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Subject: reseve fund theft
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Author Messages
RexR1
(Arizona)

Posts:1


01/16/2018 4:32 AM  
live in a 55 plus community of 120 units. Recently the president of our community took $150.000.00,and placed it into a C.D. that only pays 1.39% interest for 15 months. Our rules and regulations state that the reserve fund cannot be used for any kind of investment. He had no information of any kind from the Compass Bank, which he was totally set on having that bank be the only place to put the money with no other bids from anywhere. The banks' home office is in Spain With a few bank outlets in America. What proceedings can be done to get our money back?
AugustinD


Posts:2915


01/16/2018 5:20 AM  
Posted By RexR1 on 01/16/2018 4:32 AM
live in a 55 plus community of 120 units. Recently the president of our community took $150.000.00,and placed it into a C.D. that only pays 1.39% interest for 15 months. Our rules and regulations state that the reserve fund cannot be used for any kind of investment. He had no information of any kind from the Compass Bank, which he was totally set on having that bank be the only place to put the money with no other bids from anywhere. The banks' home office is in Spain With a few bank outlets in America. What proceedings can be done to get our money back?


Who had authority to write a check or move funds from one account to another? Is this authority documented at the bank? If so, and the bank violated its own rules, I imagine you could get the CD cashed in without penalty. If not, the rest of the board could tell the bank what happened and make an argument that the CD should be cashed in without penalty on legal grounds.

If the bank refuses to cash in the CD without penalty, then get through the 15 months and let this side of the matter go.

If I were on this HOA's board, I would motion for removal of the President; announcement of this unlawful action at a meeting; and discuss a possible Special Meeting for removal of the director.

I have heard of Compass Bank, so it is not like it is un-reputable. But the rate of interest underwhelms, based on the latest rates shown at bankrate.com, so this is troubling.
JohnC46
(South Carolina)

Posts:9312


01/16/2018 7:20 AM  
I for one would not consider a CD as an investment. An investment can vary. The CD will not. Also the OP is assuming the President alone did this meaning without BOD approval.

I say the CD is a sound way of preserving the reserves.
FredS7
(Arizona)

Posts:919


01/16/2018 7:41 AM  
While this may not have been done properly (the board should have voted on placement of the CD) it is certainly NOT correct to characterize this as theft.
KerryL1
(California)

Posts:7044


01/16/2018 8:48 AM  
Please give us the exact wording, Rex, that says reserve funds cannot be "invested." And tell us exactly what document it's in. Your bylaws? CC&Rs? I doubt it's in yur "rules."

Next, don't your documents say or perhaps AZ law, that two directors must sign checks from reserves?

Are you on the Board, Rex? How many are on the Board?
DouglasK1
(Florida)

Posts:1489


01/16/2018 8:49 AM  
There are some questions I have regarding this situation.

Rex,

Are you on the board? Did the board as a whole vote on this or did the president act unilaterally? What exactly do your governing docs say about where reserves are held? Many people feel that reserves should not be invested in the stock market, or anywhere where the principal is at risk. Some governing docs mandate this, and some might also require funds to kept in insured accounts. A CD should meet those requirements. Obviously, it makes sense to shop for the best deal. While 1.39 might not match the best rates found at bankrate nationwide, it is still not bad. I checked local banks and the best rate offered around here is 0.70, and the banks that we bank with are more like 0.10 if we were to transfer to a CD.

Escaped former treasurer and director of a self managed association.
DouglasM6
(Arizona)

Posts:724


01/16/2018 8:54 AM  
You say "only pays 1.39%". Do you feel the money should have been invested to pay more? It's probably a very safe investment, that's probably why it pays so little. Safe is better for reserve fund investing.

There's probably no way to "get your money back" since it's still your money. It's just making money for you right now.
MarkM19
(Texas)

Posts:563


01/16/2018 9:50 AM  
I find it a little odd that this Board Pres would approve a CD that large without discussion. On our board we would have the Treasurer work with a Financial advisor that the board agreed on earlier. That person would at the next meeting make the suggestion to the board and a vote would be taken and recorded.The rates on CDs are low but they have very low risk which is the boards responsibility.

We have no idea from Rex's note how much total assets the board has in other CDs. It is important to make sure that the HOA has cash on hand to handle any reserve items that may need to be funded without having to pay a penalty to cash a CD prematurely.

I always have suggested using smaller CDs that can be purchase and need to renewed every month or 2 so that the HOA funds can be managed properly. This is normally called laddering and if it is not already in place can be done by taking the 140K and buying a 3 month 40K CD and a 6 month 50K and a 1 year 50K CD. As new funds come available to be invested you fill in the months that have no CD expiring. The rates on short term CDs are lower but you are managing the HOA funds properly.
GeorgeR8
(Arizona)

Posts:157


01/16/2018 10:36 AM  
Posted By RexR1 on 01/16/2018 4:32 AM
live in a 55 plus community of 120 units. Recently the president of our community took $150.000.00,and placed it into a C.D. that only pays 1.39% interest for 15 months. Our rules and regulations state that the reserve fund cannot be used for any kind of investment. He had no information of any kind from the Compass Bank, which he was totally set on having that bank be the only place to put the money with no other bids from anywhere. The banks' home office is in Spain With a few bank outlets in America. What proceedings can be done to get our money back?




There are more than a few outlets in America. I went to their site and there are 10 within 10 miles of me. That rate is about right for Arizona. I was just checking this morning because we are renewing a CD tomorrow.

CD's are not an investment. They are savings. I don't really understand what kind of information you would need from the bank. It's a CD. It has a rate and a term.

How did you get the info that he acted alone, totally set on that bank, etc?



KerryL1
(California)

Posts:7044


01/16/2018 11:02 AM  
Our board pretty much follows what MarkM lays out. We have an officer who is constantly on the lookout for good rates. The Board approves shifts to other accounts, etc. Our CC&Rs required the funds be in insured accounts. Our reserves funds are in about 6 accounts.
TimB4
(Virginia)

Posts:16700


01/16/2018 2:56 PM  
Lets go to the basics.

Whos name is the CD in?

If it is in the Assocaitions, it wasn't theft.

If it is in any other name, it could be considered theft.
DaveD3
(Michigan)

Posts:796


01/16/2018 5:23 PM  
I'd like to know, if a CD is considered "investment", what form of money storage would be secure but not an "investment"?
DaveD3
(Michigan)

Posts:796


01/16/2018 5:24 PM  
Posted By TimB4 on 01/16/2018 2:56 PM
Lets go to the basics.

Whos name is the CD in?

If it is in the Assocaitions, it wasn't theft.

If it is in any other name, it could be considered theft.



It is that simple.
LetA
(Nevada)

Posts:893


01/16/2018 6:28 PM  
1.39% WOW!!! that's lowball, you could have shopped that to a Credit Union and gotten almost 2.5
GuyS
(Arizona)

Posts:19


01/16/2018 9:36 PM  
Posted By RexR1 on 01/16/2018 4:32 AM
live in a 55 plus community of 120 units. Recently the president of our community took $150.000.00,and placed it into a C.D. that only pays 1.39% interest for 15 months. Our rules and regulations state that the reserve fund cannot be used for any kind of investment. He had no information of any kind from the Compass Bank, which he was totally set on having that bank be the only place to put the money with no other bids from anywhere. The banks' home office is in Spain With a few bank outlets in America. What proceedings can be done to get our money back?



Nothing seems unreasonable about this to me, provided the CD is in the HOA's name. 1.39% interest on a 15 month CD is neither bad nor good, probably typical for FDIC-insured CD in a business account. (Many of the well-advertised higher rates are available only to individuals and not businesses. We have been unable to obtain many of the advertised higher rates because that restriction only becomes apparent when you try to open an account. An HOA in Arizona is probably an incorporated business.)

Was the purchase of the CD authorized by the Board, or was right to make such transfers delegated to the President?

Our investment policy says that our funds must be in FDIC-insured accounts. Interest bearing savings and CDs are equally acceptable. We do restrict maturity dates to no more than 2 years, though we have been using 6-month CDs recently as rates are trending up so a shorter period means sooner to reinvest at a possibly higher (or not) rate.

Also have no complaints about BBVA Compass Bank. We have almost $150K of reserve funds with Compass. Here in Tucson they have several branches.
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