Jason Hope says he was just trying to help. But the two associations whose boards he allegedly took over tell a different story.
The public notice of the Entrada Mountainside Homeowners Association's 2002 annual meeting encouraged residents to participate in the election of two board members, review the financial status of their community, and go over the past year's accomplishments. But, unbeknownst to anyone else on the board or in the association, then-President Jason Hope was preparing a very different agenda. During the month leading up to the meeting, he had gone door-to-door in the Phoenix, Arizona, association, soliciting proxies that he told members he would use to re-elect himself to the board.
On the night of June 20, 2002, 10 to 15 Entrada Mountainside members gathered at a nearby church for the annual meeting. Once the proceedings were called to order, witnesses say, Hope pulled from his briefcase the 83 proxies he'd collected and announced that they gave him authority to take control of the proceedings. Then, over the vehement protests of the stunned members present, and with no legal counsel there to intervene, Hope raced through his agenda. He ousted the seven-member board and replaced it with a three-member board that included himself and his wife. He motioned to fire Entrada Mountainside's management company, Rossmar & Graham. He amended the bylaws to expand the board's power to impose assessments and procure loans, and, pursuant to the amendments, passed a special assessment of $137,000.
What was to have been a routine meeting turned into the raucous first act of an 18-month drama that pitted one man against his neighbors in an emotional and legal tug of war over who controlled the community. "It was a very stressful time," says Robert Franklin, a current board member of Entrada Mountainside and Hope's across-the-street neighbor. "The lesson here is you need to closely monitor what's taking place in your HOA. Don't be afraid to face issues directly."
There's another, grimmer lesson, too. Says Jim Hanley, president of Rossmar & Graham: "Even with controls in place, you can't prevent everything."
An attempted coup in a community association is uncommon but certainly not unheard of. But hijacking two associations, 40 miles apart, in a span of four months, is unthinkable. Yet, according to Entrada Mountainside and another Phoenix-area community, the Lago Estancia Community Association, the unthinkable happened not quite two years ago when Jason Hope engineered near-simultaneous power grabs.
In each association, the results were the same: two different boards, two management companies, two sets of assessments--and plenty of anxiety among residents. Both Entrada Mountainside and Lago Estancia fought back, but Hope claimed that the results of special elections that removed him from power were invalid, and continued to conduct business in the associations' names. Temporary restraining orders eventually brought Hope's activities to a halt, and both communities separately settled with him. A criminal investigation of a loan Hope secured in the name of Entrada Mountainside is ongoing.
Hope did not respond to numerous written, phone, and e-mail requests for an interview. The law firm representing him, Phoenix-based Mariscal, Weeks, McIntyre & Friedlander, also declined to comment. In newspaper accounts published last year, Hope denied any wrongdoing and said he was simply trying to fix widespread problems in the two associations. But the communities themselves maintain that his maneuverings were part of an organized scheme to defraud them.
In the beginning, Entrada Mountainside was like most other associations. An attractive, 238-home community teeming with young families and surrounded by majestic mountains in Glendale, in northwest Phoenix, it was built in the late-1990s and transitioned to homeowner control in 2000. A year later, some residents began voicing routine concerns about certain property issues, including erosion problems. No one was more vocal in his criticisms than Jason Hope. But, according to Robert McFarland, Esq., an attorney with Ekmark & Ekmark LLC, Entrada Mountainside's general counsel, "it was all typical HOA problems"--until the June 2002 election.
Hope, who has a finance degree from Arizona State University, is described by neighbors as a charismatic, energetic young man who seemed eager to improve his community. Now 29, he was appointed to Entrada Mountainside's board in April 2001 after the president was removed for missing three consecutive meetings. Hope ran for the board two months later and was elected, and a month after that, in July 2001, he was elected president. "Early on, he demonstrated a willingness to volunteer his time," Franklin says. "And he had some good ideas." Franklin says the first signs of trouble came when, as president, Hope began acting unilaterally to deal with community issues. But no one was prepared for his apparent power grab at the 2002 annual meeting.
After that meeting, Entrada Mountainside acted quickly to resolve the issue of who was in charge. McFarland says the law was on the side of the original board. Hope's board was null and void, McFarland says, because Hope didn't give community members proper notice of his agenda, nor did he register his proxies with the board secretary prior to the annual meeting, as required by the association's bylaws. Plus, he improperly used proxies to pass his own motions. Residents closed ranks behind the seven-member board that Hope had dissolved, and, within a month, 81 of 83 residents filed written revocations of their proxies. Many of them claimed Hope misrepresented how he would use the proxies; two said he'd forged their signatures outright. The original board called a special meeting of the association at which members voted, 95-2, to remove Hope from the board. The two dissenting votes came from Hope's remaining proxies. "This meeting clearly demonstrated that the voice of the community was behind the seven-member board," Hanley says.
Hope, for his part, claimed that any action taken by the seven-member board after the annual meeting was invalid--including the special meeting where the community voted him out. Backed by legal counsel for which he demanded the association pick up the tab--which Entrada Mountainside refused to do--he filed a lawsuit in the association's name against the original board members, alleging breach of fiduciary duty and failure to honor documents and an election outcome. Hope asked the Maricopa County Superior Court for a declaratory judgment on which board had legal and rightful authority. In a strange twist, one of the original board members being sued by Hope, Darren O'Grady, was also a member of Hope's three-member board. O'Grady was irate when he learned of Hope's actions at the annual meeting. According to an affidavit O'Grady later filed, he never received notice of, nor did he attend, any meeting of the Hope-elected board, and he never authorized anything it did.
With the unresolved dispute in court, McFarland says, Hope plowed ahead as if he was running the association. The community didn't immediately take proactive legal steps to stop him, according to Franklin, because they knew if they took action against Hope he would invoke the association's directors-and-officers (D&O) policy. Plus, no one really grasped what Hope had in mind. "We thought it was just sour grapes," Franklin says.
But soon enough they would find out it was more than that. Less than two weeks after the annual meeting, in a notice dated July 1, 2002, Hope's board fired Rossmar & Graham and replaced it with a firm called Orion Management Ltd. In subsequent court filings, Entrada Mountainside charged that Orion was an unregistered, unlicensed "shell" company run by an associate of Hope's--a claim Hope has denied. Orion's president, Forest Moriarty, could not be reached for comment, and the phone listing for Orion is out of service.
Shell or not, Orion meant business. By October 2002, the company was sending assessment coupons to Entrada Mountainside residents and threatening late penalties and liens if they didn't pay, a copy of one such letter shows. McFarland says any money collected by Orion went into association accounts controlled by Hope. While it's not known exactly how many people sent their assessments to Orion, McFarland believes most residents ignored the coupons and continued to pay their dues to Rossmar & Graham.
But no one was really sure what they were supposed to be doing. Entrada Mountainside was living a double life: two boards, two management companies, two assessments, and, behind it all, Orion's ever-present threat of liens. Residents were confused and anxious. On the positive side, McFarland says, the original board was hypervigilant in keeping up communication with members, explaining its side of the story and urging people to continue paying their assessments to Rossmar & Graham. And the association had a loyal ally in the management company, which decided to stick by Entrada Mountainside even after receiving Hope's dismissal letter. "It was the right thing to do," Hanley says. "They needed someone to be there during a tough time."
Certainly this qualified as a tough time, and, accordingly, Rossmar & Graham shifted into crisis mode. A few months along, when the association was beginning to feel the financial effects of the dispute, the management company helped the original board overhaul its budget, stopped billing the community for its management services, and asked outside contractors to write off expenses where possible. "They agreed to stick with us, even though Hope was attacking them verbally," Franklin says. "They were great--they were working with us to get through this."
The association needed all the friends it had, because things were about to get even worse. In December 2002, they uncovered a bombshell: Hope had secretly secured a $250,000 loan in Entrada Mountainside's name.
Odd as all this was, it wasn't unique. In October 2002, even while Hope was filing for a loan in Entrada Mountainside's name, he was also seeking leadership of Lago Estancia, a large planned community in Gilbert, an eastern suburb of Phoenix, where his mother and sister lived.
In what Entrada Mountainside contends was a repeat performance of his June 2002 power play, Hope had also gone door-to-door in Lago Estancia that same year, persuading residents to sign over proxies. Court papers filed by Entrada Mountainside say Hope, who is part owner of his mother's home, then showed up at Lago Estancia's 2002 annual meeting with 149 proxies--registered this time--and nominated himself as well as his mother and sister to the board of the 715-member association. While the proxies gave the Hopes a majority of votes and secured elected positions for all three of them, Lago Estancia's board challenged those results on the grounds that the three candidates lived at the same address. The board adjourned the meeting to sort out the dispute, and moved quickly to amend association bylaws to clarify that only one candidate per household could seek office. A new election was scheduled for the following month.
Meanwhile, back in Entrada Mountainside, Franklin got wind of Hope's doings a few days after Lago Estancia's annual meeting. He immediately sent a letter to Lago Estancia's president detailing what had happened at Entrada Mountainside. Before the new election, Franklin's letter was distributed to most of the homes in Lago Estancia. In addition, Franklin says, it was read aloud at the November meeting before votes were cast. More than 200 voting members came out for the election. Despite being armed with some 100 proxies, Hope and his nominees were overwhelmingly rejected by the community.
But that wasn't the last Lago Estancia heard from Hope. It seems he'd disregarded the adjournment of the first meeting, and, less than two weeks after the second meeting, residents received a letter from Orion Management announcing that a new board had been elected and that Orion was replacing Tri-City Property Management. The letter instructed members to discard their Tri-City coupons and instead mail monthly assessments directly to Orion. As at Entrada Mountainside, Hope's claims to power touched off a firestorm of protest among members, most of whom believed Hope was diverting their assessments to a dubious company.
The man at the middle of the storm remained--and still remains--something of a mystery. In newspaper accounts at the time, he said he simply wanted to correct the problems that had resulted from what he called incompetent board stewardship and management. "I'm a very upstanding member of the community," Hope told the East Valley Tribune. "I've got rock solid reasons for what I'm doing."
Lago Estancia didn't see it that way, however, and in December 2002, the association sued Hope, alleging fraud and conversion, which is the civil equivalent of criminal theft, and seeking a permanent injunction. A month later, Lago Estancia dropped its suit and opted to settle with Hope rather than pursue a costly, protracted fight, according to Scott Carpenter, Esq., a senior partner with Carpenter & Hazlewood, which was serving as Lago Estancia's general counsel (and had also been hired by Entrada Mountainside's insurance company to defend the seven-member board against Hope's lawsuit). As part of the settlement, which left the community with Tri-City as its management company, board members elected at the October and November meetings agreed to resign and not to run in the next election, in which residents voted for an entirely new board by mail. The settlement also included a non-disparagement clause and, according to an association resident who asked not to be named, called for the board's insurance carrier to pay $7,000 for Hope's legal fees. (Hope had invoked Lago Estancia's D&O policy when the original board sued him.) Lago Estancia was also stuck with a $20,000 bill for its own legal fees.
"The good news is that the association got involved quickly, and the lawsuit was settled," Carpenter says. "Residents were able to put it behind them and move on."
MEANWHILE, IN GLENDALE...
But Entrada Mountainside was having a harder time with Jason Hope. On Oct. 17, 2002, Hope's three-member board--which by then included two new officers, Chris Deela and Brad Smith, who the association contends were never elected and weren't even members of the community--met and approved a loan application for $250,000 in the name of the association, according to a copy of the minutes from that meeting, which Hope included with the loan application. The application, which was submitted to Washington, D.C.-based National Cooperative Bank (NCB), said the money would be used for "common area repairs, limited improvements and reserve fund increase." According to the Oct. 17 meeting minutes, the three-member board voted to pledge the association's assessments as collateral for the loan and to repay the $250,000 by raising general assessments by 20 percent and imposing a special assessment.
Entrada Mountainside residents didn't know anything about the Oct. 17 meeting or the business that seems to have been conducted there. (Indeed, McFarland and other critics question whether the meeting occurred at all, since on that same night Hope was apparently at Lago Estancia's annual meeting some 40 miles away.) Nor did the community know that, a week earlier, Hope had secretly opened an account in Entrada Mountainside's name at a local branch of Bank of America, with himself and Orion Management listed as the sole contacts. Two months later, in late-December 2002, according to court records, NCB approved the loan Hope and his board requested, and wired the money into the Bank of America account. With that, Entrada Mountainside became the obligor of a quarter-million-dollar loan about which it knew nothing.
While Hope moved behind the scenes to open the account and close the loan, he allegedly was orchestrating other parts of his agenda in broad daylight--sometimes in residents' back yards. Just before Christmas, crews of unlicensed workers appeared in Entrada Mountainside and began tearing up common-area plots where the association had allowed homeowners to put in bushes and drip lines and do other landscaping. Witnesses say the workers, surrounded by armed guards Hope had hired, also began stuccoing the half-mile-long common wall that runs along Happy Valley Road, the main entrance into the community. Hope himself supervised the work, zipping around Entrada Mountainside on a motor scooter. The project hadn't been approved by the original board, according to McFarland, and over time would have cost the association a great deal of money to maintain.
Robert Franklin's wife, Kathy, described the scene in an unpublished letter she sent to the Arizona Republic in January 2003: "[W]henever homeowners tried to get [the workers] to leave their property alone, ask them questions, or even stand across the street and take pictures, the guards kept us off our own streets, sidewalks, and walking paths." In an interview, Robert Franklin adds: "Neighbors were staying home from work to watch. They were screaming at Hope." Tensions were escalating, but there wasn't much the community could do because it was still in defensive mode legally. And the police refused to intervene in what they called an association matter.
While the stucco and landscaping work proceeded, money was flowing out of the association account that Hope had established. Within 10 days of the loan money being wired into the account, Hope had withdrawn about half of it--nearly $130,000, according to court documents filed by the association. In a major break for Entrada Mountainside, Franklin learned of the account's existence from a person whose identity he declines to reveal; but, because the funds had been transferred into the account electronically, their origin remained a mystery. Then, in early-January 2003, Franklin happened upon a representative from NCB--the bank that funded the loan--who was visiting Entrada Mountainside to take photographs for an impact statement. Franklin and the rest of the board had figured the money in the account came from a loan, and from the NCB agent Franklin got the name of the lending institution.
Finally, the community went on the offensive. Armed with information about the loan, McFarland's firm, Ekmark & Ekmark, was able to convince Bank of America to freeze the association's account, which had $120,000 left in it. At the same time, Entrada Mountainside filed a motion to intervene and an application for a temporary restraining order to prevent Hope from conducting any further business on behalf of the association. A Maricopa County judge granted the restraining order and ordered Hope to give a full accounting of how he had spent the missing $130,000. (The same judge eventually dismissed Hope's July 2002 lawsuit against the original board members.) In response, Hope's lawyers filed a 36-page document that stated: "As the accounting demonstrates, Mr. Hope has not converted loan funds as the 'Association' contends. Rather, funds have been used solely for the purpose of paying contractors to perform necessary work at Entrada and to reimburse Mr. Hope for legal expenses he personally advanced for Association business."
McFarland--who says he was unable to question Hope about the accounting because Hope didn't show up for a scheduled deposition--doesn't believe the contractors listed in the 36-page document actually performed the work Hope claims they did. In addition, McFarland says Hope never accounted fully for all the funds he obtained.
Ekmark & Ekmark also filed a lawsuit against Hope and his associates--including his wife, Sonya; Forest Moriarty, of Orion Management, and Moriarty's wife, Gina; and Entrada Mountainside's two other alleged officers, Smith and Deela. The suit charged them with breach of fiduciary duty and asked the court to order Hope to stop acting in the association's name and to award the association damages. In the fall of 2003, Entrada Mountainside and Hope finally reached a settlement, under which the association dropped its suit against Hope in exchange for his agreeing to stop acting as president of the association. According to McFarland, Hope also relinquished his right to serve on the board or solicit proxies for two years. With that, after a year and a half of boards and shadow boards, Entrada Mountainside was once again whole.
HERE'S WHERE THE STORY ENDS
Around the time Entrada Mountainside filed its civil action, police began a criminal investigation into Hope's activities. In April 2003, a Maricopa County grand jury indicted Hope on a sole count of fraud. But three months later, at the request of prosecutors, a judge dismissed the criminal complaint. Prosecutors said they needed time to re-examine the evidence and decide whether to re-file charges. In an Arizona Republic article published last summer after the charges were dropped, Hope's legal defense team accused Phoenix police of conducting a shoddy investigation and claimed investigators had misled the grand jury into believing Hope had converted part of the loan proceeds for his personal use--a reference to $50,000 police say they confiscated from a trust fund Hope had opened at his attorney's office.
As of press time, police were still reinvestigating the case. "The investigation is not over by any stretch of the imagination," says Sgt. Randy Force, a spokesman for the Phoenix Police Department. "It's been a lengthy investigation, well over seven months and with thousands of documents. It's a very complicated case. We're not finished with it, and the county attorney is not finished with it."
Regardless of the outcome of the pending criminal investigation, both communities that brushed up against Jason Hope have moved on. Lago Estancia contained its problem fairly early, before it got out of hand, but Entrada Mountainside's road back has been more arduous. To start, there was the quarter-million dollars the association owed NCB. Along with the $50,000 from Hope's trust fund, the association recovered another $10,000 from a retainer he'd paid to his attorney. Combining that with the money Entrada Mountainside's insurance carrier ponied up for Hope and his associates--thanks to the D&O policy Hope had invoked when the original board finally sued him--the association managed to return $220,000 to NCB, and negotiated with the bank to have the rest of the loan forgiven. Entrada Mountainside also faced $85,000 in legal fees, which it finished paying off late last year through two special assessments.
In retrospect, it's clear how fortunate the community was to have an actively involved board, a dedicated management company, and skillful legal counsel that together were able to defend its interests. "The community is able to move forward without threats of past debts," McFarland says. "During the past two years, a majority of association resources were focused on this dispute--and rightfully so. It could have been a very bad situation for many years."
Now, Entrada Mountainside is focused on rebuilding--financially and spiritually. When the matter was finally resolved last fall, Rossmar & Graham dropped off a "party wagon" full of things the association could use to celebrate its future. "As much as this was negative, gut-wrenching, and frustrating, the community rallied," Hanley says. "The situation brought these neighbors together and made them stronger as a community." Plus, Franklin says, residents have been turning up at monthly meetings to thank the board for their work in "solving the 'Jason' issue and for not giving up."
Dana James is a freelance writer in Boulder, Colorado.
Players involved in the Entrada Mountainside and Lago Estancia cases agree that every association can take certain steps to minimize the risk of something similar happening.
- Allow only directed proxies that specifically address one issue for a particular meeting.
- Allow only one member per household to be a board member, and spell out the rule in your bylaws or CC&Rs.
- Turn over association funds or records only to the person or party officially in charge of association business.
- If a voting issue arises, immediately seek legal advice from a law firm that specializes in association issues. Even better, have an association attorney present at all important meetings, such as elections.
- In addition to your attorney, involve your local authorities, insurance carrier, and entire community as early as possible to head off a potential crisis.
- Prepare for worst-case scenarios by ensuring that association insurance coverage is up-to-date and adequate. Keep in mind, though, that even the best policies might not provide absolute and complete protection. --D.J.