After the group Friends of TMVOA filed one in San Miguel County District Court on June 28, the Telluride Mountain Village Homeowners Association (TMVOA), Telski, and TMVOA’s Telski board representatives Chad Horning, Jeff Proteau, and Tom Richards are now the target of legal action.
Telski has Richards as its CFO and Horning as a co-owner. Proteau used to serve as the resort’s vice president of planning and operations, but he now oversees special projects. The TMVOA board of directors is also led by Horning. The vice-chairman is Proteau.
The lawsuit asserts that TMVOA violates the Colorado Common Interest Ownership Act (CCIOA), particularly about how voting rights are distributed and how “member,” “unit,” and “site” are defined.
The lawsuit also mentions how Telski, also known as TSG, effectively controls the six-person board with its three members as a result of the non-compliance.
The CCIOA does not recognize the idea of a density bank, so TSG is given additional votes for it.
According to the lawsuit, “the distribution of votes under the current methodology, gives TSG effective control of the Association and threatens the Association’s 501c4 tax exemption, which could result in millions in tax liabilities.
Friends of TMVOA explained their decision to file the lawsuit as a last resort in a letter to the residents of Mountain Village.
The message said, “It is unfortunate that we have reached this crossroads, but we felt we had little choice.”
The lawsuit seeks to “declare that the governing documents of TMVOA are not in compliance with Colorado law, find that TSG representatives breached their fiduciary duties to TMVOA, find that TSG conspired with the TSG representatives on the Board of TMVOA to breach their fiduciary duties, and request that the court vest control of the Board of TMVOA from TSG and in compliance with Colorado law,” according to the Friends of TMVOA message.
One of the members of the Mountain Village group, Peter Duprey, explained that the TMVOA has about $47.5 million in cash and marketable investments and that residential homeowners contributed almost 90% of that through assessments and real estate transfer fees. Keeping the tax-exempt status as a non-taxable entity is the main goal of the lawsuit, he continued.
You might hear from the IRS that you are no longer a tax-exempt entity. Or they might say, “We’ll let you keep operating as a tax-exempt entity as long as you pay a fine of 10% or 25% excise tax on your excess profits over the last seven years.”
This implies that the amount would be in the millions. Furthermore, none of the locals wants that. Instead of the IRS, we would prefer that to go to Mountain Village, Duprey said. ” … In addition to several projects that have money set aside in our 30-year comprehensive plan, we have a gondola that will require funding. And we believe that some of that money ought to fund those initiatives to improve Mountain Village’s livability and aesthetic appeal.
Before Friday afternoon press time, neither Telski nor TMVOA offered a statement.
The IRS first examined TMVOA’s tax-exempt application in 1995 and had some concerns about the composition of the board, which is when the problems detailed in the lawsuit first surfaced.
“The IRS looked at it in 1995. They also had many inquiries. In the end, three submissions were required. The IRS was also concerned about TSG’s majority control of the board. Additionally, they twice rejected their application.
The IRS was finally convinced that they didn’t have the majority after the third attempt.
However, with time, they have returned to their previous position of board control, and as a result, they may be endangering the preservation of that tax exemption, according to Duprey.
After more than a year of work, the TMVOA governance committee recommended to the TMVOA board that the organization be brought into compliance with the CCIOA and 1995 IRS Determination Letter.
According to the Friends of TMVOA, the proposal was rejected in a 3-3 tie, with all the Telski board members voting against it.
The governance committee also suggested forming an audit and compliance committee made up of Mountain Village residents who are deemed to be “financial experts” to oversee the audit, examine tax compliance, review financial disclosures, and assess any related party transactions, but the Telski members also rejected that suggestion.
In his capacity as a member of the Mountain Village Council, Duprey participates in the committee. One of three TMVOA directors serving on the committee is Proteau.
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Duprey said, “I think it’s unfortunate that we’re in this situation where we’re using them, you know, the biggest employer and the owner of the resort, but I think we felt there was no choice.”
“Over a year, this governance committee discovered things that were against Colorado law.
The fiduciary duty, in our opinion, raises a lot of problems. This is a fact; it is not a theory.
How long will you keep breaking the law, is the question? We didn’t want to sue, but there didn’t seem to be any other option.
It will probably take 18 months for the courts to make their decision if that’s what we have to do.
He also said that before going to court, the group is willing to talk to the parties and reach a settlement.
“I believe that settling is always beneficial. Because if it goes to court, everyone will spend a lot of money, and the only people who win are the attorneys,” he said.
The Friends of TMVOA website, friendsoftmvoa.org, hosts the full lawsuit as well as a petition to alter the organization’s governance.
