Embezzlement

Our treasurer let us know he did infact embezzle all the HOA funds, wife did pay back, we took the proper precautions to get him off the old account closed and opened a new. My question is should we notify the insurance company now that the money has been paid back or does it matter? Seems we would be calling attention to something that was rectified.

Thanks in advance.

I looked in the forum search but did not find really what i was looking for.

v

Just curious as to why you would contact the insurance company if you don't need to file any claims against the embezzlement (which is all recovered apparently)?

If he is gone and you have enacted safeguards against a future event, what is the point of informing the insurance company?

The only thing we ever have to disclose is if there are any lawsuits or pending lawsuits that put HOA funds on the line.

Anna, it was a civil action (as the police pointed out), and it's been resolved. All the money is recovered, the barn doors are re-locked.

I'm just wanting to understand what the purpose would be to inform the insurance company of something that is no longer broken and that won't need to incur any claims against the policy.

For example, if I'm in an accident, say someone runs into me, and the person pays for my vehicle and any doctor's costs I incurred, and my car is now repaired, as am I, without involving the insurance company, why would I then call them and say, "Hey, I was in a wreck, but I won't need to file any claims and my car is all fixed and my EMS fees all paid. . . .but, there ya go, now you know. . . "

My suggestion would be to simply ask your attorney if there is a statute in your state that requires any after-the-fact reporting of something that's already been repaired.

If there isn't, then I'd save that call for the point in time where you need to file a disclosure.

No problem, and it's Michele (female).

I can imagine that the wife is quite embarrassed.

The nosy body needs to take a step back and calm down.

Be thankful it wasn't worse and that the insurance company doesn't NEED to be contacted to replace funds.

Valerie,

Even if she does call the ins co I can't imagine an increase in premiums. In the first place, this person is not authorized to make a claim against your policy -- she is NOT a board member. And secondly, there is no claim to make, the issue has been resolved. Ins companys raise rates when claims are filed against the policy and no claim has been filed. I think this person should be told to just but out, the board has taken care of everything.

I think this embezzler really got off easy. I certainly wouldn't fault the BOD for wanting to press charges even though the $$$ has been paid back. Still, a crime was committed and I believe it's worthy of some punishment. A conference with an attorney would certainly be a good thing.

Insurance companies raise rates based on history and assessed risk.

For homes and auto, risk is usually based on claim history. But I think many insurers actually base it on accident history, and use claim history to determine that. If you inform your insurance company that you had a collision while driving, but make no claim, then they may raise your rates.

I don't know if liability rate reviews are restricted to claim history. If you inform your carrier that a crime was committed -- that funds were stolen, they might consider the theft as indicative of risk and the recovery as coincidental.

I think there are legal obligations to report accidents to your auto insurer and to the police; but I would not do so, absent a claim. I think the likely worst repercussion for not reporting an accident to the insurer is that they find out and raise rates exactly as they would have done if reported -- in other words, nil. But I'm no expert.

I would not report this theft. I don't know how the technical reporting requirements in your policy are stated, and you probably don't know either. I would not go to the trouble of looking them up and interpreting them. I suspect this could be viewed as a temporary and inappropriate loan, rather than theft, since the same party (I'm sure a married couple can be viewed as a single party in interest) took it and returned it in full with no harm done. I would expect that anyone who finds out about this in future would be obliged to consider it this way, regardless of how you and your neighbors view it. You exercised the additional diligence of reporting it to the police, and they said, "No crime." But I'm no expert -- if you are worried about it, you should get advice from a professional.

I doubt I would report it, if it happened on my watch.

I agree with Brian, however, I am wondering WHY and HOW this happened.

was it that the treasurer was able to do this under the nose of the Board? Were regular reports not given, a second set of eyes on the transactions (like a fianance committee)?

I also don't see the police view on this. Unauthorized checks were written to someone. THAT is a crime. Depending on the amount it sounds like Fraud, Uttering and Publishing for sure. You need to talk to the prosecuting attorney of your municicpality for more options.

I hope that your board adopts some rules and regulations governing the Treasurer ASAP.

Brian,

Are you an insurance agent?

Why anyone in their right mind wound contact the ins co to let them know they had an accident but didn't need to file a claim is beyond me.

Thanks, Mary.

I'm sure bulletproof is a dangerous fantasy, but it's all about diligence, right?

Steps 1, 2, 4 and 5 look appropriate for volunteer HOA's with no Mgt Co. (I assume the "most important" was intended for the red flags, and the references were meant as #6.)

Since many such HOA Bylaws do not require the Treasurer or Secretary to be Directors, perhaps a practical arrangement is to appoint people with appropriate clerical skills who are willing to volunteer for these chores, and to have at least one (other) Director be responsible for oversight. The common Bylaw template allows for this, so it could be done at the Board discretion or formalized in Bylaws. After all, this is all about oversight.

lol.. no, i am not (although I did have license to sell insurance in Arizona in my past, i never did utilize it).

but in my normal job, it is good mental practice for me to debate both sides of an issue, to build the strongest defense for my side. so, i try it when i can.

Sorry, I disagree in both cases.

The HOA has just demonstrated that they do, in fact, now have a system in place to prevent fraud. They may not have, prior to the incident, but they do now, going forward.

And in the second "devil's advocate" example, um, no, still disagree. The insurance company based their rates on lots of things, including the accident rates in my area, my age, my driving record, among many other things. But whether I have new or replaced parts on my car is not one of them.

Every year the premium decreases because the car is older, I have made no claims, have no speeding tix, etc, AND they assume wear and tear, and part of that is very likely fender benders that repair/replace parts that may or may not get reported to them.

Some banks now allow Online Banking access to business accounts for more than one user with different rights assigned to each. I'm not going to name any because it might be a conflict of interest, but I know of at least one bank that offers such a service tailored specifically to HOAs. There's no reason why each member of the board shouldn't have an account with READ ONLY access to the bank records. That means you could view transaction history and review check images and the like. These users would not be able to pay bills, transfer funds or make any account changes such as adding users or changing addresses. The members with a need and the authority to conduct transactions would of course have the ability to do so. Then each board member should be responsible for logging in every so often and reviewing the accounts, looking for abnormalities and cross checking with any statements that are received from the management company, etc.

I'd like to add some color to the comment that banks don't look at signatures and thus dual signatures aren't very effective. Yes and no. It comes down to the issue of liability. Associations are business entities and are generally not considered consumers for the purposes of consumer protection laws. This means that there's less time to dispute transactions and things like that. Dual signatures on a check will not stop the bank from cashing a check if the signatures don't match. However, that does not relieve the bank of the responsibility for reviewing the signatures. Sure the treasurer could sign any old signature on a dual check and get money but if both signatures don't match it's the bank's problem to refund the item if a dispute is filed in a timely manner.

On the other hand if you only require one signature and the treasurer writes a check to himself and cleans out the account the bank is going to deny the claim because the check was signed by a person with signing authority on the account. Whether that person violated the association's rules and policies in doing so is immaterial. From the bank's perspective the check had the minimum number of signatures by authorized signers so they stamp a big red "CLAIM DENIED - AUTHORIZED MAKER" on your claim and return it to you.

Lastly for the OP, I'd recommend that the board hire a CPA, preferably one who is also a CFE (Certified Fraud Examiner) to do a financial audit. It's not going to be super cheap but you need written assurance from a professional that the association has indeed been made whole and there are no lingering issues that could impact the financial condition of the association later on. You may well have accounted for every penny that was missing but in many fraud cases the actual embezzlement is much higher than admitted especially if the perp had the opportunity to forge invoices and destroy or alter records.

And I read that they did do due diligence afterwards, so, again, we'll just have to agree to disagree.

No reason to contact the insurance company.

But I would still speak to an attorney.

AH, thanks everyone, we did make provisions that this will NOT happen in the future, so far as it will be that two persons will have access to the books and the coming and goings of the funds. There was a "two signature" rule for checks that are over a certain amount and this amount is being thought of and possibly lowered!

We have been fine for so long its still shocking that people are still people! Thanks again.

A Finance Committee could have caught this before.

a Standing committee of the Treasurer, and two members of the community sit down and go over every transaction monthly. That way, there is another set(s) of eyes on the books and the on-goings. Board members don't have time to watch the treasurer's every move and rely on written reports, which can be doctored.

John,

Thread is from 2009