HOA Treasurer Indicted for over $1 Million in Fraud – Please Get More Than One Person Doing Books

Here’s another example of an HOA possibly being defrauded by the treasurer. Aaron Yashouafar of the Paradise Spa Home Owners Association in Las Vegas just got indicted for looting more than $1 million from an HOA. Over a year it is charged that he wired himself $250,000 for personal projects, and then deposited two insurance cheques for over $830,000 into an out of state account.

To me it doesn’t matter if your HOA or condominium account has millions of dollars or tens of dollars – any money misappropriated is a hardship on the owners.  There are some very simple steps to help prevent fraud:

1. Self-managed boards should always have co-signatures required on cheques, and standing polices that limit the amounts of electronic transfers.
2. Books and statements should always be presented by the treasurer to the board at each meeting.
3. If possible, use a management company to do the bookkeeping. While it’s not unheard of for a management company to “go bad” – it’s a lot, lot (lot) less unlikely because your accounts are run through a third-party, who has to make all your account statements available to your board and treasurer.
4. Move the role of Treasurer around – do not let the treasure remain the same person for more than two year. The bookkeeping isn’t too hard, and even for self-managed, outsourcing the bookkeeping is hugely inexpensive – just search the internet for services.

Using Conflict of Interest to Generate Money and Prison Time

When I teach the 101 Board Education course for the Canadian Condominium Institute of South Alberta, I comment several times that board members should always avoid conflict of interest.

Conflict of interest for those who may not be clear on the term:

A conflict of interest occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other (Wikipedia).

Note that a conflict of interest doesn’t even need to a realized corruption, but just the possibility. For boards, common conflicts of interest include voting on contracts with bidders that include family, friends, and business partners. It also includes board members doing services for the condominium and receiving remuneration.

For a group in Las Vegas – they saw being in a conflict of interest as a process to profit. They hatched a scheme.

They recruited individuals who they gave money to buy units in condominiums. In return, the individuals were asked to run for the board and once on, direct legal and construction work for the condominium to companies designated by the group who fronted the cash. Just to make sure the scheme worked, board elections were rigged, and ballots were forged.

So far, one of the people fronted money – Steven Wark – will be facing a maximum sentence of 30 years for his participation in the scheme (and pay more than $94,000 in restition).  The reason: after he was elected to the Vistana homeowners board he took payments and voted “in a manner directed by and favorable to his co-conspirators.”

That would very much be a conflict of interest.