Editorial Response- Desperate Actions
Desperate people often do desperate things.
For example, LWA president Mike Rodriguez and the TWI Editorial Board — which includes two former Board Members — recently published scurrilous personal attacks on us using the Association’s email distribution list and an Oct. 23 TWI Editorial.
Those attacks were precipitated by our Letter to the Editor two weeks earlier, in which we attributed falling Lake Wildwood property values to soaring assessments, the Board’s failure to properly maintain our common facilities and infrastructure, and false or misleading financial reporting.
What disturbs us most about those attacks is that they are clearly aimed at demonizing the two of us but do not dispute any of our claims regarding Board improprieties. It’s a technique commonly used by attorneys to discredit witnesses who might present testimony that could be damaging to their clients.
Our Letter to the Editor reported that:
• The Board intentionally low-balled estimated clubhouse construction costs to obtain member support for the $4 million special assessment.
• The Board mismanaged the clubhouse project by permitting special interest groups to alter and expand the plans after the vote and then failed to obtain competitive bids from general contractors, as required by our governing documents.
• With only a 5 percent cost overrun allowance, the clubhouse project was $1.2 million (22 percent) over budget before a spade was turned.
• The Board is planning to fund the $1.6 million clubhouse funding shortfall with additional special assessments that would not need Member approval or by expending replacement reserve funds that were saved for other purposes.
• The Board intentionally under-funded reserves for at least 15 years by excluding the structural components of all our common facilities (including the clubhouse), the golf course, the dam, 228 culverts and all parks from replacement reserve reporting and funding. As a result, current replacement costs increased from $8 million in 2013 to $23 million this year because those exclusions were eliminated in 2014 to help fund the clubhouse.
• The Association’s 2015 reserve funding plan projected a $41 million increase in reserve assessments over the next 30 years — $14,471 per member — but did not explain why that enormous increase would be needed to repair, replace or renovate only $5.6 million in total assets reported in the Association’s 2014 audited financial statements.
After nearly a year of futile, behind-the-scenes efforts to persuade the Board to implement tighter financial controls and provide the membership with more accurate and understandable reporting, we requested Internal Dispute Resolution (IDR) on July 7, seeking to discuss our concerns in a more formal setting. During that meeting, we urged the Board to adopt five specific actions to correct the most immediate risks.
Three days after that meeting, we submitted a follow-up letter to the entire Board, explaining the need for each of those recommended actions. As stated in our letter, “Our aim in (making these recommendations) was to provide the Board with the information it needs to identify and correct the causative system factors, policies, and procedures that enabled inappropriate actions. It was not our intention to discredit past or present Board Members.”
Eleven weeks after we submitted our IDR request, the Board finally rejected all of our recommendations.
We fail to understand why the Board rejected our recommendations, particularly the one that proposed requiring the President and General Manager to approve the Association’s Management Representations Letter to the Auditor each year. Normal accounting standards require that two responsible managers sign such letters but, in 2014, that letter understated Association reserve obligations by $10 million and was signed only by the Chief Financial Officer. That false information was later submitted to the clubhouse lender.
Now Mr. Rodriguez and the Board have gone on the attack, probably because they know that intentionally publishing false or misleading financial information can subject Board Members and mangers to joint and several liability for damages. He intends to publish our letter requesting IDR and the Board’s dismissal of our proposals. He is not, however, willing to publish the five recommendations in our settlement proposal. We have posted a copy of our proposal on http://www.lwwa.net. Please read it to get the full picture.
Mr. Rodriguez has falsely reported that we frequently threatened the Board with litigation during the past year. That simply is not true; we never threatened litigation and do not now intend to file suit against the Association. However, a shareholder derivative suit could put as much as $4 million from Director and Officer Insurance policies into the Association’s treasury.
If you are concerned about these issues, as we are, then it’s time to get involved. Maybe a great place to start is to ask yourself if the kind of representation you’ve been receiving during Mr. Rodriguez’ tenure on the Board serves your needs and those of our community.
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