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Leisure World Management Is Ordered to Make Financial Records Available

September 10, 2004|David Reyes | Times Staff Writer

A group of Leisure World residents scored a second victory Thursday when a judge ordered managers of the Seal Beach retirement community to open the financial books.

Superior Court Judge Stephanie George, who was presiding over Small Claims Court, endorsed the residents' argument that Leisure World functions as a giant homeowners group, giving residents the right to see how their fees are spent.

"This is a good victory for us. We're going to contact Leisure World and make arrangements to see the financial records, including the salaries," said Carol Franz, one of eight residents who sued the Golden Rain Foundation, an umbrella group that governs the 9,000-resident community, in Small Claims Court.

For months, residents have asked for financial records but were denied access until Wednesday, when managers inexplicably decided to allow the plaintiffs a chance to view the records.

Residents wanted to know why monthly fees have increased, the salary of chief administrator Habir "Bill" Narang and other executives, and how much the foundation pays contractors.

Though they were given access to some records Wednesday, problems arose because the ledgers were coded, difficult to comprehend and salary information was not included, Franz and other residents said.

"We were told it would take a court order to see the salary information," Franz said.

On Thursday, they got it.

In her ruling, George denied Leisure World's motion to transfer the case to Superior Court, which would have prohibited her from ruling on the matter.

The judge also challenged Leisure World's attorney, Jay Picking, about the relevancy of his arguments.

Picking argued that jurisdiction should be in Superior Court, where Leisure World has a civil suit pending against the same group of residents. He also argued that under the state corporations code, financial records do not need to be disclosed.

But George sided with the residents and told Picking, "There are problems with your argument on multiple points."

In her ruling, George gave the residents their biggest legal boost by reinforcing their argument that members of a homeowners association are entitled to inspect records under the state's Davis-Stirling Act.

Leisure World argued that they do not fall under the law's provision, which George dismissed.

"Although you say you're not an association, you look like a duck, walk like a duck and, well, you are a duck," George said.

During the hearing, Shirley Burns, president of the Golden Rain Foundation, told the judge she didn't believe in giving salary information because "it's a matter of privacy."

The judge didn't agree.

"Look, the point is, if people want to learn the down and dirty of the accounting, then you have to provide it," George said.

Narang, who attended the hearing, refused to comment.

This clash was the second round of Small Claims actions filed by the residents against the Golden Rain Foundation. In the first round, a judge sided with the residents and awarded each $200 in fines levied against the foundation. But managers appealed that decision. A hearing is scheduled Thursday.

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