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EMBEZZLEMENT PROBE

Firm Under Scrutiny to Be Sold

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By Bill Turque
Washington Post Staff Writer
Friday, March 23, 2007

The Fairfax City company under state and local investigation for possible embezzlement of more than $800,000 from Northern Virginia homeowner associations will be sold to a Herndon real estate management partnership, presidents of both firms said yesterday.

Robert A. Koger said Koger Management Group, which oversees the finances of more than 300 homeowner and condominium associations, has reached an agreement with National Realty Partners. National Realty will take over day-to-day management of Koger Management, and the purchase is to be completed about July 1.

In an interview in his office, where a court-ordered auditor and an attorney are scrutinizing the company's financial records, Koger also said that he will work with investigators to reimburse any homeowner association that has incurred losses. He said the money will come from his insurer or from money recovered as a result of the inquiries underway.

"Our main objective is to make the homeowner associations whole," said Koger, 69.

He expressed confidence that the findings of investigators "will debunk everything negative that's been said about us."

"I've been in the business for 30 years," Koger said. "We've lived on our reputation. We've done that by providing a good service at a fair price."

A Fairfax County Circuit Court judge placed the firm under court supervision Feb. 26 after a complaint filed by the Virginia Real Estate Board and the state Department of Professional and Occupational Regulation alleged that large cash withdrawals had been made without documentation from numerous homeowner association accounts managed by Koger Management.

State investigators said the losses are likely to exceed $800,000.

Court documents identified Koger's son, former Koger Management chief financial officer Jeff Koger, as "the likely primary culprit responsible for embezzling the funds." Fairfax City police have opened a criminal investigation, but no arrests have been made.

Robert Koger said it is "possible" that his son played a role in the disappearance of the money. He said he is estranged from Jeff, 38, who left the firm in November with what the elder Koger called "major medical problems." He said his son "doesn't think he did anything wrong."

No one answered the door yesterday afternoon at Jeff Koger's Herndon home, where a van was in the driveway and the porch light was on.

Robert Koger said he has been semi-retired the past couple of years and left management of the company largely to his son, a graduate of Texas Christian University who worked for an accounting firm in Atlanta before joining Koger Management in 1993. His son's situation has been deeply painful, he said.

"My wife and I are going through holy hell, no doubt about it," he said.

Koger disputed some details in court documents. He said that Pinewood Meadows Condominiums in Chantilly, whose auditors reported losses of $100,000, never had any such discrepancy in its records. "I don't know where they got the numbers," he said. "People are throwing all sorts of different numbers around."

Yesterday at Koger Management's offices on Rust Road in Fairfax, the front entrance was draped with a huge red banner proclaiming the company's 30th anniversary, and the main floor was filled with rows of open file boxes being perused by investigators. A lobby receptionist fielded a nonstop stream of phone calls. Koger said the firm has lost 22 management contracts with homeowner associations in recent weeks but has signed about the same number of property owner groups.

National Realty owns and manages office and retail properties in Northern Virginia and oversees the finances of 41 homeowner associations. President James Foley said the company was interested in expanding the community management portion of the business as a hedge against the ups and downs of the real estate market. When he learned of Koger Management's legal problems, he began negotiations, he said.

Foley said the agreement was for the purchase of Koger's assets only, meaning homeowner association management contracts and the company offices. Any legal liabilities would remain Robert Koger's responsibility, he said.

He expressed confidence that Koger's legal and regulatory problems would be resolved. "Mr. Koger is a reputable man whose reputation has been sullied by an employee of his company," Foley said. "This is a situation where you have one bad apple spoiling the whole bunch."


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