Sea Gate residents sue homeowners association over financial disclosure • Brooklyn Paper
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Three residents of a south Brooklyn gated community are suing their homeowners association in court to force release of its financial records – claiming there is more than $ 5.1 million in discrepancies between tax returns governing body and financial statements over four years.
The owners say the Sea Gate Association – which manages the Sea Gate community on the western tip of Coney Island – inconsistently recorded its income from government grants and spending on construction projects, among others, between 2015 and 2018.
“It doesn’t provide correct information, it hides information and falsifies information,” said Gary Daniels, a Sea Gate resident, who said board members were not open about their finances. “You can’t get answers from them.”
The Sea Gate Association, a 501 (c) 4 nonprofit run by volunteers elected every two years, collects fees from landlords to fund garbage collection, a small police force, infrastructure repairs and other services in the community of 4,000 people.
Since Storm Sandy devastated Sea Gate in 2012, the organization has also received tens of millions of dollars in government grants for storm resilience projects, the association’s president said.
âWe have brought over $ 60 million to our community so far,â said David Wynn, an owner who has been with the association for over 10 years.
The repairs include a $ 4.8 million bulkhead and a new sewer system that is well under construction. But several residents say that the association’s refusal to make its finances public, as well as the inconsistent files, raise questions about the association’s projects and finances.
Daniels and a small group of other owners began reviewing Sea Gate’s finances after attending a public meeting in 2018 on the association’s financial statements from the previous year, which Daniels said struck him as odd. .
âFrankly, something about the 2017 financials didn’t smell right,â said Daniels, financial consultant and longtime Sea Gate resident.
Daniels had access to the association’s tax returns and financial statements between 2015 and 2018, and noted discrepancies between the separate returns. While the association’s total expenses and revenues have remained fairly consistent from document to document, the original tax returns tended not to list large amounts paid to independent contractors, legal fees, or expenses. amounts that the association has received in the form of government grants. Sometimes the statements listed some of these numbers in separate sections, such as âinsurance collection incomeâ.
Following Daniels’ criticism, the association amended its 2016 and 2017 tax returns, revealing some of the flaws in its previous reports. For example, the original 2017 return mentioned $ 275,011 in insurance recovery, while the amended return mentioned no insurance recovery and $ 643,320 in government grants instead. The original statement also made no mention of any independent contractors paid more than $ 100,000, while the revised statement listed four contractors who received $ 800,270 in total.
âThey mislabel money. They move it, âDaniels said, adding that many of the maneuvers areâ 100% illegal â.
As a non-profit association, the association does not pay taxes and its tax returns are for informational purposes only. But Daniels said the inconsistent deposits help hide the association’s income and expenses.
âA lot of people are playing around with their tax returns. But it’s a $ 5.1 million difference, âhe said.
The association, however, said the differences in returns are minor – especially since all of the documents report the same amount of total costs and revenue.
“[The accountants] amended [the return] to read that one plus one is two, rather than one plus one plus one equals three, âsaid Barbara Garafalo, a board member for about 16 years. âOur accountant certified our audits. We were audited and they never found anything wrong.
Board members added that the state is closely monitoring funding for government-funded projects, such as the bulkhead project.
âThe grants don’t just get to us, we have to disburse funds and we get reimbursed,â Garafalo said. âIt’s not like we got money for grants. No one is throwing money at us.
After seeing the discrepancies, Daniels and two other residents, Olga and Vincent Scarcella, asked in December that the association submit the minutes of its management meetings as well as hundreds of documents concerning most of the finances of the association. over several years – citing a law require homeowner associations to authorize owners to view minutes and records upon request.
At a meeting in January, board members told the three owners they could see some documents, but would have to sign a nondisclosure agreement first. Protesters refused to sign it.
âI’ve seen NDAs before, and it’s an NDA that you can barely breathe,â Daniels said.
Chairman David Wynn has defended nondisclosure agreements, saying all board members sign them and they serve to prevent owners from blowing up sensitive documents on social media.
âThe reason is that in this day and age of what’s going on on social media, we’re running a business at the end of the day,â Wynn said. âIf people think we are doing something wrong, they can look at the books and go to the authorities. “
Wynn added that the association is willing to show the protesters’ documents, but cannot hand over hundreds at a time, especially since lawsuits with the owners are confidential. Daniels and the Scarcellas argued that they could sift through documents on the association’s computer or look in boxes of papers.
Olga Scarcella filed a show cause order at the end of February, which would oblige the association to hand over the requested documents to the owners. The hearing has been postponed due to the coronavirus outbreak and is postponed until June 25, Daniels said.