Archive for the Removal Election Category

“HOA abuse” March 9th Review-Journal Editorial

(Updated)

The March 9th Las Vegas Review-Journal Editorial is about “HOA Abuse”. Here is a file with the article and some reader comments:   HOA abuse & comments

This editorial seems to strike a serious blow against the credibility of the SCA “Unity Party” advocates who seem to believe that the SCA Board does no wrong.  It helps to educate SCA voters why they should mistrust unity’s self-serving political machine con that appears to favor the business interests of the developers, attorneys, property manager and auditor over our shareholders–homeowners. 

SCA members who have taken so much personal abuse, vicious condemnations, and unfair public ridicule by SCA boards, Finance Committees, Election Committees and unity party leaders for the past few years can now be seen as the honest, ethical, selfless patriots they are.

Imagine that out of the “hundreds” of persons of interest to the FBI,  SCA may already have some names on the list.  Remember how the current board president and treasurer participated in the 2008 Finance Committee attack against a sitting board member for daring to question the finance committee’s “200 years of expertise”?  Since hundreds of years of “financial expertise” within Fannie Mae, Freddie Mac, Enron, and Madorf scams did not protect those stock holders, it is clear that claiming such training and work expertise is no guarantee of ethics or integrity in this HOA.

While the SCA issues may not seem identical to the ones making the R-J headlines, under the surface there seems to be direct links.   It is no wonder that certain (current and past) board members are so incessantly nasty to SCA members who tell the whole truth, and nothing but the truth! 

Certain board members are likely to have much to keep them awake at night when the FBI looks into the Sun City Anthem case. 

See this link to the R-J web site:
http://www.lvrj.com/opinion/hoa-abuse-117635883.html

Here are the words of the article:

HOA abuse

“One corruption scandal always seems to segue into another in Southern Nevada, where abuses of trust and public office are as common as foreclosed homes.The latest embarrassment to the community: the federal government’s 2½-year fraud investigation into valley homeowner associations. The Review-Journal’s Jeff German reported Sunday that the Justice Department has identified 75 to 100 co-conspirators including lawyers, judges and former police officers, and that plea deals are being finalized this week for some of them to shore up the prosecution of two-dozen high-level targets.

The inquiry surrounds a scheme to place conspirators on the boards of local homeowner associations through rigged elections, then have those conspirators vote to initiate construction defect lawsuits against builders. The legal work and resulting repairs then would be farmed out to lawyers and companies in on the plot.

The conspiracy was wide-ranging enough before Washington-based prosecutors took over the case from Nevada’s U.S. attorney’s office in response to suspected leaks to suspects. Local prosecutors and other officials are now the subject of a separate Justice Department criminal investigation, sources told Mr. German.

It’s not surprising that such a cabal was concocted around construction defect claims, a legal specialty that’s long been ripe for abuse. Using a handful of legitimate cases as a selling point, aggressive attorneys persuade homeowners with routine, easily fixable repairs that their problems result from developer greed and corner-cutting. Such litigation tied up entire District Court departments for years during the valley’s construction boom.

The entire Justice Department case strikes at the heart of the judicial system’s inability to police frivolous litigation and the lawyers who shake down businesses for quick riches. Every claim has merit; every attorney is righting a wrong. No cases are dismissed. It’s incredibly expensive insanity.

And it’s a prime example of why tort reform advocates seek a loser-pays civil litigation process, so attorneys with flimsy arguments will think long and hard before dedicating their resources to a bogus action, and businesses won’t be compelled to get out their checkbooks to settle every claim.

We’ve all paid handsomely for this alleged abuse and others like it through increased burdens on investigators, prosecutors, courts and businesses. At some point it has to stop.”

 ———————-

IRS Report Released–Board/Auditor Have No More Excuses!

Finally, the income tax issue is plain.  Copies of the IRS report have been released by RMI.  It is clear that our auditor/tax preparer and certain board members have been dead wrong about what they can do with end-of-year membership surpluses.

The fact is that “income” is taxable.   But, for about 40 years, homeowner associations and condos have been avoiding paying  income taxes on SURPLUS membership income if the HOA immediately RETURNS or CREDITS the surpluses back to the members.

The IRS Report states it has assessed Sun City Anthem $1.345 Million in back taxes and penalties because:

“Based upon conversation with Jack Troia, President of Sun City Anthem Community Association, on September 9, 2010, during the field audit, the 2007 reserve surplus was never refunded or applied to the subsequent year.”

Also stated in the IRS Report was this statement: 

“The Taxpayer did not refund or credit the homeowners the surplus funds for tax years 2001-2007.”

The truth is clear.   The board can not spend such surpluses, save them, or do anything else with surplus membership assessments without having to pay income taxes on the full amount of the surplus.  This IRS position has been tested in court before, and it is clear that Sun City Anthem and Nevada HOAs are not exempt.

We believe no one can read the IRS Report and honestly come away thinking there is any “wiggle room” in the findings.  There is no evidence we can find showing that a single HOA has defeated the IRS on how it applies 70-604. The chance of beating this rap appears to be zero. 

And, that is a good thing for homeowners.  The rule prevents boards from consciously overcharging on dues and hiding the surpluses in “slush fund” accounts to spent as they wish.

Our members will be to blame if we allow the SCA board and its apparently discredited tax preparer/auditor and attorneys to waste more of our hard-earn money on a doomed quest to just try to save a bit of their highly inflated egos.  Following that path would be a clear violation of the director’s fiduciary duties, and might become a matter of personal liability in the future.

Meanwhile, there is reason to believe that a good negotiator (someone not involved in the past errors) could save our members a great deal of money.   In return for not having to pay most or all of the taxes on the surpluses, it could be proposed that IRS allow SCA to admit its mistakes, return all of the accumulated surpluses to members, correct all subsequent tax returns, and pay a modest penalty of something less than $100,000.

Even if the IRS unreasonably demanded all of the income tax be paid, it is obvious that immediate, full compliance with 70-604 is the least cost solution for SCA.   Our members should immediately demand to receive nothing less.

However, time is of the essence.  The approach of saying we are sorry for the mistakes and we promise to always be compliant, will quickly go up in smoke if the board follows its battle plan.

Nothing could be worse than hiring so-called experts to be the warriors that waste hundreds of thousands more of our dollars–with no chance of winning a reduction in taxes or penalties. 

By the way, if you run into a current or past board member, finance committee member or board candidate who supports the board’s announced plan to fight with the IRS, insist they explain to you exactly how they can be confident it will not fail.  Ask for examples of where the past and current directors, auditor and attorneys or anyone else has ever beat IRS on its interpretation of Ruling 70-604.

See this link for more details on our library website:
http://www.anthemvoice.org/taxes_issue.html

 

Full List of Board Candidates Reported by SCA

As reported by email today, the following candidates (alphabetical order) have filed for the 2011 election:

Michael L. Carey
Robert E. Frank
James J. Long
Bella L. Meese
Wade E. Terry
Michael Dalton Waterhouse
Carl Weinstein

Will $2 Million Dues Increase In 2011 Violate Law?

Reference our recent article about “You CAN Participate During Board Meeting Discussions“.  The following information could be a good item to discuss during upcoming board meeting discussions about the budget.

The Board’s own data as previously reported during a board meeting shows that the SCA board has consistently overcharged annual assessments/dues by 1 to 2 million dollars every year.   That is a fact.  See this link for our previous postings on this issue.
Dues Holiday is Bogus

If $720 per unit ($5,143,580) was enough to fully fund the needs for this association during the past 2 years, why will it take $2,000,000+ more to run it in 2011, and the future? That question must be clearly and concisely answered to member satisfaction.

In addition, according to:

  1. NRS 116.31073.3(c)Notwithstanding any other provision of law, the executive board is prohibited from imposing an assessment without obtaining prior approval of the units’ owners unless the total amount of the assessment is less than 5 percent of the annual budget of the association.
  2. NRS 116.3115.8:  “If liabilities for common expenses are reallocated, assessments for common expenses and any installment thereof not yet due must be recalculated in accordance with the reallocated liabilities.”  This appears to state that when a board determines that assessments are overstated, and a”dues holiday” is declared as was done in the past 3 years, the following year’s assessment rate must be recalculated and reduced accordingly.  Not doing so would seem to violate this Statute.

Obviously, a 39% increase must be fully justified and approved by the membership via ballot.  In addition, this whole murky situation calls to question:

  1. Was last year’s action to raise dues from $720 to $960 legal?
  2. When will the board’s reported $3,000,000+ of accumulated ’surplus assessments’ be refunded as required by law?
  3. When will the other millions retained for the unjustified (per IRS ruling) slush funds called ‘working capital’ be refunded to members as required by law?

This seems to be the case where an extra million here, and another extra million there, and the board  and finance committee members wind up with some serious money owed to the members and some potential liabilities for the actions taken! 

Our community should demand the refunds be made now, and not not allow the board to waste the hundreds of dollars owed per household on unnecessary income tax payments, fines, and penalties.

“Dues Holiday” Is Bogus! Tell Board You Know The Truth!

For 3 straight years, the SCA Boards have declared “dues holidays” during the 4th quarters. However,that term is traditionally used with regard to “union dues”.   But, there is no such thing as a “dues holiday” in a homeowner association.

The Directors and Community Mangers have known it was a bogus term, but they use it to deceive our members into thinking it is some sort of “gift” from the board.  Hogwash!

Nevada Statutes and IRS rules call such reductions in annual assessments for homeowner associations “returns” of surplus assessments.  The returns are to be accomplished by credits to the unit owner accounts in the current year, or in the first quarter of the next year. The reason why such “returns” must be made to members is because the alternative is to pay income taxes on those surpluses.

“Returns” are required when the board significantly over-charges the annual assessments.  It is standard budgeting practice to routinely charge slightly more annual assessments than expected.  Members usually dislike being told towards the end of a year that an additional, special assessment was needed.

Standard practice in a non-profit homeowner association is to promptly return the end-of-year surplus–all of it–not just a small percentage.

The current plan for only returning $240 is not even close to what the board owes our members!  Again, such returns are NOT ‘dues holidays”

Your question should be, when do we get the rest of the hundreds of dollars owed to members?

For the record, below is a table of data extracted from the Board’s annual financial reports where they openly admit they have been grossly over-charging annual assessments, and routinely failing to return the surpluses at the end of each year.

Such failures to return all surpluses are likely key reasons why the IRS is currently conducting its corporate audit of the Board.  If HOA Boards fail to return the assessment surpluses, they MUST report them as corporate income, and pay taxes at the 30% rate.  Otherwise, it could be considered a violation of Federal Income Tax Laws.

In case you are not aware of it, the data below is what the SCA board have reported concerning annual assessment rates, accumulated surplus assessments, refunds, and resulting “effective assessment amounts”.  It is obvious the board has been systematically over-charging on assessments for many years.

From the available data, the annual assessment rate should be cut to around $800–instead of being increased to $1,200 per unit by 2014!

Year      Standard     Accumulated     Refund     Effective
_____Assessment       Surplus                             Assessment
2005       $    940         $     909,000               -0-           $    940
2006       $    940         $  2,348,000               -0-           $    940
2007       $    940         $  3,179,000                -0-           $    940
2008       $ 1,100         $  3,845,000             $100          $ 1,000
2009       $    960         $  4,755,000              $240          $     720
2010       $    960         $   3,371,500              $240          $     720
2011        $ 1,050
2012        $ 1,100
2013        $ 1,120
2014        $ 1,120

WOW!  What a difference honest assessment rate settings could make for many senior SCA homeowners during the next decade!   And, what about those millions of dollars of accumulated surplus assessments owed to the members?  When will they be coming?

You may be wondering why the assessments have been routinely over-charged for so many years?  The board’s lame excuse is that because it is “about average” for the Las Vegas area.   But, that is a bogus reason!  That is a for-profit corporate concept that does not apply to this HOA.

The laws allow the board to collect from members what is actually needed to operate and maintain the community properties.  The laws do not allow HOA boards to get away with grossly over-charging and “profiting” by keeping the surplus assessments for the board to spend.

Due to the unique designs and features of SCA’s community properties, the Board has actual experience that they only need to charge about $800 per year.  So, why don’t they cut the rate instead of plan to increase it?

When you dig into the details, you won’t like the rationale!   In addition, the board is required by State and Federal laws to “return” the millions of accumulated surplus assessments or pay income taxes at the 30% rate.  In spite of having so many CPAs on the board and finance committee, I think you might see why so many members have not been impressed with their performances since 2005.

In addition, imagine how much easier it would be for those who need to sell their SCA units if the board did its duty and cut assessments and maintained them at the proper level of around $800 per year!

SCA could then be viewed as BOTH the best designed senior community, AND the lowest cost/best value age-restricted community in Nevada!  That would come much closer to the “paradise” that certain board members love to claim!

So, tell the Directors you know the truth!   Don’t let them get away with such a flagrant budget deception again.  Demand they return all of the “surplus assessments” as required by law and cut 2011 assessments to $800!

Correcting Distortions on the Berman Blog

Unfortunately, the suspended attorney operating the Berman blog has posted more hateful distortions that need to be corrected.  Otherwise, he and his buddies will claim he is right because we did not refute his distortions and false statements.

For example, he said during a typically vicious, personal attack on Rana Goodman:

“She also states that she admires Frank and Stebbins for standing up to file their criminal complaints against Roz Berman and Roger Cooper. And although she correctly notes that they have yet to be found guilty of anything, and the presumption of innocence until proven guilty must be given, she said NOT A SINGLE WORD when the police exonerated both Berman and Cooper. So apparently Berman and Cooper are still guilty, even though the police investigation ended and the current case is not about Berman and Cooper.” …

“It’s laughable that some on the Goodman/Arendt blog have expressed umbrage that I referenced Kay Frank’s own unethical past action regarding our website members list around the same time that Kay’s fahter passed away …as if I received a phone call with that news before I posted my comments? Yet neither the Franks or Ms. Goodman ever expressed any empathy for the hundreds of hours of grief Frank and Stebbins put Roz through while their phony complaints were being investigated.”

The following is the truth, and nothing but the truth:

  1. It is true that Roz Berman and Roger Cooper, as well as Stebbins and Frank, are all innocent unless  proven guilty in a court of law.  But, if or when Stebbins and Frank are found NOT guilty, a more rigorous investigation of the original report at a higher level may need to finally settle the matter.
  2. HPD’s investigation officer (self-acknowledged as insufficiently trained and inexperienced in white collar crime and accounting matters)  reported he was unable to confirm the suspicions reported on by Stebbins and Frank.  So, without using any independent, professional consultant, he chose to believe the board’s story, and concluded the allegations were “unfounded”.  And, by charging Stebbins and Frank with filing a false police report, HPD and the Board blocked them from going to the District Attorney to seek a second opinion on the suspected violations.Here is an independent legal opinion by local attorney, Robert Sullivan, about HPD’s arrest for filing a false police report:
    http://blog.anthemvoice.org/2010/02/22/independent-legal-analysis-of-arrest/
  3. Meanwhile, we know the IRS would not be auditing the corporation’s tax returns if there were not some serious questions involving large sums of money concerning compliance with tax laws.   If you have not seen them, Ron Johnson’s articles on this topic provide useful information and insight:
    http://www.scaview.org/The%20IRSTaxAuditII.html
    http://www.scaview.org/The%20IRSTaxAudit.html
  4. While it is impossible to discuss the details of the formal case while it is being tried, Ron Johnson’s personal investigation and reports can be useful.  He provides some facts and draws some conclusions on how the Henderson PD conducted its investigation, and how it appeared to arrive at its decision.  See these links:
    http://www.scaview.org/UnderArrest.html
    http://www.scaview.org/TextHPDLtrBODt.html
    http://www.scaview.org/FalseReport.html
  5. There is nothing “laughable” about Mr. Berman’s personal, hateful vendetta of libelous allegations against Kay Frank for over 2 years.  He unilaterally claimed and commented on perhaps a dozen occasions that he believes something unethical or illegal was done by Kay.  But, no violations of association rules or NRS 116 statutes has ever been claimed by him or the board.   So, exactly what has been his agenda for 2 years of such bogus, relentless attacks?  Does anyone really believe he is singularly qualified to establish SCA rules and public condemnations for “ethical conduct”?

Just Another Cheap Shot?

While Kay Frank is away, tending to the burial arrangements of her recently passed, 92-year-old, WWII Veteran (B-17 crew member) father, the “little guy” exploits this time of Kay’s intense emotional stress to take yet another cheap shot.   He wrote:

“Nevada Revised Statute 116, which includes reference to removal-election petitions and removal elections, contains no limitations on the methods that may be employed to collect petition signatures, so it would appear that the signature gatherers are operating within their rights, assuming they are residents, in using the online address book for this purpose.

It is definitely not analogous to the situation of a couple of years ago when resident Kay Frank improperly advised a Board candidate on how his non-resident consultant could gain access to the website by pretending to be the candidate’s wife.

That has always been a willfully false/distorted claim of concern to no one but the little guy.  Kay Frank was never accused by the board of any violations, or subjected to a kangaroo court.  History proves that if the board could have charged her with some violations, they would have.  “Innocent until proven guilty” means nothing to the disgraced, former attorney.

So, why does the little guy continue to repeat such evil claims–particularly during a period of great emotional stress?  Is  knowingly repeating a clearly false claim for the purpose of damaging a person’s ethical reputation a classic case of defamation–or just another cheap shot?

McCullough Found…”Not Guilty”?

You may know by now that the Board’s law firm (Leach, Johnson, Song & Gruchow) notified Norman McCullough’s attorney that the Board had found him “guilty” of one of the two charges, and that his punishment was (1) to be barred from using our common facilities for 6 months, and (2) required to pay $564 of the association’s legal expenses.

With Norm McCullough’s permission, see a plain text version of the notification letter at the end of this posting.

But, how can one be found “guilty” of a bogus charge that does not violate any statute or SCA governing rules? Even worse, how can the board legally assign MAJOR penalities by barring a member for 6 months from “common” facilities without following the lawful procedures required before assessing such a punishment?

Answer:  The board cannot legally enforce its action because Norman McCullough has not been legally found guilty of anything.  And, we welcome current and former attorneys to correct us if, we are mistaken in coming to that conclusion!

In the meantime, with the compelling evidence available, the McCulloughs have the right to continue using all “community facilities”–including accessing their own home!

Why do we say that?  The Board’s/law firm’s action and punishment are so outrageously wrong that they do not even recognize the difference between the “common areas associated with the 3 SCA “Centers” and the “common areas” surrounding the McCullough villa home!

Article III, Section 3.6 has only to do with activities by “persons using the Common Area or to the Occupants and invitees of other Lots“.  These are the “common areas” between, among and surrounding the 164 villa owner properties.   The cited Section III of the CC&Rs has NOTHING to do with the Anthem Center facilities!

If Norman had truly, intentionally “assaulted” someone in the villa areas, he might have been eligible for a complaint under Section III by another homeowner, but certainly not by an RMI contractor. If a RMI contractor is assaulted in the areas between the villas, they must file with local law enforcement.  Contractors are not bound or have redress under the SCA CC&Rs.

So, if you were the McCulloughs, would you comply with a bogus/half-baked direction that prohibits you from using the grassy areas surrounding your home?  What about the common area that includes the driveway?  Not exception was included to allow access to his garage!

What kind of incompetent attorneys and other directors are sitting on the SCA board and handling our legal affairs?  They all can not claim to be suffering from senility.  This is perfect evidence of gross negligence and incompetence by them all–including the licensed Community Manager that went along with the statute violations, and Vice President Berman.  She is intimately familiar with the statute details for punishing member misconduct since she and her husband have been previously accused (but not punished) of similar or worse conduct.

Bottom Line:  Norman McCullough has NOT been”legally” found guilty of any statute or community governing rules.  In the meantime, he can not be denied access to his own home or other any other SCA community property.

The next step is for Norman McCullough and his friends to demand that the Nevada Real Estate Division direct the SCA Board (and its self-acknowledged, incompetent law firm) to

(1) immediately reverse its actions, and

(2) immediately reimburse Norman McCullough’s legal expenses.

————————————-

Plain text of notification letter follows:

———start of letter————

LEACH JOHNSON SONG & GRUCHOW
Nicole Guralny, Esq. nguralnygleachjohnson.corn
September 1, 2010
Via Email & U.S. Mail
Ryan Hamilton, Esq.
2505 Anthem Village Drive
Suite E-137
Henderson, NV 89052
RyanAndrewHamilton@gmail.com
NOTICE OF RESULT OF HEARING
Re: Norman McCullough —2620 Peoria Avenue
Sun City Anthem Community Association
Dear Mr. Hamilton;

As you are aware this firm serves as legal counsel for the Sun City Anthem Community
Association (the “Association). The purpose of this letter is to provide you with the results the August 26, 2010 hearing before the Board of Directors (”Board”).

First, the Board would like to thank your client Norman McCullough for being present the hearing along with counsel. The audio-tape, along with Mr. McCullough’s testimony, your argument and the affidavits of Caren Carrero, Skyler Jewell, and Dan Forgeron were taken account in the Board’s final determination as to the alleged violations for which Mr. McCullough was called into hearing. The Board appreciates you and your client’s participation in this matter. It must also be noted that at the time of the Board’s deliberations regarding subject violations, Board members, Roz Berman and Dan Forgeron, recused themselves and not participate in the decision of this matter.

Pursuant to the Clark County Nevada Assessor’s Office, The Goldman Family Trust the owner of the property located at 2620 Peoria Ave., Henderson, Nevada, APN# 191-12-610-121 (the “Subject Property”), and Mary Belle McCullough is its trustee. The Subject Property is located within the Sun City Anthem development (the “Community”) and therefore is subject to the use restrictions as set forth in the Third Amended and Restated Declaration of Covenants, Conditions and Restrictions and Reservation for Sun City Anthem (the “Declaration”) and Association Rules and Regulations (”Rules and Regulations”).

The Board determined that there was no violation of Article IV, Sections 3, 5, 6, and the Rules and Regulations, as these sections of the Rules and Regulations were removed in updated 2009 version of the Rules and Regulations.

Ryan Hamilton, Esq.
September 1, 2010
Page 2

Article III, Section 3.6 of the Declaration states, in pertinent part, that: No obnoxious, illegal, or offensive activity shall be carried on upon any portion of the Properties, which in the Board’s reasonable determination tends to cause embarrassment, discomfort, annoyance, or nuisance to persons using the Common Area or to the Occupants and invitees of other Lots.

The Board determined that on May 27, 2010, Mr. McCullough inappropriately jabbed the Association’s then Community Manager, Caren Carrero, in the shoulder and that such conduct amounted to an offensive activity in violation of Article III, Section 3.6 of the Declaration. Given the unwarranted and physical nature of the violation, the Board determined that it is reasonable that McCullough’s usage of the Association’s Common Areas be suspended for a period six (6) months commencing on September 3, 2010. Accordingly, Mr. McCullough may not utilize the Association’s facilities during the time of the suspension which is from September 3, 2010 until March 3, 2010.

In addition to the foregoing, Mr. McCullough is also responsible for the attorneys’ fees and costs incurred by the Association for enforcing its governing documents and obtaining compliance. Specifically, NRS 116.3115(6) provides that any common expense caused by the misconduct of a unit’s owner, may be assessed exclusively against that unit’s owners. Thus, Mr. McCullough is also responsible for legal fees and costs incurred for the preparation of this letter and for legal counsel’s attendance at the hearing in the amount of $564. Your time and attention to this matter are very much appreciated. If you have any questions or comments, please do not hesitate to contact this office.

cc: The Board of Directors

——end of letter——–

Can Directors Under Investigation Be Suspended?

With the mounting evidence of flagrant abuse of power and allegations of suspected fraud going on against the SCA Board, the question has been asked:  “Can the State Ombudsman suspend a director that is under investigation?”

Answer: no.

The governmental chain of authority (Ombudsman Office, Real Estate Division, Governor) cannot interfere with a corporate director’s duties without following the lawful due process involving allegations, investigations, hearing and judgment by the Commission for Common Interest Communities, or by a court of law. In both cases, those processes usually take years to complete.

On, the other hand, the laws provide that corporate share-holders (i.e., home owners) can conduct a “removal election” for one or more unacceptable directors. The removal process can be completed in a matter of a few weeks–if over 17.5% of the members vote in favor of removal.

That internal process protects the rights of the owners, and allows action to be completed fairly quickly. It has been effective in many NV homeowner associations in the past decade. And, when it looks like they are likely to be “removed” in an election, volunteer directors can elect to resign in lieu of being forcibly rejected by neighbors.

Of course, when there are suspicions of illegal behavior by directors, citizens are required by law to “report” on such concerns to the appropriate law enforcement agencies.  Citizen(s) are not required to prove their concerns–that is the job of law enforcement.

Removal Election Petition File

The most recent version of the Removal Election and Special Members Meeting Petition can be downloaded by clicking on this file name:

scaremovalpetition1.pdf

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