Get 1 year of free community web site hosting from Community123.com!
Wednesday, October 27, 2021











HOATalk is a free service of Community123.com:

Easy to use website tools to help your board
Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.
Subject: What to do when I suspect HOA embezzlement?
Prev Next
Please login to post a reply (click Member Login on the menu).
Author Messages
NataliaZ
(Washington)

Posts:7


09/16/2021 4:48 PM  
We own 4 properties in 1 HOA that only maintains private roads and my husband is VP for 3 years and I'm a board member for 2 years. About 130 lots and most of them have 5 acres. 3.5 years ago one guy got himself into a president position by taking over the HOA from previous president who failed to maintain the roads due to serious illness and that nobody wanted to take her place. New president appeared only 1 year prior and nobody knew him. Soon he started talking about changing our bylaws that were "poorly written". He also put his wife on board even though our bylaws stated "one membership per lot owned". We point out this to him few times but he always had something to pin on us that later we found wasn't breaking any laws or bylaws -- it was just him blowing dust so we would stop going after him.

Long story short, we never had any access to the HOA funds. It was him and a treasurer who was very "by the book". One of my duties was to check her ledger with bank statements and initial. Then she stopped giving them to me and she was always giving me the printouts so I told my husband who is VP my suspicions. He asked about that at the next meeting and she told us she will bring them to the next meeting. On next meeting 3 months were missing. Also they were printouts again. So my husband requested to see HOA bank account website and it was declined by the president. His reply was "I don't trust you." After our 3rd request we both got "removed from board" at the meeting we weren't given a location and couldn't attend. Later he, his wife and treasurer listened to all recordings of meetings to find any "dirt" on us. They come up with 10 accusations that were mostly personal opinions, half truth and assumptions and none was breaking our bylaws or state HOA law. But their actions were breaking our bylaws and state law.

We emailed that to them so president threaten to send all members the list with 10 accusations to tell them who we are. Treasurer resigned and it was due to the fact we later discovered that HOA didn't had the D & O insurance coverage. So on board left was only him and his wife who couldn't be on board because of our bylaws. Also he sent to all members his accusations about us and that we were removed from board. There is a FB HOA group that was opened by someone that was on board and president with his wife were added as admins. We were in that group but my husband was removed due to his posts about "HOA talk". Annual meeting is on 4th Saturday of September which is in a week and 2 days. What can we do to stop him? Our option so far is hire a lawyer at our expense. We posted few times in that FB group about him breaking the law and bylaws and our reply to his accusations but the posts were removed (of course). We called the police but they beat us to it. They called the police and told them we are harassing and slandering them. I searched public records and found that they both have criminal convictions in 2 states and they both served time and had warrants for arrest but police reply was "give us the evidence they are stealing now because we are not interested what happened in the past."

Also I found the copy of his proposed NEW bylaws and they are pure evil with members giving HOA all the rights and they can impose anything from color of the house paint to the rights to enter any lot for inspection and repair and have a continuance of liens for all fees annual and "special", including foreclosure. Most likely he will try to vote on them on this annual meeting in 9 days. They are 22 pages and I doubt anyone will read them. How can we stop him and remove him???
AugustinD


Posts:1695


09/16/2021 5:26 PM  
Posted By NataliaZ on 09/16/2021 4:48 PM
Annual meeting is on 4th Saturday of September which is in a week and 2 days. What can we do to stop him? Our option so far is hire a lawyer at our expense. We posted few times in that FB group about him breaking the law and bylaws and our reply to his accusations but the posts were removed (of course). We called the police but they beat us to it. They called the police and told them we are harassing and slandering them. I searched public records and found that they both have criminal convictions in 2 states and they both served time and had warrants for arrest but police reply was "give us the evidence they are stealing now because we are not interested what happened in the past."

Also I found the copy of his proposed NEW bylaws and they are pure evil with members giving HOA all the rights and they can impose anything from color of the house paint to the rights to enter any lot for inspection and repair and have a continuance of liens for all fees annual and "special", including foreclosure. Most likely he will try to vote on them on this annual meeting in 9 days. They are 22 pages and I doubt anyone will read them. How can we stop him and remove him???
-- NataliaZ, to address all your concerns as quickly and effectively as possible, in my opinion you should review how directors are elected; find candidates who are willing to run, including, if allowed, candidates being nominated from the floor at the annual meeting; gather proxies as allowed by by your bylaws and state law; vote these folks out of office; and vote against the bylaw changes.

-- If you meet with an attorney, what I wrote above is what I believe the focus of the meeting should be. This is because time is short.

-- Do not accuse these folks of embezzlement. Where possible at board meetings and the annual meeting, ask hard questions that expose what you feel is wrongdoing. I advise this approach because you simply do not have hard evidence at this time.

-- I agree with the police's response. If what the police said surprises you or seems illogical, then this fight to replace these two directors is probably beyond your skills.

-- If you have hard proof of these folks's criminal past, and if this is public record, I feel you should consider letting the other owners know. Do not embellish the facts. Speak without emotion.
MelissaP1
(Alabama)

Posts:10534


09/17/2021 4:25 AM  
How did this person get elected? Do you know your election process or processes? Do you know how to do a recall? It seems before you start accusing people of being crooked or criminal, you may want to verify the right terms. It sounds more like the President and his wife may be trying to get things in order. The lack of participation on every member allows them to do it.

Former HOA President
MichaelS56
(Minnesota)

Posts:279


09/17/2021 6:10 AM  
Our Association books are audited each year. Have your books been audited and if so what does the accountants report indicate?
NataliaZ
(Washington)

Posts:7


09/19/2021 7:18 PM  
He and treasurer took over HOA from previous president who got seriously ill. They get re-elected each year due to the fact that most people are busy and/or not interested in volunteering. Also nobody knows our bylaws or state law for HOA. We only got on board because of 4 properties we own and that we recently retired and were developing our new home here. First year it was hard coming to the meetings because we lived 30+ miles away but something weird was going with the 3 of them so we stayed. During the construction and our move it was even harder but we managed because we had the feeling that they want us to leave. Everyone else who was on board during his presidency has either left or was asked to resign for whatever reason like non-attending or they found something on one member and didn't even check if it was the truth. Treasurer went straight to his house and asked for his resignation. He agreed because of "all the scrutiny". Now I think that they were watching us from the beginning and waiting when we make a mistake or brake the law. But in 3 years nothing happened and they got desperate.

When we asked for access that should've been given to VP from the beginning according to our state law and our bylaws, all hell broke lose. Treasurer threw a tantrum and resigned. President called this "bullying and harassing" and listed as 1 of the reasons for removing VP. Asking for access is not bullying and harassing anyone. We didn't ask for access to his personal account but they acted like we did. And they broke several state law and our bylaws like they don't exist and it's a criminal behavior. Also they lied about us without any shame or regret. All this made me do a search on them in state courts public records and I found for both of them a long list of court cases including criminal convictions, the last one being 1 year before he became a president. Some of the charges were

After one member started asking him the right questions and showing the WA state HOA law, he posted on FB HOA group that our removal "was not done properly and will be put to vote on annual meeting." But seems like everyone either turns the blind eye or just too busy or ignorant on the fact that they are breaking our bylaws and WA state law like they don't exist. I'm sure that if one of us broke just one law or bylaw, they would see that we've been voted out. They even trying to get us out without us breaking anything but asking them to give access to HOA information and finances that by our state law all members of board of directors should have. And they call this "bullying and harassing". It's actually what they are doing.

We are very sure that him and his wife are not trying to get things in order for the benefit of people but they are making it a "family business". This HOA have been doing just fine since 1986 with current bylaws and we don't need someone telling us what color the house should be or someone entering the property with only 24 hour notice (that goes against state law of 48 hours) to look for any "violations" and giving us 1 week to fix it or they will fix it at our expense. Also new bylaws states that each member will have a continuing lien upon the property against each assessment made together with interest and reasonable attorney's fees incurred to collect such assessments. So literally we all become indebted to HOA, all 130 properties because from the looks of it, each 5 acre lot will have at least 1 "violation" found. If this is not harassment and money extorsion, then I don't know what to call it? Also forgot to mention another article in his new bylaws "the foreclosure for non-payment and HOA will have the right to keep, rent or sell the property."
NataliaZ
(Washington)

Posts:7


09/19/2021 7:23 PM  
Who is enforcing WA state law? He broke WA state HOA law numerous times but the police are only interested in "hard proof" that he took HOA money. Of course, he is guarding HOA account like a hawk. Obviously he knows that without the proof there will no case. What to do besides spending our own $$$ on a lawyer?
MelissaP1
(Alabama)

Posts:10534


09/19/2021 7:49 PM  
This isn't a police matter. May go to the District Attorney's office ONLY if you have proof. Which what proof do you have?

Former HOA President
CathyA3
(Ohio)

Posts:2475


09/20/2021 5:47 AM  
Here's what I would do if I were in this situation:

* Formally request financial records that I am entitled to see - maybe last year's financial statements along with copies of contracts, a copy of the latest reserve study, and a copy of the last audit results. Make the request in writing, citing relevant bylaw article and/or state law about what records I am entitled to see, and send it certified return receipt requested. I want proof that the request has been delivered (some states also have a time limit in which the records must be made available).

* Do a thorough review of all this to make sure all expenses make sense. This will take a while, and if you're not used to dealing with association finances, then perfectly OK stuff may look "off".

* All expenditures should be matched to bills/statements/contracts/etc. If they can't be, an auditor would cite this. However, this may not be a smoking gun - it may only be evidence of poor record keeping.

* Skilled embezzlers probably won't go after HOAs - that's penny ante stuff. Which means if there is something going on, there should be some smoking guns because the embezzler won't be hiding their tracks too well and these will probably involve small amounts.

If nothing interesting turns up but I still dislike the way a group is running the show, then my options are fix it, live with it, or move. The usual way to fix things is to have enough allies who see things your way and to get enough of you elected to the board to have a majority. If my neighbors are apathetic, this may not be an option - if they aren't apathetic, it is still a lot of hard work and, is probably a multi-year project, and is not everyone's cup of tea. If fixing it isn't on the table, then I need to decide if I can live with things as they currently are, and if not then it's time to call a realtor.

Calling a lawyer is my least-favorite option since it can involve a lot of personal expense without any guaranteed result. If you end up suing the association, it will also have negative impacts on the association as a whole (eg. increased assessments to pay for legal expenses and possibly lowered home values since buyers/lenders may not want to touch your community until the legal mess is settled). And be prepared to become the neighborhood pariah - your neighbors will not thank you for this, no matter how badly the current board is behaving.





NataliaZ
(Washington)

Posts:7


09/22/2021 2:38 AM  
The problem is that he is a criminal and criminals don't play fair so most likely the voting will be "rigged" on this annual meeting (hint: proxy votes). Is there a way to prevent it? I think that we have some allies because when he mailed his accusations about us to everyone, many didn't think it was professional or fair. Some searched public records and found his criminal history so now many know who he is. Hopefully everything will be ok.

We have requested the access but he is not providing even after agreeing that we are still on board. He said that after special request, he can give us copies but not the access. He's really trying not let anyone to see HOA bank account.
MelissaP1
(Alabama)

Posts:10534


09/22/2021 4:08 AM  
So this leads that they are doing illegal activity? That is a pretty big jump. Ever think of taking a different view? You don't get proxy votes to be voted in unless there are people voting their proxies for that person.

I can't listen to people whom go down the "they are crooked" route. I need a bit more details than just your personal opinion. So far have not seen anything leading me to think "embezzlement". Not allowing access to the bank statements doesn't mean one is embezzling money. No one owes you copies. Just allow you access. Plus one should pay for those copies. They cost money and time to produce.

So please give more details on exactly what equals criminal activity or just not doing what you think needs done.

Former HOA President
NataliaZ
(Washington)

Posts:7


09/23/2021 2:54 PM  
He is breaking our state HOA law and our bylaws like they don't exist. Then using his position and his access to all members emails and addresses, he sent out his list of accusations and lies about us to all HOA members as the reason why he removed us from the board. That alone was breaking at least 5 state laws from Chapter RCW 64.38 and our bylaws times 2 (for 2 people). I recognized the criminal behavior and searched the public records. I found a long list of court cases including criminal convictions for them both. Court cases stopped 3.5 years ago when he became a president. I guess it's due to the fact that he didn't get caught. One other member called him out on breaking the state law when he removed us so he posted on FB HOA group that we are still on board and "our removal was not done properly and will be done at annual meeting by voting". Not really an apology but he still didn't give us any access to documents or finances so we can't get any "hard proof". I wonder if contacting the lawyer will help to get subpoena for the bank account website. I know what to look for to get proof and that's why he's guarding the account like a watchdog.

If you search for the signs of HOA embezzlement, not giving an access to HOA bank account listed as one of them. We asked to see the website without any credentials and the answer was still "no". Vice President is a member of board of directors and by state law and our bylaws they all have same access and rights. His new bylaws list president literally as CEO of the company calling all the shots. Based on his past, he was a thug all his life and people were treating him as a low life. Then he moves to our nice and friendly community far away from his old life. All of a sudden he's given an opportunity to be called a "president" and an account with ten grand in it. No criminal will say "no" to that! Treasurer is "the brains" in this operation. I don't know how they become a team since she seemed like an honest person that followed the law. But then I noticed that it only applied to us and she was turning the "blind eye" on his breaking the law and always supported him 100%.
NataliaZ
(Washington)

Posts:7


09/27/2021 10:49 AM  
At yesterday's annual meeting we saw something we were suspecting for a while: president is just a puppet and ex-treasurer is the one who is the brains of this operation. She is smart and looks like ruthless because of the way she tried to destroy us. The 3 of them conspired to commit HOA fraud and get rid of anyone else on board. It wasn't hard to do except for us because we actually read the new bylaws and were horrified, especially with 4 properties we own there. Those bylaws more applicable to condominiums in Seattle than to rural area 5 acres lots without any common areas, or playground, or clubhouse. We only maintain private roads. First 5 pages contained legal descriptions and most stop reading before they reach the real "fun". Ex-treasurer was saying that some HOAs are so powerful and have so much money and foreclose on people's houses. We didn't like that idea and knew that she was checking us if we want that. We stayed all this time to prevent them from voting and implementing them. At the meeting it was an "angry mob" wanting to "crucify" us and not letting us say a word to our defense.

I really hoped that people can see and understand that president's behavior was not appropriate but with ex-treasurer backing up the lies about us it didn't take much to turn trusty people against us. About 15% showed up out of 130 because for $150 a year most of the members don't care to go to the meeting.
Those who showed up were turned against us and were attacking us. Their unbiased investigation of HOA finances was led by ex-treasurer who presented her accounting firm audit that said everything was good. I understand that those who never done any accounting can easily trust that. I did accounting for over 15 years and know that accounting firm checked whatever she gave them. I also suspect it could be a "cooked" report because she used this firm for tax returns and have their letterhead. In the past she owned a computer software private business that she closed.

We know the real reason why she resigned and it's because she failed to purchase D&O insurance coverage and I have an email to prove it. She thought that HOA liability insurance included that coverage and emailed our agent in June to inquire about it. Agent replied that we didn't had that coverage so she resigned.

I had a short conversation with one lady who gave us meeting agenda. At first she was repeating those lies about us but when I asked her simple question "Why they didn't show me the bank account website to compare? I only wanted to compare to make sure that I'm initialing the actual statements." She changed her attitude and said that she was confused. Also she said that president fixed her road with his tractor. I remember that treasurer was "compensating" him for fuel in the past. And after first meeting at his house, he bragged and showed us HOA attachments for grading that they took from previous HOA board members and kept on his property. My husband really liked them and asked if he used them on his lot and he replied of course. Treasurer was not happy about it and ended the conversation with being late to some event.


I am not a lawyer but I feel that conspiracy to commit a fraud is much serious crime. Which profile attorney handles it? Is it still civil?
CathyA3
(Ohio)

Posts:2475


09/28/2021 5:52 AM  
Posted By NataliaZ on 09/27/2021 10:49 AM
... snip ...

We know the real reason why she resigned and it's because she failed to purchase D&O insurance coverage and I have an email to prove it. She thought that HOA liability insurance included that coverage and emailed our agent in June to inquire about it. Agent replied that we didn't had that coverage so she resigned.

... snip ...




If I were on the board and discovered that we had no D&O insurance, I'd resign so fast people's heads would spin. It has nothing to do with not being honest, it has everything to do with not being stupid. (Dishonest people generally try to cover their tracks without a big song and dance. Of course it's possible to be both dishonest and stupid.)
AugustinD


Posts:1695


09/28/2021 5:59 AM  
Posted By NataliaZ on 09/27/2021 10:49 AM
We know the real reason why she resigned and it's because she failed to purchase D&O insurance coverage and I have an email to prove it.
It is the Board that failed to purchase D&O insurance.
NataliaZ
(Washington)

Posts:7


10/02/2021 2:42 AM  
She was the one who purchased it. She kept saying how it's important to have it in case someone sues the board because even though we are volunteers, we still can get sued. BUT D&O coverage does not cover intentional stuff so....
AugustinD


Posts:1695


10/02/2021 6:56 AM  
Posted By NataliaZ on 10/02/2021 2:42 AM
She was the one who purchased it.
This does not matter. The statutes and covenants say the board is responsible for running the HOA/COA. The Board as a whole had a duty to arrange for D&O insurance.
JohnT38
(South Carolina)

Posts:768


10/02/2021 7:47 AM  
Posted By AugustinD on 10/02/2021 6:56 AM
Posted By NataliaZ on 10/02/2021 2:42 AM
She was the one who purchased it.
This does not matter. The statutes and covenants say the board is responsible for running the HOA/COA. The Board as a whole had a duty to arrange for D&O insurance.




Absolutely agree.
Please login to post a reply (click Member Login on the menu).
Forums > Homeowner Association > HOA Discussions > What to do when I suspect HOA embezzlement?



Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.







General Legal Notice:  The content of forum messages are from the posting member and have not been reviewed nor endorsed by HOATalk.com.  Messages posted by HOATalk or other members are for informational purposes only, are not legal or professional advice and do not constitute an attorney-client relationship.  Readers should not act upon this information without seeking professional counsel.  HOATalk is not a licensed attorney, CPA, tax advisor, financial advisor or any other licensed professional.  HOATalk accepts ads from sponsors but does not verify sponsor qualifications nor endorse/guarantee any sponsor's product or service.
Legal Notice For Messages Posted by Sponsoring Attorneys: This message has been prepared by the sponsoring attorney for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Readers of HOATalk.com should not act on this information without seeking professional counsel. Please do not send any sponsoring attorney confidential information unless you speak with the sponsoring attorney or an attorney from the sponsoring attorney’s firm and get authorization to send that information to them. If you wish to initiate possible representation, please contact an attorney in the firm of the sponsoring attorney. Sponsoring attorneys that post messages here are licensed to practice law in a specific state or states as indicated in their message signature or sponsor’s profile page. (NOTE: A ‘sponsoring attorney’ is an attorney that is a HOATalk.com official sponsor and is identified as such in the posted message or on our sponsor page.)

Copyright HOA Talk.com, A Service of Community123 LLC ( Homeowners Association Discussions )   Terms Of Use  Privacy Statement