Another Board Member Caught Stealing

I just saw another sad news story about a board trustee stealing from his condo association in Massachusetts. "Condo trustee Aaron Church has been charged with embezzling nearly $15,000 from the Mill Hill Condominium Association."

I have seen stories like this from all across the country. Are other board members concerned about the people who are serving with them? I am curious as to whether others are as concerned as me about all this stealing that his been in the news. Also, how about self serving deals and other things that your fellow board members may be doing. I am sick to my stomach about this.

I learned the hard way while serving on my board never to let one person handle financial matters of any kind.

We let one board member deal with our old management company and our old law firm. The board member would report that some huge number of owners were delinquent but not give us any details and we made the mistake of not asking for the details. Most of the "delinquencies" were unpaid late fees ($15) that the management company never billed for. None of us knew how little was owed nor were we aware that the management company never billed for late fees, even when they billed for the following year's assessments. At this board member's urging, we turned everything over to the law firm for collection. The lawyers charged us about $175,000 to file 60+ lawsuits, few of which were ever served because the owners could not be found.

When it became clear that the law firm was bleeding us dry and producing no results, we had a lot of discussion about dropping the law firm. That same board member pleaded to keep the lawyers on the job. Finally the board voted 8-to-1 to dismiss the lawyers and the member in question resigned on the spot and stomped out.

I cannot prove it, but I strongly suspect that he was receiving kickbacks from the lawyers at our expense.

The mistake we made was to allow one person to deal with stuff the rest of us did not want to handle. We trusted one person's judgment when should have pressed for details before taking action.

The article says that the trustee admitted to getting the money from ATM's using the condo's debit card between January 15th and January 29th. So what's the big deal? He was caught within days of the crime. That is what internal controls are supposed to do. There is no way to absolutely prevent theft. But good internal controls will insure that the crime is detected quickly, before catastrophic damage occurs.

Most HOA's dont have good internal controls. People simply trust everything is good.

Too often inexperienced people fail to realize that there are controls. When I was in the self-storage business I witnessed first-hand two different sets of resident managers who somehow thought that if they pocketed cash payments instead of depositing them that no one would notice. Neither of them noticed that the computers that tracked all the daily payments were connected by modems to the main office and that the off-site supervisors knew to the penny how much should have been deposited.

In each case, about $4k was taken. In each case the husband lost his job, the wife lost her job, their families each lost the residence that was included with their job, they lost any opportunity to collect unemployment benefits, and they lost employment references. I wish I could also say they ended up in jail but lax law enforcement decided it was not a serious enough matter for the criminal justice system in either case. Still, the benefits each set of managers derived was clearly not justified by what cost them.

And that of course would be the mistake.

As we all know, there are criminal laws and civil laws. The State enforces criminal laws. The parties involved enforce civil laws. Associations are covered under civil laws.

Frank,

I agree that Chris is making some excellent points.

I haven't personally dealt with a developer controlled Association. Therefore, I can't really respond that. However, I have learned from stories on this forum that there is little a member can do to affect changes in a Declarant controlled Association if the Declarant isn't willing to make those changes. Those are simply the terms of the contract (i.e. the CC&Rs) that is entered into when property is purchased.

Frank, I'm not sure what you are referring to. I don't recall ever saying that there weren't things that could be done to correct various issues. Since you brought up some options, lets look at them:


That's a nice forceful statement but you didn't specify how you would force that to occur.

I for one, prefer to utilize the "force" of the membership. If the membership is apathetic, then I can do what I can do by attending meetings and, if needed, inform the membership of the issues (perhaps via newsletters) so they might step forward and vote the bums out that won't comply with statutes or simply not reelect them. To assist in making this change, I'll go knock on doors and send letters requesting others to 1) serve, 2) appoint me as their proxy or 3) do both. Of course, the best way to ensure that compliance occurs is to be part of the decision process, therefore, I would volunteer to serve on the Board and, if elected, be in a better position to see that the Association complies with the statutes. I also believe that this has the least unintended consequences for the Association. I also know that this works, as this is how I affected change in my own Association.

As the laws applicable to Associations are civil in nature, the other option, of course, is through legal actions. This will cost time, energy and money. The unintended consequences would be scaring off potential volunteers to serve on the Board and scaring off potential buyers. If there is a lot of legal action the buyers Realtors may actually discourage their client from even looking in your development.


See response to A)


HOW?

If the membership is apathetic, and not attending board or general membership meetings, they likely won't take the time to attend seminars.

You can certainly publish a newsletter and deliver it to the members. However, you can't be sure that they will actually read it. Additionally, you need to be careful in the wording of any newsletter as you can open yourself up to potential libel suits if you can't prove what you write.


I expect that you mean politicians. Yep it can happen but it certainly won't happen overnight and possibly not even within 10 years. Heck it took me 3 years of educating the membership via newsletters before they even started to respond. It then took another year before any changes actually occurred.

If you mean a community ombudsman or other federal regulator (like the FHA or ADA) then, yes that one issue may be resolved. However, the root of the problem would still remain - the Directors who you made you solicit help from outside the community.


Well, misery loves company as they say. Taking an Association issue public (by public I expect you mean the press) may help other Associations from going through the issues your Association is experiencing. It may even put pressure on your Board to change their action (or to take action) to remove the bad press. Depending how long the issue is in the news, it always has the unintended consequences I stated earlier.


Yep. The expensive, time consuming and typically life draining (from stress) action that is always available. Not only can one take legal action against their own Association to encourage compliance but they can take action against their neighbors to encourage compliance with a covenant violation.

Unfortunately, sometimes this is the only option that works. Again, it doesn't get rid of the root of the problem (the Directors who's action (or lack thereof) motivated you to take legal action. However, it may get the actual single issue resolved. Again, the unintended consequences include, discouraging others to volunteer to serve on your board, possible discouragement of potential buyers, potential of a special assessment to cover Association legal costs, the potential that such action can consume your life and may affect others around you (spouse, kids, friends, etc.).

Tim,

Reporting behavior to the controlling authorities helps maintain law abiding behaviors. Calling the behavior out every single time so they will at least think about their future actions also helps.

E-mails, Board meetings, talking with neighbors-this is how we inform them. It is never ending and people will most likely get annoyed, but I continue.

Get elected to the Board like we have, and you have an even bigger platform to communicate.

You already know these answers. I am no genius. It just takes tenacity, which I have a lot of

I can't even begin to imagine the potential for corruption in the states that do not require membership access to financials, or do not require open meetings etc. How about requiring HOAs to provide everything any publicly traded company has to?

As mentioned several times in this forum, in fact it was posted earlier in this thread, there are criminal laws and civil laws. The government enforces criminal laws and the parties involved enforce civil laws. Hence, there is always someone there to enforce civil law - the parties involved in the issue.

They enforce them either by working it out themselves or involving a third party (mediator or the courts) to rule on their disagreement.

In Associations, working it themselves may include compromise, voting the existing Directors out of office and replacing them with someone who will comply with the law or simply voting them out of office at the next election. Of course, you will always need to find individuals willing to serve that will comply with the law.

I'm all for transparency and if your board doesn't have it, then you should encourage it.

The articles should be used to urge everyone to be involved and ask questions. That means investigating for yourself and not taking someone else's word for it. Our former HOA decided to trust the three board members who were breaking the law and the results was three lost court cases and a substantial payout from the insurance policy (which only covered our legal costs). Those three board directors are still serving but we have left the HOA so I don't know who's watching over the board now. Even when the police came over and forced the lead director (treasurer) to return things he had stolen from us (by climbing up a ladder to our balcony), no one moved to remove him. From our perspective, the other owner/members are getting what they asked for.

Kimberly,

Typically the Association carries the bond or obtains crime insurance in lieu of an actual bond. Having filled out paper work for the crime insurance, the companies don't ask for the names of individuals being covered. They simply want to know how many and if they are volunteers or being compensated.

Now, our bookkeeper (when we had one) was required to obtain their own fidelity bond as they were a contractor and not covered under the Associations crime policy.

Patricia,

It's best to start a new thread than reactivate an old one.

As for your post, I'd like to make the following comments:


Most Associations expect that spouses are both on the deed. Unless there is reason to check, checks typically aren't done. Yes, they should be but the reality is, people only have, or are willing to donate, so much time to volunteer positions. Without assistance from others, things are missed or simply aren't followed.


My question would be, how did you present it?

Was it along the lines of, "you may not be aware of this but . . . and to help prevent it from happening in the future, I'm willing to volunteer to serve as inspector of elections or on the nominations committee

OR

Was it along the lines of "you may not be aware of this but . . . and it needs to be fixed.


Perhaps the individual was taking their share, or more, of the Boards work load and the Board simply didn't want to lose that asset. If, when you brought the issue before the Board, you or anyone else didn't volunteer to fill the position and take on the duties, then why should the volunteers simply dismiss an asset and take on more work.

As an example, as Treasurer for my Association, I spend approximately 20 hours per month on Association business. That equates to a full month of my life per year. I do this without pay and am happy to do it but become frustrated when the same individuals are always late with their payments, causing me more work. Do you think that they care? I don't. Therefore, if, for some reason I was considered no longer eligible to serve, I suspect that someone would find a similar solution to keep me on. Mainly because no one would want to commit the time and it would cost at least $5,000 per year to hire someone to do just part of the job. More, if the whole thing were to be contracted out.


Yep, that is right, it would be legal. What needs to be understood is that Directors and Officers are two separate positions. Often the same individual may fill both the Directors position and the Officers position at the same time. When that happens, it's the same as having two jobs. Many members, and Directors, don't always realize this.



Actually, when I was soliciting signatures to add similar qualifications to serve as Director in my Association, I learned that most don't place them on the deed because it's a second marriage and this keeps the kids happy. Other reasons I was informed about were financial reasons (or ways to minimize taxes). In fact, I know of many older couples who simply live together (vs. getting married) as it's financially better for their circumstances to do this.

What reasons were you eluding to?

Oh, upon learning this, I chose to not go forward to have those restrictions become adopted.


I would have thought your previous job, that of working in a mortgage office, would have instilled that upon you vs. learning "the hard way."


Depends who writes them.
The minutes are the official record of the Association and should simply state the facts and decisions. Often, when a Secretary or Board record more than that in the minutes, it tends to work against the Association.

This is from the The Fairfax County (VA) Community Association Manual on minutes:

Too often, meeting minutes become lengthy with the intent of being thorough and correct. The purpose of a meeting is to conduct the business of the association; and the minutes should record what was done or decided, and not what was said or by whom. The minutes should never reflect upon the character, emotion, or personality of any person, or give the secretary’s opinion, favorable or otherwise, on anything said or done in the meeting. For important motions, however, the name of the mover should be recorded along with the exact final wording, including amendments, upon which the subsequent vote is taken. The recording secretary should be familiar with “Minutes and Reports of Officers” of Robert’s Rules of Order Newly Revised, 10th Rev. edition (November 14, 2000). Meeting minutes, including motions, amendments and votes should be signed and dated by the president or secretary once they have been approved, and should be kept in a binder, file or “book of minutes” for later reference. It may also be helpful to file copies of meeting notices, financial statements, committee reports, and other documents along with the minutes, making them part of the association’s official records. Complete minutes can be valuable to an association should it need to document or defend its actions.

Perhaps you could volunteer your time to serve as Secretary. This way, you can be sure the minutes are written properly and not skewed toward anyone or anything but the facts.


Patricia, again, you need to shift your focus to the entire Board. The President was just the messenger. They may or may not have been the deciding factor in your issue but issues are decided by majority vote. This means that others had to agree with the President (if the President was the cause) in order for anything to occur.

Focusing on one individual vs. the entire Board can be detrimental in your cause to correct the problems you see as your actions can be seen as a personality conflict vs. actual issues.

Again, it's best to start a new topic than to reactivate an old one.