HOA Heist: Lessons Learned from HOA Fraud

August 31, 2023 Sasha Cancél

Homeowners Associations (HOAs) are designed to safeguard property values and foster a sense of community, but they are not immune to HOA fraud, embezzlement, and financial mismanagement. With millions of dollars often under their control, HOAs can become tempting targets for unscrupulous board members or property managers.

The recent scandal at the Hammocks Community Association in West Kendall, Florida, has sent shockwaves through the homeowners association world. It’s a stark reminder of how essential transparency and community participation are in avoiding an alarming tale in HOA governance.

ChatGPT for HOAs: Detecting HOA Fraud with Advanced AI

ChatGPT is AI-based software with a substantial amount of information. By issuing clear and effective commands, using ChatGPT for community associations can be highly beneficial. You can establish rules and explore its capabilities. Learn about historical instances of HOA fraud and, if you possess sufficient knowledge of using AI-based models, leverage ChatGPT for HOAs.

The Hammocks Crime: A Brief Overview of HOA Fraud

As reported in the Miami Herald and other media outlets, over the course of seven years, the Hammocks community in Miami-Dade County was victimized by a secretive board of directors who set up an elaborate HOA fraud scheme involving 55 bank accounts, theft, and neglect of community maintenance duties. Retired Chief Judge David M. Gersten has been diligently unraveling the web of deceit. At the same time, charges have been filed against critical figures like former HOA president Marglli Gallego, her husband, and other board members. 

The Miami-Dade State Attorney’s Office compares the situation to tactics employed by mafia and cartels, emphasizing the severity of the case. Amid rising HOA fees and fears of losing their homes, residents started a recall effort that attracted the attention of local politicians, turning a local community issue into a statewide ethical and legal concern.

Other cases that have shaken the HOA industry:

Nevada HOA Scandal (2008-2013) 

One of the most extensive HOA corruption cases unfolded in Las Vegas, Nevada, leading to 42 convictions. Conspirators manipulated HOA board elections to gain control and steer construction and legal contracts to specific firms. This led to inflated costs and substandard repairs. The conspiracy involved more than a dozen homeowner associations and generated millions of dollars in HOA fraud fraud contracts. The mastermind, Leon Benzer, was sentenced to 15 and a half years in prison in 2015, and other participants received varying sentences.

Glen Meadow Condominium Association, Waltham (2014)

Lesley A. Correa, a resident of Waltham, pleaded guilty to embezzling approximately $350,000 from the Glen Meadow Condominium Association. According to the Middlesex District Attorney’s Office, Correa faced three counts of larceny over $250 for her involvement in the financial misconduct. On September 24, Middlesex Superior Court Judge Sandra Hamlin sentenced Correa to a probationary period ranging from one to four years. As part of her punishment, Correa is barred from working in the financial sector. Also must obtain approval from probation officers for any future employment. Furthermore, she was ordered to continue mental health counseling and pay a total of $367,338 in restitution to the association. 

Lava Bluff HOA in Hurricane, Utah (2022)

The Lava Bluff Homeowners Association found itself embroiled in a financial scandal when a persistent homeowner, Tim Mullicane, noticed discrepancies in the HOA’s financial reports since 2018. After years of research and questioning, the former treasurer confessed to embezzling over $150,000. With a forensic audit revealing transfers close to $250,000 into her personal and gambling accounts. Mullicane’s investigations even revealed that HOA checks were cashed near casinos in Nevada. The embezzlement, which continued for almost eight years, led to tensions within the community and changes in the HOA board’s leadership. The police investigation was reopened, and the community, while staying ahead of bills, found itself lacking funds for essential projects like road repairs. 

Lesson #1: The Importance of Transparency and Monitoring Brees Chaos And Corruption

Transparency is a vital antidote to avoid fraud and misconduct. HOAs should provide clear, regular reports of financial activities, decision-making processes, and other essential aspects of governance. When information is hidden, opportunities for fraud increase.

Lesson #2: Low Community Engagement Leads To Unpopular Outcomes

Encouraging community participation ensures that homeowners have a say in how their HOA is run. Regular meetings, open forums, voting rights, and clear channels for feedback can make the difference. It can make difference between an engaged, vigilant community and one that falls prey to fraud.

Lesson #3: Digital Platforms Are A Key Solution (And A Real Lifesaver)

Modern technology offers powerful tools to foster transparency and participation. Platforms like ONR have emerged as game-changers in property management.

ONR provides a digital interface where residents can view reports, meeting minutes, and other essential documents. It facilitates online voting, enabling more homeowners to participate in elections and decisions. By providing a transparent platform where every transaction and decision is recorded and visible to all members, ONR promotes accountability and reduces the chances of fraudulent activity.

Looking Forward: A Tech-Savvy Future Without Fear From HOA Fraud

The Hammocks scandal has exposed the vulnerabilities inherent in HOA governance. Which also illuminates the path to a future where HOA fraud can be minimized or eradicated. Through transparency, participation, and leveraging modern tools, HOAs can create resilient, engaged communities where trust flourishes and fear recedes.