This time it happened in a 72-unit condominium in Massachusetts. The Board Member Treasurer did things like writing checks to her contractor son for made up work and none of the other Board Members or owners were reviewing condo records like bank statements. When other Board Members stumbled upon the records years later, the fraud was revealed but it was too late; the money was gone, there was no insurance available and the owners were left without $183,000.
It really is important for organizations to have framework, policies and procedures in place for their Boards. Board Members need to oversee their organization’s business but also their fellow Board Members. They are fiduciaries who are charged with looking out for the best interest of their members. There is no excuse for a Board Member of any type or size organization not to have unconditional and ready access to organization records and not to regularly review those records (like bank statements) and allow such a fraud to happen. This case also highlights what happens when volunteer organizations skimp on insurance that may have covered some of the damage for this inexcusable loss.
If you’re a volunteer Board Member you should ask yourself where are my organization’s records? How do I access them? When was the last time I looked at them? I may be responsible for the actions of my fellow Board Members and others running my organization so I’d better start overseeing them before its too late.
In buildings that are not smoke free, smoke-odor complaints are commonplace. Someone in an apartment smokes and the smoke finds its way in vents, through walls or floors, into adjacent apartments. In cooperatives, there is a warranty of habitability issue and in condominiums, a nuisance issue. The obligation of the cooperative corporation or the condominium association to deal with the complaint is a difficult one. Assuming they are responsible for stopping the odor condition, how do they do it? Very difficult. Maybe create a rule deeming a coop shareholder’s conduct (smoking and allowing secondhand smoke to eminate out of the apartment) objectionable or maybe a condo rule making a unit owner’s like conduct a nuisance. Trying to stop the odor from emanating can be quite a task and almost impossible. Sometimes convincing the offender to use an air purifier or other device to “eat” the smoke may help; particularly if the offender is ultimately responsible and may suffer exposure.
This situation manifested itself in a NYC cooperative called Connaught Tower over the last several years and a Supreme Court Judge in Manhattan decided to punish the cooperative Board for not doing much of anything to cure the condition. The punishment being disgorgement of maintenance back to 2007, amounting to $120,000 plus interest and attorneys’ fees. It appears that the cooperative’s general liability carrier was defending the case but it is not clear whether there was a reservation of rights in place by the insurance carrier so that the cooperative is on its own in paying the damage.
The Connaught Tower’s Board’s big mistake was not taking any reasonable action to try to intervene and abate the odor condition that a unit owner, Mrs. Reinhard was living with for years. The Supreme Court Justice on the case was a former law assistant to a Judge and was disturbed by the Board’s lack of action to the tune of over $120,000. The key for a Board faced with a second-hand smoke complaint is, at the very least, some action to try to intervene and stop the odor condition. We often intervene as negotiators or mediators to try to avoid these types of odor complaints from escalating as it did at Connaught Tower.
