The owner and the accountant of the long-time Hilton Head Island property management firm Property Administrators Inc. have been indicted on a half-dozen federal charges after accusations that the company embezzled millions from dozens of local clients.
Don Christy, 72, and Lisa Arnold, 48, of Walterboro, were charged with five counts of wire fraud, according to charges filed by the U.S. Attorney's Office last week.
Arnold also faces one count of misprision with a felony for allegedly covering up the accused fraud, according to the filing.
The maximum penalty that Christy and Arnold could receive is 20 years imprisonment, and the case has been assigned to Assistant U.S. Attorney Rhett DeHart of Charleston for prosecution.
Property Administrators Inc. abruptly and without explanation closed its doors in February, stranding more than 20 regimes and property owners' associations on Hilton Head Island without access to their financial records.
Just days later, federal investigators seized computers and records from the company's Shelter Cove office and three former clients announced that more than $1.2 million was missing from their bank accounts managed by the company.
After a more than six-month investigation, federal agents now allege that Christy fraudulently obtained more than $3 million from his clients from 2007 to 2014, according to the charges.
Christy's alleged scheme included transferring money without authorization from clients' bank accounts into the company's operating account and overcharging clients with fictitious "advance management fees," according to the charges.
Arnold, at Christy's direction, then prepared false financial statements to conceal the embezzlement, according to the charges.
The charges detail five wire transfers totaling $48,000 from Sept. 2012 to Jan. 2013 from PAI clients' accounts to the company's operating account, managed at a T.D. Bank in New Jersey.
A hearing had not yet been scheduled as of Monday afternoon, according to court records.
Christy remains at his Palmetto Dunes home at this time, according to Beaufort attorney Charles Macloskie, who is representing Christy in the criminal case.
"I just got a ream of material today from the U.S. Attorney's Office," Macloskie said Monday afternoon. "Mr. Christy has already been interviewed by the appropriate authorities and will continue to cooperate in that investigation."
Attempts Monday to reach Arnold's attorney, Rose Mary Parham of Florence, were unsuccessful.
Some former clients rejoiced at news of the charges Monday afternoon after months of mystery surrounding the federal investigation.
"I was kind of shocked. I thought nothing was going to happen (because) it took so long," said New Jersey attorney Vince Marino, president of Centre Court Villas owners association in Palmetto Dunes. "It shouldn't have taken that long; it was almost a year. But he's going to have a tough road to go now because the feds, when they come down on you, they come heavy."
Marino and Centre Court were the first to come forward with accusations of financial malfeasance in the immediate aftermath of Property Administrators' closure.
The association now knows that $99,000 was taken from its accounts through unauthorized transfers to other PAI-managed associations and checks for bogus maintenance projects, he said. The association has filed a claim for that amount with Traveler's Insurance, but the process has been painfully slow, he added.
Audits of PAI records this summer revealed other associations also fell victim to unauthorized transfers to other PAI-managed organizations, leaders have said. A full accounting of those missing funds has not been released, pending several civil lawsuits, including a pending action filed by more than a dozen former clients against Don Christy and his wife, Ann Christy.
Those transfers are likely to become the subject of a series of individual civil lawsuits between each association as they trace where money was moved and try to recover the missing money, according to attorneys familiar with the association's plans.
"I hope they get the maximum because it's such a dirty deal," Marino said of the scheme. "Of course, who knows how many years they were doing it."
Christy worked on the island for more than 40 years, and PAI was at one time a local powerhouse, managing thousands of condos, townhomes and villas from Sea Pines Resort to Savannah.
"It's unfortunate that someone with his history on the island had to get into this situation," said Ray Pfeiffer, president of the Inverness Village owners association in Palmetto Dunes.
Inverness had money taken from its accounts though Pfeiffer declined to discuss exact figures while the association negotiates its own insurance claim. Because of the disarray of the records kept by PAI, however, he suggested that the total amount of money embezzled from all of the associations is likely higher than detailed in the formal charges.
"It was a busy summer trying to get things together, but all in all, we're on the right track (at Inverness). We're just glad to put it behind us," he said. "This sort of is closure. I'm not the kind of guy who holds a grudge; the guy made a mistake and he's going to pay for it."
Marino agreed and noted that it has been an important lesson learned for owners' associations who hire and trust management companies.
"Down through the years, I haven't seen anything like this pulled, especially with condo associations," said Marino, who served nearly 40 years as a municipal judge in New Jersey. "But now that I look at it, we're a very easy mark. We're all absentee."
"He apparently outsmarted some other people, until he got caught," he continued. "He pulled a lot of shenanigans, and hopefully we can recoup some of it."
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March 28, 2015 The unexpected closure of a longtime property management company has thrown nearly two dozen Hilton Head Island regimes into confusion. Here's a deeper look at this industry on the island, and some warnings signs associations should know. | READ
- Six months later, Property Administrators case still shrouded in mystery, Sept. 10, 2015
- Former Property Administrators clients secure accountant to help search for missing money, May 29, 2015
- Property Administrators closure: Where's the money? March 27, 2015
- Lack of regulation makes condo regimes easy targets for fraud, March 27, 2015
- Judge orders Property Administrators to turn over all money, documents, March 6, 2015
- Property Administrators took $94,000 from Centre Court villas, regime says, Feb. 27, 2015