Forensic Audits Following the Money

Just a few months ago, according to various media reports, property manager Steven Dym of the Queens-based Gabriel Management Corp., was facing a lawsuit for allegedly taking approximately $22,000 from a client. The ultimate result from this case, however, was shocking and tragic: Dym, 56, took his own life, along with the lives of his wife, Loretta, 50,  and daughter Caroline, 18, in their Westchester County home, according to a statement by authorities.    

Fortunately, cases of fraud and wrongdoing in co-op and condo communities rarely have such a heartbreaking ending. “It’s a horrible story, but [financial fraud itself] is rare, because most condos and co-ops of any size will have several layers of oversight,” says attorney Slava Hazin of the firm of Warshaw Burstein LLP in New York City. “You have the board, a managing agent, and an outside accounting firm that will do the annual financial statement. There are usually more than enough eyeballs so that if someone is stealing or embezzling a significant amount of money, eventually it’s going to come out.”

While the mid-1980s brought a flurry of indictments of property managers cooking the books, taking kickbacks, and defrauding their clients that has yet to be matched, cases still pop up with some regularity. A few years ago, owner Richard Bassik of Downtown Properties was accused of embezzling nearly $2 million from buildings he managed. More recently, bookkeeper Jennifer De Coteau Ulanov was charged with stealing more than $755,000 from a family-owned company that managed residential buildings in Brooklyn. And of course, there are smaller cases that don’t even make it into the newspapers. Keeping your own building or association fraud-free is a matter of proper oversight, transparency, and vigilance on both the board and management’s part. 

Raising the Red Flags

Fortunately, even the most cunning schemers eventually leave evidence of their wrongdoing – and a savvy observer may be able to catch them, if they know what to keep an eye out for. During audits, accountants, boards and managers look for various red flags that indicate that there may be fishiness afoot, such as missing cash or suspicious activity.

“A properly budgeted building should meet its operational expenses and build reserves each year,” says Nadav Weg of Bosse Management in Manhattan. “If a building consistently runs into shortfalls without major projects or clear explanation, it may be time to consider foul play. For smaller buildings, self-dealing by board members can be a common issue.”

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