How bad can condominium/HOA management get?

I was going to stop writing condo corruption stories from Florida because there were so many of them but these stories need to be told.

Residents: North Bay Village condo has gone criminal
No charges in HOA dispute
Lawsuit alleges property manager embezzled $228,000 from condo
Former Longboat Key condo manager ordered to begin serving 3 years
Mastermind of $300 million fraud gets 40 years
Ex-CFO of $300 Million Resort Condo Fraud Charged by Feds
'Condo crime family' pleads guilty to felonies
Developer in prison, but Clearwater condo owners still paying the price

Residents: North Bay Village condo has gone criminal
Manager charged with theft; burglaries plague waterfront building TV News
Author: Bob Norman, Reporter
05 March 2015

North Bay Village—Florida:
The Kennedy House condominium is located on Biscayne Bay in North Bay Village, but many of its residents said the way things are going it doesn't feel like it's in America at all.

"It's like we're in a banana republic," said resident Lynn Ragusa.

Residents said there has been unchecked crime at the condo that starts at the top with condo manager Rachel Badilla, who was charged in August with stealing $4,500 from the condo association after forging the names of board members on a check.

Despite the fact that she faces criminal prosecution on the allegations she stole from the Kennedy House, she has been allowed to keep her position running the association and overseeing its $1.2 million budget. Residents said they learned the association even posted the $5,000 bond to bail her out of jail.

Former board treasurer Sigrid Nilssen, a witness in the case, said she's disgusted that the association's current leadership is keeping Badilla in charge of the Kennedy House.

"A woman who has been charged with two felonies, how can you explain that?" asked Nilssen.

Nilssen said she was forced off the board after she began asking questions about financial irregularities. She notes that the Kennedy House also has Robert Dugger on the payroll as a consultant.

Dugger is a former North Bay Village commissioner who was removed from office by former Gov. Jeb Bush after he was charged criminally in a corruption case and was ultimately convicted of two misdemeanor charges.

Dugger has a long history of complaints as a manager at several condos and has been fined and reprimanded in the past but has managed to retain his state license.

Kennedy House Dugger also happens to be Badilla's stepfather.

"It's a family affair," said resident Sergio Evora.

"He must have a good friend at the [state Department of Business and Professional Regulation]," said Nilssen.

They learned the association's listed accountant, Gary Alexander, didn't have an active license and reported that to the state. The Department of Business and Professional Regulation interviewed Alexander, who said he wasn't doing any accounting work for the Kennedy House and that he was the victim of "a clear case of identity theft."

When state investigators questioned Badilla, she mentioned that the person actually serving as the accountant was a man named Craig DeGregory, who had said he worked with Alexander.

State investigators then learned that DeGregory also was unlicensed and had been convicted in 2003 of stealing $400,000 from Miami condo Surfside Condominium.

DeGregory told Local 10 News that he was indeed working with Alexander, but admitted he didn't have a license. That investigation has been forwarded to the state attorney's office and DeGregory said he has been cooperating with the state.

Finally there are the burglaries. Residents have also complained of a string of burglaries where units have been stripped of appliances with no signs of forced entry. Evora said his unit was hit prior to him moving in 2013, with expensive new stainless steel appliances mysteriously replaced with older damaged appliances. Police investigated and when they questioned Badilla she said it had been a "mistake."

"Badilla stated the condo had been unoccupied for four years and the appliances were moved by mistake to another unit," North Bay Village police Officer Walter Sajdak wrote in his report. "Badilla stated the management company will repair any damage to the unit caused by the mistake."

Residents, including a retired Miami-Dade detective named Jorge Brito, began gathering evidence in the case, but they said the police department failed to properly investigate. A group of residents attended the Feb. 10 North Bay Village commission meeting to complain.

"That was a flat-out burglary -- it had all the elements," Brito told the commission. "We have thieves not only working at the Kennedy House but running the Kennedy House."

North Bay Village manager Frank Rollason told Local 10 that the poor way in which the Kennedy House cases were handled was one factor among others in his decision to fire Police Chief Robert Daniels last week. He also said that he has put a priority on the Kennedy House burglary investigation, even authorizing overtime for investigators to get it done.

When Local 10 investigative reporter Bob Norman caught up with Badilla, she refused to comment on her own criminal case and the burglaries, saying that her attorney had instructed her not to speak about it. She also called police on Norman who was a guest of numerous residents at the condo at the time.

Norman also spoke with current board treasurer Judith Landis, who voiced support for Badilla.

"Don't you have concerns about what's going on here?" asked Norman.
"Leave me alone," said Landis.
"The residents here think you're looking the other way," said Norman.

Landis said there were only a handful of residents complaining and that 230 of them "like what we are doing."

"That like the fact that you have a manager who is accused of stealing money from the association?" Norman asked.

"Accused only," said Landis before slamming her car door shut and driving away.

Read the comments under the news story

3 arrested following investigation into condo corruption TV News
09 March 2015

Residents at the Kennedy House condo were in disbelief today after their board's president was charged with grand theft and condo manager Rachel Badilla and her assistant Alejandro Salcedo were charged with theft and organized scheme to defraud. It's the second criminal case involving Badilla.

(Watch the television news video report.)


No charges in HOA dispute
Ocala Star Banner
30 March 2015

Expect no criminal charges in the case of an Ocala property management firm being investigated by the state over allegations it spent homeowners’ association money in violation of state law and improperly conducted association meetings.

This is a very long article. The managers did get minor penalties. Shows that white collar crime pays.


Lawsuit alleges property manager embezzled $228,000 from condo association
Bob Norman
12 May 2015

A property manager at a 100-unit condominium on Hollywood Beach embezzled $228,000 from unit owners during a two-year period, according to a lawsuit filed by residents.

The Hollywood Police Department is also criminally investigating the allegation that Kristin Glansen, 35, diverted large sums of money from The Waterway at Hollywood Beach into bank accounts she controlled, the city confirmed.

A lawsuit filed on the condo's behalf by attorney Eric Glazer alleges that Glansen created a company called Willis Homes, which has a very similar name to the condo's actual insurance company, Willis of Florida. And then Glansen cut big check after big check -- one of them as high $47,000 -- to her own company, the lawsuit alleges.

Glazer said one big mistake made by the condo board was giving Glansen the power to sign checks. Along with a former board president, Glansen signed each of the checks in question.

Hollywood police have put out a grand theft warrant for the arrest of the 35-year-old condo manager, who allegedly embezzled more than $225,000 from The Waterway condominium on Hollywood Beach over a two year period.

A police spokesman said her whereabouts are unknown but that detectives are following "investigative leads" in an attempt to find her.


Former Longboat Key condo manager ordered to begin serving 3 years in prison for stealing more than $200,000
Bradenton Herald

08 July 2015

Judy Paul, convicted of stealing more than $200,000 from the Sand Cay Homeowners Association on Longboat Key, reads a statement before sentencing Friday at the Manatee County Courthouse. Paul was sentenced to 3 years in prison, 10 years probation and must repay $200,000.
GRANT JEFFERIES/Bradenton Herald

MANATEE -- The former manager of a Longboat Key condo association, convicted in 2013 of stealing more than $200,000 of Sand Cay Homeowners Association funds, was ordered Tuesday to begin serving a three-year prison sentence.

Judy Paul, 51, was convicted in July 2013 on felony counts of grand theft in excess of $100,000 and scheming to defraud more than $50,000.

In September 2013, Paul was sentenced to three years prison followed by 10 years probation, and ordered to pay $200,000 in restitution to the Sand Cay Homeowners Association. She was allowed to remain out of jail pending appeal.

On June 3, the Second District Court of Appeals affirmed Paul's conviction.

Paul was scheduled to surrender at a court hearing July 1, but she failed to appear and later claimed she had attempted suicide. When she didn't show, Circuit Judge Susan Maulucci ordered a warrant for Paul's arrest.

Paul appeared in court Tuesday and pleaded with Maulucci for mercy, claiming several medical conditions needed treatment. Paul claimed medical issues including uncontrollable bowels, post traumatic stress disorder as a result of the case, a failing colon, alleged mistreatment at the Manatee County jail and back surgery.

Paul also said she attempted to end her life two days before she was originally scheduled to surrender.

Paul and defense attorney David Ehlers claimed a motion for a federal stay of sentence had been filed on her behalf. Assistant State Attorney Lisa Chittaro said she could not find any such federal court filing and federal courts had no jurisdiction in the case.

Ehlers offered to show Paul's medical records to Maulucci.

"It's all hearsay, and I'm really not inclined to do that," Maulucci said. "I don't see that I have any other option but to invoke the sentence at this point and time."

Paul began to sob loudly.

Maulucci read Paul's sentence into the record again and ordered her housed in the medical unit at the Manatee County jail until taken to prison.

"That's where they hurt me, your honor," Paul shrieked amid her sobs.

Maulucci added jail officials should review her medical records, which should go with her to prison.

"I hope you are all happy,"

"I hope you are all happy," Paul said through sobs as she walked out with her cane after being fingerprinted.

Paul's case was the first brought to trial by the State Attorney's Office's newly formed White Collar Crime Division in 2013.

"In 2013, a jury delivered a just verdict in this case for the financial misconduct the defendant committed while in a position of trust as the manager of Sandy Kay condominiums," Chittaro said after the hearing.

"I'm pleased the second DCA affirmed the defendant's conviction and sentence and that today the defendant begins to serve her prison sentence for the crime she was found guilty of."

purchased a Harley-Davidson motorcycle

Paul's fraud was discovered when a routine 2009 audit uncovered more than 50 checks she issued and cashed or deposited into her own accounts. Evidence revealed she also purchased a Harley-Davidson motorcycle with association money.

Sand Cay Condominiums Beach Resort, 4725 Gulf of Mexico Drive, is made up of 60 individually owned units also available as vacation rentals on a weekly or monthly basis. Owners were forced to repay the loss through assessments.


Mastermind of $300 million fraud involving Clearwater condos gets 40 years in prison
Tampa Bay Times
Susan Taylor Martin

For a few heady years, Fred Davis Clark Jr. enjoyed the perks of an ill-gotten success — aircraft, yachts, waterfront homes.

But now Clark likely will spend the rest of his life behind bars for masterminding a $300 million fraud scheme involving condos in Clearwater and other vacation spots.

A federal judge in Key West this week sentenced Clark, in his late 50s, to 40 years in prison. Clark was also hit with judgments totaling $307.1 million for bank fraud and obstructing a Securities and Exchange Commission investigation.

Clark was convicted in December on three counts each of bank fraud and making a false statement to a financial institution. The charges stemmed from his role as CEO of Cay Clubs Resorts and Marinas, a company that said it would turn Clearwater's run-down Grand Venezia condos and 16 other tired properties in Florida, Las Vegas and the Caribbean into luxurious "hotel condos.''

Cay Clubs promised investors who bought the condo units that they would receive steady rental income and upfront "lease-back'' payments of up to 20 percent of the purchase price at the time of closing. Federal investigators said the company raised more than $300 million from buyers but the operation turned into an illegal Ponzi scheme when it began using money from new buyers to pay the lease-back fees to earlier ones.

In an attempt to meet his obligations, Clark engaged in an elaborate series of fraudulent mortgage transactions that drove up the sales prices of units. He also extracted $22 million from Cay Clubs operations for his personal use, investigators found.

Cay Clubs, which never completed the renovations, collapsed in 2008.

The fraud "cost me my retirement, cost me my life savings, cost me all the sacrifices I made in 30 years of traveling the road to support my family,'' said Kimball Pugmore of Utah, one of several victims who went to Key West to testify at Clark's sentencing Monday.

Laurie McNulty of Charleston, S.C., paid $669,000 in 2005 for a condo in the Grand Venezia, which had views of Old Tampa Bay but was just a few hundred yards from congested U.S. 19. She and others were told that a water park and high-end shopping complex would soon be built nearby, transforming the area into a classy resort.

"This has affected my life so much over the last 10 years,'' McNulty, a pharmacist, said in court. "It has hurt my marriage. It's taken so much time away from my kids.''

McNulty's unit went into foreclosure after the promised amenities failed to materialize and was sold by the bank in 2008 for $175,500.

In related cases, two other Cay Clubs executives pleaded guilty last year to bank fraud charges. Each was sentenced to five years in prison and ordered to pay $161.5 million to victims, both individuals and financial institutions.


Ex-CFO of $300 Million Resort Condo Fraud Charged by Feds
Daily Business Review
Carla Vianna,
14 October 2016

When investors handed money to the Cay Clubs Resorts and Marinas during the last real estate boom, they were promised a hefty return that comes with owning a snazzy condo in South Florida, one of nation's hottest markets.

The Florida-based developer, which operated from Key Largo, among other places, touted plans to deliver several five-star luxury resorts in the sunny, tourist-laden Florida Keys and elsewhere. Buyers hoped to "Retire Rich and Young in Paradise," as Cay Clubs' marketing material told them.

But the five-star resorts were never built, and investors never received the quick return or steady stream of rental income promised to them.

Cay Clubs' former Chief Financial Officer David Schwarz was arrested Thursday in Orlando on bank fraud and tax charges, more than 10 years after he and imprisoned company president Fred "Dave" Clark launched a shady real estate scheme that fleeced 1,400 investors out of more than $300 million.

Schwarz allegedly played a key role in what federal authorities have described as an illegal Ponzi scheme carried out by the defunct Clay Clubs between 2004 and 2008.

Schwarz co-owned the company with Clark, who served as president and CEO. The duo sought to "unlawfully enrich themselves by misleading and defrauding lending institutions," according to a sealed indictment filed Oct. 11 in the Southern District Court of Florida.

Federal prosecutors charged Schwarz with conspiracy to commit bank fraud, three counts of bank fraud, three counts of making false statements to a financial institution and one count of interfering with the administration of the Internal Revenue Service.

The U.S. attorney's office in Miami issued a news release but declined additional comment.

In late 2004, Schwarz and Clark began selling Cay Clubs condo units to insiders, using money from company bank accounts to fund the deals, while falsifying loan applications to secure mortgages, the indictment alleges.

The purchases were made to inflate condo prices and paint an artificial portrait of high demand for the units when in reality the company was simply buying from itself. While Schwarz and Clark pocketed the cash, investors were shown a picture of a project whose tony condo units were selling well.

But the developers faced dwindling sales in 2006 when dilapidated properties still stood where the shiny new hotels were slated to rise. Schwarz, Clark and other Cay Clubs executives continued selling units at higher prices to insiders, including family members, and falsifying mortgage documents, the indictment states. Eventually, the company began using money from new investors to pay off older ones with no new profits or loans coming in.

Clark and Schwarz personally snagged over $28 million in investment funds between them while Cay Clubs was operating from 2004 to 2008, according to the indictment.

They failed to file tax returns for the Cay Clubs' shell companies and didn't file individual returns until after the U.S. Securities and Exchange Commission began probing the fraud.

Schwarz hid millions of dollars from the federal government in false tax returns for 2004, 2005 and 2006, according to the indictment. If convicted, he could face 30 years in prison for each of the conspiracy and bank fraud offenses plus three years for the tax offense.

Clark received a 40-year prison sentence in February for bank fraud and false statement to a lender.

Former Cay Clubs executives Barry Graham and Ricky Lynn Stokes, both of Fort Myers, were sentenced to five years each in prison last year after pleading guilt for their roles in the scheme.

Assistant U.S. Attorneys Jerrob Duffy and Alison Lehr are prosecuting Schwarz, and the case has been assigned to Chief District Judge K. Michael Moore in Key West.


'Condo crime family' pleads guilty to felonies

ABC 10 News
By Bob Norman - Investigative Reporter
25 October 2016

MIAMI - After nearly 20 years and more than 30 complaints to the state with allegations ranging from rigging elections to stealing funds, the so-called “condo crime family” has finally been stopped.

Married couple Robert and Rachel Dugger, and daughter Rachel Badilla, pleaded guilty Tuesday morning in Miami-Dade court to conspiracy to commit grand theft, with Badilla also pleading guilty to grand theft from the Kennedy House condo in North Bay Village.

Badilla had been charged with forging checks to herself from the association and stealing the money, along with using association keys to enter a vacant unit and strip it of its kitchen and other goods.

one of the most complained-about condo-management teams in Florida

Former state Rep. Julio Robaina, who conducted a state investigation into condo corruption, said the Dugger family was one of the most complained-about condo-management teams in Florida. It was Robaina, an attorney, who dubbed the Duggers the “condo crime family,” a name he said “they’ve earned.”

“It’s a big relief that they are not going to be at the Kennedy House and they’re also not going to be able to victimize the thousands of other people that they have been victimizing at the other communities that they manage,” Kennedy House resident Lynn Ragusa said. “My husband and I go to work, we pay our condo dues and they steal the money. It comes from hard-working people.”

Ragusa was one of several condo residents who came to watch the family members plead guilty to their crimes – and she wasn’t alone in her disappointment that they weren’t given jail time.

surrender their condo-management licenses

The trio instead were sentenced to five years probation and 300 community-service hours, and ordered to pay more than $500,000 in restitution and other costs. Perhaps most importantly for the condo residents, Judge Alberto Milian also ordered them to surrender their condo-management licenses and cease all condo work in the state of Florida within 10 days.

If they violate probation, the Duggers face up to 15 years in prison while Badilla could spend up to 35 years behind bars.

“They put a manual together in how to commit fraud in condominiums,” said Jorge Brito, a retired detective who helped spark the police investigations that nabbed the family. ”This has been a nightmare, but it’s a good day overall for the residents of the Kennedy House. Finally, this is coming to a closure. Today we feel better -- a little better going home tonight.”


Developer in prison, but Clearwater condo owners still paying the price
Tampa Bay Times
Tracey McManus
01 December 2016

CLEARWATER —When Wayne Chase retired from his nuclear plant job in 2012 and bought a waterfront condo overlooking Tampa Bay, he knew he'd pay the typical fees that come with gated community living.

But when he got his tax bill that year for his two-bedroom unit in Grand Venezia off U.S. 19 and Belleair Road, he was surprised to see $1,600 in assessments on top of the $1,000 in property taxes.

It wasn't until he started asking neighbors that he discovered most of that $1,600 bill was an assessment to pay off a debt run up by a convicted felon who ran the development as a Ponzi scheme years before Chase settled there.

serving a 40-year federal sentence for fraud

Although the mastermind of the failed Grand Venezia luxury resort project in the Clearwater Cay Development District is serving a 40-year federal sentence for fraud, residents of the 336-unit complex are still paying for his crime. Former developer Dave Clark's company took out a $30 million note for his promised resort in Clearwater, one of 14 Cay Clubs from Las Vegas to the Keys, but a decade after the plan crumbled, residents are still paying back the debt through assessments.

The bonds were issued to build a water park, high-end retail, a spa, canals with gondoliers and other amenities around the existing apartments that were converted into condos—but the infrastructure was never built. And likely never will be.

to free residents of the burden

Safety Harbor lawyer Bruce Barnes filed a lawsuit this year on behalf of the homeowners' association to essentially dissolve the Community Development District and free residents of the burden. His argument is the Community Development District serves no public purpose required by law and never built the development it was created for in the first place.

"He's still inflicting harm on people," Barnes said of Clark. "The law firm that represented his (company) that went before the city and convinced the city to approve this, they're still serving as CDD council. They're still getting paid."

Community Development Districts

Community Development Districts are special entities approved by local governments that have power to borrow money through bonds for construction and roads and repay the debt by assessing property owners within the district. CDDs are also responsible for maintaining their own infrastructure.

The Clearwater City Council approved Clark's Clearwater Cay Community Development District in 2005 after he told city officials his "ambitious project will revitalize the entire area," according to minutes from a work session that year.

But Cay Clubs went on to run a fraudulent scheme by using funds of lenders to purchase condos and flip the units to buyers at inflated prices. Clark and his associates promised investors who bought the condo units that they would receive steady rental income and upfront "lease-back'' payments of up to 20 percent of the purchase price at the time of closing.

the operation turned into an illegal Ponzi scheme

Federal investigators said the company raised more than $300 million from buyers, but the operation turned into an illegal Ponzi scheme when it began using money from new buyers to pay the lease-back fees to earlier ones.

The outfit crumbled around 2007, and most of the original buyers, who bought units upwards of $500,000, unloaded their properties through short sales or foreclosures, Barnes said.

they didn't understand their assessments until after their purchase

Although current residents, many of whom bought the units for their location on the bay at prices around $100,000, came in with no expectations of a future resort, they didn't understand their assessments until after their purchase.

Of the overall bond debt, residents are responsible for repaying about $5 million, which will bloat to more than $10 million with interest by the time the bonds mature in 2037.

"I felt very angry and confused and frustrated because I didn't know anything about it," said Tom McAnulty, a Canadian pharmacist who bought two units in Grand Venezia as investments in 2009. "All of a sudden, I and everybody there owe a bunch of money to people we don't know anything about."

While McAnulty didn't hire a lawyer for the purchase, he said he used a title search company to evaluate any liens. "Would I have still bought if I knew? Maybe not," he said. "I certainly wouldn't have bought two."

But David Smith, managing shareholder for Gray Robinson law firm in Tampa, which represents the CDD, said the entity is legally required to make good on the bonds and repay this debt to the financial market.

"Bonds do not disappear," Smith said. "It's devastating to the financial market if they wipe this out."

He said a portion of the funds from the initial bond offering was used to purchase the land within the district, not just to fund the infrastructure that was never built.

And property owners would have been aware of the nature of the assessment and knew what they were getting into by reading property documents.

"You can't buy and act like you're blissfully ignorant. You can't just undo it because you don't like it."

"I know a lot of people don't have an understanding of what development districts are, but it's on the public record," Smith said. "You can't buy and act like you're blissfully ignorant. You can't just undo it because you don't like it."

This summer, the CDD filed a motion for the Grand Venezia and Barnes to pay its attorneys fees based on Barnes filing a "frivolous" lawsuit.

And some Grand Venezia residents are worried they will be stuck with paying the legal fees of this case, on top of the assessments, if their lawsuit is not successful.

"They don't have a snowball's chance in hell of winning this"

"They don't have a snowball's chance in hell of winning this," said Jerry Lancaster, CDD assistant secretary and Grand Venezia resident. "There's no question these guys were crooks and they're in jail as a result of it, and you can argue (the lender) should have been more judicious in loaning the money, but the process is set up. The judge certified it."

But Barnes said the CDD, as it stands now with no public benefit, is in violation of the statute.

"The CDD is a government, and it is a government that was created by a convicted felon and a government that has been perpetuated where no benefits have been conferred on the people who are paying for that government," he said. "Nobody can justify it staying in existence or rationalize it."

The case is scheduled to go to mediation in late January.

top  contents  chapter  previous  next