Homeowner Groups' Funds Missing in N.Va.
Wednesday, March 21, 2007
At least $800,000 from homeowner associations in Northern Virginia may be missing and was probably embezzled by an employee of the Fairfax company hired to manage the money, state officials charge in court documents.
Koger Management Group Inc., which handles funds for more than 300 homeowner groups with approximately 70,000 members, was placed under a court-ordered monitor Feb. 26 while a forensic accountant appointed by the Virginia Real Estate Board investigates the disappearance of the money.
State officials said yesterday that a criminal investigation, led by Fairfax City police, is also underway. No charges have been filed, police said.
Homeowner and condominium associations play an integral role in suburban life, sometimes serving as surrogate local governments that assess millions of dollars in fees to provide services such as trash pickup, snow removal, street lighting and recreational facilities. An estimated 54.6 million Americans live in communities governed by some form of association, according to the Community Associations Institute in Alexandria. Many of the associations employ management companies such as Koger to collect assessments and pay contractors who provide the services.
The court documents specifically mention only a few homeowner groups that have lost money. They include the Pinewood Meadows Condominiums in Chantilly, which is missing an estimated $100,000, and the Ashburn Farm Association in Loudoun County, whose auditors reported more than $60,000 in accounting discrepancies. An Ashburn representative said yesterday, however, that the money had been recovered.
A Feb. 9 bill of complaint filed by the Real Estate Board and the Virginia Department of Professional and Occupational Regulation names Jeff Koger, listed in public records as Koger Management's chief financial officer, as "the likely primary culprit responsible for embezzling funds." The document says that Fairfax City police detective Edward C. Vaughan told state officials that the thefts probably were made by electronic bank transfers.
Robert A. Koger, the company's president and Jeff Koger's father, did not return two phone calls yesterday seeking comment. A receptionist who answered the phone said that Jeff Koger was no longer employed by the company. His home phone number is unlisted.
The accusations against Koger Management were first reported by the Connection newspapers.
According to court documents, Koger Management has acknowledged that at least $800,000 "and likely more, will probably be shown to have been misallocated." State officials said in the court filings that the company's explanations for the irregularities "have been consistently vague and evasive."
Koger Management's Web site says that the firm has served Washington area homeowner associations for 30 years. "KMG's reputation is based on timely reports, timely payments, effective collections and easy communication," according to the company site.
State officials said they first became aware of problems at Koger Management on Jan. 3, when Karen O'Neal, deputy director for licensing and regulation for the Department of Professional and Occupational Regulation, received a call from two attorneys representing several condominium and property owner associations. They told investigators that independent audits commissioned by their clients showed large amounts of cash missing. According to court filings, auditors complained that Koger Management was being uncooperative in requests for records.
The same day that state officials were alerted, Robert A. Koger contacted Fairfax City police. According to a memo from Vaughan included in the court filings, Koger reported the embezzlement of funds between January 2005 and September 2006.