Condo fraud revealed

Risks lurk behind 'carefree' condominium living

By Linda Lee Larson, D.B.A, CFE, CPA

Condo homeowners' environments can be incubators of fraud because volunteers comprise the boards that oversee the collection of large sums of money, and they might not properly manage these funds for the benefit of clueless residents.

Leon Benzer, owner of the Silver Line Construction Company, apparently liked the influence he wielded. He liked the cash even more. Between 2003 and 2009, Benzer fraudulently gained control of 11 condominium homeowners' associations (HOAs) in the Las Vegas area so that the HOAs would direct work to his business and a conspiring law firm.

According to a federal indictment, Benzer and several cronies identified HOA boards that could potentially bring construction defect cases. They then allegedly enlisted real estate agents to find condos within several HOA communities for purchase. Benzer and many others recruited "straw purchasers" to use their names and credit to purchase condos in the complexes, according to court documents.

"On at least 37 occasions," according to a U.S. Department of Justice statement, "Benzer and certain co-conspirators allegedly provided the down payments and monthly payments on behalf of the straw purchasers, including HOA dues and mortgage payments, and various false and misleading statements were made to secure financing for the properties.

"The co-conspirators also made various false and misleading statements to secure financing for the properties. Further, to manage the properties, Benzer and others allegedly conspired to open at least five bank accounts through which they moved more than $8 million. Eventually, 33 of the 37 units went into foreclosure," according to the statement.

Benzer's co-conspirators, at his direction, would transfer partial interests in the condos to other co-conspirators to make them appear to be homeowners who could stand for election to HOA boards of directors. The co-conspirators won some elections by submitting faked and forged ballots.

Benzer and his cronies then directed the conspiring HOA board members to manipulate votes to select property managers, contractors, general counsel and attorneys to represent the HOAs — including Benzer's construction company and the conspiring law firm.

On Jan. 15, 2013, 11 individuals — including the ringleader, Benzer — were charged in a 17-count indictment.

Benzer and his company made millions off the illegal deals. He and others, according to the indictment, gave cash and items of value to the other defendants for their alleged roles in the conspiracy.

On Feb. 24 of this year, in a plea agreement Benzer pleaded guilty to conspiracy to commit mail and wire fraud plus tax evasion. As of press time, his sentencing was scheduled for Aug. 3, and trials continued for the remaining defendants. In all, 36 defendants have pleaded guilty since August 2011, and most are cooperating and waiting to be sentenced, according to Benzer pleads guilty in massive Las Vegas Valley HOA scheme, by Jeff German, Las Vegas Review-Journal, Jan. 23. Prosecutors are seeking nearly $25 million in restitution for the HOAs and lending institutions defrauded in the takeover scheme.

Now, that's extreme HOA fraud. But all the same risks exist in any homeowners' association. Here we'll discuss how HOAs can deter and prevent crimes in this fraud-rich environment.

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