Q&A: Corrupt Management

Q We’ve had problems with a corrupt management in the past. I’m suspicious of our current management and several board members receiving kickbacks from vendors. Are there any steps that I can take to find out if this is repetition of our previous managing company and possibly board members participating in kickbacks?

—Board Member in Edgewater

A “Uncovering corruption is never an easy task,” says Stewart E. Wurtzel, Esq. of Deutsch Tane Waterman & Wurtzel, P.C. “Here, the letter writer does not specify the basis of his suspicions or what behavior he observed that raises concern. It is therefore difficult to specify what steps can be taken to prevent a particular problem. However, the following suggestions are a starting point.

“The best way to minimize the risk of corruption is to be as active a board member as possible in the vendor selection process. Being the point person in the selection process substantially reduces the risk that the vendor will give a kickback to someone who does not control the selection process. If it is a non-bid job, ask management for an explanation as to why one vendor was chosen over another. Find out how often the manager uses the same vendor at his other buildings. Bear in mind that this can just as likely mean that the contractor does good work and the manager is happy with their performance.

“As a board member you are entitled to complete access to all corporate books and records. If you are new to the board, review how the contractors were selected and how they have performed in the past. An accepted bid that is higher than lower priced comparable ones from other vendors or blind loyalty to a company that is providing less than stellar goods or services may possibly indicate that the section or retention process has been compromised.

“To find out about the reputation of a contractor or an agent, it is suggested that you check as many references as possible. Check with the Better Business Bureau to see if complaints have been filed. Check with the building’s attorney and accountant to see if they are familiar with the contractor. Ask the contractor and agents for references from some former clients and if they are willing to provide those names, speak to a member of the Board and find out why the building is no longer using them.

“Finally, you may seek to add no kickback language to your contracts. It would allow for easy termination of the contract if it were proven that a kickback was given in either the selection or retention process.”

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