Clayton woman pleads guilty to embezzling $800,000 from 25 homeowner associations

Diana Kelly, a Clayton woman accused of embezzling more than $800,000 from 25 homeowners associations whose accounts she managed, pleaded guilty on Monday to the charges as part of a plea arrangement with Wake County prosecutors.

Kelly, 54, rose in front of Wake County Superior Court Judge Donald Stephens and told him she had agreed to enter the plea, which meant she will serve the next 10 years in prison.

Kelly became emotional as she apologized to the homeowners, her family and the people who had worked for her in the company she incorporated in 2007.

As part of her sentence, Kelly was ordered to pay back $638,000 still owed to the homeowners from whom she embezzled nearly $100,000 a year for about eight years.

Stephens ordered work release as soon as the prison system will allow, as asked for by prosecutors and Kelly’s attorney. Stephens assured the homeowners at the hearing that Kelly would be returning to prison every night.

Some members of the associations’ boards spoke of the eroded trust they had experienced with the homeowners they represented and of the problems rebuilding financial records they lost.

“Our hope was that she would not get work release,” said Kelly Sena, a resident of Jordan Ridge, one of the affected neighborhoods. “However, she does have a lot of money to pay back to us so work release does make sense.”

The case stems from a criminal investigation that began last summer after Kornerstone Community Management of Garner closed its doors with no notice.

Some of the homeowners associations that Kelly’s company managed were left without access to their bank accounts, prompting a slew of complaints to the Garner Police Department and the consumer protection arm of the state attorney general’s office.

In mid-August, investigators armed with search warrants removed 14 file cabinets containing legal documents, 55 boxes of files and computers from the Kornerstone office.

Kelly was arrested four months later and charged with 25 counts of embezzlement. Two of the HOAs were from New Hanover County. The other 23 were in Wake and Johnston counties.

Two of the charges were considered Class C felonies, which means the amount of money taken from the victim was greater than $100,000. Those HOAs were the Village of Aversoro and Southern Trace. In the other 23 incidents, Garner police said the sum taken was less than $100,000. In all, 27 HOAs were the victims of embezzlement, but in two cases, the money removed had been returned before the associations discovered it missing.

Wake County District Attorney Lorrin Freeman said investigators looked at Kelly’s spending and personal bank accounts and discovered that the embezzled money was put toward several weddings, her daughter’s college, her husband’s struggling electrical business, which owed back taxes, clothes and family vacations.

“Really this is a story of greed,” Freeman said after the hearing. “And so often in these cases that’s what we see – someone who is overtaken by greed, taking advantage of other people.”

Kelly was convicted of writing worthless checks in Wake County in 2002 and Johnston County in 2005, both misdemeanors. In both cases she was ordered to pay a fine.

Kelly’s case has illustrated a thorny path that homeowners associations travel when enlisting such companies to manage their funds, collect dues and enforce rules and regulations.

A real estate license is not required to manage money for a homeowners association.

For years, the N.C. Real Estate Commission and a core group of homeowners associations have tried to push the General Assembly to adopt laws to regulate unlicensed managers. Those attempts have not resulted in change.

This story was originally published April 10, 2017 at 3:18 PM with the headline "Clayton woman pleads guilty to embezzling $800,000 from 25 homeowner associations."