Florida Homeowners’ Association Fraud and Embezzlement Costs Millions

Condo owners’ associations (COAs), homeowners’ associations (HOAs), and other residential community management organizations are common targets of fraud, causing millions of dollars in community fund losses nationwide each year.

Florida has the most community associations in the country.

The problem is acute in Florida, which leads the nation in the number of community associations. The theft of association funds can result in unpaid bills, uncompleted projects, and increased member fees. Legal action is often necessary to recover stolen funds. In many cases, third parties such as management companies and even banks can be sued to recover this money.

The Business Trial Group represents community association owners, members, and boards in lawsuits against those who have stolen or misused association funds.

If you suspect that your community has been the victim of fraud or embezzlement, contact the Business Trial Group’s Florida HOA and COA attorneys for a free case review.

Recent Cases Show Extent of Florida COA, HOA Fraud

Florida has more than 47,000 community associations, comprising an estimated 9.5 million residents. These residents pay billions of dollars in fees each year to ensure that obligations such as utilities, security, insurance, maintenance, and landscaping are met.

It is not uncommon for opportunistic fraudsters with insider access to attempt to steal money from associations. This is a common occurrence in Florida, as the following stories show:

• In June 2017, the former treasurer of a Boynton Beach HOA admitted to embezzling more than $50,000 from the association. The former treasurer perpetrated the fraud by writing checks to himself from the association’s funds and depositing them in three different bank accounts.
• Also in June 2017, the owners of a property management company were arrested in Panama City Beach for renting condos and failing to pay rental fees to condo owners whose properties they were managing.
• A former president and former treasurer of a Bradenton Beach COA were charged in May 2017 with defrauding the association of more than $50,000 over six years. The couple’s fraud included renting units without authorization and pocketing the money and making unauthorized ATM withdrawals.
• The bookkeeper for a West Palm Beach HOA was arrested in January 2017 for allegedly using the association’s credit cards and cash deposits to make $95,000 in personal purchases.
• The former treasurer of a Palm Beach Gardens HOA was arrested in January 2016 for stealing nearly $58,000 by cashing association checks to herself and diverting checks to a store she owned.

Even when fraudsters are caught, it can take years to recover stolen association funds, so if you suspect fraud, it is important to take immediate legal action with an experienced Florida Homeowners and Condo Association attorney.

How to Detect Homeowners’ and Condominium Association Fraud

Fraudsters tend to employ similar types of schemes to steal association funds, such as using credit cards for personal expenditures, manipulating accounts receivable, altering records, creating and paying fictitious vendors, arranging vendor kickbacks, check tampering, writing checks to cash, and theft of cash receipts.

Common red flags of condo and homeowners association fraud include:

• Balances that exceed budgeted amounts
• More than one payment to a vendor that was supposed to be a one-time transaction
• Vendor’s address or name is the same as an employee or board member’s
• Delayed bank deposits
• Duplicate payments
• Missing petty cash
• Discrepancies in accounts payable and accounts receivable
• Suspicious “consulting” fees
• Services that were paid for but not performed
• Checks made out to “Cash”
• Copies of receipts and other documents, rather than originals

While any of these incidents may be a simple error in isolation, they can also indicate a wider fraud pattern and should be investigated with help from an experienced Florida fraud attorney who can advise you on how to identify misconduct and hold the perpetrator accountable.

Florida Association Members Have a Right to Access Financial Records

The structure of homeowner and condo association boards can make them attractive to fraudsters. Association boards are comprised of part-time volunteers responsible for accounting and control. A system of financial controls intended to prevent fraud may be missing, especially in smaller organizations, making theft easier. Periodic audits, which can promote accountability, could also be lacking.

Officers and directors have a fiduciary duty to owners.

Additional financial record review by an outsider is helpful for spotting suspicious activity, although the unresponsiveness of boards to unit owners is a well-documented issue. Florida owners, however, have the legal right to access financial records of the association.

In Florida, officers and directors of HOAs/COAs also have a fiduciary duty to owners/members. This means that officers/directors must always act in the best interests owners/members and never put their own interests first.

If you suspect that your condominium or homeowners’ association is the target of financial fraud, the first step may be hiring an attorney to gain access the association’s books and records.

Florida Contingency-Fee Fraud Attorneys

The Business Trial Group represents HOA and COA boards, as well as individual owners, in association fraud cases on a contingency-fee basis. If we accept your case, you pay no up-front fees, and you pay no fees at all unless and until we make a recovery in the case.

The sooner fraud is prosecuted, the sooner valuable association funds can be returned. If you have questions or concerns about community association fraud, learn your legal rights during a free case review.