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Meridian Fraud Report

Meridian Fraud Report

Ratings: (0)|Views: 391 |Likes:
Published by Nye Lavalle
Report on the frauds and abuses at the Meridian Buckhead Condominium in Atlanta. Report details frauds and abuses in accounting and billing measures.
Report on the frauds and abuses at the Meridian Buckhead Condominium in Atlanta. Report details frauds and abuses in accounting and billing measures.

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Published by: Nye Lavalle on May 06, 2009
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09/24/2010

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ANALYSIS OF OBL AUDITOR’S REPORT
Overview
The Gladys Duffy Pew GST Exempt Trust (“GDPT”) purchased Unit #207 on or about7/1/2002. At closing, the GDPT was given six-months of HOA fees paid for by thedeveloper as part of a purchase incentive package.The primary contributor to this report, Nye Lavalle, is the beneficiary of the trust andformer occupant of the unit. Nye Lavalle would serve as both the entity member andagent since he would be best equipped to deal with Association issues since he lived inthe Condo. He also coordinated the close the sale.Stephen E. Pew is the trustee of the Gladys Duffy Pew GST Exempt Trust and both Mr.Pew and Mr. Lavalle have disputed numerous account transactions related to the trust’sownership of Unit #207 at the Meridian Buckhead, f/k/a One Buckhead Loop since 2005.However, it was clearly defined that the trust was responsible for all bills related to theCondominium. Since the trust was managed by Merrill Lynch Trust Company(“MLTC”), OBL was informed it could either bill the trust on a monthly or quarterly basis for Unit #207 and OBL was provided contact and billing info in both Florida and New Jersey.Contrary to the assertions made in the auditor’s report, Nye Lavalle never made one payment to OBL for any HOA fees, special assessments, or utility bills. The only payments Mr. Lavalle made were for clean up fees to parties; payments for fob keys; anda $100 fee for a water extraction. Such fees were paid by Lavalle in cash.However, a major accounting problem occurred when the Association and its lawyersthreatened to sue Mr. Lavalle (See Exhibit A) for bills and invoices that were not only notowed by him nor his personal responsibility, but were not owed by his trust. The utility bills and invoices were over five-years old (1998 – 2001) and were the legalresponsibility of the original developer of the building.The bills were for unit #1605 that was leased by one of Mr. Lavalle’s business partners’company and by his family and him for 3
½
years from 1998 to 2001. Each annual andmonth-to-month lease included utilities. No demand, suit, or claim for payment of these bills was made by the developer. The developer continued its lease with Mr. Lavalle andhis family. Later, when Mr. Lavalle moved into Unit #109 in a private lease, Mr.Lavalle’s utilities were also included in that lease and paid for by the homeowner.In the Winter of 2004/2005 OBL management sent, more than six years later, to Mr.Lavalle and his trustees in Florida, demands for payment of a $2500 utility bill (SeeExhibit B). The bill was for a far larger amount that was typically received by the trustee
 
- 2 -for the Merrill Lynch Trust Company. The amount, over 10 times the amount of anaverage bill, raised a red flag to the trustee.In exercising his fiduciary duty, the trust manager at Merrill Lynch contacted Mr. Lavalleto inquire as to the legitimacy of the bill. He wanted to know if there were any major  problems with the unit, water leaks or what would cause such a high bill. Since there wasno issue with the unit, the trustee asked Mr. Lavalle to conduct an investigation andanalysis of the issue with OBL management to see what the problem was.When Mr. Lavalle went about investigating such a large amount, he came to learn thatthe bill was not even the trust’s bill, but a bill for utilities from 1998 to 2001 for unit#1605 that was owned by the developer. The Association was created in July of 1999and could not even have a claim for bills from February of 1998 to its creation.When Mr. Lavalle contacted the law firm, he was told that the amounts claimed owedwere not for utility bills, but for monthly HOA fees. When he checked with the trustees,he learned that the trust paid the HOA fees a month to two months in advance. After reviewing their documents and doing some computations on his own, the trustees wereright.Mr. Lavalle then approached the OBL board in the early summer of 2005 with this problem and warned the association that he suspected fraud by the former developer,management company, and law firm.The suspicion was based upon a bill, over six-years old, being on OBL’s books, when infact it was the responsibility of the developer to pay the bill. Regardless of ultimate payment responsibility, the condo documents called for the owners to pay any past dueutility bills that a lessor did not pay.Further investigation by Mr. Lavalle led to the discovery of other owners and residentswith similar problems. Other owners had leases with utilities included that the developer did not pay and where the utility bills were “carried” on the Association’s books, rather than the developer’s books and account. There were also commercial enterprises in the building, including a hair salon, whose bills were carried on OBL’s books.In addition, various other utility billing schemes and frauds were unearthed. Lavalle, histrust and OBL owners and residents were receiving fraudulent utility bills that indicatedthat their electric and water bills were metered when in fact the Developer and itsmanagement wereOwners and residents received fraudulent “metered” bills where the meter readings wereactually falsified and created in thin air could make a claim for fraud, deceptive acts, andeven racketeering. Additionally, Lavalle determined that certain meters were turned off in unit owned and leased by the developer so that the other owners and residents would pay a higher share of the developer’s own utility bill. In essence, the developer allocateda higher percentage of his share of utility bills to other OBL owners and residents.
 
- 3 -Allegedly, the actual meters for electric and water use were damaged in a storm and theassociation, while under developer control, received insurance proceeds to repair andreplace the meters. Instead, the fund were used for other purposes, not the replacement or repair of meters.Similar utility billing frauds by the same company involved, led to class actionsettlements in some areas of over $1 million dollars. Lavalle, with the support of other owners and even former board members, desired the association sue the former developer, management company, billing company and law firm for their participation inthis fraud and to reimburse the association and its members for new meters, contributionsto reserves, and repayments for excess utility fees.Further investigation by Lavalle, found that the association’s finances were dire and itsaccounting books and records were in complete disarray, missing, and even destroyed.Thousands of dollars in checks to OBL were in a safe un-cashed; twenty-five percent of OBL homeowners were allegedly 60 days delinquent; and payments to vendors outpacedincoming revenue.A new board, spearheaded by Joe Grenuk, claimed that it would “clean up the books” and“clean up the building.” Without addressing the claims of discrimination that will be thesubject of additional reports, with respect to the books of the association, Mr. Grenuk andthe board took upon themselves several “aggressive collection actions” as described inletters to the board and in minutes of the association. (Exhibit C).Mr. Lavalle, a consumer and investor advocate who knew of the dire financial conditionof the association as well as the fraud discussed above, informed the board that such actswere violations of various state and federal laws. He also advised the association of several ways he would help with law firms he consulted to sue the developers and othersfor the abuses that led to the association’s financial problems.Instead of welcoming the advice and support, Grenuk and the board decided toimplement the aggressive actions with the full knowledge of legal liability and risksinvolved. They weighted the legal liability and risks from low to high and ignoredwarnings from Lavalle and others of the liability.In addition to the prior frauds and abuses, Grenuk, OBL’s new manager and the boardimplemented new and additional frauds, abuses, and financial schemes in violation of theOBL condo documents in order to make the association’s books look better than theyactually were.Eventually, the board, management, Grenuk, Lavalle and his trust could not come toagreement over the association’s books of account for the trust’s unit #207. Lavalle andhis trustees had determined that his trust was defrauded by thousands of dollars and later tens and now even over one hundred thousand dollars in unlawful fees, bills, fines, and

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