Even before the economic meltdown and the media storm swirling around the thievery of money men like Bernie Madoff, financial mismanagement and fraud have been destructive problems for many co-op and condo owners.
A co-op or condo is a major investment and for many people—it is their largest investment. Residents expect board members and other building management to take their fiduciary responsibility seriously and act in good faith as the caretakers of those investments. While the vast majority of managers and board members want nothing but the best for their communities, not all management personnel are beyond reproach. Because of this, residents need to know their risks for being fleeced, and how to manage those risks through checks and balances that will ensure transparency and prevent fraud.
News headlines around the country abound with cases involving property management companies and vendors rigging bids and embezzling funds. There were major indictments handed down by the New York District Attorney’s office in 1994 and 1999 for embezzlement, kickbacks and bid rigging among dozens of management companies and professional contractors and vendors.
Such a case recently touched the New York City area again when it was revealed that Alan Gorelick, an executive with Saparn Realty Inc., a management company, was arrested January 16 and charged with grand larceny after a cooperative they managed reported funds missing from its reserve account. The case is still pending.
Certain things will make a building or HOA more vulnerable to fraud, such as a concentration of too much power in too few hands. When the board is controlled by a small minority, crooked activity is not only likelier to happen, it’s easier for thieves to get away with their crimes.