Serious Questions Concerning the Financial Matters at Windsor Fountains, HOA

July 14, 2022

Board of Directors and the Finance Committee, Each member of the Board of Directors is required to act as a fiduciary with respect to his or her duties as board members. This obligation requires the highest duty of care possible and the responsibility to always act in the best interest of the homeowners.

As duly-elected members of the Board of Directors, we take seriously our fiduciary obligation to provide checks and balances for the governance of our Association and to raise questions about seemingly imprudent business decisions. On your behalf, these questions deserve and require full and complete answers.

In the past two years, we have spoken out against the majority board members when such imprudent decisions have been made. Such imprudent business decisions have grave consequences for our HOA in that our reserves are seriously underfunded. Accordingly, Leemon McHenry at the August 30, 2021 Board meeting General Session, made the following motion: "to create an ad hoc oversight committee to investigate financial mismanagement and return monies to the benefit of the Association."

The majority board members have apparently conceded Mr. McHenry’s concerns and have proposed to engage an accounting firm to perform a so-called “forensic audit" of the legal invoices from 2016 to 2020 at $250 per hour. However, any such audit that would exclude the year 2021, a year with high legal expenses, is obviously flawed. Furthermore, this accounting firm has advised the board that unless specific concerns are identified in advance, such an audit would amount to nothing more than a "fishing expedition."

As we read the proposed contract it looks like the bill for this fishing expedition will be approximately $10,000 but even then, the time spent is capped at a maximum of 40 hours. Without the identification of specific concerns, and with the exclusion of the most relevant time period, the board majority has just made another imprudent business decision where HOA funds will be wasted on a seemingly public relations stunt. That $10,000 would be much better spent if it remained in the HOA’s reserves.

At present the board majority has failed to find two other bids from accounting firms required to move forward with this public relations ploy. However, if the Board majority was truly interested in the performance of and the results of a meaningful audit, they would have included all of our concerns. We therefore list the following examples demonstrating how the majority of the Board of Directors has imprudently spent Association funds:

1. With regard to Ms. Jessica Lee’s 2020 candidacy for the Board of Directors, Mr. Nate Wright of Horizon Management was asked to produce all documents relevant to this matter but he has only produced the financial reports recording the delinquency. Ms. Lee was delinquent for three months during the 2020 election and was therefore ineligible to run for the board, yet she was supported by the majority board members, Nate Wright and Len Siegel, Esq . How much money was spent on legal counsel by the majority board of directors to defend Ms. Lee? Since all relevant documents, including all correspondence, have not been produced, this investigation is incomplete. Evidence at present consists of email correspondence with Nate Wright and Condo Elects, and deposition testimony in a different matter that Nate Wright conceded.

2. The 2020 election rebuttals and legal consultation. How much money was spent on legal counsel by the majority board of directors in this contentious matter? Since all relevant documents, including all correspondence, have not been produced, this investigation is incomplete. Evidence at present consists of email correspondence and letters from Len Siegel, Esq.

3. The 2021 payment of $9,000 to unit 251. Leemon McHenry and Frida Dilonell made requests to Nate Wright of Horizon Management to produce all documentation that justified this expense, but he refused to send one single document. Since all relevant documents, including all correspondence, have not been produced, this investigation is incomplete. Evidence at present consists of email correspondence, Executive Session Board minutes, and correspondence with Nate Wright. Is it especially relevant that Nate Wright concealed one important piece of correspondence by Leemon McHenry and Frida Dilonell by refusing to publish it in the board package.

4. 2019 to 2021 legal counsel related to disputes between individual homeowners (rather than the HOA). Numerous requests were made to Nate Wright of Horizon Management to produce all legal invoices, but he has only produced a limited number as required by a subpoena. How much money was spent on legal counsel for reviewing correspondence and offering legal advice to individual homeowners? Since all relevant documents, including all invoices and correspondence, have not been produced, this investigation is incomplete. Evidence at present consists of a limited set of legal invoices produced as a result of a subpoena to Horizon Management.

5. 2020-2022 Revision of the Bylaws. How much money was spent on legal counsel by the board of directors to pass the bylaws revisions? These revisions were not required by California law and thus became a contentious issue for homeowners. Since all relevant documents, including all invoices and correspondence, have not been produced, this investigation is incomplete. Leemon McHenry has raised the question twice during board meetings in 2022. In response, Treasurer Amy Rosenstein reported that about $1,500 was spent on the bylaws revision, but legal invoices obtained thus far show $6,043. Evidence at present consists of a limited set of legal invoices.

6. 2019-2022 other instances of the misuse of HOA funds for legal advice. From 2019 to the present, there are numerous questionable expenses that potentially amount to thousands of dollars.* This requires an investigation of the legal invoices, board meeting minutes and correspondence. Evidence at present consists of a limited set of legal invoices.

7. 2019-2022 expenditures to the association that not approved by the Board of Directors. Based on standard review of our finances, we have detected a series of actions by majority board members that were not approved nor discussed by the Board, raising the questions of legitimacy of these expenditures that are neither voted on nor recorded in the Minutes. Evidence at present consists of monthly financial reports in the board package.

8. Judit Maull has alleged, without proof of any type, that a former building manager was taking kickbacks from vendors around 2016-2018, and has suggested that board members knew of this, but she has thus far provided no specific information or evidence for this allegation. This claim needs to be investigated. Evidence at present consists of Judit Maull’s statements at board meetings and discovery in a legal case.

Many homeowners have expressed their support for our investigations into these issues and some have volunteered to serve on an ad hoc oversight committee of concerned homeowners. In response to the board’s proposal to waste Association funds on a financial audit, we propose to meet with members of the finance committee to discuss these and other concerns, determine whether we can resolve these matters internally at no cost to our Association, and return monies to the Association if appropriate.

In any event, at a minimum, we believe that every homeowner has a right to know how the association money is being spent, and if the money is being spent wisely. With HOA dues increasing at alarming rates every year – now a total of $6876 per annum – there can be no reason for refusing our request.

If we have no response to our concerns, we will take this matter directly to the homeowners.

Very truly yours,

Leemon McHenry

Frida Dilonell

David Hayen, Esq.

Board of Directors, Windsor Fountains

Postscript

This letter was sent to the Board of Directors and the Finance Committee. At the board meeting of July 25, 2022, Amy Rosenstein of the finance committee refused to comment on our July 14 letter. Board president, Judit Maull, attempted to block all discussion of the issue, and no action was taken on our request. The finance committee and the majority board members not only refused to examine the evidence supporting our allegations, but refuse to consider any discussion of the matter. The finance committee did not respond.

At the board meeting of April 24, 2023, Leemon McHenry presented four bids for a forensic audit to the board of directors. Board member Julie Lavelle argued that either the authors of the July 14, 2022 letter must withdraw their allegations or the board must move forward with the forensic audit. Leemon McHenry argued that the forensic audit served no good purpose since the cap of $10,000 would be insufficient for any of the four bids and that a group of concerned homeowners had volunteered to meet with the finance committee to conduct an investigation for each of the eight allegations. No action was taken on the bids for a forensic audit.

*Legal invoices have not been submitted since Westcom became the management company. Requests have been made to Mr. Carmona for the legal invoices since December 2022. None have been submitted in four months.