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No embezzlement fallout here?

Koger Management Group says it will reimburse any affected HOAs

Date published: 3/24/2007

By DAN TELVOCK

The president of an embattled company that manages homeowners associations said he is not aware of any HOAs in this region that have had funds embezzled.

State officials and the Fairfax Police Department are investigating Koger Management Group for allegations of embezzling at least $800,000 from HOA accounts. KMG managed about 28 HOAs in the Fredericksburg area, a representative at the local office stated. KMG receives management fees from HOAs to collect assessments, maintain individual accounts and solicit contractors to perform grounds maintenance.

Robert A. Koger, company president, said he'll know all of the affected HOAs when his 336 HOA clients complete audit reports. He wouldn't name the local HOAs his company manages because he said competitors would steal the information for "our bad misfortune."

"I know there are some people making rumblings down there but no one has come to me and said, 'You owe me $1,000,'" Koger said.

He said it's possible some Fredericksburg-area HOAs could have been affected.

"We've had some problems, but there have been no claims made from any association down in Fredericksburg," Koger said. The embezzlement is "primarily in Northern Virginia, and 20 percent of HOAs may have been affected."

Several HOAs in the Fredericksburg area that used KMG, such as Lakeview at Culpeper and Ballantraye in Spotsylvania County, have recently hired new management companies.

Sandy Deck, treasurer of the Ballantraye HOA, said owners decided on a new management company because KMG didn't have the staffing at the local office to best accommodate the 200 townhouses in the HOA.

"I'm aware of their financial problems," Deck said. "As best I can see we haven't lost any money."

Court documents obtained through the Virginia Department of Professional and Occupational Regulation and Real Estate Board state that auditors discovered the accounting discrepancies between January 2005 and September 2006. Koger reported the charges to the Fairfax Police Department on Jan. 3. HOA funds were directly deposited into KMG accounts and at least $800,000 of those funds appeared to have been misdirected, court records state.

According to court records, Assistant Attorney General Eric A. Gregory argued that despite KMG's admissions, the company has been "consistently vague and evasive" in explaining the irregularities. Gregory argued in court records that one unnamed HOA that spotted missing funds couldn't get KMG to respond or rectify the problem.

The employee believed to be involved in the embezzlement, Koger's son Jeff Koger, no longer works for the company, Robert Koger said. A Fairfax judge ordered KMG to hire a forensic accountant and a court-appointed monitor.

"We have a claim process in place," Koger said. "Once the auditors inform us or inform the HOA that there may be missing funds, then we in return reimburse the HOA."

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Date published: 3/24/2007