Residents Voice 06-09-09 Meeting

1. June 09, 2009
Residents Voice
Conrad Grundke
06/09/2009 Residents Voice 1

2. Topics for Tonight
• “To Tell The TRUTH !”
• “TOO MUCH TRUST ?”
• Saddleback Community College (SBCC)
06/09/2009 Residents Voice 2

3. “To Tell The TRUTH!”
06/09/2009 Residents Voice 3

4. A Search for TRUTH!
• General Manager Comments at 6/2/9 GRF
Board Meeting referencing the PCM Incentive
Plan;
– He advised residents to “not believe” what you
read in the Orange County Register.
– He called them the “biased” words of a reporter.
– He stated that OC Register articles are an
“Invitation for a lawsuit.”
06/09/2009 Residents Voice 4

5. So! Where Does One Go?
• General Manager will use the following to get
the “TRUE” information out to the public via
“his” Communication Team.;
– Channel 6
– The Globe
– LWV Website
– LWV Publications (?)
06/09/2009 Residents Voice 5

6. Example of a Source of TRUTH?
• So! Channel 6 should most certainly be
unbiased and a good source for getting out
accurate data (Right!?).
• For example;
– Interview of Milt Johns by Rob Merritt
• Q: - What was purpose of Staff Credit Cards?
• A: - “EMERGENCY USE ONLY!”
06/09/2009 Residents Voice 6

7. Credit Card EMERGENCY Uses!
User Date Description Amount
Price 12/01/06 Sees Candies $1,316.00
Storage 12/18/06 Claim Jumper $ 981.87
Lee 12/22/04 Lawry’s Five Crowns $ 834.31
Storage 12/17/05 Dave & Busters $ 811.12
Johns 12/18/05 Las Brisas $ 713.77
Residents Voice made the public aware of the above data, and yet, Rob
Merritt never questioned Milt Johns when he stated on Rob’s interview
that the cards were for “emergency use only.”
The Orange County Register reporter “questioned Mr Johns answer
in public,” to Mr. Johns dismay.
Which reporter would WE want providing us information on what is
happening within our walls and gates?
06/09/2009 Residents Voice 7

8. Per Mr. Johns !
• The “Incentive Plan” has been “thoroughly
VETTED;”
– By all the Board Members.
– It is included in the Management Agreements.
– It has been Audited by our Auditors.
06/09/2009 Residents Voice 8

9. What He Doesn’t Say!
The General Manager is adept at utilizing half
truths when he doesn’t tell you;
• The CRITICAL TIME LINE.
– The Incentive Plan came to light in late
2006 when it was “unintentionally”
disclosed.
06/09/2009 Residents Voice 9

10. In Light of This!
• From 1996 thru 2006 the Boards were
unaware of any Incentive Plan.
• From 1996 thru 2006 there was no mention of
an Incentive Plan in the Management
Agreements.
• From 1996 thru 2006 there was no Board
Action taken to implement an Incentive Plan.
06/09/2009 Residents Voice 10

11. What the Boards Know!
• There is no line item in any financial report
identifying “Incentive Plan Expenses.”
• There is no breakdown of the Incentive Plan
“Savings vs Expenses.”
• They were not involved in any justification of
the “Savings” that were supposedly incurred.
06/09/2009 Residents Voice 11

12. A Classic Case OF:
Locking the door after the horse is stolen!
06/09/2009 Residents Voice 12

13. What the Resident Owners Know
About The INCENTIVE PLAN ?
06/09/2009 Residents Voice 13

14. “TOO MUCH TRUST”
06/09/2009 Residents Voice 14

15. Consequences of Blind Trust
• Increased TRUST = Decreasing OVERSIGHT!
100%
75%
50%
25%
0%
Sit 1 Sit 2 Sit 3 Sit 4 Sit 5
06/09/2009 Residents Voice 15

16. Where Are We Today ?
• The Boards Trust PCM 100%.
• There is almost 0% Oversight.
• What does that mean?
– The General Manager has stated his priorities are:
1. PCM (his boss)
2. His Employees
3. Laguna Woods Village Residents
06/09/2009 Residents Voice 16

17. PCM Priorities
• Development of our land:
– If PCM can benefit (directly or indirectly) that
would be in their interest.
– Avoid by having independent monitoring of land
development by someone who has the Resident
Owners as their 1st priority.
06/09/2009 Residents Voice 17

18. Are “Independent” Auditors
the Answer ?
• Auditing firm was hired by Board of Directors
of large company (to ensure independent
auditor?).
• $746 million class action suit on behalf of
investors.
• Investors are MFS Premium Income Fund.
• Auditors are KPMG
– Does anyone care to guess who KPMG is?
06/09/2009 Residents Voice 18

19. Other KPMG Activities
• Significantly involved in large number of high-
profile collapses.
• $200 million claim by Australian Securities &
Investments Commission on collapse of
Westpoint.
• Allco Finance Group classified $1.9 billion of
current liabilities as non-current liabilities.
– KPMG paid $3.1 million for audit work.
06/09/2009 Residents Voice 19

20. Other KPMG Activities (cont)
• $1 billion lawsuit over New Century Collapse.
• $200 M paid to Rite Aid and Oxford Health.
• RMB300,000 to Suqian Wahaha Beverage
• Involved with Ernst & Young in Tax Shelters
that cost clients $5.7 m in auditor fees.
• Etc.
• Etc.
06/09/2009 Residents Voice 20

21. Employee Priorities
• Increased Labor Costs:
– Labor contracts have evolved to the level where
we are charged $40.00 per hour by PCM for our
landscaping.
– General Manager is involved in the contracts.
• What is his objective?
– High Rate for his employee, or,
– Low Rate for our assessments
06/09/2009 Residents Voice 21

22. LWV Priorities
• Reduced Assessments:
– Retain our land!
– Reduce labor costs!
• Who Looks Out For Us?
– The General Manager/Boards – HA!
06/09/2009 Residents Voice 22

23. Saddleback
Community
College
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24. Saddleback Community College
• A true symbiosis arrangement
• Saddleback College Provides:
– Qualified/Certified class instructors.
– Equipment.
– Administrative personnel.
• LWV Provides:
– Space.
– Equipment.
– Administrative personnel.
06/09/2009 Residents Voice 24

25. Conclusion
Information that comes from PCM (and many of
our Board Members) is often untrue and
cannot always be trusted.
The Incentive Plan required concurrence by a
majority of the Board members, and without
that, the plan has been “ILLEGAL since 1996.”
06/09/2009 Residents Voice 25

26. Conclusion (Cont)
• By blindly trusting the General Manager, we
have evolved to Boards that feel threatened
when a Board Member questions the actions
of either PCM or a Board.
– This is evident in the treatment of Mike Curtis on
the United Mutual Board.
• We Need More Mike Curtis’s!
06/09/2009 Residents Voice 26

27. Conclusion (Cont)
• Many residents utilize the Emeritus Classes
and without the college, the costs would be
excessive.
• Let’s continue to enjoy our time living in
Laguna Woods Village.
06/09/2009 Residents Voice 27

28. The End
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