Forced bankruptcy sought for Waterville Valley property management firm
Three Waterville Valley condo associations are trying to force Stone Property Management — under criminal investigation for the disappearance of millions of dollars from the reserve accounts of dozens of condo associations — into bankruptcy.
Osceola Realty Trust, the High Country Homeowners Association and Waterville Place Condominium Association filed the involuntary bankruptcy motion on Jan. 17 in Bankruptcy Court in Manchester with the federal court's tough "clawback" procedures in mind. Those procedures enable the trustee to go after transfers as far as a year back and distribute what's left fairly, said the associations' attorney, Peter Tamposi.
In this case, the transfers happened about the time Stone Property Management shut down — citing accounting irregularities — and the records were seized by local, state and federal law officials, leaving some 28 condo associations in a quandary.
The three associations filing the bankruptcy motion against Stone want to go after more than $200,000 paid to the Internal Revenue Service to pay off a tax lien in October by William J. Stone, president of the firm, and his son Sean, who also works for the company.
The trustee could also look at mortgages against the father's and son's properties, said Tamposi.
Two balloon mortgages totaling $265,000 were granted Oct. 24 to the McGrath Law Firm of Concord, with a 5 percent interest rate and a due date of November 2013.The town of Waterville Valley lists Peter McGrath and his law firm as the contact person for Stone, and he has been quoted by media as his attorney. But in the bankruptcy filing — the first legal action filed, since Stone shut down — Stone is listed as pro bono, or requiring free legal help.
McGrath is currently involved in a high-profile class action suit against Exeter Hospital. The suit alleges negligence by the hospital in the infection of patients with hepatitis C, due to the actions of a contracted lab technician.
McGrath did not return phone calls by deadline.
The condo associations first went to the local police after Stone Property Management shut down. The police promptly turned the investigation over to the Attorney General and the Federal Bureau of Investigation.
Also involved are the state Department of Labor and the Internal Revenue Service.
No charges have been filed. "We are in limbo," said Robert Abbe, treasurer of the High Country Homeowners Association.
Abbe claims that High Country's 35 members are out about $100,000. (The filing puts the nature of the claim as "Theft Loss", the same reason that Waterville Place put in a claim for $20,000. Osceola Reality claim $5,000 is attributed to "embezzled funds.")Altogether, the 28 associations' losses add up to about $2.5 million, Abbe said, "but we won't know for sure for months."
The High Country association is asking every member to pay a quarterly payment in advance – just under $1,000 apiece. Other condo associations are making mandatory special assessments to cover the costs.
Still, said Abbe, "it is a terrible inconvenience. Everyone feels violated."
The condo association's officers now handle the money, put out the bids and "hold a pretty tight leash" on all contractors. Abbe said he originally bought the condo to avoid "all the headaches of property management issues," but it's something his wife reminds him of a bit too often lately.
Abbe doesn't expect total reimbursement from the insurance companies, so it's hoped the bankruptcy clawbacks would fill that gap. Another possible target of litigation includes the banks that didn't alert the association to "red flags."
"Certainly the banks were aware of patterns — the closing of accounts, the movement from bank to bank," said Kevin Saba, leader of the Homes on the Northface, a 16-unit, single-family condo association and Waterville Valley homeowner for the last 20 years.
The same could be said for the nonpayment of insurance premiums on behalf of the association, said Saba. "These are things being looked at very carefully by the association.
"On the "bright side," the associations — thanks to dozens of "volunteers" — have been put on a "solid footing," Saba said.
There isn't even anger against Stone, who he said, has been very "well respected" for the last 25 years. "Everybody is giving him the benefit of the doubt," Saba said. "I've been very impressed with how the community has moved forward here."