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Our building has corrupt Board of Directors, this corruption with finances have been going on for years. After reviewing our finances we see that in order to pay our bills the Board have been dipping into our reserve account to make up for the shortfalls we have been incurring. We have $176,000 as of last month, they spent almost half million dollars on major capitol improvement, which in no way this amount of work was done. They have incurred liens on the building which cost us $55,000 for breach of contract and another $5,000 for breach of railing contract. They spent over $60,000 in legal fees last year (total willful misconduct). The attorney just happened to be a friend of the members of the Board. The contractor was a friend as well. Now we have gotten an assessment of $1.00 per share which will raise another 98,000 in their possession to disappear. My question is, hopefully, this coming election to remove this corrupt Board, how can the new Board make this building financially solvent without an expense to the Shareholders? One way is to cut our employee payroll. How else can we help this building?
Our Board is split 5 against 3, the five make up their own rules and regulations do not abide by our By laws, they give out fines which are illegal, they only do repairs for those who sign proxys for them, others get harrassed and fined. They have extorted signatures for their proxys. They allowed their friend the Super move out of the building into his new house in a different neighborhood, hired an incompetant to live in the super's apartment, pay him a salary plus union dues, free apartment,gas,electric,phone,cable service, free parking. All this just to replace the super who lives out of the building, still gets a salary without doing his work and we pay for his union dues, gets a free parking spot and if he does do work in the building he expects Shareholders to pay him for anything he does, including illegal renovations on our time. This is part of the corruption. The President of the Board has two apartments, one was her son's until he got arrested for dealing pot, she transfered his shares into her name without paying transfer tax. Her son now sublets without paying sublet fees of $25.00 monthly like other do that sublets. We found through our financials that she paid two Shareholders $3,000 for their proxys and labeled them repairs and maintenance. Since when do co-op's pay Shareholders for their repairs and maintenance and it happened to be the same amount. Yes, we intend to do a forensic audit when and if we win and take over, it will be well over due. When I said cut payroll, we don't need a body to live in the super's apartment that does nothing but sun bath outside our building and talk on his cell phone. As far as the Super we need one who will live in the building and work for the Shareholders. They breach their fiduciary responibility every day and yes we do have BD&O insurance which will be a path we will take with cause. They linked a checking account to the reserve account, when we have an operating account, why are bills not paid from the operating account? How we picked this up was when we went to management to do an audit all the monies that were paid out to the construction company was not disclosed becuase the reserve was in a seperate account held only by the Board's five members. How do I search for these analogous postings? I need to help the shareholders and save my home as well.
Thank you for your response.
Sincerely;
DD
This sounds, (all that I have just read from everyone)just like my building, it's awful, a forensic investigator might help but that costs lots of money. Is the Managing Agent just as bad? I would suppose so, because ours is since they only listen to the majority of the members. We have issues where our board made a separate board within. I would like to hear some ideas.
Yes, the management company is just as bad. We fired them three years ago. Just before these people were elected a new management company was brought in, when these people got elected they tried to corrupt the management company, they refused to participate in our politics, they did nothing for the building and waited till they got fired. These people brought in another management company, they tried to corrupt them, they refused and quit. Now they brought in the company we fired, because they were always corrupt and now they are once again violating their fiduciary obligations, putting on illegal fines to shareholders maintenance statements. They even brought in their own corrupt attorney to work against us.
We had to hire our own attorney to protect us and hopefully, we will win and overthrow them in the upcoming election.
Could you share the name of your attorney - we need to find an honest lawyer who is able and willing to take on a corrupt condo. We also need a forsenic accountant who would work for a percentage of monies recovered.
Our board stays in power by bribing a few influential owners who then sway opinion from their friends. These people are loud bullies and most owners don’t want to cross them.
Our board also stays in power because our management company is able to manipulate and strategize keeping their friends on the board to the detriment of anyone who votes against them. Who is your management company???
How about if everyone in a corrupt building writes a report to the Attorney General and sends it on the same day. We can alert the press that condo buildings will be doing this and we hope that potential candidates that hope to be elected to the attorney general’s office will investigate and prosecute corrupt boards of directors and corrupt management companies. If we can get this into the press and the attorney general’s office gets enough complaints, they could use condo corruption as a campaign issue. What do you think?
Are you located on the UES. Sounds very like the building I reside in.
Billy.
Do you know anyone in the attorney general's office that would help with an out of control and corrupt board.
Dear Harry B. The Attorney General does not interced in privately owned Corporations. We are basically on our own. What you must do, is take over the Board, write letters send it around the building enlighten the Shareholders on what is going on in the building. Collect proxies and get an honest team together. Once you get them off the Board, hire a good attorney for the building and do a forensic audit and sue each member for willful misconduct, breach of their fiduciary obligation and other counts that the attorney and the audit will reveal. What State are you in?
Corrupt is a very strong word.
Reserve funds are there for rainy days ( unexpected repairs ) or for capital improvements.
The new board will have to work very closely with the management agent and the corporate accountant to review expenses and contracts. There's always a better deal out there.
You can keep an eye on Payroll and avoid overtime. You might be able to cut a shift here and there, but try to avoid cuts that would affect services that shareholders expect.
If you have doubts about the performance of your corporate attorney, CPA or management company ... you should consider replacing them.
It's important to surround yourselves with a good team that will work for your building and its interests.
This is going to be a long and time consuming process, if things are as bad as you describe.
I understand that corrupe is a strong word. Bills are being paid from reserve account. After reviewing the reserve account in Sept. 09 we had $115,952.42, than in Oct 1 thru Nov 30th. there was $79,384.00 how did they know in Oct, what Nov will have, the statement for Nov. disappeared. Which now leaves $36,568.42 missing without any explainations no checks written out in that amount. Comes December 09 a check was written out for $3,685.48 without explaination to who or what for. Why would you use the reserve to pay month to month bills, when we have an operating account.
Before they took over we had $244,000 in reserve, we refinanced our mortgage and took out half million dollars for construction. They used their own company to do the construction, which the scope of work was cut in half and most of the work that was to be done was never done. They breached old contactors contract which put a lien on the building for $150,000, breach contract for railings for balcony which cost us $5,000. Arrears in maintenance went up to $40,000 uncollected because these people signed their proxy's. Where is our money, they refuse to give our attorney the financial statements and other financial documents,bids for the construction, garage list etc. Our attorney had to file in Supreme Court to attain these records. The list goes on and on.
Why not go after the people that are stealing your money (board and management?) instead of laying off staff. After all why should a hard working staff member suffer because someone else is corrupt?
MRM.
My Goodness are you speaking of my coop. We are having very much same problems. Majority rules and as corrupt and self-serving as they come. Visited with Attorney General and of no help. If your situation is solved, please report back. All in all, shareholders are entirely at fault as they tolerate these incompetent board members and keep electing them year after year.
You need to overthrow the board. If you would like to know how we helped a building overthrow a board, and then helped the new board increase cash flow by $250,000 annually since then, without laying of staff, please contact me directly: tina@thecoopblog.com
This blog seems to be filling a vacuum. It seems to be offering objective assistance to shareholders who want to take action to create an educated, effective board in order to put their building on a sound long-term financial footing.
Is there a fee for this service?
Thank you for your comment. Yes, we were inspired from our own experience and our professional expertise as financial professionals. We therefore started a professional service helping other boards. We are happy to offer free advise or to be engaged for a professional review charging a small percentage of actual savings/increased cash flow. If engaged in a deep dive, no upfront cost/risk.
If your allegations are true then this is a police matter, it's called Grand Larceny. I do hope you have proof of these corrupt members. I would take all your paper work (evidence) that is backing up these serious allegations and bring them to your local police station/district att. office. What you are stating is a very serious crime. You will need no money by doing this just proof to back up what you are saying. Good Luck
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To become solvent will cost money to pay for past sins.
Cutting payroll cuts services, not always a good path.
Corrupt is a very strong word.
One may use fiduciary irresponsibility. If there is BD&O insurance, and one can prove any illegal action, the current board members can be sued. But, “stuff” you are relating does not seem to give rise to this path.
Drawing down reserve funds is not “illegal”, rather it is a stupid and irresponsible management practice to pay day-to-day expenses from the reserve fund. This also impacts your “individual” tax statements and tax basis at sale time as the reserves are typically set aside and treated differently.
So, financial controls are imperative, good practices re important. Audited statements are a must. If one suspects defalcations, then a forensic auditor may need to be engaged.
If the situation is as represented, there are many analogous postings herein these Board Talk forum. One needs to “search”.
One must wrest control from the incompetents (being charitable) and install professional managers. Remember, running a building is not running a fraternal club or a coffee klatch. Rather, running a building means running a corporation, acting with total fiduciary responsibility (e.g.; putting aside friendships, personal gains, personal desires, subjugating one to the whole). It means the Board acts like a Board.
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