Condo and HOA Debit and Credit Card Fraud Case Studies
Many associations use credit cards or debit cards for handling some expense items. We don’t agree with this practice as it can lead to abuses and fraud. With good planing and budgeting an association should be able to do with out these payment methods. We wanted to take a look at Condo and HOA Debit and Credit Card Fraud Case Studies.
In our series Association Greed Board Members, Managers and Missing Money there are several cases where debit and credit cards were abused. Those cases are highlighted below:
Embezzlement of $308,000 led to Conviction of On-site Manager (Colorado)
When bank officials’ notified officers of a Cherry Creek homeowners’ association about irregularities in its bank accounts, they knew that they had to act quickly to find the culprit.
An investigation by the Denver district attorney’s office revealed that $308,000 was taken over a five-year period starting in December 2004, and it didn’t end until the bank officials discovered the problem and notified the Portico Homeowners Association in June of 2009.
The investigation resulted in the arrest of Tamara Jane Chmelka, who started working for the association in October 2004 as on-site manager.
US Bank, Portico’s financial institution, informed the association about large ATM withdrawals and debits, many of which took place in Blackhawk between March and May of 2009 at ATMs in Ameristar Casino, Canyon Casino and Riviera Casino.
The investigation revealed that Portico association officers did not know that Chmelka had an ATM/debit card connected with Portico’s US Bank account.
According to a Denver district attorney arrest warrant affidavit, Chmelka told Portico officials that she had used the Portico card by mistake to withdraw money for gambling at the casinos and to pay psychotherapy bills.
A Portico audit, the district attorney’s office reported, showed that she increased her own salary by $29,080 and paid herself vacation and sick time beyond what is authorized by Portico.
Chmelka also issued herself duplicate payroll checks, bonus checks and other checks totaling about $115,800, according to the district attorney’s office, and also issued herself checks totaling $79,730 and listed them as payment to a Portico vendor.
In transactions that began in December 2004, Chmelka used company and personal credit cards used in hers and Portico’s names at Commercial Federal Bank to make company and personal charges, according to the arrest warrant affidavit.
The investigation showed that during her five years in her position, Chmelka forged the signature of Portico Vice President Sandy Melnick 71 times.
In 2010, Chmelka pleaded guilty to felony theft charges. [The Denver Post provided information for this blog item]
How to prevent at your community:
Limit the number of debit cards and credit cards in circulation at your association as it can lead to problems cited above. Talk to your bank and find out if you have any ATM/debit/credit cards in circulation, then add that 2 board members must approve the creation of one in the future. Also if your association has a credit card get the credit card statement with your financial reports or have them reviewed by a board member prior to payment. Next get bank statements for your association’s bank account. Bank statements that come with the monthly financial reports would have shown the large ATM withdrawals, bonus and other checks. To prevent check forgery one solution is to use an online system where board members review bills and then a third party makes the payment after approval.
Association Onsite Employee Charged in $95,000 Theft (Florida)
The need to acquire luxury items appears to be the reason why nearly $95,000 was embezzled from a West Palm Beach homeowners association, according to local police.
The theft was uncovered in April 2014 when the property manager of Cypress Lakes examined the association’s credit card bills and found that about $10,700 in personal purchases had been made between November 2013 and March 2014, according to a police affidavit.
Missing cash deposits made by homeowners and questionable use of association credit cards, indicated more losses from the association, according to police, who arrested association bookkeeper Kristine K. Moore of West Palm Beach in connection with the theft.
The police investigation revealed thousands of dollars in illicit credit card purchases from retailers in the region.
Moore worked for nearly six years at the 1,000-home complex, which serves 55-year-olds and older, and earned about $44,000 per year, according to police, who said she used the money for personal expenses dating back to 2011.
Police reported that she left her position on March 26, 2014 while the property manager was on the telephone with an accountant discussing problems in the association bank records.
Police charged Moore in December 2017 with larceny and fraud. [The Palm Beach Post provided information for this blog item].
How to prevent at your community:
Limit the number of debit cards and credit cards in circulation at your association as it can lead to problems cited above. Talk to your bank and find out if you have any ATM/debit/credit cards in circulation, then add that 2 board members must approve the creation of one in the future. Also if your association has a credit card get the credit card statement with your monthly financial reports or have them reviewed by a board member prior to payment. Next, do not allow (or limit) cash payments of assessments at your association. A best practice is to provide a bank lockbox where all checks paid go directly to the bank as well as online payments which all end up in the association’s bank account. Adding to this the bank transaction data should get uploaded into the accounting software to further prevent any tampering.
We hope this gave you something to think about at your community. If you still need to use a debit or credit card stay tuned our next post will be on debit, credit card and petty cash best practices.
