Fourth Las Vegas Resident Pleads Guilty in Connection with Scheme to Fraudulently Control Condominium Homeowners’ Associations
|U.S. Department of Justice September 23, 2011|
WASHINGTON—A Las Vegas woman pleaded guilty today for her role in a scheme to fraudulently gain control of condominium homeowners’ associations (HOA) in the Las Vegas area so that the HOAs would direct business to a certain law firm and construction company, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, Special Agent in Charge Kevin Favreau of the FBI Las Vegas Field Office, Sheriff Doug Gillespie of the Las Vegas Metropolitan Police Department and Special Agent in Charge Paul Camacho of the Internal Revenue Service-Criminal Investigation (IRS-CI).
Deborah Genato, 41, pleaded guilty before U.S. District Judge Lloyd D. George in the District of Nevada to one count of conspiracy to commit mail and wire fraud. Genato is the fourth person to plead guilty in connection with the scheme to defraud HOAs in the Las Vegas area.
According to the plea agreement, Genato was the property manager for three condominium complexes in the Las Vegas area, Vistana, Park Avenue and Chateau Nouveau. Genato admitted that from at least as early as February 2007 until at least approximately February 2009, she participated in a scheme to control various HOA boards of directors so that the HOA boards would award the handling of construction-related lawsuits and remedial construction contracts to a law firm and construction company designated by Genato’s co-conspirators.
According to plea documents, in order to accomplish the scheme, co-conspirators used straw purchasers to obtain mortgage loans for units within HOA communities. According to plea documents, Genato’s co-conspirators managed and operated the payments associated with maintaining straw properties owned and controlled by co-conspirators by running a so-called “Bill Pay Program,” by which co-conspirators funded the properties through several limited liability companies at the direction of a co-conspirator. Many of the payments were wired from California to Nevada. Co-conspirators also transferred an interest in some of the units to other co-conspirators to make it appear as if the co-conspirator was a bona fide homeowner.
Court documents indicate that the straw purchasers and those who acquired transferred interest in a unit agreed to run for election to the respective HOA boards. These co-conspirators were paid in cash, check or promised things of value for their participation, all of which resulted in a personal financial benefit to the co-conspirators.
Genato admitted that to ensure that her co-conspirators would win the elections, she and others employed deceitful tactics, such as creating false phone surveys to gather information about homeowners’ voting intentions, using mailing lists to vote on behalf of out-of-town homeowners unlikely to participate in the elections, and submitting fake and forged ballots. Co-conspirators also hired private investigators to find “dirt” on the bona fide candidates in order to create smear campaigns. Genato admitted that she used her position as property manager at Vistana, Park Avenue and Chateau Nouveau to provide mailing lists, labels and other voting materials to create fake election ballots. Genato also admitted that she allowed co-conspirators to gain access to the election ballots that had been mailed into the property management company by the bona fide homeowners prior to the election date.
According to plea documents, another tactic the co-conspirators used to rig certain HOA board elections was to prepare forged ballots for out-of-town homeowners and either cause them to be transported or mailed to California and thereafter to have the ballots mailed back to Las Vegas from various locations around California to make the forged votes for out-of-town homeowners appear to be legitimate.
Court documents indicate that the co-conspirators also attempted to create the appearance that the elections were legitimate by hiring independent attorneys to run the HOA board elections. The homeowners were led to believe that these “special election masters” were supposed to handle tasks including contacting the bona fide homeowners to inform them of the election, mailing the bona fide homeowners election ballots and voting instructions, collecting and securing the election ballots, and presiding over the HOA board election, including supervising the counting of ballots. However, the “special election masters” too, were paid in cash, check and promised things of value, by or on behalf of Genato’s co-conspirators for their assistance in rigging the elections.
According to plea documents, once elected, the co-conspirator board members would meet with other co-conspirators in order to manipulate board votes, including the selection of property managers, contractors and general counsel for the HOA and attorneys to represent the HOA. Also, the co-conspirators created and submitted fake bids for “competitors” to make the process appear to be legitimate while ensuring co-conspirators were awarded the contract.
Genato admitted that once hired, she and her co-conspirator property managers breached their fiduciary duties by receiving and accepting cash, check or things of value for using their positions to gain inside information and recommend that the HOA board hire certain co-conspirators for remediation and construction defect repairs and for construction defect litigation, and concealing their relationship with the co-conspirators from the bona fide homeowners. According to plea documents, this process created the appearance of legitimacy since bona fide homeowners believed the elected board members and property managers were, as fiduciaries, acting in their best interest rather than to advance the financial interests of co-conspirators. Genato admitted that she and her co-conspirators were paid or received things of value for their assistance in purchasing the properties, obtaining HOA membership status, rigging elections, using their positions to manipulate the HOA’s business and to further the goals of the conspiracy and enrich the co-conspirators at the expense of the HOA and the bona fide homeowners
Genato’s sentencing is scheduled for Jan. 6, 2012. The maximum sentence for conspiracy to commit mail fraud and wire fraud is 30 years in prison.
The case is being prosecuted by Deputy Chief Charles La Bella, Assistant Chief Michael Bresnick and Trial Attorneys Nicole H. Sprinzen and Mary Ann McCarthy of the Criminal Division=s Fraud Section. The case is being investigated by the FBI; the Las Vegas Metropolitan Police Department, Criminal Intelligence Section; and the IRS-CI.
This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov.