HOA President Passed away - Property Management Company Embezzled

Started by LoriL3 • 9 replies • 3009 views

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LoriL3 (South Carolina)
Posts: 1

Posted:

Have quite the doozy-- Would love advice

Our HOA consists of over 100 condos.
There are 5 people on the board. They are mostly retired/older people.
The HOA President ran the community, not necessarily the way it should have been run. A lot of people really liked her as a person, but she rarely followed the rules of the community, or asked the other board members for "permission/approval." She ruled the community, much like a dictatorship. Since the HOA Boards in any community are volunteer---many people get tired of the community complaints, being approached when you are trying to relax----or get tired of the strong opinions of the other board members that steam roll their way through the process.....that they quit or stay on the board---but give up their "voting rights."

With that said: Our HOA President died suddenly. It was on the heels of us finding out that the Property Management company they had in place--had embezzled over 25K from us (as well as other properties she was "managing"

Many of the homeowners are upset at our "Secretary/Treasurer" who many of us hold responsible for not catching this sooner. After all- its the Treasurer that should be reviewing receipts and running the checks/balances. Unfortunately our Secy/Treas knows nothing about computers and all of her notes are written. She also stated that "it was the Propr Managers job to runs checks/balances".....and she has tossed blame elsewhere.

After the death of the HOA PRES- the "Treasurer" friended the HOA PRES Family, and gained access to her home to "gather all of the HOA Documents" She did this on her own- with no other Board Member present...........she claimed she went through the deceased HOA PRES belongings-and said she "took what she found" that belonged to the HOA.

(to many of the community members--- this is a HUGE issue that any responsible person would find TABOO) However- some fear she was finding items,not only to use for HER benefit later...but perhaps things that shoudl be made of "record"

Now- another Board Member has resigned due to not being able to have "quiet enjoyment" without being approached by concerned home owners.

The TREASURER has now made herself the new HOA PRESIDENT and has assigned someone else to be the new TREASURER.
Is this legal???

This is the current set-up

BOARD MEMBER #1: BOARD PRESIDENT : Deceased
BOARD MEMBER #2: VP: A good man-even toned- honest...woudl make a great interim PRES
BOARD MEMBER #3: SECY/TREASURER: Oversaw just under 1 million $$$ in accounts, and allowed the property management company to embezzle approx 25K. We also had to hire ($4000) Forensic accountant to find this info out because she never balanced the books.

BOARD MEMBER #4: Has been on the board for years, Over 70 and easily swayed (The TREAS is now frequently cooking for this board member who is disabled)
BOARD MEMBER #5: Resigned due to too much harassment---but a good , honest man

The Treasurer approached Member # 4 and told him that the VP cant be the PRES since he has a girlfriend and he spends a lot of time at her house (Crazy-right?)
So he was swayed to say "OK"

The current VP said that he would be willing to be the PRES until we can hold new elections in the new year.

Here are the questions:

1) Shouldnt the VP automatically become the PRES unless he chooses not to? Does a vote of 2 constitute a QUORUM?
2) How do we remove this TREASURER? She is prone to crying at meetings to gain sympathy. However- this is a business. She has failed us miserably as the Treasurer, how can we allow or stop her from nominating herself as President? And why would we even want that---
3) Each member is bonded (so they say- but have yet to see a bond) Can we go after HER bond for being negligent?
4) We have a new Property Management Company- that is reputable. However the TREAS is very good at manipulating and has chosen to have meetings with her away from our HOA......it is very hard to talk tot he Property Management Company rep. Calls are not returned (unless you are a board member)

Need Guidance---Meeting this week

JonD1
Posts: 2,350

Posted:

Quote:

Posted By LoriL3 on 11/09/2014 4:37 PM
Have quite the doozy-- Would love advice

Our HOA consists of over 100 condos.
There are 5 people on the board. They are mostly retired/older people.
The HOA President ran the community, not necessarily the way it should have been run. A lot of people really liked her as a person, but she rarely followed the rules of the community, or asked the other board members for "permission/approval." She ruled the community, much like a dictatorship. Since the HOA Boards in any community are volunteer---many people get tired of the community complaints, being approached when you are trying to relax----or get tired of the strong opinions of the other board members that steam roll their way through the process.....that they quit or stay on the board---but give up their "voting rights."

With that said: Our HOA President died suddenly. It was on the heels of us finding out that the Property Management company they had in place--had embezzled over 25K from us (as well as other properties she was "managing"

Many of the homeowners are upset at our "Secretary/Treasurer" who many of us hold responsible for not catching this sooner. After all- its the Treasurer that should be reviewing receipts and running the checks/balances. Unfortunately our Secy/Treas knows nothing about computers and all of her notes are written. She also stated that "it was the Propr Managers job to runs checks/balances".....and she has tossed blame elsewhere.

After the death of the HOA PRES- the "Treasurer" friended the HOA PRES Family, and gained access to her home to "gather all of the HOA Documents" She did this on her own- with no other Board Member present...........she claimed she went through the deceased HOA PRES belongings-and said she "took what she found" that belonged to the HOA.

(to many of the community members--- this is a HUGE issue that any responsible person would find TABOO) However- some fear she was finding items,not only to use for HER benefit later...but perhaps things that shoudl be made of "record"

Now- another Board Member has resigned due to not being able to have "quiet enjoyment" without being approached by concerned home owners.

The TREASURER has now made herself the new HOA PRESIDENT and has assigned someone else to be the new TREASURER.
Is this legal???

This is the current set-up

BOARD MEMBER #1: BOARD PRESIDENT : Deceased
BOARD MEMBER #2: VP: A good man-even toned- honest...woudl make a great interim PRES
BOARD MEMBER #3: SECY/TREASURER: Oversaw just under 1 million $$$ in accounts, and allowed the property management company to embezzle approx 25K. We also had to hire ($4000) Forensic accountant to find this info out because she never balanced the books.

BOARD MEMBER #4: Has been on the board for years, Over 70 and easily swayed (The TREAS is now frequently cooking for this board member who is disabled)
BOARD MEMBER #5: Resigned due to too much harassment---but a good , honest man

The Treasurer approached Member # 4 and told him that the VP cant be the PRES since he has a girlfriend and he spends a lot of time at her house (Crazy-right?)
So he was swayed to say "OK"

The current VP said that he would be willing to be the PRES until we can hold new elections in the new year.

Here are the questions:

1) Shouldnt the VP automatically become the PRES unless he chooses not to? Does a vote of 2 constitute a QUORUM?
2) How do we remove this TREASURER? She is prone to crying at meetings to gain sympathy. However- this is a business. She has failed us miserably as the Treasurer, how can we allow or stop her from nominating herself as President? And why would we even want that---
3) Each member is bonded (so they say- but have yet to see a bond) Can we go after HER bond for being negligent?
4) We have a new Property Management Company- that is reputable. However the TREAS is very good at manipulating and has chosen to have meetings with her away from our HOA......it is very hard to talk tot he Property Management Company rep. Calls are not returned (unless you are a board member)

Need Guidance---Meeting this week

So Lori you are not a member of the Board.

Sounds like you have a mess that the property owners are willing to allow to continue.
Should the VP automatically become President? NO
How do WE remove the Treasurer? Just who is WE?
As far as bonding goes difficult to take that on as a non member of the Board from the outside.
And YES the rep. Does answer to the Board not individual property owners. Best not to try to put them in the middle.

And Board member #4 was swayed by the story of the VP and his girlfriend. But the owners low him to manage their affairs. Why would he be allowed the serve?

And Board member # 5 who could have made a difference decided best to quit. Just to damn hard to do what's necessary.

You get what you allow. You get what you are willing to stand for. Until someone grows or borrows a pair don't expect much to change.

So you have an inept Treasurer who missed the theft of funds who is now forcing themselves in as President and 97 property owners plan to do __________?

EricH8 (Virginia)
Posts: 116

Posted:

Quote:

Posted By LoriL3

Does a vote of 2 constitute a QUORUM?

Since there are only 3 directors now, 2 is a quorum. That was my question too in a previous topic, How many directors is a quorum?

Quote:

Posted By JonD1

Should the VP automatically become President? NO

Why not?

RichardP13 (California)
Posts: 1,767

Posted:

Actually, three would still be a quorum. Need to replace the other two, or get three to a meeting.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

No VP does NOT take over President. That is in government not in the corporate structure. Read your documents.

Many treasurer positions are just superficial as the PM does the job. Not to say Treasurer positions do not do anything at all. Each HOA is different. So not surprised to hear they had no idea. Especially since a PM is involved. What are they supposed to do than report what the PM tells them? Do NOT assume more if it is not defined or understood.

Seems to me your problem is to have enough volunteers to take over all these spots you all want vacated. Need to have people to replace people or deal with what you got.

Former HOA President

RichardP13 (California)
Posts: 1,767

Posted:

Actually Melissa, that is what a VP does, assumes the role of the President in the absence or disability of the President. I have to assume for argument sake, that death is a disability.

That is why you have a hierarchy after all, whether government or corporate. Now, they are free to re-organize, but until then the office of the VP assume the role of President.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Lori,

Procedurally, the VP performs the duties of the President when the President is unavailable. However, it's going to be up to the VP to step up and do this.

The Board should appoint a new President (could be the VP or anyone else) that meets any qualification factors in your governing documents (typically the President must also be a Director).

You remove the Treasurer the same way you appoint a new President. Take a vote at the next Board meeting. However, someone has to be willing to take over those duties. Will it be you? Don't remove the Treasurer without someone ready to fill in.

Personally, don't get too mad at the Treasurer for getting the HOA records from the Presidents family. It's better that it happened sooner rather than later and somebody had to do it.

Don't forget the administrative tasks that go with this issue - changing bank signature cards, informing your registered agent, updating your info with the corporation commission.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Lori

If I read it correctly, after the President died and a BOD Member resigned you still have a 3 person BOD. 3 out 5 is a quorum. Typically the BOD can fill a vacant spot(s). They do not need an owners vote to do this. They might also could wait until the next election cycle to fill the vacancy. Did they fill the positions or are they still a 3 person BOD?

After the President died the BOD could also have had an election for new officers and the former Treasurer was elected President. All legal and proper and not requiring owner approval.

You may well have a legal and functioning BOD even if you do not like it/them.

How to recall someone or even the entire BOD is another issue. It can be done but it is time consuming and can be very, very tricky especially if they fight it. Often best to wait until an election and vote others in.

Allegations of MC embezzlement is another issue also. If sure, then press legal charges.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

It is odd but if you read the responsibilities of the positions you will find the VP does NOT take over the POSITION of President if the president quits, dies, or is fired. The VP does take over handling the MEETINGS when the President is not available. That does NOT mean the VP automatically gets the POSITION of President. VP is very limited scope if you read their definitions.

Ironically, our documents state that the President can NOT act as "Secretary". Which means they can not take the meeting notes or post them. They can do the other positions if they like if necessary. I always found this a bit frustrating that the official notes of our meetings I could not post as we lost our secretary.

So don't assume things until you read your documents to see the responsibility of each position. You may be surprised the actual scope or even the election process itself. I was shocked to find out that the GENERAL membership elected the BOARD member but the BOARD member elected the BOARD POSITIONS. You would think one just simply runs for President, VP, Secretary, or Treasurer. Not necessarily. The board decides amongst themselves who gets what not the general membership.

One size fits all advice does not apply to HOA's...

Former HOA President

JohnB26 (South Carolina)
Posts: 1,001

Posted:

SECTION 33 31 841. Duties and authority of officers.

Each officer has the authority and shall perform the duties set forth in the bylaws or, to the extent consistent with the bylaws, the duties and authority prescribed in a resolution of the board or by direction of an officer authorized by the board to prescribe the duties and authority of other officers.

The above is copy and paste directly from the S.C. not-for-profit corporate law.

The SPECIFIC duties of YOUR treasurer will be spelled out in YOUR corporate by-laws.

Should he/she have failed to perform said duties he/she could be held PERSONALLY responsible if non or mal feasance is demonstrated.

The question would be: "Would a person of reasonable intelligence in a similar position have read the by-laws?

Misfeasance would be covered by your HOA's D&O insurance.

ps. my HOA's by-laws require the treasurer AND another officer to sign EVERY check

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