Condo Fraud Prevention
Fraudit.org / CondoWatch.org
SHOCKING STORY FROM A PITTSBURGH AREA CONDO
In 2014, a Pittsburgh area condo association was exposed for skipping at least 12 consecutive yearly audits. This could be the longest condo fiduciary failure of this kind in the nation's history.
- the association had hired the same large management company and manager for the entire time
- the association had also retained an attorney from one of the most popular "condo law" firms in the area
- when first discovered, along with several other concerning activities (using an illegal unregistered contractor for over 3 years and multiple payments to a board president's brother-in-law for non-bid contracts), the lawyer made multiple aggressive attempts to dismiss all claims as "defamation" and even threatened suit to prevent the revelations to residents
- the long-time manager never explained or apologized for why he kept completely silent to the Board about the audit requirement for over 12 years; the bylaws are a mere 21 pages long; the current board did not apologize for the failure but wrote that they were not aware of the requirement and were completely satisfied with the manager
- the management company website promises to ensure audits are performed when required
- the lawyer, representing the association, took no action against the management company, but vigorously defended the manager and the company
- the lawyer had months previously stated that the firm had a "conflict of interest" regarding taking any action with the management company; however, the same lawyer did not recuse him/herself from advising the association on these matters; despite thousands of attorneys practicing in the county,
the association did not hire a new lawyer/firm
- the lawyer went on record to state
- that board members should not sign "ethics pledges"
- that contrary to the widely accepted definition, "self-dealing" did not include relatives of board members
- that the bylaws specifically allowed payment for work to family/relatives of board members
(the lawyer read to a primarily elderly audience a passge of the bylaws which makes no mention of "relatives" or "family" as a justification for the self-dealing to relatives in the association)
- after all 100+ owners/residents received notification of the 12-year audit debacle, the lawyer finally admitted that this had indeed occured
- in response to the revelations, a resident was targeted with death threats and other offensive remarks posted on the website designed to reveal the misconduct; the "anonymous" poster actually posed as a resident, specifically using the full name of the resident targeted in the mutliple death threats
- the following month, the Board (still employing the same manager and lawyer), introduced an amendment which would replace the yearly audit requirement for audits every five years and allow the association and management company the ability to commingle (aka co-mingle) funds despite the essentially universal recommendation against commingling of funds in the industry; commingling has been cited as only enabling fraud and theft; owners were given just 10 days to vote ; the association never had even one of the 12+ audits completed when it proposed eliminating the yearly audit requirement
- the Board which had just cited ignorance of the 21 page bylaws now claimed it was qualified to propose an audacious fraud-enabling amendment to those very same bylaws
COMMINGLING OF FUNDS:
NEVER!
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