Vancouver Strata Council Member Charged With Fraud
A former member of a Vancouver Strata Council (which is the British Columbia equivalent of a Condominium Board) was recently charged with theft and fraud over $5,000.00. The charges arose as a result of the Council Member’s misappropriation of over $160,000.00 in Strata funds for his own personal gain. The theft occurred over a four year period, during which time, the Council Member slowly took control of the Strata’s finances.
The Council Member plead guilty to the charges, and was sentenced to two years less a day imprisonment to be served in the community (house arrest) as well as two years probation. The Council Member was also ordered to repay the $160,000 that he had stolen from his Strata.
Although this is a Vancouver case, sadly, theft and fraud are not crimes that are unknown to the condominium industry in Ontario. In fact, there are a number of cases in Ontario in which Board members and/or property managers have been found guilty of having misappropriated condominium funds for personal use. In one recent case, a Toronto property management firm is alleged to have defrauded a number of condominiums of millions of dollars, through fraudulent borrowing transactions. In many fraud cases, where the sums of money involved are relatively significant, the fraud leaves the victim condominium with large holes in its finances, which must be rectified by the owners often through special assessment and/or increased common expenses. It can also cause damage to the condominium’s credit rating, and result in stigma on the real estate sales market.
In some cases, there is simply nothing that could have been done to stop the fraud from being committed. However, Condominium Boards can work to reduce the risk of misappropriation of condominium funds by ensuring appropriate controls are in place with respect to the condominium’s finances. Appropriate controls will depend upon the particular condominium, and each Condominium Board should consult with its property manager and/or auditor in this respect. Generally speaking, a Board can ensure that all payments drawn on the condominium’s accounts are backed up with an invoice, receipt or other evidence of the expense. Before issuing payment, it is always important to ensure that the transaction and/or payees involved are recognized. Arranging for multiple signees on cheques over a particular amount provides an additional control on larger payments.
Owners can help to reduce the risk of fraud by electing individuals to the Board who they believe are capable of assuming the significant responsibility associated with Board representation. In this respect, Owners may want to educate themselves about the background and interest of Board candidates. Most importantly, Owners should participate in the election process itself. Where an Owners suspects abnormal Board activity or unusual financial transactions, the Owner may want to make a request to review particular Corporate records under section 55 of the Act.