Thursday, October 13, 2016

Tahoe Beach and Ski Club Owners Solidify Control of Board Opposed to Diamond's Potential Takeover of Resort

SOUTH LAKE TAHOE, CA --- Legacy week owners at Tahoe Beach and Ski Club strengthened their grip on the HOA board in September by electing two longtime owners to succeed directors who had perceived ties to Diamond Resorts, the giant timeshare chain that owns 22 percent of the resort’s intervals.

The showdown vote on Sept. 24 drew more than 300 owners, a turn-away crowd for an annual
The crowd gathered for the annual meeting

membership meeting, with many owners expecting an election-day charge from Diamond representatives to place one or two of their own preferred write-in candidates on the ballot.  Instead, Diamond stayed on the sidelines, casting its 1,700-plus voting bloc for legacy owners Bill Costa and Kathleen Montgomery, both of whom promised to keep the resort independent and responsive to the vacation needs of longtime deeded-week owners.  Their election creates a 5-0 Board majority opposed to Diamond's bid to gain a voting majority (by gobbling up as many TBSC timeshares as possible).

Last year, when Diamond ran one of its own corporate representatives for the board, senior vice president Frank Goeckel, the resort erected a big white tent to house the proceedings and overflow crowd of 200 owners.  This year, they brought in an even bigger tent based upon RSVPs that indicated 350 owners would attend.

Goeckel showed up, as expected, but sat just outside the tent, giving himself a few feet of space from the overwhelmingly anti-Diamond owners in attendance (as well as an easy exit path, if needed). 

The proceedings were anxious but generally dignified compared to the rancorous name-calling meeting in 2015. Board President Al Fong and Treasurer Jake Bercu gave impassioned speeches about the need to vote and maintain the independence of the resort (from any corporate buyer). They also bashed Diamond, repeatedly, for past attempts to gain control of the HOA by buying up TBSC intervals. Fong called Diamond a “Trojan Horse” waiting to take over the TBSC beach. Fong and Bercu described Goeckel as a “bully” who tries to intimidate the TBSC board and owners.  

“He (Goeckel) is trying to lull you owners to sleep,” Fong told the faithful owners in the tent.  “Diamond is the Trojan Horse because they have 1,700 votes to use against you.”

Goeckel made no move to participate in any of it, until, after the vote affirming Costa’s and Montgomery’s election to three-year terms, Board President Fong handed him a microphone to answer a simple question: what are Diamond’s intentions for Tahoe Beach and Ski Club?

Goeckel delivered a 10-minute tutorial about Diamond’s point-based trust system of vacation ownership, then, in response to impatient groans from the audience, conceded that Diamond intends to keep collecting TBSC inventory.  In so many words, he said, it’s good business, because Diamond needs to add real inventory to its timeshare trusts in order to sell more points in Diamond’s travel club.

“Our interest here is no different than it’s always been,” Goeckel said.  “If we don’t contribute more weeks to the trust, we will eventually sell ourselves out at some time.”

While sitting out this year’s election contest, Goeckel made no promises about his participation next year.  Regardless, he’s expected to remain a fixture at the resort because he is Diamond’s designated watchdog to keep an eye on the TBSC Board and other Diamond-related timeshares in the area.

Makes sense.  Diamond’s ownership stake at TBSC represents $1 million in annual maintenance fees, monies that are contributing to the resort’s current positive financial health.

Putting the TBSC vote into Perspective

Three years ago, Diamond owned 10 percent of TBSC’s timeshares.  Then it bought another 10 percent from Vacation Internationale, a travel-resort company.  It also acquired intervals at local foreclosure tax auctions, gradually upping its stake to 22 percent. Those purchases were a red-flag to the TBSC board, which had been warned by financial advisers to avoid an “over-concentration of risk” in having one owner responsible for so much of the HOA’s maintenance fees.  That risk now resides with Diamond.

Board President, Al Fong
Rank-and-file TBSC owners, according to what Fong said at the annual meeting, have opposed Diamond’s bid to gain majority voting control of the HOA board for very personal reasons: they don’t want to lose their reservation rights at their home resort and, more importantly, they don’t want to be dictated to, or managed, by Diamond.  Thirdly, they don’t want to be pressured by Diamond to relinquish their weeks or buy into Diamond’s very aggressive sales machine.

FYI, Diamond owns a very nice, and much larger, resort right next door. Diamond’s Lake Tahoe Vacation Resort is one of the best in its network, but it has no private beachfront.  The Tahoe Beach and Ski Club, in contrast, has a spectacular, private 400-foot Lake Tahoe beachfront that is the envy of many Tahoe resorts.  TBSC also has many longtime deeded-week owners who have bought multiple weeks to maintain their ability to enjoy the resort during the primetime summer weeks.  They fear those privileges will all go away if Diamond somehow gains control of their board.

Diamond’s Lawsuit Against Board goes to Mediation Oct. 20th

Another relevant detail: Diamond is currently suing three members of the TBSC board for refusing to recognize Diamond’s purchase of 245.5 Association-owned timeshare intervals in December 2014.  Diamond is NOT suing the other two members of the then-board because they supported Diamond’s purchase.  Those two board members, FYI, Shannon Krutz and Steve Williams, were replaced by Costa and Montgomery at the Sept. 24 election.

The TBSC board rejected Diamond’s bloc purchase because it was not authorized, in advance, by the board.  The board majority learned later, after the fact, that the purchase purportedly had been validated by Krutz, who had an affiliation with the club’s former management company, VRI, that brokered the sale.

VRI’s contract renewal with TBSC was terminated prior to the disputed transaction.  Krutz has not appeared onsite at TBSC for months (in all likelihood, because she is a key part of the Diamond vs. TBSC litigation).  A judge presiding over that lawsuit has already opined that the transaction will not be upheld, and that Diamond would lose at trial.

The case goes to mediation on Oct. 20.  Mediation works if both parties agree to abide by the outcome.  It’s a precursor to a trial on the merits.

So it continues to be a tangled web at TBSC, which represents, in the bigger picture, a legacy resort’s attempt to stave off a threatened takeover by a giant timeshare company.  Diamond has never said, publicly, that it intends to acquire a controlling interest in TBSC.  But it is an acquisitive company that continues to add inventory to its network.  In the past year, for example, Diamond bought Gold Key Resorts (with six resorts) and Intrawest Resort Club (nine resorts).  That’s the business model.

One Final Threat Before the Vote

Two hours before the Sept. 24 board election, Goeckel informed the HOA board that Diamond would
Mary Ann Gutierrez, owner activist
dispute the election results if the Board did not retract votes attributed to association-owned inventory (not including the 245.5 that relate to Diamond’s 2015 lawsuit).  The board declined to retract the votes.

Final tally: Costa and Montgomery, the board's preferred candidates, won unanimous seats on the board with more than 3,900 votes apiece. If you deduct Diamond’s 1,700-plus voting bloc from the total, the approximate tally was: 

  • Costa 2200
  • Montgomery 2200
  • Diamond 1700

Next year, board member Sedric Ketchum is up for re-election.  When he won his first term, his margin of victory was 23 votes, with Diamond throwing all of its voting power against him.  Stay tuned.

After the vote, RedWeek asked Goeckel if he had any comments about the proceedings.

“I have absolutely nothing to say to you.  You are not authorized….”

Not sure what the “authorized” comment meant, but if we find out, we’ll inform you.

Goeckel and Diamond’s public relations department did not respond to email requests for additional comment after the election.  That is their standard operating procedure.


This post was written by Jeff Weir, RedWeek’s chief correspondent.  He is also a Diamond timeshare owner.

1 comment:

  1. Legacy Resorts Threatened by Takeover Entities.

    This is a major issue that all owners of units at legacy resorts, (resort's built in the 70's & 80's), that are still basically owner-controlled, (by virtue of their HOA Boards being elected at annual meetings by vote of it's unit-owners), should presently be deeply concerned with.

    This is the current method by which these resorts can be taken over by various industry entities, such as major timeshare developers, vacation
    clubs, etc.

    Once this occurs, control of maintenance fees, inside staffing, purchasing of supplies, vendor contracts, operating procedures, salaries granted to personnel, policy decisions regarding access to rentals and exchange companies made available to owners of units, resort financial audits, procurement of required resort insurance, and a host of other current amenities and benefits, are subject to dramatic alterations that may directly favor the takeover entity, primarily, and negatively affect the majority of its owners, who unfortunately, do not cast their election ballots.

    Takeovers occur when these "outside entities" are allowed by the resort's
    elected governing bodies, (and in some cases, with the active encouragement and support of
    the resort
    management company, to purchase large blocks of available weeks obtained by the resort, (usually by virtue of the many deed-backs from delinquent owners who have decided to divest themselves of their timeshare properties).

    As a result of the above, these industry entities automatically gain the powerful voting power that comes with ownership of these large blocks of a resort's total unit property.

    This is now frequently leading to the "takeover entity" gaining control of the outcome of annual elections, and determining who will be elected to serve as the members of the resort's Home Owners Assn., (HOA), Board of Directors, the body legally responsible for the resort's entire overall operations.
    It is no secret that these takeover entities are now nominating and electing Board members who have direct personal associations and special interests that favor the takeover entity, and not of the majority of the owners.

    Legacy resort unit- owners must now recognize the huge importance of their voting power in order to fully protect their individual ownership interests, both now, and in the near future.

    Frank Debar, Chairman
    Florida Timeshare Owners Group