6
BROOKLYN WEEKLY, JUNE 7, 2020
Sea Gate residents take homeowners’ association
to court for release of fi nancial records
BY ROSE ADAMS
Three residents from a
gated community in southern
Brooklyn are taking
their homeowners’ association
to court to force the release
of its fi nancial records
— claiming that there are
more than $5.1 million in
discrepancies between the
governing body’s tax returns
and fi nancial statements
over the course of
four years.
The homeowners say
that the Sea Gate Association
— which manages the
Sea Gate community at the
western tip of Coney Island
— inconsistently logged its
revenue from government
grants and spending on construction
projects, among
other items, between 2015
and 2018.
“This is not providing
correct information, it’s hiding
information and falsifying
information,” said Gary
Daniels, a Sea Gate resident,
who claimed that board
members have not been
forthcoming about their fi -
nances. “You can’t get answers
out of them.”
The Sea Gate Association,
a 501(c)4 nonprofi t run
by volunteers elected every
2 years, collects fees from
homeowners to fund garbage
collection, a small police
force, infrastructure
repairs, and other services
throughout the 4,000-person
community.
Since Superstorm Sandy
devastated Sea Gate in 2012,
the organization has also received
tens of millions of dollars
in government grants
for storm resiliency projects,
the association’s president
said.
“We brought over 60 million
into our community so
far,” said David Wynn, a homeowner
who has been a
member of the association
for more than 10 years.
The repairs include a $4.8
million bulkhead and a new
sewer system whose construction
is well underway.
But several local residents
say that the association’s
refusal to make its fi nances
public, along with the inconsistent
records, raise questions
about the projects and
the association’s fi nances.
Daniels and a small
group of other homeowners
began looking into Sea
Gate’s fi nances after attending
a public meeting in 2018
about the association’s fi -
nancial statements from the
previous year, which Daniels
said looked strange to
him.
“Quite frankly, something
on the fi nancial statements
from 2017 just didn’t
smell right,” said Daniels,
a fi nancial consultant and
longtime resident of Sea
Gate.
Daniels gained access to
the association’s tax returns
and fi nancial statements
between 2015 and 2018, and
noted discrepancies between
the separate fi lings.
While the association’s total
expenses and income
remained fairly consistent
across documents, the original
tax returns tended not to
list signifi cant amounts of
money paid to independent
contractors, legal expenses,
or the amounts the association
received in government
grants. Sometimes, the returns
listed some of those
numbers under separate
sections, such as “insurance
recovery income.”
Following Daniels’
criticism, the association
amended its 2016 and 2017
tax returns, revealing some
of the gaps in its previous
reporting. For example, the
original 2017 return listed
$275,011 in insurance recovery
while the amended
return listed no insurance
recovery and $643,320 in government
grants instead. The
original return also listed
no independent contractors
paid over $100,000 while the
revised return listed four
contractors who were paid
$800,270 in total.
“They’re mislabeling
money. They’re moving it
around,” Daniels said, adding
that many of the maneuvers
are “100-percent illegal.”
As a non-profi t, the association
doesn’t pay taxes,
and its tax returns are
purely informational. But
Daniels said the inconsistent
fi lings help obscure the
association’s revenue and
spending.
“Many people play with
their tax returns. But this
is $5.1 million dollars in discrepancies,”
he said.
The association, however,
said that the differences
in the returns are minor
— especially since all
the documents report the
same amount of total costs
and revenue.
“The accountants
amended the return to
read that one plus one is two,
rather than one plus one
plus one equals three,” said
Barbara Garafalo, a member
of the board for about 16
years. “Our accountant certifi
ed our audits. We’ve been
audited and they’ve never
found anything wrong.”
The board members
added that the state closely
tracks funding for government
funded-projects, such
the bulkhead project.
“Grants don’t just come
to us, we have to lay out
funds and we get reimbursed,”
Garafalo said. “It’s
not like we’ve gotten money
for grants. Nobody’s throwing
money at us.”
After noting the discrepancies,
Daniels and
two other residents, Olga
and Vincent Scarcella, demanded
in December that
the association hand over
the minutes to its executive
meetings as well as hundreds
of documents regarding
most of the association’s
fi nances over several years
— citing a law requiring
homeowners’ associations
to allow homeowners to review
minutes and records
upon request.
In a January meeting,
members of the board told
the three homeowners that
they could see some documents,
but would have to
sign a non-disclosure agreement
fi rst. The protesters
declined to sign it.
“I’ve seen NDAs before,
and this is an NDA you can
barely breathe in,” Daniels
said.
President David Wynn
defend the non-disclosure
agreements, saying that all
board members sign them
and that they serve to keep
the homeowners from blasting
sensitive documents on
social media.
“The reason is that in
this day and age of whats going
on on social media, we
run a business at the end of
the day,” Wynn said.
Wynn added that the association
is willing to show
the protesters documents,
but can’t hand over hundreds
at a time, especially
since lawsuits with homeowners
are confi dential.
Daniels and the Scarcellas
argued they could sift
through documents on the
association’s computer or
look through boxes of papers.
Olga Scarcella fi led an
Order to Show Cause in
late February, which would
require the association to
hand over the requested documents
to the homeowners.
The hearing was postponed
because of the coronavirus
outbreak, and is rescheduled
for June 25, Daniels said.
A group of homeowners are accusing the Sea Gate Association of inconsistently reporting revenue and spending. Photo by Derrick Watterson
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