stolen funds

Question for the group...this has been on here a couple times. Long story short we had a former treasurer who used association money for his personal benefit. The new board has since obtained receipts of most of the transactions, consulted with an attorney and had the attorney send him a letter asking to be paid back in full. We still have the right to file a police report and may do that if needed but we felt this was the best way to get our money back.

My question, when do we bring this up to the membership? We will have a meeting soon before the deadline on the letter. Do we wait for resolution on this issue or do we bring it up at the next meeting?

If this gets brought up in a meeting the members will know exactly who it is without us saying anything. The lawyer letter is merely step 1 letting him know that we know what he did and asking for payment. If he declines then we will proceed with a police report. I would disagree that this isn't a small claims issue, the amount is question is about $2,800 so it is fileable in small claims court if we decided to go that route.

Brad,

Is this the same situation you posted on 8/12 in this thread:

http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/118408/view/topic/Default.aspx?

This is a crime and not a reason to collect passed money owed. That is why I suggest going the criminal route. Most likely wouldn't be much actual jail time but required to pay the money back. If your HOA does go the small claims court way, then they have to hire an attorney to represent them. This is an additional cost. If your HOA goes the criminal court route, most likely won't need to hire a lawyer to handle it.

The choice is yours if you think it's a crime or a mishandling of funds...

Our lawyer told us due that embezzlement crimes are very low priority in the DA's office and with the amount taken it is going to be even a lower priority to the point where it might not ever see a courtroom or could take a long time getting there. Our focus as an HOA is to take the route that offers us the best opportunity to get our money back. I know it is a crime that is easy to figure out.

The Board needs to come clean with the owners about what it has discovered, what it is doing about collecting the funds, and what it plans to do to make sure things like this don't happen again. Are the books audited/reviewed annually? How many signatures are required on checks? How often are the association,s financials distributed to the owners. It may seem overkill but now there needs to be absolute transparency in all financial transactions to avoid the appearance of a cover-up.

You need to file a police report. Should you decide to file an insurance claim the ins. company will insist. It also shows the other owners that the Board is serious about association funds being diverted for personal use.

Just a question our of curiosity.......was the computer passed on to the next treasurer to use? Or, did the person keep the computer?

Brad,
You asked "My question, when do we bring this up to the membership? We will have a meeting soon before the deadline on the letter. Do we wait for resolution on this issue or do we bring it up at the next meeting?"

Transaprency builds trust and communications. That being said, I think advising the members that the board may have discovered some misappropriation of funds by previuos BODs and the discovery is under investigation would be suitable at the moment. Maybe include, Pending litigation, we are not at priveledge to discuss the issue further, would be enough to provide transparency and bulid trust. Then after the situation is over, you ask your attorney to release a statement to the members and that would close the door on the situation.
Now, obivously you know and have said the situation is a cime of Embezzlement. Upon legal advice, your attorney is giving you the adice you need to follow legally and criminally.

You is NOT a corporation...A HOA is a corporation and they must either be represented by an attorney in court (be it small claims etc...) or a competent board member that has been approved by the board to represent them. It's just that not many people are competent enough nor would many HOA agree to let an individual represent them in legal matters that isn't a lawyer. Sure an individual can file a claim in small claims. Your just NOT dealing with an individual when your dealing with an HOA...

Brad:

I gotta share my reservations about this situation with you.

You indicated that three years ago the then-treasurer purchased a computer, office chair, desk lamp, and cell phone with HOA funds. These all sound like items that a treasurer would need to perform his job from his home. I assume that your HOA does not have an office of its own and owns no other office equipment.

You also indicated that during that time the board seldom met. Is it possible that the board at that time was aware of the expenses and approved of them without the formality of minutes or even a meeting? Have you interviewed the old board members and obtained affidavits from them affirming that they were not aware of the use of HOA funds for the equipment in question?

You stated that the “new board has since obtained receipts of most of the transactions.” Does this mean that the receipts were in the HOA financial records? I would think it unusual for a person to deliberately misuse funds and then turn in the receipts. How did you obtain the receipts if they were not in the HOA’s financial records? If the receipts were in the HOA financial records then one could argue that the previous board was aware of the expenditures and its failure to object is a constructive approval.

Are you in a position to state without a doubt that the equipment was never used for HOA business? That would be a tough fact to prove. If the equipment was used at all for HOA business, then the best case you have is that the treasurer has failed to return the equipment. But realistically, what is a 3-year-old computer and office furniture worth? (If it was a laptop computer, it would have a value of about zero.)

In reading what you posted I cannot find much evidence of theft or misuse of funds. Without proof that the previous board was unaware of the expenditures and without proof that the equipment was never used for HOA business, it looks to me as if you are trying to punish the previous board by hanging criminal charges on a scapegoat. No doubt about it, they failed to do their job well but that’s far short of looting the treasury for personal gain.

There is also the matter of the amount involved. I am usually an honest person but if there is enough money involved I might be tempted to throw my principles out the window. Your accusations imply that your former treasurer – a neighbor and fellow homeowner – was willing to sell his soul for less than $3,000 by picking the pockets of all the members. (I can understand selling my soul; I just cannot understand doing it for so little money.)

My advice would be that if you do not have the proof mentioned above to forget the whole episode and write it off as water under the bridge. Keep your suspicions to yourself until you have proof to back it up.

In Kansas you can not have an attorney represent you in court without permission of the court. In Kansas whether you are a company or not it is designed not to have lawyers.

sounds like our "hunch" or whatever you want to call it was correct...he met with our lawyer yesterday, didn't dispute and asked for time to get the money to pay us back.

disagree...main focus is getting our money back...filing a police report was not the number #1 option to achieve that objective...as it turns out it sounds like we are achieving our objective.