Robert M. Meisner: No choice in pursuing financial inconsistency
Jun. 1—Q: I am a member of the board of directors of our condominium association. At our last meeting, we discovered some inconsistencies in our bank account and suspect our former treasurer has embezzled some of our money. What can we do? What should we do? It's not a great deal of money ($2,500), so considering the legal fees we would have to incur to get our money back, my question is simple: is it worth pursuing?
A: Your situation, while certainly unfortunate, is not uncommon. At the outset, you must realize that, as a director of your association, you have a fiduciary responsibility to investigate the matter fully and attempt to recover the funds for the association. You really have no choice in the matter. Otherwise, you and the rest of the board could be charged with violating that fiduciary duty you owe to the association and its members. Therefore, the first thing you must do is investigate the matter thoroughly and determine exactly how much money was taken. You may think that only $2,500 was taken, but your investigation may reveal a much larger problem. Document all of your findings and notify your insurance carrier for advice as to how to proceed. Hopefully, the carrier will handle it from there.
You should also contact your local police department, tell them what you have discovered, and ask them how they want you to proceed, as the carrier will no doubt request a police report. In all likelihood, the police will ask you to drop by the police department and fill out an official report of the crime. Provide a copy of your complete investigation file as well as all of the evidence you have assembled. Make sure you let the officer know that the association wants the local prosecutor to file criminal charges and that you and the board will assist the criminal prosecution in any way that is necessary.
The police may wish to conduct their own investigation but, eventually, the matter will be turned over to the local prosecutor, who ultimately makes the decision whether or not to prosecute. You should periodically reach out to the police officer with whom you initially spoke and ask for an update on the case. Assuming your case is a strong one, the former treasurer will be prosecuted and, if the case is proven, the association will be entitled to restitution of all of the money that was taken.
In addition to criminal prosecution, the Michigan Legislature has a civil embezzlement statute which states that if a person steals or embezzles property, the person from whom the money was embezzled can file a civil lawsuit and recover "3 times the amount of actual damages sustained, plus costs and a reasonable attorney fees" (MCL 600.2919a). In other words, if your former treasurer took $2,500, you can recover three times that amount ($7,500) plus your costs and reasonable attorney fees.
Robert M. Meisner is the principal attorney of The Meisner Law Group, based in Bingham Farms, Michigan, which provides legal representation for condominiums, homeowner associations, individual co-owners and developers throughout Michigan, including Grand Traverse, Leelanauand Emmet Counties. His book "Condo Living 2: The Authoritative Guide to Buying, Owning and Selling a Condominium" is available at www.momentumbooks.com. He can be reached at 800-470-4433 or bmeisner@meisner-law.com. Visit the firm's blog at www.meisner-law.com/blog.
