The Hammocks is settling for $300,000 its suit against two law firms that allegedly failed residents while representing the homeowners association during the reign of criminally charged ex-board members.

The settlement marks the latest chapter in an ongoing saga at the Hammocks, a complex with over 18,000 residents in West Kendall that’s the biggest HOA in South Florida. In November of last year, police arrested former board president Marglli Gallego, three other former board members and Gallego’s husband over allegations they ran a roughly $2 million fraud scheme that siphoned association funds, according to court filings. All five pleaded not guilty.

Since then, Hammocks court-appointed receiver David Gersten has been working to claw back funds for the embattled association and fix other issues, such as neglected landscaping and maintenance at the 3,800-acre property. His efforts include finding out if others, aside from those arrested, allowed for the fraud, turned a blind eye to it or, in the very least, didn’t do their due diligence to notice and stop the scheme.

In May, Gersten, on behalf of the Hammocks, sued law firms Elbert Radames Alfaro Berta; Alfaro & Fernandez; and attorney Yudany Fernandez, alleging they failed residents on several fronts. The law firms and Fernandez, all of whom list the same Miami Lakes office, represented the Hammocks association from 2018 to late 2022.

Last week, Gersten filed a motion to settle the lawsuit after the law firms and Fernandez agreed to tender their full legal malpractice insurance policies, according to court records. Their insurers include Oviedo-based Florida Lawyers Mutual Insurance Company.

While the $300,000 would help replenish Hammocks coffers, the amount still is just 10 percent of the $3 million in damages originally outlined in the lawsuit.

Gersten and his team of attorneys working on the case didn’t immediately return a request for comment. But in court filings, they wrote that in light of “evaluation of other collection issues and the risk attendant to litigation, the settlement is in the best interest of the receivership estate.”

The settlement is signed by both sides, and is awaiting Miami-Dade Circuit Court Judge Beatrice Butchko’s approval.

In the suit, Gersten alleged that attorney Fernandez penned a misleading legal opinion in 2018, saying that the association can reimburse the personal legal expenses of board members. But Fernandez failed to point out this is only the case if the board member “acted in good faith” and in a way that is “reasonably believed to be in or not opposed to the best interest” of the association, according to Gersten’s lawsuit. Fernandez’s letter also failed to say that for the association to cover a board member’s criminal defense expenses, it needs to not have a reasonable cause to believe the board member’s conduct was illegal.

Based on this advice, the association shelled out funds to cover criminal defense expenses for Gallego. The former board president, who is largely described as the fraud’s ringleader in court filings, was first charged in 2021 with grand theft.

Gersten and his team of forensic accountants discovered the association paid $825,000 for Gallego’s criminal defense, according to a February presentation Gersten gave to the court.

In other allegations, Gersten claimed that the law firms and the attorney played a role in the ex-board members’ attempts to hold onto their power. During an election in January of last year, the attorneys helped close polls early and then later that year struck down 1,900 recall ballots “under the guise they were ‘facially invalid,’” Gersten claimed in his suit.

The election polls closed early when a bomb threat was reported, though investigators later found no credible evidence of such a threat, according to court records.

As the Miami-Dade State Attorney’s office was working on its criminal investigation, the former board of directors also pushed back on subpoenas and records requests under the advice of the law firms, according to Gersten’s lawsuit.

Elbert Radames, Alfaro & Fernandez and Fernandez, as well as their attorneys, didn’t immediately respond to a request for comment.

In an August motion to dismiss, they partly argued that the suit commingled allegations, meaning the suit made claims against the law firms and Fernandez without delineating specifically who was responsible for what alleged action.

The pending settlement follows Gersten settling for $2 million a lawsuit he had filed against former board members who were not criminally charged but allowed for the alleged fraud to take place. The proceeds were proffered by the associations’ directors and officers policy, which insures HOA leaders from liability.

Gersten has sued several other law firms and attorneys, alleging they also failed residents and adhered to ex-board members’ wishes.

Aside from Gallego, the former board members arrested were Myriam Rodgers, Yoleidis Lopez Garcia and Monica Isabel Ghilardi, as well as Gallego’s husband, Jose Gonzalez. Their scheme entailed hiring bogus contractors, with Gonzalez leading some of the purported vendors, to supposedly work on maintenance and repairs at the Hammocks, according to a state attorney’s office arrest affidavit. When the association approved the contractors’ invoices, paid by association residents’ dues, much of the money was diverted to the pockets of Gallego and Gonzalez, investigators claim.