Interesting Fraud Case In Las Vegas: Can It Happen Here?

Scam 101. This is how it works. The accusers in lawsuits against the “Contractor” and the “Attorney” allege the scheme boiled down to the Contractor being given repair work — and the Attorney being given the legal work — at condominium complexes, not through competitive bidding, but by cheating.

To win the work for himself and his attorney friends, the Contractor made sure the association boards that awarded the bids were controlled by his cronies. The associations and owners suing the Contractor and the Attorney allege he stacked the boards with friends and employees of his construction company through fraudulent means involving phony or suspicious condominium purchases, making his pals eligible to run for the boards. Without revealing their ties to the Contractor, the

conspirators would then win board elections that were rigged by crooked management companies and the Attorney. Once elected, the litigants say, the Contractor’s pals would hire attorneys friendly with the Contractor for legal work representing the associations.

Much of this work went to the Attorney, whose practice revolved around suing builders of condominiums and homes for construction defects. After she won multimillion-dollar settlements from the builders and took hefty cuts for herself for legal fees, the boards would then turn most of the remaining settlement money over to the Contractor in the form of repair contracts.

Generally, prosecutors say, management companies participated in the scheme by recommending straw buyers for association board elections and then making sure they were elected through fraudulent means, ranging from forged ballots to delivering ballots to corrupt attorneys serving as supposedly neutral election masters. The attorneys would then count the ballots in ways to ensure the Contractor cronies were elected.

In one case where the scam worked, the Attorney settled a construction defect lawsuit for $19.1 million. The suit, alleging racketeering, says that of the $19.1 million, nearly all of it went to the Contractor, the Attorney and the other defendants- and that just $600,000 of actual repair work was performed.

The defendants so far have pleaded guilty to conspiracy to commit mail and wire fraud, which carries a maximum 30-year prison sentence. Prosecutors haven’t indicated what their sentencing recommendation will be, but plea agreements indicate that defendants face much shorter prison terms given their lack of criminal records and their agreements to cooperate in the ongoing investigation.

While a scam of this magnitude is unlikely here, a lesser variant is still possible. There are lessons to be learned. What were some of the factors that allowed these misdeeds to occur? Closed meetings, the lack of transparency, no published lists of board members, vague regulations, and the lack of full annual financial reviews or audits and disclosures are just a few of the factors. Also, be alert if one of your vendors, be it the property manager, attorney, accountant or contractor pushes you hard towards a single vendor, rather than giving you several options.

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