Exposing Misconduct: Legal Victories, CPA Referrals, and The Fight for Transparency in Illinois HOAs
From court wins and professional investigations to reserve fraud and board upheaval—essential lessons in oversight for every board and homeowner.
📰 In This Issue
Legal Victory: Owners’ Rights Strengthened
CPAs Referred for Misconduct
Reserve Study Fraud Uncovered
Forensic Audit Highlights
ARDC Referral of Association Board President
Rapid Resignations After Records Request
Relocation Announcement
Action Steps for Boards & Homeowners
📣 Introduction
At Common Interest Advisors, LLC, we’re committed to protecting the financial health of community associations by exposing misconduct, enforcing transparency, and holding professionals accountable. This update summarizes key legal, regulatory, and investigative developments affecting Illinois condominium and homeowner associations.
⚖️ 1. Court Victory Strengthens Transparency Rights
Case: Norman Kabir v. 175 East Delaware Place Homeowners Association
Case No.: 2023CH08854
We are pleased to report a legal victory that reinforces the rights of unit owners to obtain essential financial records. In this case, the homeowners association was represented by Saul Ewing LLP, and our firm provided expert forensic testimony in support of the plaintiff. The testimony went unchallenged and played a central role in the court’s decision.
The ruling confirms that associations cannot withhold documents that are part of the CPA’s audit deliverables, including:
Working trial balances
Adjusting journal entries
Passed adjustment worksheets
Income tax allocation schedules
🔍 While detailed budget documents are not part of the auditor’s deliverables, the court acknowledged that owners are still entitled to access such information under separate statutory rights.
⚠️ Note: This is a trial court decision and does not create legal precedent unless affirmed by an appellate court. However, it is binding on the parties involved and may influence future litigation.
🧾 2. CPAs Referred for Professional Misconduct
We have referred five CPAs from four accounting firms to the Illinois Department of Financial and Professional Regulation (IDFPR) for suspected misconduct. Notably, each firm was serving associations represented by Saul Ewing LLP at the time. This overlap underscores the importance of effective oversight in professional relationships.
🔎 Key Allegations:
CPA #1
Overstated the ending Operating Fund balance by $215,000 — inflating the reported amount by more than 1,600%
Failed to record a $300,000 settlement obligation related to the Reserve Fund
Under investigation by AICPA, ICPAS, and IDFPR
Refused to correct errors in audited statements
CPA #2
Understated taxable income by $1.9 million
Improper deductions; potential tax evasion of $542,963
Under investigation by multiple authorities
CPA #3
Failed to record hundreds of thousands of dollars in credit losses related to multiple settlements
Refused to amend inaccurate financial statements
CPAs #4 & #5
Failed to complete audits from 2014 to 2023
Created self-review threats; violated independence requirements
🏚 3. Reserve Study Fraud Uncovered
A Chicago-based reserve study firm issued three fraudulent reserve studies containing unsupported assumptions and manipulated figures. These reports understated long-term funding needs and misrepresented financial obligations.
Inaccurate reserve studies can lead to chronic underfunding and deferred maintenance, harming property values and community stability.
🕵️♂️ 4. Forensic Audit Findings & ARDC Referral
Recent forensic audits have revealed significant irregularities in financial management and governance practices.
⚠️ Key Findings:
🚨 Governance Failures
Board presidents acted without board approval
Financial decisions made outside required voting
Violations of Declarations and Bylaws
💸 Unauthorized Spending
$446,684 in unapproved salaries and bonuses
Reserve contributions waived without owner consent
🧾 False Tax Filings
Multiple associations filed materially false federal and state tax returns
CPAs and board members failed to correct or disclose errors
🔍 Real Case Snapshot: Unreconciled Financials & Oversight Failure
A multinational management company posted 5.5 years of unreconciled financial statements to its client portal. This obscured discrepancies and posed significant risk to homeowners.
This case highlights the importance of board oversight, independent audits, and vendor accountability — regardless of a firm's size or reputation.
🔍 Real Case Snapshot: Unauthorized Compensation by Management Employees
Employees of another leading property management firm awarded themselves nearly $450,000 in raises and bonuses — without board review, discussion, or authorization. This breach of fiduciary duty was uncovered during a forensic audit.
Boards must independently monitor compensation practices, even with long-standing vendors.
🧑⚖️ ARDC Referral of Association Board President
An association board president has been formally referred to the Illinois Attorney Registration and Disciplinary Commission (ARDC) for knowingly signing false income tax returns. These filings:
Concealed financial liabilities
Misstated income and expenses
Violated ethical and legal standards for attorneys
Licensed attorneys on boards are subject to legal and professional discipline for knowingly filing false documents.
🔍 Real Case Snapshot: Rapid Resignations Following Records Request
After a board member’s formal records request went unanswered by management, the board of directors retained our firm to conduct a forensic review. Within six weeks of our engagement:
The association’s legal counsel was immediately terminated
His predecessor was rehired, then resigned shortly thereafter
The managing agent issued a 60-day termination notice, which took effect March 31, 2025
The association’s independent auditor formally disengaged from the audit process
This rapid sequence of resignations and disengagements illustrates how the introduction of forensic oversight can expose entrenched dysfunction — prompting legal, managerial, and financial professionals to abandon positions where transparency and accountability are enforced. It reinforces the critical need for boards to act decisively when financial records are withheld and red flags emerge.
📑 Violations Summary from Recent Report
20 violations of governing documents
Unauthorized spending: $446,684
Significant flaws in the approved operating budget
Recommendations include:
Board member recall
Termination of negligent vendors
Full forensic and tax audits
🏡 Personal Announcement: Returning to Illinois
As part of our commitment to serving Illinois associations more directly, I am pleased to share that my family and I will be relocating back to Illinois by October 1, 2025. This move enhances our availability for on-site investigations and board consultations statewide.
📢 What You Can Do Next
✅ Schedule a forensic audit or financial review
✅ Re-evaluate your CPA, management, and legal providers
✅ Share this newsletter with other board members and homeowners
✅ Demand transparent financial practices and full access to records
💬 Contact Us
Have questions or need support? We’re here to help.
📧 mnovak@cia.mba
Common Interest Advisors, LLC
Independent Forensic Investigators for Community Associations
Promoting transparency, accountability, and ethical financial practices
📢 Take Action
At Common Interest Advisors, we believe transparency starts with awareness — and action begins with access. If this report resonates with you:
✅ Subscribe for ongoing updates on financial oversight, legal developments, and governance reform.
✅ Share this post with fellow homeowners, board members, or community leaders who care about integrity.
✅ Contact us if your association needs a forensic audit, vendor review, or guidance navigating complex financial issues.
📧 Reach us at: mnovak@cia.mba
Together, we can hold boards, professionals, and vendors accountable — and protect the communities we call home.