HOA in Illinois - Board Member Conflict of Interest

I am very frustrated at this point and would like to hear from other HOA members in Illinois and other states where you might have similar laws.

Let me give you a quick background:
Our board president had two long term contracts, one for snow removal and the second one for exterior paint work awarded to his company in 2008 - 2009 when most of the current residents were not aware of what was going on. He also has been doing most of the day to day maintenance work and upkeep of the property which is done with workorders (no contracts) on an ad-hoc basis. He has used time and material clauses in his contracts over and over again to charge us additional fees over time. We brought this up during the last couple of quarterly meetings only to be told that there's no conflict of interest and other board members have approved this work and the contracts. BTW we have three members on the board including the president out of which one board member has the same concerns as us, but the third member seems to be on the same side as the president (he signs off on most contracts and checks). Note we have 90 homes in the HOA and approximately 65-70% of the budget is allocated to the work done by the president's companies. I am quite sure that the contract bidding process was not followed as it should have been and very few board members have seen a competitive bid. The HOA manager usually makes a statement at every meeting saying that the president had the lowest quote.

In 2010, a law was passed in Illinois which gave the HOA members more rights including the right to protest and review invoices, etc. This law was effective from July 2010 and it states that all HOAs should be compliant by begining of 2012. I came upon this law last September and sent numerous emails and letters to the board about the conflict of interest clause which states that no contract can be awarded to a board member or his family and the members can send a petition with 20% signatures to call for a special election.

The board then sent a disclosure notice stating that these contracts presented before July 2010 need not meet these standards and the board member indeed had a personal stake inthe companies on Dec 28, 2011. Again, the contracts were drawn in 2008 and pre 2010, but the disclosure notice was sent only on Dec 28, 2011. I then sent a petition asking for a review of these contracts and all the work orders passed since 2010 and was told that the petition was rejected by the board.

Is talking to a lawyer my only choice? I am afraid that if I file a lawsuit it will hurt our HOA budget even further. Can the contracts awarded before the law was passed be reviewed and revoked if required. What are our options here? How can I force the board to accept any petition? Thanks!

Do your CC&Rs permit the board to enter into long-term contracts? If so, may your board do so for anything, or just for certain services? In our HOA, for instance, we (the board) may not form contracts with a duration of more than one year for almost all maintenance (e.g., landscaping, pest control, pool service, etc.) and for all staffing services.

I wonder if your board is in compliance with your CC&Rs.

I am not the only one who has raised this issue, but I am kinda leading this effort.
Note Illinois did not have a comprehensive HOA law till 2010 and the HOA claims to work with the bylaws and the Illinois not for profit act 1986 which states clearly:
If a transaction is fair to a corporation at the time it is authorized, approved, or ratified, the fact that a director of the corporation is directly or indirectly a party to the transaction is not grounds for invalidating the transaction.
(b) In a proceeding contesting the validity of a transaction described in subsection (a), the person asserting validity has the burden of proving fairness unless:
(1) The material facts of the transaction and the
director's interest or relationship were disclosed or known to the board of directors or a committee consisting entirely of directors and the board or committee authorized, approved or ratified the transaction by the affirmative votes of a majority of disinterested directors, even though the disinterested directors be less than a quorum; or

but this law seems to be superceded by the IL Common interest community law from 2010 which says that conflict of interest has to be handled by petitions and special elections.

Thanks!

AJ

I went through a similar situation with my HOA. The president when I had moved in had is own "company" and did alot of the HOA maintenance and work on people's homes. Many residents trusted him and viewed him as our resident HOA handyman. Here is the rub...He was NOT licensed or insured. Plus he was a con-artist type who would bid on a job and then charge extra after getting the job. I have a LOOOOOONGG list of rip-offs this guy performed I had to deal with on a daily basis as new President. However, couldn't get rid of him because he had established himself with the HOA members as a "Good guy" even though he was the scum of the earth. (He'd rip off elderly people with alzheimers...) A few residents had their eyes open to him which helped me get elected.

What I did is established two rules on hiring contractors to do any work for the HOA for certain dollar amount. IF the job was over say $100, the bidder had to be licensed and insured. Plus we had to have 3 bidders for each job. This showed the board did it's due diligence and presented the jobs in front of the membership. IF they still choose to go with the President's company, that's okay. It's just that someone should say "hey, let's present two other bids besides the Presidents before we make a decision". Any member should be able to bring the board the bids if they so choose. It shouldn't always be the board who gathers all the bids. Maybe even establish a committee to do this to help out. This may allow more diversity in what your looking for.