By Don Smaltz, July 13, 2015

My sense of what is at stake is: It is not just the HOA’s purchase of the golf courses, but rather it is the very governance of our community, not only on the golf course purchase issues but future matters as well.

When we purchased our homes in Arrowcreek, we agreed to be bound by and comply with the CC&Rs, which together with the relevant Nevada Statutes provide the governance procedures and requirements for our community. In the past year,we have learned that:

1. In 2014, 36 residents of Arrowcreek who are golfers formed an LLC, Friends of Arrowcreek (FOA), and made a deal to buy the golf courses out of Bankruptcy – and sell it to the HOA. That deal was made with the Board’s officers and its Directors with the connivance of the Boards lawyers, Maddox, Segerblom, Canepa, and its Community Manager, Associa Sierra North (“Collaborators”).

Note Attachment 1-April 14, 2014, Email from Paul Burkett to Messrs. Kenny, Fox, Rakusin, Robertson,Reeder, Anderson and Tarantino,
Re: ACC Committee Meeting with Arnold Palmer Golf …Short term management issues for the management of the courses? …

Impact and duties for ACHOA as the leader in these efforts…Legal review and recommendations? …Transparency issues and information for the ACHOA membership? Town Hall meeting subjects?…

2. The fact of this deal was kept secret from the homeowners, and no survey or sampling was undertaken to determine if there was a consensus that the HOA should consider, let alone pursue, the possible purchase of the golf courses prior to the time the announcement was made to the HOA.

Note Attachment 2-Email August 24, 2014, Subject 8/26 BOD mtg; from Robin Hoa a/k/a Rakusin to Messrs. Kenny, Smith, Reeder, Burkett, Fox, Gurnee, Dickinson, Kirsch,Elliot, Ross, Tarantino- Since the cat is/will be out of the bag on Tues, and we expect a lot of people, I suggest a simple focus (probably golfer biased) survey to hand out and collect at the meeting …cost would be negligible to get a sense of support by the community and give us an idea of marketing work cut out for us…
E mail Response of Norm & Jan Reeder to Hoa a/k/a Ruskin and Kenny et al re 8/26/ board meeting:
I am reluctant to conduct a survey at this very early stage …most likely the response we get this week will be based more on emotion vs. thinking through the issue which will take some time coupled with additional meetings. I would de-emphasize golf and focus on the benefits of being a social member of the new “Community Club”…

3. What the Board disclosed to the homeowners at the August 26, 2014 meeting was that the HOA may have to purchase the golf courses from the Bkcy court and that the HOA had only 3 options – It could let the courses go brown, keep them green, or operate them as golf courses and joint venture with Arnold Palmer Golf. These three options were expressly premised on the assumption that the Gulf Club went to Chapter 7 and no buyer came forward so that in order to control the future use of the property the HOA would purchase the course by assuming the $1.4 current of Aspen Sierra to the County. But that was not the situation – as the Board then well knew the property was in fact going to be purchased by either the FOA or a former affiliate of the Bankrupt– depending upon who the court decided made the higher bid. In that resentation the Board never discussed that when the property was purchased it would be operated as a golf course by the new owner and that the concerns that the HOA would have to buy the property to keep it green and operational were the responsibilities of the new owner and not the HOA . In effect the HOA would have to do nothing – but instead it stated Do nothing was discussed but dismissed due to lack of control over land use and threat posed by unmitigated fire risk. See Recommendations for Dealing with the Aspen Sierra Bankruptcy presented August 26, 2014.

4. The Board represented that the FOA agreed that, after its acquisition of the courses, the HOA would have a limited time to purchase them from FOA, which would sell them at a profit – and the HOA would joint venture the operation of the courses with CGMI which had the right to use the name Arnold Palmer Golf.

5. While the Board and its collaborators were aware of the identity of the 36 members of the FOA, they agreed not to identify them to the HOA membership – lest allegations of conflicts of interest be made to the effect that the members of the FOA were making a profit from the sale.

6. Since Dec 2014, this group has been contesting the Boards efforts and procedures to have the HOA purchase these golf courses. However, in opposition to our efforts the Board and its collaborators have willfully and knowingly:

A. Misrepresented the facts;

B. Misrepresented the law;

C. Ignored the provisions of our governing documents;

D. Refused to recognize the rights of our opposition;

E. Repeatedly violated their obligations as fiduciaries to represent the best interests of the HOA members;

7. While our efforts have caused the Board to change its tack – and apparently they now propose to buy it and not necessarily operate it as a golf course – the Board will continue to push the HOA toward a purchase proposal.

8. Absent a court order, my expectation is that the Board will ultimately get this matter to the home owners for a vote, claiming that it only needs an affirmative vote of 50% plus 1 to succeed. When it fails to achieve that number on the first ballot, it will seek to hold the vote open until at least 50% of the entire HOA has been received.

9. In the interim – what has occurred in our community is unfortunate, to say the least. Consider what a schism has occurred between the members: those in favor of the purchase – primarily golfers – vs. those opposed. Statements uttered by some proponents, “Those opposing the purchase of the courses shouldn’t live here if they can’t afford it,” and others of similar ilk, have ghettoized our community. Aside from the adverse economic consequences which will occur if we purchase these courses,thus acquiring unlimited liability, this derisiveness alone can have an adverse effect upon
the desirability of buying a home in a community where such enmity prevails.

10. At stake is not only how the Board is able to disregard its legal obligations and procedures in this matter, but also the manner of our future governance.

11. Those Board members assuming that their costs of defense are covered by the Directors & Officers insurance policy–so they are effectively immune from financial liability–may be shocked to learn that the policy doesn’t cover intentional illegal acts.

Sincerely,

Don Smaltz

July 13,2015