Corruption
“Life is a corrupting process from the time a child learns to play his
mother off against his father in the politics of when to go to bed;
he who fears corruption fears life.”
—Saul Alinsky

It is very hard to determine how much of a problem corruption is in condominium corporations. Not all boards are shady by any means but a few are really bad and many directors and managers will take advantage of their position to some degree.

Why so few criminal convictions?
One possibility is that no fraud was committed. This possibility should not be discounted. If there was wrong doing, proving fraud rather than negligence, willful blindness or stupidity is difficult—especially against board directors.
Jed Rakoff,  New York federal judge
Article—New York Review of Books  2014

Fraud is difficult to prove and investigating fraud takes up a lot of scare police resources. Unless a condo board, an owner or a whistle blower gives the police sufficient evidence to prove that criminal fraud took place, they likely will not be interested in pursuing it.

Abuse of office
Many board members feel that their position gives them certain rights or privileges. Therefore, they may make use the party room for free, park a second vehicle in the visitor’s parking lot, use the building’s office supplies and equipment for personal business or have the superintendent or contractors do repairs in their private units as a "favour".

Some of this behaviour is so common that it is practically normal. A director at one Weston condo parked in a condo-owned parking spot and rented out his private parking spot. Later on, he went too far when he asked the corporation's lawyer to change the deed to put the corporation's parking spot in his name. The lawyer refused to assist in such a blatantly dishonest act.

Fraud
By necessity, fraud is elusive and must be concealed. Most of what we know of it is by anecdotes enriched by rumours, speculation and confirmed by a few civil and criminal convictions.

The acceptance of kickbacks is hard to detect as they are ongoing and by necessity kept in check. A dishonest board president or manager needs to exercise self-control so that the size of the fraud does not give them away.

In September 2011, the Toronto Star reported:
The list of condos involved in an alleged $20 million-plus property fraud is growing as shocked owners are being informed, while others are still unaware.

It was a tense morning at 39 Kimbercroft Ct. in Scarborough on Thursday when the condo board’s president learned that Woodbridge entrepreneur Manzoor Khan, president of Channel Property Management, had allegedly defrauded the corporation of $2.8 million.

“I am glad we found out today,” said a shaken Muhanthan Anantharajah, who took over as board president in June.

He said the board had no clue Channel had taken out a loan against the corporation until the Star told him Thursday afternoon.

A few hours later, he instructed a lawyer to search the condo bylaw registry, which revealed that Khan had allegedly created a fake by-law.

This is a case where the owner of a property management company stole millions from at least seven condominium corporations.

However, like everything else, condo corruption seems to be bigger than life in Las Vegas. Four retired old ladies uncovered a quarter of a billion dollar condo scam that involved condo boards, property management companies, contractors, lawyers and a top political operator in the Republican Party.

Once again, it took individual owners to conduct the initial investigation and bring it to the authorities’ attention.

Putting the bite on the contractors
An owner of a Toronto-based plumbing company told me that 80% of all condo presidents he has dealt with expect a kickback from their contractors. (I was shocked at that figure.) He thinks that they are more dishonest than the managers.

“If a president has been in for six years, you’ll never get him out.” The contractors will do free work on the president and treasurer’s apartments while the manager gets work done on his house. (He said the contractors never see the other three board members.) Sometimes the directors are given tickets to the Maple Leaf or Blue Jay games and the costs are added to the next project’s estimate.

I asked if he knew of any property managers that lived in a condo. He laughed and said they are like him; they know what goes on in condos.

Alfonso Carcamo was the president of his condo for a year and a half. He wrote in his self-published book, “Condo Saga: Exposing the Frailties in the Canadian Condominium Industry” about his experiences.

In his book Alfonso tells us that an owner of a small  property management company offered him $3,000 to $5,000 a month in “commissions” if he got the property management job and was free to get the estimates for every job. He stressed that if Alfonso wanted, in time he could attempt to get one or two other directors to work in collusion with the manager but he stressed that Alfonso would never be able to get all five of the directors “on board.”

This matches what the the owner of the plumbing company told me.

Alfonso also tells of a contractor who offered him “some money” after being awarded a small contract as a sign of his appreciation.

In is very interesting that after Alfonso’s “reform” board was elected into office, expenditures on maintenance dropped 15-20% and the condo had money to do repairs that had been neglected for years.

There are various frauds some big, some small. At one Downsview condo, for a two-year period, none of the money collected from the guest suites or the party room rentals showed up as income on the financial statements.

A president of a condo tower in North York told me that a contractor gave her a Rolex watch as a thank you for giving him a contract. She gave it back.

In his book “Cheats at Work” Gerald Mars describes why dishonest contractors have an advantage over honest ones. The dishonest contractors install used parts instead of new, charge for a full maintenance when only half of the work was done and they replace parts that are not defective. How can the board members or owners ever know they are being cheated?

Alfonso and the Toronto Star articles on Mr. Khan raise another point. Some property management companies bid low to get a contract. Alfonso wondered how some companies could work so cheap. Is the contracted price just the visible portion of the money that management is planning to make from the condo corporation?

Mr. Khan owned a number of shell contracting companies that “won” contracts put out for bid by his Channel Property Management Company. After winning the contract he subcontracted the work, at half of the winning bid, to other companies who—in some cases—did shabby work.

Other Toronto examples
The president of a condo tower in the Silverthorn part of Toronto hired a new property management company. In short order, the half million-dollar reserve fund was depleted and a special assessment was announced that would hit each owner for $5,000.

The owners revolted. After the new board was elected, they fired the property management company and after looking through the financial records, the new president told his predecessor that he had three months to sell his unit and move out or he would give the evidence of fraud that he found to the police. The ex-president sold and moved.

An owner of a small property management company told me that he gave up a contract rather than have a contractor come in and paint the president’s apartment for free.

So corruption exists. How much, how bad and how long it has gone on, depends on the condo corporation and the honesty and ethics of the different boards that the owners have elected over the years and the financial controls that were put in place.

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