Convicted Felon Helping Manage HOA Treasury

I would rather work with someone I know is a thief than one I do not. My opinion is that he should come cleanabout his past and tell his story. No one knows the circumstances this happened. If he does not be open, then consider voting off the board. The position requires honesty and openess. Can not build trust if you can not convey honesty.

You can not kick him out the HOA of course. He is a member. Treat him as such. However, does not mean he can not be on the board if voted on by the members. His board position can be removed by the board.It is in the boards hands.

I would have been upset with involving the lawyer in your previous case. The HOA should have known what info they can share. No need to waste money.

MelissaP, thank you. Your insights help a lot in processing this situation (or non-situation?).

PitA, wow I just did a cram course on fidelity bonds. My HOA's declaration under the insurance section explicitly states the Board /may/ purchase fidelity bonds at its discretion. The Bylaws say similar. I have put out queries to see if my HOA has a fidelity bond. I also see from a post you made elsewhere that a background check of those signing checks is usual as part of the bond issuing process, and how this may disqualify some proposed check signers. Thank you for pointing this out.

I don’t know why this man and the other guy would try to keep another director from looking at HOA records (how can you make informed decisions without looking at them?) And with this in his background, I suspect the man feared that someone looking around to see if there might have been fraud would lead to more digging and people would have found out about his conviction. Now you have to wonder if the other shoe will drop – if this man was so adamant that another director not look at records he/she should have access to anyway, what exactly does he have to hide???

The conviction was 20 years ago and people can and do change, but because this man wasn’t forthcoming from the start and especially because of his attempt to keep another director from reviewing information (why didn't the rest of your board stop all this from the beginning?) that would prompt me to recommend that he be removed as assistant treasurer. A censure by the board for not being complete upfront about his background when he’s being appointed to a position that gives him access to Association financial resources is also in order. As Melissa said, this position requires honest and openness, especially since you’re in an officer position.

I would have a private meeting with the man and ask that he come clean with the board as well as resign from the treasurer position – he can stay on the board as long as he doesn’t have access to the cookie jar. Give him a deadline (not a lengthy one) and if he doesn’t or refuses, then all of you who discovered this information should tell the board and where the information came from (better yet, show it to them) and see what it does. If the answer is nothing, push for a recall. By the way, a censure of the other guy for trying to keep records secret from fellow board members might also be a good idea.

Since you do have officers with access to the checking account, you may want to institute a policy stating those being considered for the treasurer positions will be subject to a background check, whether they ‘fess up to bad behavior in their past or not – that, in addition to a fidelity bond and periodic audits of the books can help protect the association for waste, abuse and downright fraud.

In Colorado, it is more than just "unacceptable" it is a violation of the Colorado Common Interest Ownership Act (CCIOA) statutes, specifically:

38-33.3-303 Executive board members and officers - powers and duties - reserve funds - reserve study - audit.
(1)(b)"Notwithstanding any provisions of the declaration or bylaws to the contrary, all members of the executive board shall have available to them all information related to the responsibilities and operation of the association obtained by any other member of the executive board. This information shall include, but is not necessarily limited to, reports of detailed monthly expenditures, contracts, to which the association is a party, and copies of communications, reports, and opinions to and from any member of the executive board or any managing agent, attorney, or accountant employed or engaged by the executive board to whom the executive board delegates responsibilities under this article.

I agree with Larry. Question him about it before proceeding.

AugustinD: If there is credible arms length internal financial control in place, Leo's officership otherwise may not be a big deal. But condos & HOAs are notoriously vulnerable to fraud regardless of auditing.

Troubling is that Leo would have been in his 50s when convicted.

Maybe there were 'extenuating circumstances' IF bigtime betraying the trust of others has such possible extenuation ? Some form of substance abuse now hopefully kicked ? Maybe Leo fully repaid his victims. Wonder what he has to say ? Bottom line : a judgment call by Directors now. Won't be pleasant if he betrays the trust.

Guess one nice thing about fessing up one's past misdeed, is that it's no longer a source of secrecy nor blackmail.

Shocker in local condo law here 2 years ago : an owner accepted acclamation to condo Board Directorship amidst unpublicized latest criminal prosecution for pedophilia. Not his first such conviction. Now voluntarily gone / somewhere into penal system. But opened some eyes.

Good idea to have an internal "audit committee" of owners (not subject to board approval nor dismissal)tasked with:
1) Supervising the annual audit
2) Approving the annual budget
3) Approving the financial statements
And ensuring all of the above are in compliance with governing documents and state laws.

Augustin - that is surprising. What state are you in?

Linda, I apologize, but I do not like giving the state. I fear repercussions from my posts here. The HOA attorney, current board, and prior boards have all chastised people for posting even constructive criticism of the board. There's enough retaliation going on. (Again, I plan to run for the board with a couple others. We are lining up members who would be willing to give one of 'our people' their proxies.) I will update on this matter as the dust settles in the coming months.

Tim, I didn't suggest that the attorney send him a letter -- only that the Board and the attorney be advised so they, as the owners' elected decision-makers and their counsel, can decide how best to address the matter.

My opinion Augustin and his group are possibly heading down a wrong road. This group has no elected position or authority to now perform background checks on those who serve the community. And under what pretense has this meeting been called? We wish to discuss your criminal past? Or will this individual be blindsided? And to whose satisfaction must his explanations rise? Are there any facts or evidence that suggest current criminal acts?
But this small group of self appointed investigators plans to demand explanations and details.

I have to wonder if this same group would be open to having others dig into their personal lives?

This knife can cut many ways. Does board service then open one up to background checks, criminal history, marital history, employment history or maybe personal financial reviews? Or only when people like Augustin deem it to be necessary?

Having provided no real details, having no real evidence of ongoing wrong doing I would hesitate to meet with a man who may have committed a crime 20 years ago and demand their explanation. How could that end badly?

This coming from someone hesitant to provide their state of residence but willing to put themselves in a position to judge others.

I would tred lightly and carefully.

Augustin

I have made just one post on this thread. In it I never suggested or implied your information should be withheld from the board, HOA attorney or now the HOA insurer.

What I said was in light of the fact you have no evidence of current wrong doing. In light of the fact you now hold no position of authority in the board's operation yet have determined LEO for some reason owes you and a few others an explanation. And understanding you seem to value your privacy and anominity but have no problem investigating and sharing the private details of other's lives. You may wish to consider the course you have plotted for yourself.

Innocent until proven guilty. And do unto others as you would have others do unto you. In your first post you requested input about how you should handle this matter. Now you have decided it best to imbark on your own investigation. And if your concerns or information is wrong, what then?

I would privately provide your information to the board and ask they look into it. I would not ask to meet with a 70 year old man and then blindside him with demands for explanations and details which very well might be none of your business. He was not appointed by you therefore he need not answer to you.

My view you and your supporters are overstepping your role. But please let us know how this plays out in the end.

"I again seek a reality check from people who have the appropriate distance from all the sturm-und-drang at this particular HOA. Current and past HOA directors and HOA members,would you take any action regarding this situation?"

So Augustin I can only address that information you have provided.

This was your question from your first post.

I agree, you are not in the position to demand or suggest Leo resign. Nor are you in the position to set up a meeting with a 70 year old man to present your incriminating evidence in the hopes it serves your agenda. But that seems to now be your plan.

Will you be submitting yourself for a background check when and if you seek a board position? And would you mind if another owner decided it was necessary to investigate your background and then share it with your neighbors understanding it just might have nothing to do with your board service?

The board appointed Leo. Whether he is fit to serve or whether your evidence should have any bearing on his ability to continue serving is the board's decision not yours. I would not put myself in the position of self appointed judge of who is fit to serve on your board. Nor would I continue to pry into someone's private life based on merely suspicions.

Just what purpose is to be served by you presenting your "evidence" to Leo personally? And if he walks out having no need or desire to address your accusations what then?

My view you are handling this badly and your actions are unnecessary to accomplish your goal.

The association obtaining a fidelity bond for all having access to funds solves this issue.

The insurance company will investigate background(s) to THEIR satisfaction.

No bond issued = no access to funds.

correct, of course

but

if the BOD were to attempt to obtain said bond NOW

and

the treasurer in question fail to qualify for said bonding

then

the BOD would be fully justified in appointing a new treasurer and terminating the person in ?'s access to (association) funds

JamesG11, correct, Leo is the assistant treasurer only. However the Treasurer has no background in finance. We members think Leo has done the lion's share of work on budgeting, reviewing finances regularly with the HOA Manager, and so on, for over 1.5 years.

Update:
I think the meeting was sober, civil and brief. Leo freely confirmed his conviction and that he had told no one at the HOA of it. We few are preparing a short letter to the Board and Association Manager, requesting that the HOA attorney and insurers be consulted; that Leo be removed as assistant treasurer; and that an independent audit of the books be done.

I do not plan to offer further updates. Thank you all for your assistance.

http://www.wral.com/police-estimate-500k-missing-in-garner-hoa-embezzlement-case/15932902/

Just passing it along as a reminder that theft and embezzlement concerns should always be taken very seriously, Jon. Since the article and this thread are devoid of many important facts (at least IMO), I don't know how much the two situations may or may not overlap, but I strongly suspect that inadquate checks-and-balances have been a factor in both.

If you review my prior posts here, you will note that I was not an advocate of Augustin's plan to meet with the association's assistant treasurer, but that was his call to make and I respect his decision and his desire to conclude his contributions on the topic.

I wish to share an update. Since I last posted, no public disclosure of Leo's past was made. A few months went by and the membership never heard whether Leo was still the assistant treasurer. Recently one of my neighbors asked the HOA manager if Leo was still the assistant treasurer. The manager said that Leo had resigned (followed by a snarky comment; Leo and the manager are friends). Leo has not appeared at any board meetings since I made my first query here. In late November the HOA board announced that it had contracted with a CPA firm to review the HOA books for the last five years. The board seemed to be avoiding the word "audit." The board gave as a reason that such a review had never been done before and they thought it was a good idea. It is a sad situation on many levels. I try to keep in mind safety of the HOA finances comes first.

Tim, thank you for the great information and link that elaborates. Now I understand why my board did not use the word "audit." For the interested reader: My HOA's gov docs speak of the HOA board being permitted, but not required, to select one of these three options for the annual financial report. The latter is required to be available to members at the AMOM. From what I can tell, state law where I am does not require any of these three categories of financial record examination for HOAs or nonprofit corporations.

DonnaR5, transparency is one of around three main planks in my platform. The current board does provide the monthly P&L statement and balance sheet to members and presumably reviews same. See the other thread I started this past week for some shenanigans with the P&L statement and how one of my HOA's members corrected them.

Update and follow-up question:

This past week I learned that the HOA has a Fidelity Bond covering directors and employees that handle the HOA's funds. The manager noted in writing that the Fidelity Bond is also known as "employee dishonesty or crime insurance."

The Annual Meeting took place this past week. Leo (the convicted felon) did not attend. Questions were asked about the CPA financial review and why it was necessary. One member (not me) disclosed the name of the aforementioned convicted felon (a.k.a. Leo).

I was elected to the three-director board. Over 50% of the members voted. I won the most votes, with my co-candidate a close second. On Monday the new directors met. The HOA manager informed the board that it needed to approve or disapprove Leo's continuing to (1) be the official monitor of the property's surveillance camera footage; and (2) control the HOA entry gate remotely in the event of an emergency such as high winds.

I have heard rumors that management has watched surveillance camera footage of the HOA's hot tub like it was porn. For all I know, and up to 10 PM, there is the occasional skinny dipper. Leo is very close to the HOA manager.

How would you have voted on Leo's continuing to be the official monitor of the surveillance camera footage?

Now seems like an opportune time to get rid of Leo altogether. You and your co-candidate secure a majority of the Board votes. You seems like you have good intentions for your HOA and want to see things done properly. Start cutting dead/unnecessary weight, possibly increase your responsibility for a bit (by taking on surveillance monitoring if that's necessary and whatever other random tasks/positions have been doled out), then determine later on if additional/responsible help is needed. You and your co-candidate can essentially hand pick who you want to have help you.

And if the Manager cannot keep business separate from personal acquaintance with Leo, then cut ties with the Manager as well.

Before rocking the boat too heavily though, make sure you've taken appropriate measures to secure documentation, secure funds, and have a good handhold on all business-related things. That way, when/if you do decide to cut ties with Leo and/or the Manager, they can't cause too much damage on their way out the door.

To sort of answer your question though . . .
Knowing all other potential issues involving Leo, I would have questioned what the responsibilities actually included (to get a better idea of what is being done versus what actually needs to be done) and then likely would have voted to relieved Leo of those duties and accept responsibility for them myself.

-- Suppose early in the week a former director told me (a new director), over a friendly breakfast, that "Leo" never had check signing privileges.

-- My HOA has accounts with three banks.

-- Two of the banks hold large HOA reserve funds. This past week two
of the new directors set up check signing privileges with these two
banks. The former directors were dropped as check signers. Several
hoops had to be jumped through, but nothing that was unexpected
occurred.

-- The third bank holds the HOA's operating fund.

-- The HOA business manager had previously written the new directors
that he had a special connection with an out-of-state "relationship
specialist" at the third bank and that he was trying to see if he
could set up check signing without any of the new check signers or old
check signers having to go to any bank branch.

-- Yesterday the business manager had me sign several checks for
vendors, on the operating account with the third bank. The other check
signing director was present as I asked questions. I assumed transfer
of check signers had occurred, based on several emails from the
business manager and the fact that the business manager was standing
there having me sign checks on this third bank's account.

-- A few hours later, it occurs to me to call the business manager to
explicitly check that I have check signing privileges with the third
bank.

-- The business manager realizes the two new check signers do not in
fact have check signing privileges with the third bank.

-- I immediately send an email to the board, explaining what has
happened, and that I will post back as more information becomes
available.

-- In parallel, the business manager immediately emails his "special
connection" at the third bank and gets more instructions on how to
transfer check signers. All board members are cc'd.

-- The "special connection" at the third bank gives several steps. The
first step is for the new check signers to report to a branch of the
third bank.

-- Half an hour later, I report to a branch of the third bank and
explain that I am a new check signer, presenting all required papers.
The clerk checks the HOA account info. The clerk tells me that "Leo"
(the convicted felon now well known in the HOA) is still a check
signer on the account. I say "oh."

-- The clerk gives me a procedure for switching check signers that is
very similar to the other two banks. It includes at least one check
signer to be removed coming in with the two new check signers.

-- At one point I call the business manager because what the local
bank clerk is telling me is different from what the out-of-state
"special connection" specialist wrote. The business manager asks to
speak to the local bank clerk. I hand the clerk my phone. The business
manager and the clerk talk. Then the clerk calls the special
connection specialist. A few things are expedited, but there are still
several steps to complete.

-- I email the other directors that Leo needs to be removed from the
third account and the steps that remain to transfer check signers with
the third bank.

Are the red flags there, and I need to pull the wool away from my eyes? How would you respond to this?