The issue of whether Directors who are members of The Meadows Country Club have a conflict of interest (COI) on issues related to TMCC has come up a number of times in the last year. Current and past MCA Presidents hav noted that the MCA has a legal opinion stating these Directors do not have a COI, but it is fair to say that many MCA Homeowners haven’t been fully satisfied by this. Conflict of Interest can definitely be a complex and nuanced issue, and is always based on the particulars of a situation.
Over the next few months the MCA Board will be making some very important decisions that will affect TMCC. And after the upcoming election at least four Directors will be TMCC members (possibly as many as six). It is really important that MCA Homeowners have confidence in the decisions and their validity (whether they agree with the decisions or not).
That means having confidence in our Conflict Of Interest situation.
We won’t wade deeply into the legal waters, but we have some observations and a recommendation that would increase community confidence that that the MCA Board is proceeding with transparency and honesty. On to the issue at hand…..
This is the legal opinion that is regularly referred to (received by a homeowner through a Records Inspection request):
MCA Attorney Letter COI issue Nov 16 2017
Below are the purpose and the recommendation from that MCA Attorney Letter (excerpts are provided below verbatim).
Preamble: “The purpose of this letter is to provide advice to the Board pertaining to the member position that Board members owning an equity interest in the Meadows Country Club (Club) should not vote on material issues pertaining to the Club”
“Recommendations
Please provide additional facts concerning the equity Club interests. It would be helpful to know how much each director paid for their equity interest, the benefits of the interest, the current value of the interest, and a projected value of the interest if the Club finances are turned around or the Club property sold.
If the equity interest is nominal in value, one solution might be for at least a majority of the Board to divest themselves of the equity interest and eliminate the conflict of interest.
Another solution would be to make any contract or transaction contingent on subsequent approval by a majority of the total voting interests of the membership at a duly notice membership meeting or via written consents in lieu of a meeting.”
Our Takeaways
We’ve had a couple of retired lawyers do a brief review of the opinion and both acknowledge it is a reasonable opinion based on the circumstances and facts provided (without looking into the cases cited).
Per the preamble, this legal opinion was on a very specific set of circumstances that are no longer at issue. At that time the Directors held equity shares with minimal value. Today the TMCC member Directors benefit as members from MCA’s significant ongoing subsidization of TMCC.
The lawyer’s request for additional facts implies that the amount of benefit received are relevant facts. As the MCA did not provide subsequent correspondence with the lawyer, we are left to conclude that the MCA did not provide the additional facts requested. (perhaps justified by the action below)
The equity interest of the 8 MCA Directors (or their spouse) in TMCC did only have nominal value, so they followed the second recommendation by divesting of their shares in TMCC. This followed one of the lawyer’s recommendations and effectively resolved this specific issue.
Today’s situation is very different. TMCC members, including some MCA Directors, have benefited significantly over the last 7 years from MCA subsidization including 7 years of free/low-cost leases, Renaissance Access Plan fee, MCA paying TMCC operating expenses, and the recent short term loan.
The lawyer was clearly not asked to opine on whether TMCC member Directors have a conflict of interest in today’s situation.
MCA Homeowners need a new legal opinion based on today’s situation, with a full disclosure of all relevant facts to their lawyer (our articles on the size of the subsidy and how few benefit from it would be a good starting point). As it is of significant interest to the community, and some controversy, the MCA would be wise to make this a very transparent process.
As it is now clear that the existing opinion is not relevant to the current situation, MCA Directors who are TMCC members should recuse from voting, or having a disproportional committee voice, on TMCC related matters until we have an opinion on the matter. As the lawyer advises on page 4: “Although I currently have no details about the nature and extent of the equity ownership in the Club, the Board should proceed cautiously”.
The sooner MCA Homeowners have a relevant legal opinion, the sooner we can all have comfort and confidence in any TMCC related decisions. The Board can act on this immediately and we encourage them to do so. Let’s get it done.
Ballots for the MCA election will be coming out soon.
Vote for candidates that you believe will represent all MCA Homeowner interests, increase transparency and be honest with Homeowners.
Please share this with your friends and neighbors.
You can contact us at ForTheMeadows@SarasotaMeadows.com
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