The venerable Inn of the Seventh Mountain on the road to Mt. Bachelor has been through a lot in its 35-year life, and it shows. The dark wood siding on its condos is weathered and deteriorating. Roofs leak. Uninsulated water pipes freeze.
- New skating rink is one of the improvements the Papes made
Right in the middle of the war is Bill Friedman, a Bend city councilor and former mayor, who as owner of Cascade Bookkeeping manages the affairs of the condo owners' association and is under attack from disgruntled owners who claim he's been unfairly favoring the Papes.
The Pape family - which made a fortune selling heavy construction equipment - controls a majority of the seats on the condo owners' association board of directors. Or it used to. Or maybe it still does, depending on how things play out in court. But we're getting ahead of the story.
- Condos at the Inn are showing their age: Condos are the Inn are showing their age
The AUO board hired RDH Building Sciences from Vancouver, BC to evaluate the work that needed to be done on the condos. RDH came back with a jaw-dropping cost estimate of $30 million. The board asked the engineers to scale back the scope of the work and come back with a revised number, which they did: $17.7 million.
That's when the civil war broke out.
The Pape faction on the board wanted to go ahead with the work and called a special meeting for Nov. 25 to authorize a special assessment on condo owners to pay for the renovations. The cost to the owners would range from $11,000 to more than $100,000, depending on the number and size of units they own.
- Peter Bours (with Joan Moss) leads dissident condo owners
"We all want to see this place fixed up, but not based on some obscure engineering firm's walk-through," Bours said. "We want to get a builder in here that does this kind of work."
The dissidents also challenge the board's decision to structure the assessment in a way that would financially benefit the Papes. The details are complicated, but the gist of it is that if the assessment is approved by the board before Dec. 31, 2007 the payments to INNspired will be accelerated, meaning INNspired stands to get about $7 million more.
Although the Papes have offered to let the condo owners spread out payment of the assessment over three years at 4% interest, the owners say the cost is still much more than many of them can possibly afford. And they don't relish the prospect of trying to sell their condos in the middle of one of the worst real estate slumps in decades.
One owner who didn't want his name used said the assessment on his two condos is about $65,000 on one and $55,000 on the other, "so we owe, as it stands right now, $120,000 in special assessments. I can't afford to [pay it]. I don't have an extra $40,000 a year lying around. What will I do? I don't know, honestly, at this point and time. I stand to lose over $380,000" in what he's invested so far in his two units.
In a last-ditch effort to block the assessment from going through, the dissident owners moved aggressively. They contacted all the unit owners they could find and asked them to turn in voting proxies to unseat the Pape faction on the AUO board.
"We all received a rapid education in using the Internet to find people," Bours wrote on the dissident owners' website, innof7thmtn.com. "The ... assessment notices had grabbed owners' attention and our position was an easy sell. We began to feel guardedly optimistic."
Then the dissidents got word that representatives of the Papes were contacting owners trying to buy their units, thereby increasing their number of votes in the hope of staving off the attempted board coup. The Papes "bought up five condos right before Christmas," Bours said.
Nonetheless, Bours said, the dissident faction managed to collect enough proxies to give it 50.8% of the votes and kick the Pape faction off the board.
But things didn't go smoothly. At a special board meeting on Dec. 31, the dissidents cast their proxies and voted off the six members of the Pape faction. But the Papes and Friedman - who was charged with supervising the election - are claiming that, for a couple of technical reasons, the Papes actually won.
For one thing, the Pape faction claims it won on the basis of "cumulative voting." Under that procedure, an owner who's entitled to, say, six votes can cast them all for one candidate or split them up. The Pape faction used the cumulative voting process to take their votes away from one of their six board members and throw them all to the other five in an effort to maintain a slim majority.
"The bylaws simply saw that cumulative voting is allowed in all elections and recalls of board members," Friedman said.
Not so, claims Bours. Cumulative voting "is the system we've used to elect boards, but this wasn't the election of a board - this was a special election to remove the board."
Another issue on which the legitimacy of the vote turns is whether all the proxies Bours and his allies collected were properly cast. Friedman claims four of them were properly rejected on legal grounds.
"One of those proxies came from an owner who, after he signed the proxy, sold his unit to another individual," Friedman said. "Our attorney believed that under that set of circumstances the ballot could not be counted. Three of the proxies were later revoked in writing by the person who sent in the proxies, and our attorney advised me that was a correct revocation and I should not vote those ballots, and that's what I did.
"When the dust settled, the proxy ballots that I cast plus three other ballots cast at the meeting in favor of recall amounted to less than 50% of the possible votes."
But according to Bours the deadline for turning in proxies was Dec. 26, and the bylaws say proxies can be revoked after the deadline only if the owners show up at the meeting in person to do it - which didn't happen.
So now there are two AUO boards - for convenience, we'll call them "the old board" and "the new board" - each claiming to be the legitimate one. Which one really is will most likely be determined in court.
The new board and its supporters are still angry with Friedman, who they say tipped off the Papes to their coup attempt and has dragged his feet when asked to provide them with information they're entitled to, including contact information for condo owners in advance of the Dec. 31 meeting.
"We are really unhappy with Bill Friedman," said Bours. "There's absolutely no transparency. We can't get anything out of him, even as a board member. ... He still hasn't released the voting data [from Dec. 31] to us - he's just completely in their pocket. He's supposed to be representing all of us."
"There are certain records that are open to homeowners, and whenever they were requested we provided those," Friedman said. "What they were specifically looking for was contact information including telephone numbers and e-mail addresses, and our attorney has instructed us, absent the board's direction otherwise, to treat such information as confidential."
Who does Friedman consider himself to be working for - the Papes or the condo owners?
"Good question, and one that's really clear," he replied. "Under every homeowners association and condo association declaration, the business of the association is conducted by a board of directors, and the board of directors has the ability to hire folks to perform certain tasks. So in this case and every other association we represent - and there are 30 or 40 of them - we are employed by the association through the board of directors."
And as far as Friedman is concerned, the old board is still the one he's employed by. "Other than a letter from some folks purporting to be a new board, I have no evidence that anything has changed," he said.
The new board's attorney, Bruce Cahn of Ball Janik LLP, sent a letter on Jan. 4 to the attorney for the Papes, Tamara McLeod of the Bend law firm of Karnopp Peterson LLC, demanding that she and Friedman "immediately turn over all files and materials owned by the AUO and ... instrumental to the operations of the AUO, including but not limited to all owner contact information, all vendor materials, all financial records and any other documents pertaining to AUO business." As of Monday there had been no response, and the Source was unable to reach McLeod for comment.
In the meantime, plans for repairs to the Inn are up in the air, as is the question of who will pay vendors, contractors and employees - including Friedman.
"We're trying to decide what we can do," said Bours. "We haven't worked out all the moves. Basically we want to get the board situation in front of a judge as quickly as possible. ... Now I think we've gotten a foot in the door and they [the Papes] will have to deal with us, because you can't run an organization like this with two boards. So we're feeling reasonably comfortable compared with where we were two weeks ago."
Despite the bad blood between him and the condo owners, Friedman says he'd like to try to broker a deal between the dissident faction and the Papes. One possibility, he indicated, is to stretch out the payment period for the assessment over more than three years.
"Many of the owners believe the board manipulated the date of the assessment" to speed up payment to INNspired, he said. "So if we want to move to solutions, the way is to talk with INNspired [about] over what period of time will they agree to take this money. So there's a solution in there. It's a matter of how long it takes for tempers to cool down."
"It's unfortunate that all of this has occurred," he added. "The primary thing behind us is difference of opinion related to how to move forward with the payment of an obligation [the condo owners] have. Boards up until recently - and I mean over a 30-year period - have chosen to keep the dues low and not put aside money for these needed repairs.
"There's no disagreement that the buildings need to be fixed. The disagreement comes about because some owners believe that somehow, magically, they ain't gonna have to pay for it."