By Gene Garner, May 1, 2020
There has been a continuing discussion in our Village, asking if HSV is a community or a corporation and I’d like to examine that question. Note: All the following factual statements, either highlighted or in quote marks, are in the public domain and accessible by the general public.
I first noticed an incorporation disconnect when the CEO filed the Petition to Amend and Restate Articles of Incorporation on February 13, 2018, in the Garland County Circuit Court.
This subject came up again in November 2018 when CCI filed their “records” lawsuit (26CV-18-1609) against the POA. The Rose Law Firm attorney noted the following: “The Association contends venue is not proper in Garland County because its physical office is located in Saline County.”
Also, “Moreover, the Association has alleged in a case before this Court that its principal place of business is in Garland County. It is judicially estopped from taking an inconsistent position in this case.” (estopped = prohibited)
Also, “Facts The association’s Articles of Incorporation are filed in Garland County.”
The POA had stated their principal place of business was in Garland County when they amended and restated their Articles of Incorporation in February 2018, but then in November 2018, they stated their principal place of business is in Saline County when CCI asked to see the books and records.
I looked up the Arkansas Nonprofit Corporation Act of 1963 and found ACA 4-28-206 Articles of incorporation generally. In Section (a) it states; “Any association of persons…desirous of becoming incorporated under the Arkansas Nonprofit Corporation Act…shall file with the circuit court of the county in which the main office or principal place of business of the proposed corporation is located signed and verified articles of incorporation…”
So, what can we learn from the above? It appears the HSV Articles of Incorporation don’t comply with AR statutes. For our edification there are numerous AR Supreme Court decisions that address this situation, one of the earliest is Gazette Publishing Co v. Brady that stated:
“In other words, we are of the opinion that the failure to file the articles of incorporation in either the office of the Secretary of State or in the office of the county clerk has the effect of constituting the proposed corporation a de facto corporation.” (de facto “A state of affairs which exists actually but which is illegal or illegitimate.” Black’s Law Dictionary).
The above tells us the HSV Articles are filed in Garland County only and the POA is doing business as a partnership without the protection of a corporate identity.
This sounds a lot worse than it is. The situation can be corrected by a vote of the BOD to amend the Articles of Incorporation in the Saline County Circuit Court. If the BOD decides to take that action any contracts, agreements, or other decisions by the previous BOD (February 2018 until now) become the individual liability of the directors that made those decisions.
The CEO’s contract was signed March 19, 2019 by Tom Weiss and Lesley Nalley.
By Gene Garner, May 1, 2020
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Julie
05/01/2020 — 1:05 pm
Further examples of incompetence and malfeasance. Why am I not surprised??
Al Lipson
05/01/2020 — 1:15 pm
I sure hope you are right regarding any contracts signed after 2/2018.
Frank Shears aka Bubba
05/01/2020 — 1:24 pm
This is the best news I have heard in years. Someone in the POA is going to be very upset and concerned when they hear about this.
Thank you Gene!
Minn. Daly
05/01/2020 — 1:26 pm
Gene, we were always Garland county until COOPER lawsuit, Legacy BOD moved us to Saline county jurisdiction. This was to build per the CMP. Your facts are so correct, there was no logic in this, as POA building had been built in Saline county for a number of years doing business with all things Garland County, NEW BOD should highly consider moving us back into Garland county. We need to go where association was created! I believe that COOPER would agree to that as well. Garland County has the largest population as to this date. Garland County has two roads also located within HSV. Minn Daly
Sam Taylor
05/01/2020 — 1:57 pm
Does this mean that we have a way out of LN’s ridiculous contract too?
Julie
05/02/2020 — 4:41 am
There is always a way out of anything. Just take courage and bold action.
Andy Kramek
05/01/2020 — 2:34 pm
I note that Gene asserts that if the current Board decides to re-file in Saline County, (i.e. something the previous Board neglected to do) then Directors of that previous Board become personally liable for decisions made – which includes the signing of the infamous CEO Contract. Would that also render the contract invalid?
If so, then it appears to be just a contract between Tom Weiss and Lesley Nalley personally and would have no status other than between them. Would that also make Tom Weiss liable for all the money paid out under that contract?
Or am I totally misunderstanding something here?
Joseph Vlasek
05/01/2020 — 2:41 pm
I think you just hit the nail on the head! Tom and can pay Nalley! YEAH!
Gene Garner
05/02/2020 — 8:41 am
Andy, you are not misunderstanding. In a number of AR Supreme Court decisions, “Gazette Publishing Company v. Brady” has been cited as authority when an association doesn’t comply with the requirements of their respective Articles of Incorporation.
In this same decision the Court further stated “In order to exempt any association of persons from personal liability for the debts of a proposed corporation they must comply fully with the act under which the corporation is created. A partial compliance with the act is not sufficient. Unless they comply fully with the act, they are, as to business transacted, a partnership.”
A simple “partnership” (not an LLC) doesn’t provide the protection of a properly created corporation but leaves the individual partners responsible for the association debts, which I believe would include any employment contracts.
But don’t take my word for it. I’m not an attorney, “google” Gazette Publishing v. Brady 162 S.W.2d 494, 204 Ark.396 and read the decision. —Gene
Andy Kramek
05/03/2020 — 10:35 am
Thank you. I agree that the court’s decision makes it pretty clear. But I assume that only the Board can take the necessary action.
Gene Garner
05/03/2020 — 10:41 am
Andy, that’s correct.—Gene
Randy S
05/01/2020 — 3:30 pm
I don’t believe, given a test in any court, that Tom Weiss would be held solely responsible for Lesley’s compensation or severance package. I would dance in the streets of HSV if this could actually happen but there’s just too much of a tone of unreasonableness to Gene’s premise. But hey, it’s with a shot and would make for hilarious conversations and I’ll buy the first round of drinks if it actually happened.
Vicki Husted
05/01/2020 — 4:32 pm
I believe this opens some great possibilities. I have no legal training, but reading the English indicates to me that it is plausible that Tom Weiss might find himself personally liable and the contract might be invalid.
I recall, when attending the hearing that resulted in Cooper’s lawsuit winning access to records for ALL of us on June 19, 2019, that there was discussion prior to Mr. Weiss testifying, regarding whether or not his testimony would render him subject to personal liability. This was PRIOR to ANYONE seeing what Ms. Nalley’s contract contained. I think they all knew then that they were treading thin ice.
I had only arrived in HSV in March, and although I understood fully what the lawsuit would mean to all of us, at the time of the hearing I did not connect Mr. Weiss as being the former BOD Chair, and unfortunately don’t recall the details of what was discussed. But he and the POA attorneys were very concerned about him being required to testify. HOWEVER, the Judge ruled that he should, and he did indeed have to testify to certain things.
I’m not familiar with Arkansas Courts, but I sincerely hope that transcripts of that hearing are available. It seems entirely plausible to me that Ms. Nalley, Mr. Weiss, and the former Board of Directors who were accessories may have out-smarted themselves in their efforts to keep the Village in the dark. Karma is a beautiful thing…and I can only HOPE!
Kilroy
05/01/2020 — 4:34 pm
Slap her down with a technicality. No, Randy I am buying! But I will dance with you.
Tom Blakeman
05/01/2020 — 5:04 pm
Thank you Gene Garner. The Village owes you a debt of gratitude for what you’ve done over the years to try and tame the POA Beast released and fed by incompetent (or secret agenda driven) Boards over many recent years.
I can only hope that now we have a honest, competent, rational and thinking Board majority and a more than competent law firm this will be handled appropriately. If that means liability for someone or ones, we’ll that’s just how the cards should play out.
A non no mouse
05/01/2020 — 5:52 pm
Gene has taken a lot of heat. Unnecessarily.
Wouldn’t be ironic? That would be some Karma.
Robert Busse
05/02/2020 — 12:56 pm
I love reading this and I hope there is actually some validity in Gene’s findings. It is something to look forward to.
But I still maintain, and have for several months, that the BOD just needs to throw her out immediately. Pay her what the contract dictates, and not a penny more. Keeping her around is and will do more harm than good for the Village. And she can get us in even more costly law suits the longer she is around. But the big pay off is that the BOD will not have to buck Nalley on every step to undoing and straighten things out what she was the driving force creating. Additionally, the Board will be able to eliminate a few and cut other high paying executive salaries, which can go a long way in paying off Nalley’s buyout. We must get rid of the cancer as soon as possible!!
Chipmunk
05/02/2020 — 6:04 pm
Amen!
Gene Garner
05/02/2020 — 2:48 pm
Robert Busse, these statutes and court decisions aren’t my opinion but laws written by the AR legislature and findings by the AR Supreme Court. What I’ve found is in the public domain and is there for everyone to read.
That being said you’re aware, of course, that the two dissenting directors, Campagna and Luering, prevents the BOD from firing Nalley– unless you can get one to switch sides. Her contract reads;
4. EMPLOYMENT TERMINATION & SEVERANCE
The Board may, in its discretion, terminate this Agreement and the CEO’s duties hereunder. Such action shall require a minimum of six of the seven members of the Board voting in favor of termination of the Agreement. Abstentions from such termination vote shall be counted as a vote against terminating the Agreement.
So it looks like we’re stuck with her until March 31, 2023 unless the present Board takes some bold action. This contract was signed by Tom Weiss, the BOD chair at the time.—Gene
Moe
05/02/2020 — 7:30 pm
Nothing in her contract says she can’t be assigned new duties.
Crack sealing team.
Now.
Robert Busse
05/02/2020 — 8:03 pm
Gene,
I have no doubt that what you have cited is factual and from AR law. My point is, is what you have found enough to get her terminated? Do you honestly think that, if the BOD corrects and signs new Articles, Leslie is going to wave the white flag and say, “you’ve finally got me? I’ll pack up and leave ASAP”. I think not. Additionally, we would have another lawsuit on our hands costing lots of money and time, with her remaining as CEO, until the suit is settled, a year or two later. Again, I was just saying that I think getting rid of our CEO is a bit more complicated and will take quite a bit time. I hope your findings would hold up in court, but as we all know strange things happen legally in court.
Why can not we just buy her out, as I have said. I think a simple majority could authorize that. I think a complete buyout is different from terminating her. I am no legal expert, but I think there are contracts being bought out quite frequently every day.
George
05/02/2020 — 9:04 pm
The principal place of business when incorporated in 1970 was Garland county. I sure Cooper’s lawyers got this right. The problem arises when you move your office to another county. The POA moved to Saline county after incorporation.
Where do you file subsequent actions? It was not the POA but the lawyers who got this wrong. We have new lawyers now.
Nalley contract runs ends 3/31/2021. It is automatically renewed unless the board votes to not renew the contract. This would be a simple majority vote. She is not being terminated the contract is not being automatically renewed.
We need to spend our time making the village better. Yesterday is gone. We have a new Board which needs our support and help, Let us spend our energy going forward.
Gene Garner
05/03/2020 — 10:00 am
George, the POA Administrative Office moved from the Velda Rose Motel in Hot Springs AR 71901 to the Fire/Security Building on Callela Road in HSV in 1973, according to “History of Hot Springs Village, Arkansas 1970-2000” page 15. I believe this was still in Garland County. Then in 1979 the Office was moved to 895 De Soto Blvd HSV 71909 which is in Saline County.
It’s the BOD responsibility to notify the AR Secretary of State by amending the Articles of Incorporation when there’s a change in the county of the main office of the corporation. This was an oversight by the Board of Directors and I’m sure not done on purpose.
But the Amendment and Restatement of the Articles in February 2018 was purposeful and the BOD & CEO knew, or should have known that the AR Nonprofit Act of 1963 requires the Articles to be filed in the county where the “principal place of business” is located.
Nalley’s contract runs through March 31, 2023 and she has to be paid for every day if terminated, but we don’t have the 6 votes needed to terminate her. Also there is a clause in her contract that prevents her job description from being changed so she can’t be assigned “new duties”—Gene
Gene Garner
05/03/2020 — 9:09 am
Bob, at the Regular Meeting Of The HSV POA BOD of March 18, 2020 under “New Business”;
“The Board and CEO Nalley have reviewed the terms of her current employment contract and. together, we have chosen to affirm them as they currently stand with no revisions. The contract will auto renew with the same terms on April 1, 2021 unless terminated.”
From her employment contract;
“The term of this agreement is for two years from March 30, 2019 through March 31, 2021, and can be renewed at any point during the initial and subsequent terms for successive two (2) terms through a review first with the Board Chair and then with all Board members in executive session, with agreement of the CEO, and will be paid in full unless paragraph 4(b) or 4(d) apply.”
So on March 18, 2020 the BOD renewed her contract, that was to end on March 31, 2021, for two more years. That means as of now, her contract has about 2 years and 11 months left on it at a yearly salary of $210,105. We don’t know if she got the 30% bonus that’s allowed in her contract but let’s say she did. That means her annual salary is now approximately $273,000. That means we would owe her about $800,000. There is also a provision to pay her an extra 4 months pay and health and life insurance. Is it worth almost $900,000 to remove her, especially in the terrible financial shape we’re in?
If the POA refiled the Articles in Saline county and declared her contract the responsibility of the previous BOD she would probably file a lawsuit against the POA –but would have to pay for it herself since she is no longer an employee. Since Rose Law is already on board as legal counsel it would probably cost less than 10% of that $800,000 to go to court and I believe win because of the previous decisions from the AR Supreme Court.—Gene
jim hall
05/04/2020 — 10:41 am
I just hope some board member has read this and they have checked it out with their new law firm!!!!!