Homeowners Accuse HOA President of Embezzlement!

J.M. from New Haven County writes:

Dear Mister Condo,

My HOA President is embezzling funds from our HOA and it appears he is getting a “bonus” from the contractors we use. What are the correct steps to remove him from his position and possibly sue him (we have evidence of some of his transgressions)?

Mister Condo replies:

J.M., I am so sorry to hear about any HOA having their funds stolen through embezzlement. While it is far from the norm it can happen to any HOA where proper money handling and asset protection protocols are not adhered to. Embezzlement is a crime that can be reported to your local police department. If they don’t act, the association can and should hire an attorney to look into the matter further and take legal action against the embezzler. This could be a lawsuit or could be criminal charges. As far as removing him from his position, you would follow the procedures as outlined in your governing documents. A special meeting of the unit owners is called specifically for the removal from office for this Board member. The remaining Board members are then free to select another unit owner to serve out the term of the removed Board Member and the Board can then reorganize themselves as they see fit. It would not be uncommon for the newly appointed Board member to serve in an “at large” capacity while the other Board members vote on who will fill the various offices of the Board, including President. If the association has insurance to protect them from monetary loss from embezzlement, a claim should be filed. The attorney should review the contracts of vendors who previously offered a “bonus” to the President. If they have violated their contracts, they should likely be terminated and replaced with more reputable vendors. Finally, make sure a better system of checks and balances is in place to prevent this from happening again. A great resource is available free of charge online from CAI at https://www.caionline.org/HomeownerLeaders/ResourcesforHomeownerLeaders/Preventing%20Fraud%20and%20Embezzlement.pdfBe sure your new Board members read it and adhere to the guidelines. All the best!