Board sabotaged association bank
account, obstructed treasurer
Los Angles Times
By Stephen Glassman and Donie Vanitzian
17 June 2012
Question:
Our homeowner association board makes its own rules regardless of the
law.
Before the new election, the outgoing president closed the
association's bank account and reopened another, preventing the new
treasurer from depositing checks.
The board was reelected by vote-rigging and without notifying owners of
meetings.
Things got worse when the newly elected treasurer uncovered
improprieties. Board directors were requesting $180 checks for mileage,
$400 for holiday decorations and a $900 reimbursement for supposedly
paying a gardener but had no actual receipts. Instead they would write
something on paper and be reimbursed.
The treasurer put the board on notice of their violations and reported
them to local law enforcement. The board responded by firing her and
hiring an attorney to sue her. Directors then withdrew thousands of
dollars from association operating funds to pay attorneys. What can
owners do?
Answer:
Under Civil Code section 1363.03(h) and (i), election results and votes
are required to be preserved for up to one year in the event of a
challenge. Not only must there be notice of the meeting at which the
election is to be held, but under Civil Code section 1363.03(g) the
election results must be communicated to the board and to the
membership within 15 days of the election. If the election was not held
in accordance with the required format for a secret ballot, the
election itself is likely invalid.
An association's operating account is not intended to be used as a
petty cash account or slush fund for the board's taking. Directors
using those funds in that manner are violating their fiduciary duty to
the association and its titleholders. When a board is unaccountable to
the law and unresponsive to its titleholders who fund the association's
operations, owners should take the allegations of theft to their local
police department and county district attorney for investigation.
Directors have a duty to produce receipts before requesting
reimbursement for expenses, yet even a receipt doesn't prove that the
expenditure was valid.
The new board cannot unilaterally "fire" the treasurer unless its
reason for doing so is stated in the association's governing documents,
the Civil Code or Corporations Code regarding mental incompetence or a
felony conviction. The board may be able to change the function of an
individual director but cannot stop that director from attending the
meetings.
Sabotaging the association's bank account and obstructing the new
treasurer's duties could be evidence a district attorney and/or city
attorney would need to show that certain directors are engaged in
criminal activity.
Situations like those you describe are a warning that every
titleholder's assets in the common interest development are at risk. Do
not become complacent and accept the status quo.
Glassman is an attorney specializing
in corporate and business law.
Vanitzian is an arbitrator and mediator. Send questions to P.O. Box
10490, Marina del Rey, CA 90295 or email noexit@mindspring.com.
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