Absolute Power Curbing Corruption in Your Building

"I'm on the board of my co-op in Queens, and there's a problem with our current president; without consulting the other board members, he has cancelled our upcoming meeting, saying there's "˜nothing on the agenda,' and he signs service and construction contracts without getting more than just one or two bids, and without presenting them to the board for approval. Is this kind of behavior simply unethical, or is it illegal?"

"...Our management company's accountant is a close blood-relative of our managing agent. Recently, the management company attempted to form a trust in the name of our agent's deceased grandmother; shareholders were so skeptical, they hired a real estate attorney to probe the matter. At that, the whole trust scheme was immediately dissolved, and the management company has never mentioned it again. Is this management/accounting intersection really ethical?"

It goes without saying that the overwhelming majority of co-op and condo boards are run by honest, ethical people who work hard - often for no pay and little thanks - to make sure their building is not only a pleasant place to live, but a good investment for the people who own shares or units in it. Even when things go awry in a building, it's more often an issue of inexperience or ineptitude on the part of the board than one of bad faith or corruption. That said, questions just like the ones above are regularly submitted to The Cooperator by readers locked in conflict with their board members or managing agents. Sometimes the problem involves the dissemination of information about a building's finances or business practices; sometimes it's a question of graft or kickbacks from contractors. In a co-op or condo, where a board's fiduciary responsibility often entrusts ordinary people with millions of dollars, temptation exists - and while most people wouldn't dream of taking advantage of their position within their building, sometimes one or two leave the high road for murkier paths.

Not a New Problem

Corruption in New York City is legendary from Boss Tweed to present day - for as long as there's been a city, there have been people in it trying to swindle others. In the summer of 1999, the prevalence of greed surfaced and affected the residential real estate industry with the indictments of some 30 individuals and 10 corporations, who were charged with defrauding co-op shareholders and residents of millions of dollars through kickbacks and bid-rigging schemes. The indicted parties included board members, managing agents, vendors, and even building superintendents, and the 74 buildings they allegedly victimized included both prestigious co-ops and lower- and middle-income Mitchell-Lama and Title 8 buildings.

The More Eyes, the Better

When money's concerned, the appeal of taking a little for oneself can be irresistible for some people. Even with safeguard protocols in place, your board can still be broadsided by fiscal incompetence and blatantly unethical behavior - but there are a few things you can do now to tighten up your proverbial ship.

The first step is to keep all accounts current and accurate and your building's funds fully accounted for. The more detailed you are in your record keeping, the slimmer the chance that money can slip through the cracks unnoticed.

Read More...

Related Articles

When a Board Breaks Bad

Righting the Ship at Your Co-op or Condo

What's the Biggest Mistake Boards Make?

Legal pros share some of the more common administrative blunders boards are prone to.

Controlling Legal Costs

What Can Your Board Do?

 

7 Comments

  • I am a shareholder in a coop building that has very poor cash reserves. In reviewing the lastest financials, there was a $120,000 in decrease of cash, whereas revenues went up from prior year due to increase in maintenance and special assessments and liability decreased. I would like to request substantiation of where the money was spent. I'm suspecting that the board members are either mismanaging the money or stealing it. Please help. Thanks.
  • "It goes without saying that the overwhelming majority of co-op and condo boards are run by honest, ethical people who work hard" beyond cliche, I doubt the how much truth is in this statement. everyone is in for themselves, and everyone has their own agenda, which often times lead to their own interests. I just posted a blog item @ iopenbid.com.
  • I live in a small condo complex and the property manager continually "pads" his pocket when it comes to maintenance issues, work at the complex, landscaping, pool maintenance, etc. This type of work is then billed to the tenants via HOA Dues, tenant direct bill, etc., which in turn ends up "padding" the property managers own pocket. We find this practice unfair, however before anything is said, we would like to know what the law is pertaining to this subject. Thank you pdcali38
  • Absolute power is more like a free ticket to violate laws, rights of others. In a small co op community where I reside, most, if not all owners have limited financial resources. The board resorts to unethical and criminal tactics when one might question anything, fight for their rights within the lease, etc. They harass, talk freely about the owner with intention to cause ill feelings, divide and conquer. Of course, owners will stay away, in fear of retaliation from the board. Isn't this criminal? I fail to recognize them as a board but as a "gang", aren't their actions synergistic of a gang? The constant landscaping that goes on and now a big overhaul of all the front beds to remove and replace beautiful shrubbery and plantings is quite questionable. Why would one choose to plant annual flowers and huge amount of them, they would have to be replaced year after year? Without managing to get involved one cannot find the evidence of what they suspect. No one wants to find their vehicle vandalized or other actions meant to deter, hurt and harm potential exposure. So, Absolute Power is a free ticket to do whatever comes to mind, this is uncomprehensible. Any advice on this one, Phew!!
  • Oh yes it happens in our complex. My georgeous impatience are a beautiful row of sunshine for the past 6 years since I purchased my free standing condo. This year two board member decided just mine shouldn't be there. Every neighbor loved seeing them all neat in a row for just 3 months by the way. Everyone else inclipudimg these 2 board members have flowers in the front also. Just not my kind. Amazing after the minutes were delivered in my storm door, the next morning a stone basket of flowers were dead! Georgeous that night but the next morning dead! I took them to the farm where we purchased them and they tested it to be bleach. We emptied the pot cleaned and filled it again with new flowers. Another $30.00 for the new plant. The next monthly meeting the minutes come around again, by the way it was the presidents husband who wants our flowers gone, and the next day not only was my plant dead in my stone basket, all my impatience were dead like sticks in the morning. We were crushed, saddened by such vindictive people, although we know in our hearts, can't prove it. We have two board members whose authority is for themselves. We are single family homes, everyone so nice and neat homes and people, but they pick and pick on ones they don't like. My husband and I are very well liked and enjoy parties and fun for everyone. We invite everyone to attend and never would ever single out anyone but they do not attend which is their choice. We want them off the board, even one of them. We just found out that the President is having extra work done with our landscaper and driving him nuts doing extra things atoned their property that none of us get. We pay for hills in back of our yards being done with our own monies or hard work with some that do it, and she gets it done for free. I asked the landscaper why is he doing this? He says she hasn't threatened, but insinuated we can get a new landscaper anytime. Several workers have told me the same thing. I just happened to fall on all this. I took pictures of them mowing her hill, which was said at several meetings are the u it owners responsibility if they want it done. Can anyone give us some advise how to start this conversation with our pictures of proof. Also isn't this a breech of her fiduciary responsibility to all of us to be honest and trustworthy. If she could do this so blatantly in the open, why should we trust her with anything else? This person holds vendettas with everyone and uses it. Not a happy camper she is with anyone who challenges anything she does or says! She is out spoken, mean to people and so rude with her looks, comments etc. She was not elected, just came on the board because someone quit, then no one wanted to run, so she was just put in. How can we get her off? Do we need 2/3 or can we hold a special meeting with 20% as it says by law. Do we have to get proxy votes to ge ther off? Or can we vote her off at this monthly meeting and ask her to resign? Any help. This board will not approve getting an attorney for this 39 units. We all paid $329,000 to $400,000 for our homes and have $100,000 in the bank and stocks. So these are not low income units and we have no attorney. They like the control and do not want anyone overlooking the board. We have ONE board member who is with us. She was our President, but these two directors voted her to vice president and made herself President.
  • I am VP. I believe our Treasurer is accepting a kickback. We considered changing vendors, and he threw a fit. When I checked, his (required) insurance is with this vendor too--for years! And I know in my heart there is more going on, but this is all the 'proof' I have. Is it enough to take action against him of ANY kind?
  • My suggestion to posters is to support new laws sitting stale in Senate, e.g., Co op Condo Ombudsman, licensing management, etc. Change.org is a great site to start a petition, get signatures, write, write, write and call representative. Be proactive and help to create change or you can just sit there and be violated! Make your choice!