—Concerned ShareholderA “The ‘Sunshine Law,’ also known as the Freedom of Information Law, only pertains to an individual’s right to obtain information from the government,” says attorney Andrew B. Freedland, of the New York law firm of Rosen Livingston & Cholst LLP. “However, with “millions of dollars missing” without explanation, there are other avenues for you to resolve the situation.
“The board of directors of a cooperative (and the board of managers of a condominium) have a fiduciary duty to the shareholders and must maintain proper books and records of the cooperative. Because at your most recent board election, the entire board was replaced except for one individual, you have a mandate, thus, the board should be able to take the appropriate measures to investigate the situation. If a majority of the board is concerned about accounting irregularities, it should first address the situation with the accountant who has been preparing the cooperative’s audited financials. Any board member (especially the treasurer) has the right and the fiduciary duty to inquire as to accounting irregularities. If the board’s concerns are not thoroughly addressed by the cooperative’s accountant the board may by a majority vote hire a forensic accountant to review all of the cooperative’s financials. Once such a review is complete, the board may then take the appropriate action against the party responsible, if any, for the allegedly missing funds.
“Because officers are elected by the board, you may want to remove the president and replace him or her with one of the recently elected board members (you should check the bylaws of the cooperative to determine the procedure for removing an officer). Following the election of a new president, the former president will continue to serve as a member of the board, but will no longer be an officer. Furthermore, you may want to consider hiring new counsel and a new accountant if you believe that your current attorney/accountant were too closely tied to your former managing agent.
“None of the members of the board should be “kept in the dark” with respect to the cooperative’s finances, but in fact have the right and the duty to review the books of the cooperative.”