V.R. from Florida writes:
Dear Mister Condo,
Recently, I received a letter from a concerned neighbor that revealed some serious issues at our condo. The HOA was dropped by both the auditor and Property Management Company due to concerns over internal controls. Included were copies of letters from each company terminating their services and citing concerns: use of debit card for many unexplained transactions ($12K unexplained ATM withdrawals, $6K debit card transactions at casinos in 2013), the board moved Reserve Funds to operating without approval, paying of invoices in cash – questions of related parties, HOA paying $80 a month for a safety deposit box, personal expenses of HOA president charged to operating expense. I went to my first HOA meeting the day after receiving this letter and it was a complete circus. None of the questions of concern were answered. The most persistent questioner was the former HOA president. The current president proceeded to slander him, claiming that he lost his job with the city by saying the “N” word (he actually said the word which causes quite a stir). The meeting broke up and I talked to some of the other residents (it is a big complex of 400+ units). The stories were outrageous: people who have confronted the president have had their tires slashed, the HOA president racked up $250K legal fees (paid for by the HOA) fighting a $5K fine due to late financials (I’m thinking the accountant had a lot of questions), the HOA president rides around his golf cart wearing a bathrobe carrying his gun. We have assigned parking spaces, recently they were repainted with numbers matching the unit numbers (potential security risk: easy to see who is not home). What would Mr. Condo do?
Mister Condo replies:
V.R., what a nightmare! For starters, I’d probably avert my eyes when the gun-toting, bathrobe-wearing, president drove by in his golf cart. Yuck! On a more serious note, you have a series of serious issues to contend with and while the image of the HOA president you have portrayed is humorous to the point of being cartoonish, I can assure you that theft of association funds, impropriety of governance, and the potential loss to your association is no laughing matter.
I am not an attorney, so please consider my advice as friendly and not legal. For legal advice you will want to contact a local attorney, which I strongly suggest you do. This Board president needs to go and there are proper procedures for recalling him from the Board and then following up with civil and criminal charges if association funds have been stolen, which it sounds like they have.
Your condo documents outline the procedure for recalling a Board member. Generally speaking, the unit owners are called together for a special meeting to recall the Board member, in this case, the HOA president. Once he is voted off the Board, it is important that all access he has to association funds is immediately revoked. Certainly, if he is the one with the ATM card making withdrawals, you will want to make sure that ATM card is voided. Since the Property Management firm has washed their hands of the association’s business, this will require the remaining Board members to work with the bank(s) directly. Again, a qualified attorney is your best option to run you through these steps to assure as smooth a procedure as possible.
Stealing money from an association is a serious crime and is punishable by fines, repayment of stolen funds, and/or jail time. Once again, a qualified attorney will be the association’s best friend when it comes to handling these charges properly. Once the HOA president is out of office, he won’t have the association’s funds to bolster his defense. Have the attorney draw up proper charges and file with the court and/or local authorities if an arrest is warranted. The courts are designed to get to the bottom of a mess like this and it sounds like there is plenty of forensic evidence to prove the wrongdoings of the Board president.
Finally, it’s time to get your HOA back on track. I find it hard to believe that this president was elected to serve on the Board and then elected to the office of president of the Board by his fellow Board members. This is a wake-up call to association members to nominate and elect better people to serve on the Board and watch over their finances and governance. You’ve outlined $18,000 in possible misappropriated funds. The amount in question is paltry compared to the potential money this person had access to and could have stolen. Volunteers who serve on Boards are elected by their fellow HOA members. Did the power corrupt this person so badly that he behaved this way only after he was in office? Or is the community struggling to find qualified leaders from within its membership? Either way, I would suggest that a Nominating Committee may be in order for your HOA. Applicants for office need to be screened for potential problems before they serve. Also, the rest of the Board members need to be much more selective in deciding who will lead the Board as president. Your state has laws requiring that Board members receive training and certification shortly after being elected. Make sure all of your Board members are certified. This is exactly the type of behavior that training and certification are designed to curtail. All the best!