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NC management company closes doors, owner disappears & owners money missing

Channel Property management's victims will know how these homeowners feel. Manzoor Khan unexpectedly closed up shop and disappeared with their money.

Why does this continue to happen everywhere there are condos? There are clues in these news reports. It starts with there being no financial controls.

Police investigate after HOAs say money missing

HOAs claim management company closed shop with their money

$500,000+ possibly stolen from 29 HOAs, police say

HOAs claim management company closed shop with their money (updated)

SBI joins investigation of missing HOA money

Police execute search warrants in HOA case

HOAs meet with Garner police over embezzlement case

Police, Wake DA to HOA leaders: Be patient, get lawyers

Ogden HOA left in lurch while management company investigated

Diana Kelly charged with taking money from 25 HOAs

Clayton woman pleads guilty to embezzling $800,000 from 25 clients

Garner police investigate after HOAs say money missing
WARL.com
Candace Sweat
10 August 2016

GARNER, N.C. — Police said Wednesday that they are investigating the possible embezzlement of tens of thousands of dollars from at least six homeowners associations in the Triangle.

Accounts for all six HOAs were, at some point, maintained by Kornerstone Community Management in Garner. Two of the HOAs have filed reports with Garner police, and four have filed complaints with the Consumer Protection Division of the state Attorney General's Office.

Diana Ellis Kelly didn't return phone calls and emails

Kornerstone provides management services to about two dozen HOAs in the Triangle. Its office was locked on Wednesday – the company is listed as "permanently closed" on Google – and president Diana Ellis Kelly didn't return phone calls and emails seeking comment.

Tony Losada, an HOA vice president for the Greystone Crossing neighborhood in Garner, said about $52,000 is unaccounted for after the HOA decided to leave Kornerstone in May and tried to transfer its funds to another management company last month.

"The money may be somewhere in a bank account, and she may have some type of issue that she's dealing with and she's not able to get back with us, which would be the nice thing to think," Losada said. "Or she's on vacation in Tahiti. I'm not quite sure."

A Kornerstone check for almost $24,500 in Greystone's operating account was returned for insufficient funds, he said, so the transfer for the remaining money was never attempted.

In the Wellington neighborhood in Angier, a letter from the HOA president informed residents that the association's account had been drained of more than $9,000 with no warning from Kornerstone. The HOA reported the missing money to Garner police.

"We're still in the preliminary stages of that investigation and trying to get our victims together, trying to ascertain what happened and then where to go from here," Garner police Capt. Joe Binns said.

the investigation could be long and complex

Binns said the investigation could be long and complex, giving the number of HOAs that might be involved.

"We have a lot of other victims to contact and a lot of potential victims to contact," he said. "Once we've made those contacts and kind of get an idea of what we're talking about, then we can proceed on to the other pieces of that investigation."

An HOA representative for the Hunter's Mill community in Clayton said an account with Kornerstone holding $16,000 has been frozen.

Kari Alberque of the Laneridge HOA in Raleigh went to Kornerstone's office Wednesday seeking answers to questions.

"We're just trying to gather information and figure out how we get access to our records," Alberque said.

"We're disappointed that she, for some reason, wasn't being forthright with us and, for some reason, doesn't want to give us our money back," Losada said.

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Triangle HOAs claim management company closed shop with their money
The News & Observer
By Jonathan M. Alexander
16 August 2016

The lights were off and the door was locked at Kornerstone Community Management off 1300 Benson Road.  Jonathan M. Alexander

GARNER
Police are investigating whether a management company has stolen hundreds of thousands of dollars from at least 27 homeowners associations across the Triangle.

The management company, Kornerstone, based in Garner, suddenly closed without notice this month, leaving some associations without access to their bank accounts. Others who had already decided to leave Kornerstone for various reasons claim their financial records show money missing from their accounts.

unsure exactly how much money is missing

Garner Police Capt. Joe Binns said he is unsure exactly how much money is missing. Investigators are still trying to gather that information.

“This is particularly complex because of the number of victims,” Binns said.

Jeff Swain, president of the homeowners association at Village at Aversboro in Garner, said nearly $150,000 is missing from two of its bank accounts.

Swain said the Village at Aversboro association was in the process of switching management companies because it hadn’t been pleased with Kornerstone after nine years. He said it followed the contract, giving the company 60 days notice, and that at the end of the contract, Kornerstone was to turn over records to a new management company.

Swain said after HOA officers started going through the materials, the first thing they realized was that after the contract ended, they discovered that the agent, Dianna Ellis Kelly, had written two checks that came out of the Village at Aversboro’s checking account. One check was for $11,000 and the other for $55,000.

a banker said they did not have an account with them

He said HOA members checked another bank account they thought they had with PNC Bank, which was supposed to be used as a reserve fund. But when they got to the bank, a banker said they did not have an account with them.

Swain said they were supposed to have $82,000 in the fund.

“This is the most unbelievable situation that I’ve seen in 40 years working with non-profits and state governments,” Swain said.

Swain said the neighborhood had insurance of up to $100,000. He said it’s important to note that the neighborhood has enough money to continue to pay its bills.

Bernardo Gelabert, president of the homeowners association at Arbor Greene in Garner, said he isn’t sure what has become of the money that Kornerstone managed for his subdivision. He said the agent, Kelly, contacted them last Tuesday to say the company would be closing and that someone would contact Arbor Greene to return its financial records.

But after a week of phone calls and emails went unanswered, Gelabert said he began to worry. The office is now dark, and a Google search for Kornerstone says the company is closed.

“Unless we get our paperwork and go to our bank, we cannot tell if money was stolen,” Gelabert said. “We cannot get in touch with (Kelly).”

bank accounts were in the company’s name

Gelabert said Kornerstone did everything for its HOA, from collecting dues and managing bank accounts to issuing violation notices to residents who didn’t abide by the rules. He said its homeowner’s association bank accounts were in the company’s name, so association members don’t have access to them. Gelabert declined to say how much money is unaccounted for.

“Obviously she closed the doors for a reason,” he said.

Now Arbor Greene, a Garner subdivision of about 160 homes, may have to start from scratch.

Wade Corbett, a member of the board of directors for the Weston Woods subdivision in Johnston County, said he, too, is unsure what Kornerstone has done with the homeowners’ association money, but he has questions.

Ellis would lock the doors

Weston Woods, comprised of 143 townhomes, switched management companies last month. When association members tried to ask for their financial records, Ellis didn’t provide them. Corbett said board members tried calling, emailing and going to the office, but Ellis would lock the doors. Then she left.

“She could have been taking money without anybody knowing about it,” Corbett said.

He said the bank account was in Kornerstone’s name and that Weston Woods does not have access to it.

“She’s not required to release that information,” Corbett said. “So without seeing the financial (information), we can’t prove whether she’s stolen anything from us.”

Efforts to reach a representative at the company were unsuccessful. Emails to Kelly come back with an automated message saying the company is currently closed.

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$500,000+ possibly stolen from 29 HOAs in Wake and Johnston counties, police say
By CBS North Carolina
16 August 2016

GARNER, N.C. (WNCN) — More than $500,000 may have been stolen from 29 home owners associations in Wake and Johnston counties that are managed by a company called Kornerstone Community Management, Inc, Garner Police say.

Police said Tuesday the possible embezzlement was discovered after some HOAs came to authorities about the matter last week.

Garner police said that the issue will take some time to examine because of extensive bank records involving the 29 possibly affected associations.

Kornerstone Community Management, which is located at 1300 Benson Road in Garner, is accused of fraud and embezzlement.

The first three associations to report to police did so on Aug. 9 and were Wellington Homeowners Association, Village Of Aversboro and Laneridge HOA, according to a Garner Police report.

Police said that this is the list of possible victims in the case — so far:
Arbor Greene HOA
Boling Townes
Broadmoor HOA
The Gardens at Flowers Plantation (Association Section 2)
Glen Road Townhomes
Greystone Crossing HOA
Hoke Landing Community
Hollyfield at West Bay Estates
Honeycutt Landing
Hunter’s Mill HOA
Ives Landing HOA
Jordan Ridge HOA
Krendle Woods
Laneridge HOA
Leone Landing
McKenzie Subdivision
Partin Place
Quail Woods Owners Association
Rowland Meadows HOA
Rowland Pond Subdivision
Sierra Heights HOA
Southern Trace
The Meadows of Southfort Plantation
The Valleys at Ashebrook
The Village of Aversboro
Vandora Pines
White Oak Landing
Wellington

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Triangle HOAs claim management company closed shop with their money
The News & Observer
By Jonathan M. Alexander
16 August 2016 (updated & abridged)

Police have searched Kelly’s home in Clayton. Authorities say they are working with the Wake County District Attorney’s office and the State Bureau of Investigations to go through what was collected.

a history of writing bad checks

Kelly has a history of writing bad checks. She was convicted of writing worthless checks in Wake County in 2002 and Johnston County in 2005, both misdemeanors. In both cases she was ordered to pay a fine.

No oversight
Subdivisions tend to hire management companies to manage their funds, collect dues and enforce their HOA rules and regulations. It is not a requirement to have a real estate license to manage money for a homeowners’ association, and many management company owners around the state don’t, said Corbett.

Corbett a licensed real estate agent, said the N.C. Association of Realtors has been discussing how to regulate unlicensed owners of management companies.

Records show Kelly, who ran Kornerstone, was not licensed.

“This is more than just Kornerstone.”

“That’s how simple it is,” Corbett said. “This is more than just Kornerstone.”

Tom Miller, who served as the legal counsel for the N.C. Real Estate Commission in the attorney general’s office, agreed.

“There is no state agency with the authority to go in and handle a complaint or to make sure that standards are being maintained,” Miller said. “No public accountability.”

Miller said it makes homeowners’ associations vulnerable.

It’s a cash flow issue, he said. Each month residents pay into a reserve fund to pay bills and recurring expenses. Eventually that fund builds up.

there’s nobody around to spot cooked books

“You can steal all that money, and as long as the day-to-day business is being handled, there’s nobody around to spot cooked books,” Miller said. “I mean, eventually it’s all going to come tumbling down, but it might be a year or more.”

many people couldn’t resist the temptation to steal money

He said when he was working in the attorney general’s office he saw that many people couldn’t resist the temptation to steal money.

“Some of them were crooks,” Miller said. “Many of them were just not up to the business and mismanaged it. I guess the people had gotten into the business, it’s like the wild west, because there are minimal standards to get into the business.”

He said for years a core group of HOA managers, the N.C. Real Estate Commission and other homeowners across the state have urged the General Assembly to adopt laws to regulate unlicensed people who manage homeowners’ associations. However, no legislation didn’t get far.

has received six complaints about Kornerstone

Samantha Cole, a spokesperson for the attorney general’s office, said the Consumer Protection Division has received six complaints about Kornerstone from HOAs across the state. One was in Wilmington, where there was also a Kornerstone office.

Cole encouraged anyone with complaints about Kornerstone to contact the Consumer Protection Division and the Garner Police Department.

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SBI joins investigation of missing HOA money
WRAL.com
24 August 2016

GARNER, N.C. — Police said Wednesday they have called in financial crimes experts from the State Bureau of Investigation to assist in an investigation of possible embezzlement from dozens of area homeowners associations.

Twenty-five HOAs from across the Triangle have filed complaints with the Garner Police Department or the Consumer Protection Division of the state Attorney General’s Office in connection with as much as $500,000 missing from their accounts.

Accounts for all of the HOAs were, at some point, maintained by Kornerstone Community Management in Garner. Its office has been closed for at least two weeks, and president Diana Ellis Kelly hasn't returned phone calls and emails from WRAL News seeking comment.

A couple of HOAs said Kelly has emailed them to assure them that they will get access to their money.

Lt. Lorie Smith said she met with Kelly

Garner police Lt. Lorie Smith said she met with Kelly more than a week ago when police seized some Kornerstone files, but she declined to elaborate on anything Kelly said.

No charges are pending against Kelly, Smith said, because investigators still have to review hundreds of financial records.

Police said they plan to hold a meeting with representatives of the affected HOAs on Sept. 8 at the Garner Police Department to update them on the investigation and to provide them with resources to answer many of their civil questions.

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Police execute search warrants in HOA case
The News & Observer
By Jonathan M. Alexander and Ron Gallagher
26 August 2016

GARNER: Police detectives took 14 file cabinets containing legal documents, 55 boxes of files and computer memory from seven machines on Aug. 11 after searching the office of the management company that eleven homeowners associations claim stole their money, documents showed.

That number of complainants has since increased to 25 homeowners associations managed by Kornerstone Community Management, a Garner-based company, which has been the target of the investigation.

No one has been arrested yet and it still may take some time, police say. The investigation is ongoing.

“We want to make sure we conduct a thorough investigation before we consider charges,” Lt. Lori Smith said.

executed a second search warrant

Detectives executed a second search warrant, in which they seized three laptop computers, a computer storage device and ten credit cards on the same day when they searched the Clayton home, a truck, a Jeep and two cars owned by Diana Ellis Kelly, the owner of Kornerstone.

A third search warrant

A third search warrant let police go into two units at Garner self-storage business, but they did not seize any evidence there, the documents show.

The warrants were issued a day after police went to Kornerstone’s offices in Suite 1300 at 102 Benson Road and found the doors locked.

Police got calls from eleven homeowners associations on Aug. 9 and 10 reporting that they were missing money from their bank accounts or could not get access to accounts. Later, more than a dozen others filed reports.

The first call came from Wellington Homeowners Association, located in Angier. The president of that HOA said all its money in their PNC Bank had been removed. Kornerstone Community Management was in charge of their HOA’s finances.

The second report came from the president of the HOA at the Village at Aversboro in Garner. They, too, had their finances managed by the company before deciding to switch companies. Board members had given Kornerstone a 60-day notice that they would be canceling their contract with the company. Kornerstone sent an acknowledgment email on April 4.

However, on July 14, an invoice was created by Kornerstone Management Company for $11,687 for management fees for the next 14 months.

Another check was written to the Village at Aversboro for $55,497 from the operating account to close it out. But that check bounced.

In total, they claim they lost nearly $150,000

The HOA’s president, Jeff Swain, claimed the Village at Aversboro was supposed to have more than $82,700 in their reserve account, but there was no reserve account. In total, they claim they lost nearly $150,000.

With the first two reports, there was a total of $159,979 reported stolen.

Some of the HOAs which filed reports said they did not have access to a bank account number associated with their HOA. Those that did have access to an account number were not allowed access to the account through the bank.

“Homeowner Associations would receive documents from Kornerstone advising them of their assets and liabilities but these were documents created by Kornerstone and not the financial institution,” the warrant states.

Smith said the police still are not sure of the exact total taken from the HOAs. She said of the 29 HOAs Kornerstone managed, one HOA did not report any losses, and three have not been contacted yet.

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HOAs meet with Garner police over
embezzlement case
WNCN.com
By Amy Cutler
08 September 2016

GARNER, N.C. In August, Garner Police said more than $500,000 may have been stolen from 28 home owners associations in Wake and Johnston counties by a company called Kornerstone Community Management, Inc.

Thursday, the HOAs met with Garner Police.

Police officials said they started the embezzlement investigating about a month ago. Now Garner Police says up to $1 million may be missing.

Because it is a complicated investigation and people are frustrated with the progress, it’s important to hold the meeting, Garner Police officials said.

“Obviously the biggest question for most of these folks is how can I get my money back? Is my money gone?,” said Garner Police Captain Joe Binns said. “So that’s kind of the questions we’re going to try to answer tonight.”

Gay Grandison said she became a member of her homeowners association to be more involved.

She, like many at the Garner Police Department Thursday, had the right intention by volunteering to help their community. But police said Kornerstone community Management took advantage of that.

“I want to be a part of where I live that’s the whole purpose of buying a home,” Grandison said.

Wake county District Attorney Lorrin Freeman, along with a representative from the North Carolina Attorney General’s Office, police, and private attorneys all attending the meeting.

They told the HOAs the investigation would take time and their focus should be on moving forward.

When asked if any of the HOAs could get their money back, Freeman said it’s still early in the process.

“We’re lucky to know that a good number of them do have some form of insurance policies,” Freeman said.

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Police, Wake DA to HOA leaders:
Be patient, get lawyers
The News & Observer
By Johnny Whitfield
09 September 2016

Garner:
Lawyers and police counseled patience Thursday night before a crowd of homeowners association leaders gathered to hear an update on an investigation into money that was discovered missing after the management company that ran the associations closed suddenly.

Garner Chief of Police Brandon Zuidema told the crowd of about 50 people that his officers have made the case a top priority. They are working with auditors from the State Bureau of Investigation to rebuild financial records for the 28 homeowners associations – most of them in the Garner area – that have come forward with complaints.

“We have four, five, sometimes six people working on this every day,” Zuidema said. “We’ve already put hundreds of man hours into this, but there are still hundreds more to go.”

Wake County District Attorney Lorrin Freeman told the group that her staff is in daily contact with investigators as they comb through thousands of pages of documents seized from the offices of Kornerstone Community Management. Freeman said she understood the surprise and frustration HOA leaders are feeling as the investigation unwinds.

“I know that, never in a million years, did it cross your mind when you agreed to serve on your association’s board that you’d be sitting in the Garner Police Department at a meeting like this,” Freeman said.

Freeman said the volume of information investigators are sifting through complicates the investigation, but she also said the length of time the alleged embezzlement took place added to the workload. “We are talking about years of financial documents,” Freeman said.

Diana Ellis Kelly, is cooperating with investigators

The owner of the management company, Diana Ellis Kelly, is cooperating with investigators, Freeman said. Kelly has not been charged with any crimes, and Freeman was asked if police or the DA’s office was keeping track of Kelly’s whereabouts to prevent her from fleeing prosecution.

“In terms of her bolting, that’s not a concern,” Freeman said.

Despite the volume of investigative work left to do, Freeman tried to assure the crowd that progress was being made.

“We aren’t talking about months more,” she said. “We are within striking distance here. I don’t expect to be here again six months from now.”

She told the group that investigators would likely pursue all the instances of possible wrongdoing as a single case.

Embezzlement of less than $100,000 is considered a Class H felony and doesn’t usually draw prison time. Embezzlement of amounts over $100,000 is classified as a Class C felony and can draw up to five years in prison.

Potential crimes like these, Freeman said, are treated differently based on the amount of money believed to be stolen. Embezzlement of less than $100,000 is considered a Class H felony and doesn’t usually draw prison time. Embezzlement of amounts over $100,000 is classified as a Class C felony and can draw up to five years in prison.

money was moved from one HOA’s account to others

“We want to position ourselves to restore as much as we can and hold the person accountable on the other end,” Freeman said. She said it’s still unclear how much money is missing because it appears money was moved from one HOA’s account to others. But she said the total amount is expected to be over the $100,000 threshold. HOA leaders at Village of Aversboro alone say they are missing $150,000.

the degree to which a suspect cooperates with investigators and how much restitution they make up front also plays a role in the level of punishment

She said the degree to which a suspect cooperates with investigators and how much restitution they make up front also plays a role in the level of punishment.

In addition to Freeman’s update on the case, attorneys with the Community Associations Institute of North Carolina were on hand to offer advice to HOA leaders on what to do next.

They told the crowd they should determine whether their HOA had insurance and, if so, they should read their policies to determine whether the insurance covers claims like this. “You also need a lawyer,” CAI attorney Hope Carmichael said.

For their part, HOA leaders at Thursday night’s meetings were pleased with the update.

John Hogan, the president of Hollyfield at West Bay Estates in Wilmington, said there wasn’t a lot of new information presented on their case, but he said he would take something away from the meeting. “The information about insurance was helpful,” Hogan said. Three of the 28 HOAs involved in the case are from the Wilmington area, where Kornerstone also had an office.

Jeff Swain, with the Village at Aversboro, said he was pleased with the effort investigators are putting into the case.

“I think they did a good job of explaining things tonight,” Swain said. “I understand better, now, why they are investigating this all as one case.”

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Ogden HOA left in lurch while management company investigated
Star News Online
By Hannah DelaCourt
11 September 2016

NEW HANOVER COUNTY – After a Garner-based management company, Kornerstone Community Management, closed its doors abruptly in August with no notice to homeowners’ associations it managed across the state, at least one local HOA is without access to its bank accounts.

The HOA of the Holly Field subdivision in Ogden was one of the associations under the management of the company.

Notices posted throughout the subdivision on Aug. 19 stated that the HOA’s most recent financial statements from the company showed Holly Field had approximately $89,000 in the accounts the Kornerstone Community Management managed.

we currently do not have access to these funds

“We do not know how much, if any, remains, and we currently do not have access to these funds,” the notice stated.

The management firm is currently being investigated to see if hundreds of thousands of dollars have been stolen from state HOAs, according to the News & Observer in Raleigh.

John Hogan, who became the president of the Holly Field HOA this year, said he attended a meeting Thursday night in Garner with investigators and representatives of other HOA affected.

Hogan said the Garner Police Department and the NC State Bureau of Investigation are working on the case, but no charges have been filed as they have yet to determine a total sum of the money missing.

Hogan said the representatives of the HOAs asked investigators Thursday if they had found any money that might be returned to them, but investigators did not answer as the investigation is ongoing.

While the company was paying the neighborhood’s bills on a regular basis, the HOA board became suspicious earlier this year when one of Kornerstone’s agents made a payment error.

“The board became alarmed when she bounced a check earlier this year, and we knew we had plenty of money,” he said. “She gave us an explanation and then we found out that explanation was not correct and then we wanted to get more information from her.”

finding a new management company

Hogan said the subdivision’s HOA board has already held an emergency board meeting. The next steps are finding a new management company and holding a meeting with homeowners, he said.

The board is compiling a list of homeowners, as many houses in the subdivision are rentals, so he can mail a notice to each about when the homeowner meeting will take place, Hogan said.

But until the investigation is complete, he said, police cannot tell him if accounts were even set up or if there is any money to get back.

We thought we had three bank accounts with her

“We thought we had three bank accounts with her,” Hogan said. “The police told us to assume we had nothing.”

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Woman charged with taking money from 25 homeowners associations
The News & Observer
By Johnny Whitfield
13 December 2016

Police have charged the owner of a now-defunct company with 25 counts of embezzlement in connection to money that went missing from the checking accounts of several homeowners associations.

charged with taking more than $800,000

Diana Kelly, 54, of Clayton, was arrested Tuesday afternoon and charged with taking more than $800,000 from 25 HOAs. Kelly was the owner and manager of Kornerstone Management Company, which operated the business operations of several homeowners associations in and around Garner and as far away as Wilmington.

Diana Kelly, 54, arrested by Garner Police on 25 counts of embezzlement.
Photo: Joe Binns  Garner Police

Police began investigating the management company Aug. 9 after receiving complaints from an officer of one Garner HOA who was having trouble getting access to banking records that were supposed to be managed by Kornerstone. Two days later, police executed search warrants at the company’s office on Benson Road in Garner and at Kelly’s home in Clayton.

In early September, Garner police took the unusual step of inviting officers from all the HOAs managed by the company to a public meeting with police and Wake County District Attorney Lorrin Freeman.

Freeman said at the meeting that investigators were combing through a lot of financial records and that it would take some time to determine what had happened to the homeowners associations’ money. She also said Kelly had been cooperating in the investigation.

Investigators worked with the Wake DA’s office and the State Bureau of Investigation’s financial crimes unit to gather evidence in the case. Kelly was arrested after a Wake County grand jury issued an indictment.

Kelly is in the Wake County Detention Center under $500,000 bond.

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Clayton woman pleads guilty to embezzling $800,000 from 25 homeowner associations
The News & Observer
By Anne Blythe
10 April 2017

RALEIGH— Diana Kelly, a Clayton woman accused of embezzling more than $800,000 from 25 homeowners associations whose accounts she managed, pleaded guilty on Monday to the charges as part of a plea arrangement with Wake County prosecutors.

serve the next 10 years in prison

Kelly, 54, rose in front of Wake County Superior Court Judge Donald Stephens and told him she had agreed to enter the plea, which meant she will serve the next 10 years in prison.

Kelly became emotional as she apologized to the homeowners, her family and the people who had worked for her in the company she incorporated in 2007.

As part of her sentence, Kelly was ordered to pay back $638,000 still owed to the homeowners from whom she embezzled nearly $100,000 a year for about eight years.

Stephens ordered work release as soon as the prison system will allow, as asked for by prosecutors and Kelly’s attorney. Stephens assured the homeowners at the hearing that Kelly would be returning to prison every night.

Some members of the associations’ boards spoke of the eroded trust they had experienced with the homeowners they represented and of the problems rebuilding financial records they lost.

“Our hope was that she would not get work release,” said Kelly Sena, a resident of Jordan Ridge, one of the affected neighborhoods. “However, she does have a lot of money to pay back to us so work release does make sense.”

The case stems from a criminal investigation that began last summer after Kornerstone Community Management of Garner closed its doors with no notice.

Some of the homeowners associations that Kelly’s company managed were left without access to their bank accounts, prompting a slew of complaints to the Garner Police Department and the consumer protection arm of the state attorney general’s office.

In mid-August, investigators armed with search warrants removed 14 file cabinets containing legal documents, 55 boxes of files and computers from the Kornerstone office.

Kelly was arrested four months later and charged with 25 counts of embezzlement. Two of the HOAs were from New Hanover County. The other 23 were in Wake and Johnston counties.

Two of the charges were considered Class C felonies, which means the amount of money taken from the victim was greater than $100,000. Those HOAs were the Village of Aversoro and Southern Trace. In the other 23 incidents, Garner police said the sum taken was less than $100,000. In all, 27 HOAs were the victims of embezzlement, but in two cases, the money removed had been returned before the associations discovered it missing.

Wake County District Attorney Lorrin Freeman said investigators looked at Kelly’s spending and personal bank accounts and discovered that the embezzled money was put toward several weddings, her daughter’s college, her husband’s struggling electrical business, which owed back taxes, clothes and family vacations.

“Really this is a story of greed”

“Really this is a story of greed,” Freeman said after the hearing. “And so often in these cases that’s what we see – someone who is overtaken by greed, taking advantage of other people.”

Kelly was convicted of writing worthless checks in Wake County in 2002 and Johnston County in 2005, both misdemeanors. In both cases she was ordered to pay a fine.

Kelly’s case has illustrated a thorny path that homeowners associations travel when enlisting such companies to manage their funds, collect dues and enforce rules and regulations.

A real estate license is not required to manage money for a homeowners association.

For years, the N.C. Real Estate Commission and a core group of homeowners associations have tried to push the General Assembly to adopt laws to regulate unlicensed managers. Those attempts have not resulted in change.

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