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From the June 2013 Issue Subscribe
News & Politics
CONFLICTS AND INTERESTS
To limit the power of the Legislature, the state constitution calls for its
members to be part-time lawmakers who can hold full-time jobs in their
districts. So what happens to the world of ethics when public policy collides
with private ambition and legislators write bills that affect their own
pocketbooks? Let’s ask Senator John Carona.
By Jay Root
June 2013 0
Photograph by Jeff Wilson
The Brookfield subdivision in Pflugerville, north of Austin, lies two miles from
Interstate 35 in a bland patch of suburban sprawl, the kind that sprouts like
clover on the edge of cities. Cookie-cutter homes line winding streets with
tea-themed names like Earl Grey Lane and Darjeeling Drive. Two playgrounds,
erected in the middle of circular intersections, fill with children when school
lets out. In the summer a fenced-in swimming pool—for Brookfield residents
only—provides a break from the punishing Texas heat.
Shawn Riggs lives on Sally Lunn Way in a beige two-story house that he bought
for $137,559 in 2003. Like all his neighbors—and a growing number of people
across the state—Riggs belongs to a homeowners’ association, which charges
monthly or annual fees to care for common areas, enforce deed restrictions, and,
at least in theory, maintain property values. One day this past February, Riggs
went to the post office to retrieve a certified letter. He had been in a
long-running spat with the Brookfield Owners Association over some mistaken
fines levied against him for not taking care of his lawn. Riggs believed the
letter would contain good news. For almost two years he’d been waiting for the
property managers to acknowledge what he’d been saying since he’d received a
nasty little notice warning him to cut his grass or else: they had gotten the
wrong yard.
As Riggs had explained, it was his neighbor’s house that had been pictured in
the notice he had received in June 2011. So he printed out images from Google
Maps to prove it. He had emails documenting his increasingly vociferous
objections. He had even received a response from the property managers saying
his protests had been “noted” in his file.
None of that was in the letter, though. Instead, typed in capital letters across
the top of the page were the words “CITATION—FORECLOSURE.” Riggs, a trim
39-year-old technician at a semiconductor equipment plant, felt like his chest
was going to pop open. Over time, $50 in disputed fines had ballooned into more
than $2,000. Now they were coming after his house.
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I first met Riggs in mid-March, a few weeks after he received the foreclosure
letter. By then he had decided to fight back, even if it meant it would cost him
more to sue than to settle. He wasn’t going to let the Brookfield Owners
Association shake him down. “Your HOA should not have that much power,” he told
me.
And yet, in many cases, an HOA does have that much power. According to estimates
by the Community Associations Institute, the industry’s chief lobbying group,
almost a fifth of the U.S. population—including 3.4 million Texans—now live in a
residence that is managed by some type of property owners’ association. These
associations, ostensibly created by and for the people in a neighborhood,
usually operate more like mini-government agencies, assuming responsibility for
duties that cities and counties typically perform: maintaining the parks and
pools, providing utilities, repairing streets, and in some cases enforcing the
speed limit. Which is exactly why there are so many of them; nowadays, cities
and counties often require new developments to create property owners’
associations. In a booming state like Texas—and especially in suburbs like
Pflugerville, which is one of the fastest-growing places in the
country—outsourcing these services to an HOA management company may be the only
option for a cash-strapped municipality.
Not surprisingly, HOAs have become a big business. They generate $40 billion in
annual assessment revenue (the dues collected from individual homeowners) and
$35 billion in reserves, representing a huge government-like contracting
opportunity—only without all the procurement safeguards and transparency
guarantees expected of taxpayer-supported entities. The largest HOA management
company in the country is Dallas-based Associations Inc., better known as
Associa. It oversees Riggs’s HOA, along with 9,000 others in 31 states, as well
as Mexico and Canada. Over the past 34 years, the company has been transformed
from a small business into an industry behemoth by its founder, John Carona.
But the Dallas millionaire isn’t just the president and CEO of Associa. He’s
also a powerful state senator who chairs the Committee on Business and Commerce
and who, back in 2001, authored the law that enshrined pro-industry HOA
foreclosure practices in statute, ensuring that associations like Brookfield’s
could continue to aggressively collect fees and dues from homeowners. And if
you’re flabbergasted by that fact, well, you don’t know much about Texas
politics.
Texas, as any seventh grader can tell you, has a part-time Legislature whose
members typically have full-time jobs in the private sector. The framers of the
state constitution wanted it this way because they were suspicious of
centralized government and saw a citizen legislature as a chief antidote. That
belief still holds strong. Successive generations of Texans have insisted that
their legislators, now paid $7,200 a year in salary, meet in regular session for
only 140 days every other year and then return home to work in the communities
they represent. But while that may limit the power of the state government, it
also blurs the line between public responsibilities and private interests. And
thanks to weak disclosure rules, voters are often clueless about the conflicts
of interest that result.
At the Capitol, lawmakers rarely recuse themselves from legislation that has an
impact on their livelihoods for one simple reason: they don’t have to. They are
asked to step away from the action only if it directly affects their own
company. So insurance agents can pass bills for the whole industry, and
pharmacists can carry drug bills that cover other pharmacists. But when it comes
to a lawmaker being so closely tied to his industry, perhaps no one is as
prominent as John Carona.
Mandatory HOAs took off in the early seventies as entire neighborhoods sprang up
from old cotton fields and pastures in suburban areas. Today, an incredible four
out of every five new homes in metropolitan areas are built in association-ruled
communities. In Texas, whose population is growing at about 3 percent a year,
people buying new homes are more and more likely to settle in places like Las
Colinas, New Territory, or Circle C Ranch than in urban Dallas, Houston, or
Austin.
Typically homeowners have very little interaction with their HOAs: they pay
their annual fee (Riggs’s is $336, though other associations’ can reach far
beyond that), and they don’t give much thought to the work that goes on behind
the scenes to maintain the neighborhood. Unless HOAs are ruled by power-drunk
board members or nickel-and-diming management companies, most residents are
pleased with them—and don’t have to worry that their neighbor will paint his
house pink or leave a rusty car on blocks out in the front yard.
From time to time, however, abuses by HOAs grab the spotlight. Like when Jim
Greenwood, of Frisco, was told in 2009 that he could park a Cadillac Escalade
but not his Ford F-150 pickup in his driveway. Or when Michael Clauer, also from
Frisco, had his home foreclosed on by his HOA in 2008 while serving in Iraq.
Then there was the case of 82-year-old Wenonah Blevins, a Houston widow whose
home got auctioned off for $5,000 in 2001 to satisfy an HOA assessment debt of
$814.50.
HOA executives like Carona often say people choose where to live, and if they
don’t like HOAs, they can move to a neighborhood that doesn’t have one. The fact
is, HOAs are getting harder and harder to avoid. In developments like
Brookfield, everyone has to join and pay their dues. That’s the norm these days.
Moreover, a homeowner with an HOA may find himself locked into a web of services
he has little choice but to accept.
What Carona figured out with his first association is still true today: HOAs are
a low-margin business—the grocery stores of property management. The real money
comes with volume, economies of scale, and add-on services. That’s why Associa
sits atop an ever-expanding pyramid of companies that Carona has created to cash
in on all the ancillary services his HOA clients need: an insurance agency
selling liability and property casualty policies, a document-production company
that provides the records needed when homes are bought or sold, a 24-hour
maintenance service for house repairs and upgrades, and a collections company
that targets delinquent homeowners.
Technically speaking, only residents are allowed to run neighborhood
associations, by serving on volunteer boards of directors, but that’s true only
in the purest of legal terms. As a practical matter, management companies run
the day-to-day operations for the boards. They enforce the deed restrictions,
interact with the homeowners, operate the websites, hire the contractors (which
may be a subsidiary of the management company), and, most important, control the
money.
“Everybody always professes that the board of directors is responsible for all
affairs, but the reality is, the management company has tremendous influence,”
said Mike Parades, a former HOA management company owner who teaches best HOA
practices at the Community Associations Institute. “If they have the management
contract, for all intents and purposes they are the ones who are calling the
shots.”
If there’s any confusion about who the gatekeeper is at Brookfield, Associa
clears it up for homeowners on the association website: “Your Board of Directors
can only be reached through your Community Manager.” I tried to get answers
about Riggs’s foreclosure case from Associa, which is known in Central Texas as
Alliance Association Management. But it deferred to the Brookfield board. When I
got Brookfield president Brooks Rowell on the phone, he called himself a
“volunteer” and then hung up on me. In a subsequent call, he told me that if I
had any questions about Riggs’s case or Associa, I should contact his attorney
in San Antonio. So I tried that too. The answer? No comment.
Riggs didn’t have anything against HOAs when he moved into Brookfield. He had
had a good experience with a tiny one in San Antonio, where he knew his
neighbors and the management company didn’t send people out in golf carts
looking for violations or mail out computer-generated notices.
It’s these types of violations that lead to most of the grievances against HOAs.
Taking down a tree without approval, even a dead one, can get you in serious
trouble in some association-ruled neighborhoods. So can staining your fence the
wrong color. One Associa-managed HOA in California even fines its residents for
the transgressions of others. If a pizza delivery boy gets caught speeding on
his way to your home in Sun City Shadow Hills, he doesn’t get the $50 ticket—you
do.
There’s also the “priority of payments” scheme, which allows HOAs to take the
dues they collect from homeowners and redirect them to pay any outstanding
fines, attorneys’ fees, and “administrative” charges that the HOAs tack on for
themselves. In that situation, dues generally come dead last, and homeowners
inevitably fall further and further behind in their accounts. That, in turn,
triggers another round of penalties, which results in additional fees. This is
precisely what happened to Riggs: he continued to pay his dues, but they were
being directed to his fines instead of his principal balance. In short order, a
measly little fine became a financial headache, and he was faced with two bad
choices: fork over the money or face expensive legal bills and uncertain odds in
court.
How is any of this legal, you might ask? Start with Senate Bill 507, Carona’s
bill from the 2001 session. It guaranteed that the HOA industry could keep
wielding its foreclosure powers over homeowners—with no oversight from any state
agency or elected official.
Texas has a long and colorful history of lopsided special-interest influence.
LBJ biographer Robert Caro, writing about the legislatures of the early 1900’s
in his book Path to Power, found that lobbyists “dispensed ‘beefsteak, bourbon
and blondes’ so liberally that some descriptions of turn-of-the-century
legislative sessions read like descriptions of one long orgy.” In some cases,
lobbyists could even be found casting votes on the floor in the place of absent
lawmakers.
Occasionally the behavior has gotten the attention of law enforcement, as it did
during the Sharpstown scandal of the early seventies, when politicians were
accused of passing favorable banking regulations in exchange for quick stock
profits. Twenty years later House Speaker Gib Lewis, a Democrat from Fort Worth
who was constantly hounded for his cozy ties with special-interest lobbyists,
pleaded no contest to two misdemeanor violations after being accused of
accepting an illegal gift. He left office at the next available opportunity.
The Texas Ethics Commission was created in the early nineties to fix that
culture. But it’s been called a paper tiger because lawmakers intentionally
restricted it from biting them too hard—and the ethics laws were weak to begin
with anyway. Despite Lewis’s problems, no one accused him of doing anything
illegal when he stocked his ranches with wild game and fish at state expense,
courtesy of Texas Parks and Wildlife. That’s because it wasn’t.
In the current Legislature, those kinds of breaches have become increasingly
rare, but there are still gray areas. In the 2011 legislative session, Houston
Republican Gary Elkins earned infamy for his objections on the House floor to
new legislation that would regulate the payday lending industry. His occupation?
Payday lender.
Today the longest-serving member of the Texas Senate, Democrat John Whitmire, of
Houston, works for the government affairs section of a law firm that represents
special interests seeking favors from the Legislature. The senator says his
paycheck, which, incidentally, he doesn’t have to disclose, has nothing to do
with his senatorial duties. With the blessing of the Ethics Commission, the
senator, known as Boogie, is also tapping his fat campaign account—the largest
among legislators—to enjoy perks such as nearly $300,000 worth of tickets to
sporting events in the name of “constituent entertainment” and an $80,000 BMW
650i.
Stick around long enough and the ridiculously low state salaries for lawmakers
don’t seem so unreasonable. Longtime senator Rodney Ellis, a Democrat from
Houston who has made a lot of money (and faced some criticism) underwriting
bonds for local government agencies, loves to tell people why he will never
trade his Texas gig for one in Washington, D.C., where the elected
representatives make $174,000 a year but are heavily restricted on outside work.
“I can’t afford the pay cut,” he says.
When one of the most basic elements of transparency—a legislator’s income—often
remains cloaked in secrecy, how can voters have faith in the process? For
example, Senator Judith Zaffirini, a Democrat from Laredo, simply checks the
“self-employed” box and lists her occupation as “communications consultant” on
her annual personal financial statement. Nowhere does it say that one of her
clients is John Carona’s very own Associa. Neither Zaffirini nor Carona will say
how much she’s being paid or for how long. The beauty for them is that they
don’t have to—and probably never will, since proposals for even the barest
improvements, such as publishing the personal financial statements online, are
about as popular as special sessions in the Legislature.
But even among these lawmakers, Carona stands out. By his own estimation,
Associa employs 8,800 people and remains the largest and most active business
operated by a member of the Legislature. Given the nature of his business,
Carona has an impact on the lives of people far outside his Senate district
because he sits at the top of the food chain for the two million people or more
living under the rules of the privatized governments Associa helps operate. No
other state legislator has that kind of power. He is a senator and a
special-interest group rolled into one.
“He’s got to be number one in that category,” said former state senator Jon
Lindsay, a Houston Republican. “I can’t think of anybody who serves in the
Senate who has so much vested interest.”
Carona was born on the Gulf Coast, near the town of Dickinson, and raised in
East Dallas. By the age of twelve he was making $100 a day mowing lawns every
summer—more than his stepdad, a hard-drinking butcher, made cutting meat.
Democrats dominated the state the whole time he was growing up, but in 1978, the
year he graduated from the University of Texas business school with a double
major in real estate and insurance, a Dallas oilman named Bill Clements broke
the stranglehold and became the first Republican to get elected governor since
Reconstruction. Two years later, Ronald Reagan was elected president of the
United States.
By then, a Dallas developer had hired Carona to manage HOAs, which were just
beginning to multiply around Texas. As business took off, Carona, a
free-market-loving entrepreneur, threw himself into the conservative political
movement, first on behalf of others and then with his own successful candidacy
for the state House of Representatives, in 1990, when he was 34 years old. Six
years later he ran for the Texas Senate, and he’s been there ever since.
Politically, he has the qualities you’d expect from a tough, ambitious self-made
man. At a time when most politicians live in fear of their party’s activist
fringe, Carona seems to gleefully confront it. On issue after issue, he’s proved
himself to be a maverick willing to buck his own party on everything from gay
rights to higher gas taxes. But he also has a reputation for jealously
protecting his company’s bottom line and the interests of the big-business lobby
in general.
He’s known to have a volcanic temper too. Just ask Senator Royce West, a
Democrat from Dallas who was the recipient of a notorious finger jab from Carona
on the floor of the Senate in 2001. Or Senator Dan Patrick, a Republican from
Houston who found himself on the business end of a Carona tirade over a minor
legislative disagreement. Carona, who is proud of his Italian heritage and has
been known to make Godfather references, later wrapped a toy horse head in a
blanket and put it on Patrick’s desk on the floor of the Senate. (In a bitter
email exchange in May 2012 Carona suggested that there were rumors that Patrick
is gay. The religious conservative and radio talk show host called the attack a
false and “repulsive” smear and demanded an apology, which was not provided.)
These qualities were in evidence during the fight over SB 507 in 2001. The
legislation didn’t just tweak existing laws. It created a brand-new section of
the Texas Property Code that dealt with HOA powers and duties, everything from
the way foreclosures and liens are handled to record-keeping and management.
Carona says his carrying the bill did not violate any ethical rules pertaining
to conflicts of interest—rules he acknowledges are “loose.” To the contrary, he
insists that SB 507 was a pro-consumer bill, thanks to provisions that gave
homeowners the right to redeem foreclosed homes, to review certain HOA records,
and to receive notice when a fine has been levied against them.
“That bill was all about protecting homeowners,” Carona told me. “It truly
provided all sorts of transparency and individual rights to homeowners who had
been largely shut out of the process by some of these runaway boards of
directors.”
Talk to the many homeowner activists and attorneys who have spent the past
decade suing HOAs on behalf of people like Shawn Riggs, however, and you’ll get
a different view. (Lawsuits against HOAs are common, in part because, with no
state agency overseeing HOAs and no licensing requirements, homeowners have
little option but to sue when they get into a dispute.) According to its
critics, the law seemed to stack the deck—in the name of consumer protection—in
favor of HOAs and their for-profit partners. Look no further than the language
concerning the priority-of-payments practice. The bill said HOAs could not
foreclose “solely” to collect fines and attorneys’ fees, but it enabled managers
to redirect dues payments to cover them. So the effect was the same: diversions
technically left the dues unpaid, allowing the HOA to foreclose—even after
tacking on thousands of dollars in arbitrary administrative penalties, handling
charges, and attorneys’ fees.
Lawmakers generally pretend their colleagues have no personal ties to the bills
they sponsor, but on the night SB 507 came up for a final vote, Senator Lindsay
departed from tradition by pressing Carona to discuss how management companies
like Associa operate.
“That’s not anything we’re gonna discuss on the Senate floor,” Carona replied.
“We’re talking about a homeowners’ protection act here, the obligations that a
homeowner has to their homeowners’ association. We’re not talking about anything
else.”
Lindsay scoffed. “If this bill doesn’t have anything to do with management
[companies], I’m kind of blown away by some of the correspondence I got, all
from management companies,” he said. In fact, Carona’s bill referred to HOA
managers repeatedly, giving them joint control over an association’s bank
account, among other things.
Lindsay was so incensed about the lack of consumer protections in the bill that
he vowed to stage a filibuster to kill it. Since only a few hours remained
before a midnight deadline on the last day to pass substantive bills, this was
not an idle threat. As the night wore on, Lindsay kept talking and talking and
Carona kept getting more and more agitated. Carona implored his GOP colleague to
recognize that SB 507 was at least marginally better than the messy patchwork of
laws that had prompted so many complaints at the Capitol. Lindsay acknowledged
that homeowners were thrown a couple of bones, but he complained about his
exclusion from a hand-picked team of legislative negotiators, which naturally
included the bill’s author, who had stripped off homeowner-friendly amendments
in the waning days of the session.
More important, Lindsay said he was worried—prophetically, as it turned out—that
the industry would use the “property rights” bill as a fig leaf to cover up the
need for deep consumer protections, actual remedies, and oversight. “What I’m
fearful of is that taking that small step in that direction now will prevent us
in two years from taking a major step in the right direction to rein them in,”
Lindsay said. “Because everybody will say in two years, ‘Oh, we took care of
that last session.’ ”
With the clock inching toward the midnight deadline, Carona fell into a
charitable mood. He offered to advocate for new reforms if the ones he was on
the verge of passing proved inadequate and in need of some amending. Finally, at
about 10:20 p.m., Lindsay relented. In the aftermath, Carona looked like a new
father in a maternity waiting room. “Thank you very much,” he said. Carona then
pledged to work with Lindsay on HOA issues in the next legislative session,
presumably as an agent of reform.
Lindsay’s response wasn’t meant for broadcast, as a review of the old videotapes
makes clear. But if you crank up the volume, you can hear it. “I don’t want you
carrying the goddamn bill,” he said. Carona promised he wouldn’t. Then he sent
SB 507 on its way.
True to his word, Carona didn’t carry the 2003 HOA bill. In fact, because of all
the conflict-of-interest criticisms he faced—unwarranted, he still believes—the
Dallas senator decided he shouldn’t be directly sponsoring HOA bills anymore.
But that doesn’t mean he stopped advocating for his company’s interests at the
Capitol. When Lindsay fulfilled his promise in 2003 to spearhead sweeping HOA
reforms—including government oversight of HOAs in big counties and a limit on
management company fees, none of which the management companies liked—Associa
dispatched droves of employees to Austin to testify against it, recalls Gary
Stone, a former property manager for a Dallas-based Associa subsidiary.
Stone says he and other employees were told to use the names of their nonprofit
neighborhood associations when they registered in opposition to Lindsay’s bill,
though some did disclose their management company’s affiliation, according to
committee witness records. “We went down in a big van. We were told this was
very important and that if we could get away we needed to go, because Carona was
against it,” said Stone.
Some of Carona’s methods were more direct. On the day Lindsay was scheduled to
lay out his bill before the committee, Carona dropped by the hearing room. On a
scratchy audio recording of the proceedings, an audible stir can be detected
following his entrance, and an unidentified lawmaker says, “Mr. Chairman, I want
it noted that Senator Carona is in the house, so all amendments and all
amendments to amendments and committee substitutes, beware.” They all had a good
chuckle. It was no secret that Carona didn’t like the bill and was working to
scuttle it. Ultimately, he prevailed. Lindsay’s legislation died without a
vote.
Over the ensuing years, Carona has continued to expand his HOA advocacy network,
adapting and innovating just like he has with his business empire. In 2006, for
example, the Associa brass helped create the now-defunct Communities for Fair
Legislation, an innocuous-sounding group formed to lobby at the Capitol on
behalf of HOA management companies, according to those who helped create it.
After that, Carona took it in-house by lining up a team of his own registered
lobbyists. There are now eight in all, including several from the influential
Graydon Group, whom Associa pays to watch its back and promote its agenda in
Austin. A senator hiring lobbyists to influence his own colleagues? Even in a
Capitol accustomed to cozy legislator-lobbyist ties, that’s a new twist.
There are also simpler methods. In 2011 Senator West, then the chairman of the
Committee on Intergovernmental Relations, carried the most significant HOA
overhaul since SB 507. West also happens to be the recipient of $73,500 in
campaign cash donated since 2008 by Carona, his wife, and Associa general
counsel Paul Reyes. The most amazing thing about this may be Carona’s
forthrightness in discussing it.
“Just as any lobbyist or any special interest would approach a legislator, our
company’s interests are protected in that fashion,” Carona told me. “As a
company, we have to be able to know that Senator West is somebody who will at
least listen.”
It’s a little jarring to hear a senator liken himself to a special interest.
Then again, it’s hard to argue with his cold-eyed calculation. One can only
imagine that $70,000 endears one senator to another better than a chest-poking
tirade on the Senate floor.
Carona has been described as a man in constant motion, and on the March day that
I interviewed him, I discovered he has a Capitol office to match. When I walked
inside, one lobbyist was dropping off a bag full of snacks and three others were
waiting to talk to the senator. While staffers answered phones and made small
talk, a visibly antsy Gary Elkins, the payday lender and Houston state
representative, stormed in and joined us. Carona was carrying a hotly disputed
bill to restrict high-interest payday lenders, and Elkins was upset about a
draft of the legislation. There were no seats left, so he had to lean against
the wall next to me.
When my turn came, Carona welcomed me in and hurriedly returned to the chair
behind his desk. Wearing a charcoal suit and a starched monogrammed shirt, he
seemed unreasonably relaxed amid the chaos. He asked me how much time I needed.
A half hour? Forty-five minutes? I took the longer option, but he ended up
giving me two hours.
He was unfailingly courteous, generally talkative, and often surprisingly blunt.
When I asked him why he once turned to Democratic trial lawyers like the late
Fred Baron or John Eddie Williams for investment capital at Associa, he stated
matter-of-factly, “I’m looking for people with money.”
He was less forthcoming, though, when pressed about the inner workings of his
vast business empire. On that very day, a major cog in his HOA
machine—Dallas-based First Associations Bank—had gotten state approval to
complete its merger agreement with the publicly traded Pacific Premier Bancorp
Inc., of California. The transaction provided a rare glimpse into an important
piece of the senator’s otherwise privately held conglomerate. As the largest
shareholder in First Associations Bank, Carona was entitled to receive
approximately $8 million in cash and stock for the transaction, plus a
$2,750-a-month spot on Pacific Premier’s board, according to federal
disclosures. (Democratic fund-raiser and lawyer Lisa Blue Baron, Fred Baron’s
widow, was also listed as a major shareholder.) Carona, who has oversight
authority over the Texas Department of Banking in the Legislature, insisted the
deal got approved without his input or influence, but he declined to talk about
what he got out of it.
Only once during our interview did Carona show any sign of his trademark anger.
It happened when I asked him about reports from former Associa company employees
that he sometimes treats company assets as if they were his own, whether it’s
the corporate jet he uses to ferry himself between Austin and Dallas, often
multiple times per week, or the leased warehouse near Love Field where he keeps
his cherished vintage-car collection. “Those are issues that pertain to my
business interests and my personal interests, and frankly, I think it’s out of
line for a political reporter to be digging into any issue of that nature,” he
said.
What Carona did reveal were his views on HOA power and the effort to dial it
back, including the 2011 reforms that finally gave homeowners some of what
they’d been fighting for: the elimination of quickie “non-judicial” foreclosures
in single-family HOAs (though not those for condos), an enhanced right to
inspect association records, and better disclosure of fees.
The 2011 law, to Carona’s chagrin, also closed the priority-of-payments loophole
for single-family HOAs for all transactions as of January 1, 2012. Now dues have
to be applied to the annual HOA fee. No more diverting to fines and other
charges.
While Carona thought the reforms struck a fair balance overall, he felt pretty
strongly that the ban on reapplying assessment payments eliminated a reasonable
tool to force “irresponsible” homeowners to pay their tab.
“I think what we did in that one regard was not best for the associations,” he
said. “The public opinion just overrode any other consideration.”
But he’s not pouting about it. Carona looks at the legislative process kind of
the way he looks at business. You don’t get everything you want; you cut deals
and move on. In the case of the 2011 legislation, Carona had his lobbyists on
it. He made contributions to the Senate author. And on the rare occasions when
West asked him what he thought about a tweak here and there, Carona said he made
his opinions known. What more can a senator and CEO do?
“The only real time you ever hear us complain is if we simply didn’t get an
opportunity to at least be heard,” Carona said.
Given Associa’s national reach, I asked Carona how he approaches other state
legislatures, where he doesn’t have a fancy title, about HOA issues. In addition
to hiring A-list lobbyists, his company runs Associa PAC, a Texas-based
political action committee that doles out bipartisan campaign contributions to
sympathetic lawmakers all over the nation. It shouldn’t come as a shock that
legislators with influence over HOA issues, in Texas and beyond, are on the
distribution list.
“We have certainly impacted the laws around the country. There’s no question we
have impacted them,” Carona said. “We actually work to help pass good
legislation.”
What stood out the most to me was that Carona, unlike so many of his colleagues,
doesn’t pretend as though his public and professional lives never intersect. He
says he hasn’t ever abused his position or violated ethics laws, but he’s up
front about how he works the system for his own benefit within those very
forgiving restraints.
“I feel like I have a right to protect my business interests,” he told me. “Part
of my job for my clients, which are the associations and their members, is to
come down here and try to stand in the way of legislation, some of which is
rather impulsive.” You might call that refreshingly candid. Or fantastically
tone-deaf.
In Texas, as the Godfather might say, it’s just business.
Right about the time the Legislature was putting the finishing touches on those
heavily negotiated HOA reforms, Shawn Riggs, who lives 23 miles from the
Capitol, was getting the notices about his lawn from Carona’s management
company.
Unfortunately for Riggs, the hard-fought deal on the diversions of dues came too
late. His case falls under the old law, so the fees kept piling up, and the
pressure to resolve it kept mounting as the stakes increased. I didn’t expect
Carona to know the details of the Riggs case, of course. Riggs is but one of at
least two million Associa homeowners. A number. But wasn’t there something the
senator could do? “I would be happy to track it down and get it fixed,” he told
me.
It seemed promising. Though Riggs was technically suing Brookfield and not
Associa, if anyone could just make this mess go away, it was Carona. But after
our interview, the Riggs case started grinding its way through the court system.
Soon the Brookfield insurance company’s lawyer got involved. A settlement offer
from Riggs came and went. And still no word from Associa. Pretrial sparring was
just around the corner.
Then, in early May—out of the blue, it seemed to Riggs—Associa intervened and
started openly pushing for closure. Riggs’s lawyer, J. Patrick Sutton, had never
seen a settlement deal brought to a client by a company he had not sued, but it
was an offer they couldn’t refuse.
Riggs was not able to discuss the terms of the settlement, but it gives him a
fresh start with a neighborhood association he had come to loathe. For a while
he was so disgusted with Brookfield that he couldn’t wait to move out. Not
anymore. “Now I feel like I have a responsibility to take action,” he said. “I
feel committed to my neighbors to make things better—instead of just running.”
The fear of losing his home woke him up to the power of HOAs. The outcome of his
lawsuit made him feel empowered to do something about it. For that, at least, he
has John Carona to thank.
Jay Root, the author of Oops! A Diary From the 2012 Campaign Trail, is a
reporter at the Texas Tribune. He lives in Austin. This story was produced in
partnership with the Texas Tribune.
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