY RESTATE OR DEVELOP FINANCIAL INFORMATION FROM 2004 THROUGH 2016
3) FILE A BREACH OF FUDUCIARY RESPONSIBILITY D&O CLAIM AGAINST PRIOR BOD’S
4) RECOVER A POTENTIAL $350,000.00 IN DAMAGES
5) REDESIGN AND RENOVATE THE FRONT ENTRANCE AREAS
We close with a quote from Maude Royden…”THE CORRUPTION OF THE BEST, IS THE WORST”.