Attorney Katerina Tsoukalas-Heitkemper received a successful result for her condominium association client after an extensive four-month forensic investigation led by Kathy (with the assistance of her HOA law team and client) revealed that the Association’s former employee, a licensed on-site community association manager, had committed multiple acts of theft and employee dishonesty over a four year time-frame resulting in a financial loss to the Association in excess of $150,000. A newly elected Board President asking lots of important questions at the beginning of her term churned up information that did not seem to “add up”. This initial inquiry and the hiring of Tressler’s HOA law practice to terminate this dishonest employee and aid in the investigation and pursuit of civil and criminal charges against this former employee, revealed that the former employee had stolen over $150,000 by concocting various schemes to defraud the Association of its precious financial resources. Kathy’s forensic accounting expertise and skillful lawyering resulted in a 2,000 page proof of loss claim being tendered to the Association’s crime and theft insurance carrier—the claim was so detailed and articulate that no further evidence was needed by the carrier to process the claim and full recovery of the amounts claimed were recovered by the Association.
While this particular Association got lucky in that it had a crime and theft insurance policy to cover the loss, many other condominiums and homeowner associations are not as fortunate and can never recover when an employee or board member commits theft. Here are some important steps that an association can take to ensure that safeguards are in place to protect against such theft and loss:
- Ensure that your association has the appropriate insurance coverage. This should include director and officer’s liability insurance coverage, crime and theft insurance coverage, workman’s compensation, etc. Consulting with an insurance industry professional who specializes in insuring condominium and homeowner associations is recommended.
- Reviewing your books and records on a monthly basis. This should not only include a thorough review of the monthly bank statement but a review of the receipts for any expenditures for which association financial resources were utilized.
- Ask questions and be active – failing to act is a breach of your fiduciary obligation to the owners who elected you to serve on the Board. Do not leave yourself vulnerable to a lawsuit – you could end up being personally liable!
The lesson to be learned – do not be complacent and assume that all employees and board members are honest and trustworthy—it’s all about following the rules and making sure there are checks and balances in place, so this does not happen at your association.
Should you wish to discuss implementing rules and procedures at your association to ensure that the board and the association’s members are adequately protected, please reach out to one of Tressler LLP’s HOA Law attorneys for assistance.