The document discusses several issues facing the Laguna Woods Village community including the GRF Trust agreement that expires in 10 years, concerns about the management company PCM, the option of self-management, and the need for election reforms. It argues that meaningful changes are needed to governance structures and leadership to improve decision making and serve all residents, and that many viable options exist to make productive improvements.

1. Facts regarding the GRF Trust, PCM, Self
Management, B of A Loan Agreement
and Direct Election.

2. Why this Presentation
 Publication of October 31st political ad in Globe
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despite prior decision to eliminate the Directors
Corner to avoid controversy.
Publication of 322 word Letter to Editor on November
7th (with 250 word max missing).
Failure of supported candidates to disavow the
advertisement.
Re-establishment of 250 word max in November 14th
edition of Globe.
Offer to speak at Residents Voice meeting.

3. The GRF Trust
 Consists of Trust Agreement & Bylaws – two
documents with different rules for amendment.
 Trust expires in 10 years. All four entities
(GRF, United, Third and 50 must agree to
extend, revise or replace. Agreement will be impossible
if just one entity refuses to agree.
 Expiration would force distribution of all assets among
the mutuals – an Armageddon.
 Bylaws, however, can be amended by majority vote of
corporate members council (no GRF vote).

4. The Inconvenient Truth
 From the Paul/Hastings legal memorandum: “the
GRFT appears to be antiquated and fraught with
inconsistent recordkeeping, irrelevant exhibits, tax
analysis, filings and references that are no longer
relevant. It appears that the GRFT was a trust formed
for construction and construction lending purposes
only.”
 Extending it for 60 more years makes no sense. It
defines no specific responsibilities between GRF and
the mutuals – just sole discretion to GRF.

5. Cont’d.
 Anyone opposing extension has been labeled as
wanting to dissolve the Trust and ruin LWV.
 The GRFT can be amended, modified or replaced with
a more suitable document.
 Many HOA’s have a Master and sub associations that
share joint responsibilities in crucial economic and
policy decisions.
 We have GRF with sole and absolute discretion,
allowing as few as six people to make decisions
impacting the whole community. A $5 million landing
pad for UFOs? Don’t laugh – it could be possible!

6. Cont’d.
 Essentially we have four bodies orbiting around each
other without any defined relationship other than GRF
possessing sole power.
 GRF’s business is not United’s business, which is not
Third’s business, etc. etc. This is a recipe for continued
strife over big decisions.
 While GRF’s budget affects the whole community, the
housing mutuals have little say or input.
 The required approach is to work now on examining
the various models for effective Master/Sub HOA
structures.

7. Cont’d.
 Unfortunately the GRF task force on bylaws revision
voted at their initial meeting to not consider any
alternatives other than extension of the existing trust
agreement. Hopefully this attitude will change.
 They did vote however to remove three actions of GRF
that required corporate members approval. Essentially
a backwards move to cement GRF sole power.
 Our new leaders need to “get it” and work on revision
of the Trust. Even the Constitution has been amended.
There are many models to look at in determining the
best fit for LWV.

8. Removal of PCM
 To be fair, there are many aspects of mgmt. company
evaluation – customer service, maintenance quality,
clarity of financial reports, management interaction,
etc.
 With four separate management contracts PCM is in a
difficult position and can be in a position of defending
both the victim and the perpetrator. Siding with a
particular entity is dangerous.
 Nevertheless, the company has a fiduciary
responsibility to the HOA corporation – not to the
Board or any particular Directors.

9. Cont’d.
 One troubling aspect is the use of attorney letters
alleging “tortious interference with contractual
relations” to intimidate directors or other Boards who
simply seek information.
 The legal requirements for such cases are high and are
generally lacking, so these are frivolous letters
intended to scare.
 The key is whether the management agent was
complicit, warned the Board or just stood by since this
issue has to do with ethical integrity.

10. Cont’d.
 Removal is basically a Board decision, but a weak
Board will obviously love a management agent that
issues no warning and just goes along.
 Bottom line is that PCM is a vendor, like any
other, who can be replaced. It happens all of the time
and most mgmt. companies are always on their toes as
they know they could get the pink slip if they do not
please the Board.
 Also, agents can be directed to change their behaviors
so all aspects of service need to be evaluated prior to
pulling the plug.

11. What is self-management?
 Basically large scale HOA’s decide to either self-
manage or hire an agent. Coto de Caza employs
Keystone Pacific as their management agent, Nellie
Gail Ranch hired their own General Manager.
 With an agent, the employees are employed by that
company and charged back to the HOA. With selfmanagement the employees are employed by the
HOA, but the organization structure is the same in
either case. With self-management there is no
additional management company fee.

12. Cont’d.
 With a change-over to a different format the existing
employees are simply re-employed by the new entity.
Any changes are normally made at the top level where
positions and departments might be eliminated or
changed. The HOA has control over all salary levels
and benefits with self-management. There is always a
bumpy transition period, but life goes on as before.
 The reason a new master/sub structure is needed is
that it would be difficult for a General Manager to
report equally to our four orbiting satellites without
more defined roles and responsibilities.

13. GRF Recreation Plan
 I am actually neutral on the plan itself as I consider the
financing as seriously flawed.
 The $1500 facilities fee was implemented to return
money to the mutual for their reserves to tackle big
issues such as dry rot and sewers.
 To my knowledge there was no open discussion or
debate to change this objective to allow a 15 year cash
flow to be high jacked for one capital project.
 In a normal HOA this type of change would be subject
to approval by a broader base of the membership.

14. Cont’d.
 A 2006 engineering report showed total replacement
cost of $7.7 mm for CH2, only about $1.2 mm more
than renovation. Even with inflation our reserves plus
the $1.6 mm annual facility fees over the past few years
could pay for total replacement. This would be
replacing a Chevrolet with a new Chevrolet – not a
Bentley convertible.
 Obviously the ease with which the facilities fee cash
flow was so easily diverted to a different purpose
represents a very serious governance issue.

15. Direct Election
 This did not appear in political ad – perhaps way too
popular to pose as a threat to mankind?
 Current method assumes super knowledge by
directors – how about the 8-11 new directors?
 This can easily be achieved by a majority vote of the
corporate members. The sticky issue would be “how”
to do it – general election, by mutual, by district, etc.
Pushing only one method could be a non-starter.
Better to change the process and then decide via task
force or ballot vote as to the best method.

16. Resident CEO
 This reference appeared in the 10/31 ad without any
further discussion.
 I am familiar with the person most often pointed to as
leading a secret cabal to install a CEO in place of PCM.
 That person has denied any interest in such a position
and does not feel qualified for such a job. I can furnish
a written disclaimer on request. Let’s put this myth to
bed.

17. SUMMARY
 The world is not coming to an end – we have many viable
options to improve the governance of the community.
 Three of the current Boards have a slim majority of the
reactionary directors – just enough to stalemate needed
progress on the more important issues.
 What is needed is a determination to elect new leaders that
have vision, intelligence, ethics and compassion. Most
importantly they should have “heart” and also serve those
in our community who are challenged financially. Stating
that they should just move is not acceptable.