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RA Board Moves Toward Remediation Process Following Tetra Review

by Dave Emke March 21, 2017 at 2:45 pm 22 Comments

Reston Association Board Special Meeting - March 20, 2017

The results of an independent review of Reston Association’s purchase of the Tetra/Lake House property are in, and now the discussion is shifting toward how to make best use of its findings.

That discussion began Monday during a special meeting of the Reston Association Board of Directors. Deirdre Flaherty, partner and co-founder of forensic accounting firm StoneTurn Group, answered questions from both RA members and directors during the session, and offered her advice for RA’s remediation process following the controversial purchase and a renovation process that cost $430,000 more than budgeted.

Flaherty’s advice, which built upon the recommendations offered in StoneTurn’s review in February, included the drafting of foundational documents that have an overreaching principle statement to define ethical concerns — something she says is lacking in RA’s current policy structure.

“When you have an unusual transaction and you don’t have that bedrock foundation, there’s no touchstone,” she said. “It would be my strong suggestion that great consideration is given to what those overarching principles that you want for how you do business, and then take that and drill it into writing, into practical policies and procedures for the staff, that details exactly what is to be done.”

The Board of Directors voted unanimously to accept the review delivered by StoneTurn and to begin working toward implementing the recommendations made therein. Flaherty made a number of other recommendations for how to do so, including giving staff and CEO Cate Fulkerson the time to develop new policies that are in line with the goals of the Association.

“You have some very strong, qualified people in your Association staff [who are] doing a lot of the day-to-day work, and as a result, they haven’t had the opportunity to step back and put those foundational documents into place,” she said. “My strong advice would be to have them do it — to hire people, even on a temporary basis, to handle some of your day-to-day operations so that you can elevate people like your CFO or your new head of capital projects [or] Cate to actually stepping back and giving thought and consideration to what those documents should look like, to having the communications with the membership and the board to make sure you’re comfortable with them, and then to putting them in place.”

It was also suggested by Flaherty that an RA audit committee be formed to independently make findings and assess staff.

“Anytime you have a board, you want the board to be communicating with the auditor [and] you want the auditor to have the ability to communicate with the board to the extent that they have input that is independent of management,” she said. “You want that communication to be open and direct with your board, not filtered in any way.”

In response to members’ questions about the review, Flaherty said nothing was found that indicated violation of Reston Association policies regarding conflicts of interest, nor was anything found to suggest any breach of fiduciary duty, any self-dealing or any intentional misstatement of fact.

“If there was anything that came to our attention, that gave us pause given our experience and background… we would have raised that immediately with both Eric and Mike [Carr and Sanio, of the Tetra Review Committee] and we would have suggested a scope expansion,” she said. “That never happened.”

Directors also answered questions from each other during the meeting, notably about whether information that was available to members of the Board Operations Committee in March 2016 regarding potential cost overruns on the renovation project was purposefully withheld from other board members until they came to vote in May of that year.

Director Sherri Hebert, who was elected to the board in April 2016, said she could not understand why such information would be shared with the rest of the directors in a more timely fashion. Director Ray Wedell, who joined the board in 2015, echoed her sentiments and went one step further.

“I’ve never seen this board hold anything so secret for 10-plus weeks, something of this importance,” Wedell said. “That took a lot of effort, that took a lot of coordination. … Among the board, you talk to each other, you talk to your membership, and that’s something that comes out pretty quickly.”

Members of the BOC, including Director Julie Bitzer, said there was no ill intent in not bringing the issue before the board sooner.

“We had no idea that is was a $400,000 issue… and we did ask for more clarity,” she said. “There was no intent to hide it from anyone else on the board, and when information comes out in the board package, we are free to call any of our other members on the board to ask questions.”

Flaherty said a gap exists in the procedures regarding when such an issue should be brought to the full board’s attention, and suggested that gap be addressed when new policies are drafted.

The board will have a regular meeting Thursday at 6:30 p.m. at RA Headquarters (12001 Sunrise Valley Drive).

  • Dennis Hays

    Dave – you might mention that almost all of the RA members who spoke at this meeting expressed disappointment that the StoneTurn report did not address any of the questions as to why or how we reached this point. This was particularly frustrating in that StoneTurn was asked repeatedly to do exactly this in the kickoff meeting held last month. A recommendation from the floor was made to the Board to allow concerned citizens to follow up on this glaring oversight. Perhaps the incoming Board will take the millions of dollars lost more seriously than some members of the outgoing Board.

    • cRAzy

      You’re absolutely right. Over half the meeting was spent with the members excoriating the Board for not doing a more thorough job of getting to the bottom of this ugly matter and some even questioned some specifics in (or not in) the StoneTurn report.

    • Reston2000

      I also agree with the recommendations you made [two thumbs up]

  • Tammi Petrine

    Last night, STG and a majority of the current RA BOD were happy to discuss changes in process to prevent another Tetra. But RA members will never be able to re-establish trust until basic questions are answered.

    What was completely missing was:
    #1 WHO (Why???) instigated the idea of purchasing Tetra when there was no need for this property – this started as early as 2003. 14 easements across the property, a flood plain, county zoning questions and RA DRB control guaranteed that nothing much could be done with this plot that RA could not influence.
    #2 How was the purchase price determined when the appraisal and engineering reports both included details that contradicted the $2.65M purchase price? This price was what was required by the SELLER to wipe away his existing debt on property but not a fair price for the run-down property with zero viable other potential buyers in a decade. So why did an HOA advised by 2 attorneys figure that this was a legitimate price? (Thank heaven for honest appraisers and engineers despite odd instructions given by someone for both reports!)
    #3 Why was the contract drawn up to preclude bargaining on basic repairs – not renovation features to put it into shape for RA “needs” (Quick! Manufacture some!)- but to put building into ‘good or better’ shape as appraisal states?
    #4 Why were rent-backs not included in contract?

    I could go on. Members want and deserve answers. STG was given a set budget but an artificially short investigation time-frame. Why weren’t they allowed to take more time to get a more complete picture?

    HUGE kudos to those in RA and STG who are being cooperative in continuing to help unravel details. Fie on those who want to continue the cover-up. Of course we are never going to be happy that we were misinformed during the referendum process for Tetra. BUT at least we are proceeding to some conclusions that can explain why this all happened in the first place and prevent a recurrence.

    Now we wait for the election of 4 new BOD members who will determine whether we get answers and can begin healing. Please vote carefully for those with skills to prevent future Tetras.

    • 30yearsinreston

      We all know the answer to # 1

    • Scout

      Thanks, Tammi – and Terry for the cogent recap of the whole Lake House disaster – basic trust – gone! And Now RA is off on a PR blitz to welcome people to the Lake House – more $$$ – taking a page from Boston Properties – throw a party – invite everything and maybe we’ll all forget about it BS

  • Amy Sue

    Wedell’s comment suggests that he, at least, believes the lack of communication regarding cost overruns was intentional, which is interesting. Would it have made any difference if other board members had known about the overruns earlier?

    • 30yearsinreston

      We will never know

      • Jenny Gibbers

        [Drumroll]

    • Bernie Supporter

      Yep. Very interesting indeed.

    • Restonlover

      Mr. Wedell was a significant part of the communication process. He stuffed many a mailbox w. propoganda and did not pay postage

  • Bernie Supporter

    With all the restrictions placed on this “independent” investigation, it sounds like the fox guarding the hen house. If you really want to stop this kind of crap in the future, now’s your chance. When you vote for our 4 new BOD members eliminate all the business as usual candidates. Because, clearly, business as usual isn’t working out very well for us. And there are fresh voices in literally EVERY RACE.

  • Jenny Gibbers

    Empty chairs at the meeting.
    100 viewers on youtube.

    That is how 18000 households processed the biggest swindle in HOA history. The board members knew it, could not even face the speakers during the QA session, faces down. Stonechurn rambled and so did many others.

    Not even my vivid imagination of the FBI swooping down into the bored room could keep me awake.

    Basically we encouraged the board to continue with the theft of public funds. Hook Road “improvements” will be their smoke screen.

    • clarification point

      Hey, Jenny.
      I was there, and it was a packed house. Perhaps the empty chairs emerged towards the end, since it went over?

      • Jenny Gibbers

        I just went by the video. Sorry, but still – I think we need to come out in greater numbers. Also agree with another poster that the long drivel about process is just a smoke screen for their failings. Awful stuff to listen throu, one can only hope the next board will be more results and action oriented, dare I say community-centric [whack]

  • Evil Thompson

    Thanks y’all for coming and blaming the
    lawyers, we ♡ you.

    Now to make you all happy I wanted to share with you one of closely held secrets with hopes you also can join the big league and again, trust me, there is a room in my heart for all of you, sincerely

    http://www.realtor.com/advice/sell/what-is-a-rent-back-agreement/

    Have a nice day.
    Luv, Evil

    • Mikey “Eats evrythng” Insanio

      Tanks Evil, I ♡ you too.

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