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Claim story - Crime in a community association.

Posted 3/11/2019

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In late 2017, a small housing association in San Diego County was rocked by the discovery that a long-time member of the community had embezzled more than $120K out of the association’s financial account over the course of 16 months.

The perpetrator had been a member of the homeowner association’s committee for seven years, and he had served on the managing board since 2015. Since he was considered a trustworthy and upstanding member of the community, many people were shocked to discover he had been stealing from them for more than a year.

Because this member was a dedicated employee of a local accounting firm, the board designated him to manage and organize the books and financial records. The homeowner’s community board also allowed him to distribute funds for specific purchases on behalf of the community. He took advantage of the situation by shifting the numbers between what he recorded as being purchased and the actual purchase price. This is an embezzlement tactic often referred to as overbuying.

Forensic accounting research found multiple instances of these discrepancies taking place, most revolving around situations where the perpetrator was given the opportunity to both distribute funds and simultaneously manage the records.

In one instance, he contracted labor and materials for the construction of a new fence around the local community park. The records showed an investment of $4,200 in building materials and $10,500 in labor. Yet, the forensic investigation revealed the actual material costs to be $2,600, while the labor costs were $8,100. In this instance alone, he siphoned $4,000 from the community’s financial fund without any oversight.

He was eventually caught and prosecuted for fraud and embezzlement when another member of the board began to get suspicious of his aloof behavior when asked about specific transactions. The committee member brought in a private accountant to analyze some specific purchases, which were found to have major discrepancies. This eventually lead to a much larger criminal investigation, where it was found that, through numerous fraudulent tactics, he had siphoned a total of $120,234 out of the housing association’s financial funding.

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