Association manager tells directors what to say and how
to vote during
board meetings
Los Angles Times
Donie Vanitzian
03 January 2016
Question:
Our homeowner association manager inserts herself into board
meetings, then controls what goes on. Three majority board directors
are responsible for hiring her; together they dominate operations and
association finances for over 650 units. With her help these directors
get kickbacks and keep their positions by rigging votes. During regular
meetings she texts the three majority directors telling them what to
say. She tells them what motions to make and how to vote. Because these
statements are in private texts, officially they don't exist in meeting
minutes.
After years of relentless complaints regarding management, owners
finally removed one of those majority directors, breaking their
stronghold. An emergency meeting agenda was circulated stating
"possible termination of management company" and the manager was
ordered not to attend. One board director claimed to be out of town and
attended by conference call. After that meeting the supposedly
out-of-town director bragged that he was really at home in his unit on
a speaker-phone conference call with the manager sitting next to him.
The manager used his phone to text their cohort director, who was in
attendance, what to say during the meeting. He said if not for the
manager's involvement, they would not have been able to stave off
having her fired. What laws have been violated?
Answer:
This manager is a liability to the association. Vote rigging
and kickbacks, especially to control association finances and
operations, are serious actionable offenses. Under Corporations Code
section 8215, any directors, employees or agents of a corporation who
make false or deceptive entries in corporate records are liable for all
damages that result — this includes board directors who aid and abet.
There exists a basic fiduciary duty to act in good faith and in the
best interests of the association and its titleholders. If the majority
board directors are corrupt or complicit with management, they risk
prosecution.
Corporate powers, activities and affairs shall be conducted and
exercised by or under the ultimate direction of the board, and the
board has a duty to protect records, documents, financial records and
voting materials including ballots, according to Corporations Code
7210. Although the board is empowered to delegate certain management
activities to individuals, management companies and committees, some
duties are non-delegable to anyone — even a manager.
Accurate and comprehensive meeting minutes comprise an ongoing
knowledge base for the association. Texting does not comport with an
open meeting discourse. Omitting discussions occurring during any
meeting could prejudice a board should members need to defend their
actions.
There is a strict prohibition on board directors attending meetings or
voting by proxy, under Corporations Code section 7211(c). Although
these directors have not formally designated the manager as their
proxy, they are giving her the powers they have been entrusted with by
the titleholders when they say what she tells them to say or do what
she tells them to do. This behavior needs to be exposed, with
titleholders informed that the individuals they voted for are not
acting in their best interests. In fact they are not acting at all, but
instead are serving as mouthpieces for management.
As a third-party vendor, managers are hired to assist the association.
Allowing any third-party vendor to dictate the speech and voting of
directors is an astounding conflict of interest. The board's duty to
eliminate such conflicts is unsurpassed. These directors' failure to
timely discipline the manager and her aider and abettor directors
places the association and every titleholder's assets at significant
risk. If this puppetry of the board continues, the vote of every
titleholder cast for a director that is controlled by management was of
no consequence, resulting in a monumental waste of association
resources.
Before filing a lawsuit against the manager and the culpable directors,
consult with a lawyer to determine whether the statute of limitations
has expired as to each potential cause of action.
Zachary Levine, a partner at Wolk & Levine, a business and
intellectual property law firm, co-wrote this column. Vanitzian is an
arbitrator and mediator. Send questions to Donie Vanitzian, JD, P.O.
Box 10490, Marina del Rey, CA 90295 or noexit@mindspring.com.
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