Condo Fraud, Kickbacks and Conflict of Interest

See also the letters in "Troublemakers" and "Traitors"

By the end of last year, 451 of the letters received detailed cases of alleged kickbacks, fraud, and outright theft. These cases appeared in 15% of all letters received. In fact, larger and larger numbers of such letters were being sent as the year went by.

Research Note: It is significant that 311 or 69% of these 451 letters detailing such problems come from "insiders," that is, persons who work or have worked in the condo industries (managers and various contractors) as well as a few board members, especially  current or past presidents. It is worrisome that these situations are not usually visible to owners. In other words, conflicts of interest, kickbacks, and fraud largely go unnoticed by those who pay the bills...condo owners.

Letter: My condo is going to have serious work done [....deleted] and it will be in the several 100Ks. The board and manager say that they have gone through the usual bidding process and received 4 sealed quotes which were opened at the board meeting in the presence of the engineer in charge. They named the contractors in question and I used to work for one of them, which I keep to myself, and I also knew the other two bidders and I can tell you for sure that these three companies are always in touch with each other and provide quotes together so that each time one of them ends up doing the work with the best quote and the next year at another condo it will be the other one and so on. What they also do is that they ask for more money as the process is ongoing. I can also tell you that all three of them submit bids that are much higher than they should be, so it’s a win-win situation no matter how you look at this for all of them. The engineering company they have hired knows about this or is bound to know but it can’t be proven, right? So it protects his ethics between quotation marks. I tell you this because I do hope that you are addressing this issue at your meetings. But I stay out of this in my building because I would be sued for defamation.

September 2013, Toronto area

Letter: I am a [deleted] contractor that has worked in condos for a long time. Recently a manager asked me for a [$ deleted] kickback. I have worked in these buildings for over two decades, but I walked away from them after this. I find that many managers these days come from countries where kickbacks and bribery are common practices. They expect their contractors to offer them large amounts of money if they are doing a major project. I know many contractors that refuse to play this game but others participate because they want the job. Condo fees are going sky high and this is part of the reason why.

— January 2013, Ontario

Letter: I am a retired [deleted] contractor that used to work mainly in condos in [deleted] and around areas. I had lots of experience with condos and I have made a lot of easy money and seeing how incompetent managers are, how they like “gifts” and how ignorant boards are I swore that I’d never live in a condo. But I have a heart problem and my wife wanted me to buy a condo and I went to the gossip mill before we bought one, an older one that is better built and that has a president that gets second opinions and stands for his owners’ best interest rather than his stupid pride, so he doesn’t waste money on us contractors unless necessary. So that’s where I am and its very good. One guy told me to look up the letters in your blog and now that I am out I can tell you that its all true. We see condos as easy money. We add a bit to our bills, we do a few things that are not exactly necessary and no one knows any better. We have a list of easy managers and easy presidents, they are our easy money. But we don’t mess around with those places where the managers know what they do and care or where presidents are there for there owners. We respect those and do good work for them and earn our money the right way. Now I’ll be a fan of your blog but before I would have hated it because it comes too close to the truth. But keep my name to yourself please. [name deleted]

— January 2013, Ontario

Letter: I trust that you will keep this letter confidential in terms of my name. I just bought a condo [sentences skipped]  my father is in one of the trades that condos most often use .... and I hate to say this but [the situation] may be even worse than what is described [see other letters below] father... was afraid that I would end up paying huge fees because these boards spend and spend. These boards just live in a little bubble of their own and they are supported by the manager and often the solicitor and especially the [group name deleted] contractors and suppliers that constantly offer new options and new ideas that will “increase the value of their investment” .... is eventually owners that pay for this retail therapy that the boards like to indulge in and these [rising] fees end up decreasing the investment. My father and his pals see absolutely nothing wrong in cozying up with the boards and esp. the presidents and stroking their egos and making them feel so important and telling them what a great job they are doing and you have no idea how well this works. These people don’t even see that there are better alternatives, cheaper ones that are as good, they are in love with the techs and the glamour that are presented to them and they don`t know a thing about them so it`s easy to con them. They are real foolish little cliques that are out of touch with reality. Owners are too afraid and kept too ignorant to do anything. The fraud that takes place is just incredible, the padding of invoices is just one thing and I won`t even mention the kickbacks to management..... [deleted]

My father and his pals know which condos are easy marks and they drink to them! Even so, these are good men trying to make a living for their families and if the boards are stupid, the way they see it, it`s these boards that are in the wrong. The real issue is that it is too easy for suppliers to make money out of condos because you are right, there is no oversight. It’s just too tempting an opportunity to pass it up. Your website is the only thing that dares spell out the truth. But things are so secret that I bet most people don`t believe it: they should! [deleted] I want the government and people to wake up and face the corruption. I don’t care how they call it, it IS corruption and boards are willing victims, but owners arent’.

— January 2013, Ontario

Letter: I am the owner of a company [type of contractor deleted] and I refuse to do favors for presidents of boards and managers. What the contractor writes in your Readers Respond is just so true because as a result of my not doing favours, I don’t get a fair shake at contracts. [He is referring to letters posted in previous years: see below]

— January 2013, Ottawa

Letter: This is to follow up on the recent letters that you posted about fraud and kickbacks. If you know this [condo] business, you know that managers move around from condo to condo and company to company. So we see and hear a lot of things. Me and my manager buddy get together for a beer after work and swap stories. My buddy told me that at his management company, all of the condos use the same [contractor deleted] contractor. He said that this is because the vice president of the management company gets a kickback on every contract.

The same story is happening at my company. The vice president gives contracts to a relative. We used to complain to each other, but after a while we started taking those Leaf and Raptor tickets and other things. If our managers are getting a piece of the pie, why shouldn`t we? Everybody does it in the condo industry.

— January 2012, Ontario

Letter: I worked in a high end condominium a few years as an administrator. One day, a board member from one of the other condominiums told the manager and me this story. Their former manager had embezzled $120,000 from the condo. The manager created phony invoices from a phony company that she created. When it was discovered, the board members wanted to report it to the police so the manager accused one of the board members of sexual harassment and he was afraid that if they pressed charges, she would too.

The management company paid back the money that was embezzled, or at least their insurance company did. Then the board fired the management company.

We cracked up when the board member told us that the manager left the condo management industry to work as a loans officer in a bank. Talk about putting the cat among the pigeons.

— January 2012, Toronto

Letter: I am the owner of a company [type of contractor deleted] and I refuse to do favors for presidents of boards and managers. What the contractor writes in your Readers Respond [see below] is just so true because as a result of my not doing favors, I don`t get a fair shake at contracts.

— January 2012, Toronto

Letter: I will hazard a guess that a lot of your readers saw the story in the Star [September 2011] about a multi-million dollar fraud in several condos by a management company. Let me tell you, this was not an isolated case. I own a unit at [address deleted] and a couple of years ago, we were supposed to have our toilets replaced to control our maintenance fees that are always going up. The toilet contractor disappeared with hundreds of thousands of dollars of our money.

When our board directors found out about the theft, they sued the management company, the manager and the manager's boss [all names deleted]. Our board reported to us that the management company settled, so lucky for us we recovered our stolen money. Now a funny thing about this story is the manager's boss that we sued is now on the board of [name of the condo group deleted]. Name me another type of business where that would happen!

— October 2011, Ontario

Letter: I served on the board of directors of my condominium for quite a few years. After a while of becoming familiar with the situation, I saw things that caused me to suspect that our manager was taking kickbacks. I investigated with another new board member and was proven right. We confronted the manager and she didn't even try to hide it. She couldn't. We caught her red-handed. Getting rid of her was a nightmare. Our lawyer advised us to pay her off to avoid a wrongful dismissal suit, so we did. Even though she was a thief, we couldn't fire her. When she left, she shredded important papers and changed the passwords on our computer just for spite. I have a friend who owns a condo in another place and he told me that this same old manager of ours is now some big muckity muck at the management company that manages his condo. She left here after robbing us blind and got a promotion!

Until I got on the board, I had no idea what went on in condominiums. I have met other board members in other condos and many tell me the same thing. One said that their manager ordered supplies from Home Depot and then had the super load the stuff into his van. We now have a good manager and not even a paperclip goes out of this place now.

— October 2011, Ontario

Letter: After all that happened at those condos that have been defrauded by their management company [as reported in the Toronto Star, Sept. 2011], I thought that you would like to know what happened at my brother's condo. He became the treasurer because the fees always kept increasing and it seemed that when he talked to me about the services that were the most increased that this was a lot of money. Unknown to my brother's manager and his friends on his board, I own my own company in [type of contractor often used in condos] and I know what those services are for and how much they cost. So my brother began photocopying some of the new invoices that came to the attention of the board and showed them to me. I can swear to the fact that each one of the invoices for [X] services were very much padded and some of the services were not needed.

[several sentences skipped] My brother also noticed that this contractor was a very frequent and friendly visitor to the manager's office and often brought the invoices himself. One day that the manager wasn't in yet, my brother saw the contractor going in the manager's office with an envelope (he had a key and he shouldn't have, another suspicious thing). After he left, my brother asked the security to open the door for him and he took the envelope with him. In it he found $2,500 in bills and when he showed me the invoice later, that $2,500 was about half of what I considered that the invoice had been padded for. So we concluded that my brother's manager was getting half of the inflated price and the other half went to the contractor or perhaps to the management company. [several sentences skipped] But I am asking you not to post the conclusion of this story to protect my brother (he is the one that asked me to write this letter). Let's just say that this manager could not be brought to justice and didn't get what he deserved. There is no justice for condos when things like that happens and had it not been that I am the owner of my own company, these kickbacks would have continued. We figured that they cost an additional $50,000 minimum each year to the condo.

— October 2011, 905 area, ON

Letter: When I arrived to Toronto 15 years ago I had a BA but my spoken English was not good enough and worked for 15 years as a superintendent in 8 different condominiums. All along I pretended that I didn't understand much English because it made it easier for me to do my work without being bothered by everyone and it let me hear things that I wasn't supposed to hear. What was for sure because I had a lot of various technical skills is that all the companies in electrical, pool maintenance, plumbing, AC/H, groundskeeping, drywall and painting, and a couple of others were doing work that wasn't always necessary.

In one building one day I heard the manager complain to one of them that she was having a lot of problems with her [home] plumbing and that she also needed to make over her bathroom. He said that he would do it and they went on talking about when and he said, we owe you big time. A year later she asked me to go to her house to pick up something she had forgotten and when I got there one of the guys that had contracts with our building was doing her roof.

At another building the new manager was having the floors at her house all redone by this other contractor that was in charge of a lot of work in my new building and he was doing a lot more work than was needed. Later she and her management company [name deleted] was fired but [her management company] kept her. She was a nice woman but kind of lazy and not too fast. The housekeeper told me that this was the second time that [X] was being fired [along with] her management and that all the managers at her company were also getting free repairs from the contractors working in their condominiums.

What I also noticed is that the managers regularly refused that I do some various types of work in the building that I knew how to [do] because they preferred to phone their own people. The result is that my buildings never got their money back from me and in addition they had to pay contractors that then came in to do my work. I could have saved them a lot of money with no problem.

I now have my own company that has nothing to do with condominiums but I live in one. It is the president that told me about your website and I am lucky that he hears me out but I will always make sure that these things don't happen in my own building. Now that my job and my future is secure, I wanted other owners to know about these situations.

— February 2011, Toronto

Letter: A few years back I changed management company and was transferred to replace this manager and I was surprised by how much work was being done in one of my new condos by a couple of regular contractors that I will not name here. The board didn't seem to have a clue and had been very happy with this manager because she was good at planning, they said and did preventive maintenance so that the condo was problem free, they said. After a while, these contractors showed up without my even asking them and indicated that they were here to check when they should carry out such and such preventive maintenance. I told them that I would call them back when I felt it was necessary. I called my former contacts and they agreed that this maintenance was not necessary, not so often, in a condo that age and they had never heard of one of the types of work being done like this. Then I was very surprised when I received a call from one of my superiors and [he/she] just casually asked me what I needed done in my house because this contractor always did try to help managers in the condos they service. It was just good PR [he/she] said. I am making this short here but later I also learned that another manager had a lot of work done by the same contractors for free. Guess where the money comes from for this "PR" eventually? [This manager has since moved on and out of management.]

— February 2011, Ottawa area

Letter: The [specific category of contractor is deleted] contractor that our Manager uses is owned by someone in her Management Company and we were never informed of this. Also I have noticed that he is working on our property on a much more regular basis than with the previous Management Company. I have only learned of it recently and I want to know what owners should do because this is a clear-cut conflict of interest.

October 2009, Toronto

Answer: Your management company should, at the very least, have informed your board of directors from the very beginning. At that point, a condo board can decide whether they will ever consider this contractor when they put a big job up for tenders or give small jobs to this contractor if his price is competitive. If the board decides to go ahead and use this contractor, their next step should be to inform owners and explain the situation. That way, there will be transparency. This said, the risk that abuse will take place and that this contractor will be called upon by the manager to do work that could be done internally by the staff, such as the superintendent, increases seriously. This means that the board will have to be extra vigilant and ask, Could this job be done internally? Is it necessary to outsource it? And, occasionally, this board will also want to secure some quotes from other contractors.

As to what owners can do about this, they should first write the board and ask for information and justification. If a reply is not forthcoming and if owners see that abuse is taking place, please consider calling a requisitioned meeting to bring this topic out in the open. Click here for more information on Requisitioned Meetings. Added January 2012: Since this has been posted, several letters from other owners have been received who have have been threatened with legal action if they "defamed" the contractor, the manager, or the board for even asking or warning that there may be a risk of conflict of interest. Please click here for "Harassment" and "Defamation" Redefined.

Letter: [The following letter is from a former contractor; the highlights have been added for emphasis.] I have just finished reading some of your pages and I think that there is one issue that is missing and that is important to address. I am a [deleted] by trade and have worked for 4 different companies before this. I finished my degree with night courses and have been employed for the past two years by the [X] ministry. What I want to explain to you is that for contractors [for repairs, maintenance, and installation], condos are an inexhaustible source of profits.

The first scenario goes like this: the contractor or one of the workers are related to either the manager, the management company or the superintendent or even a board director. Such an “in” gets a lot more contracts with much less competitive bids because the manager has an interest in seeing that you get work on a regular basis, or likes you personally. Lots of managers come from backgrounds like us and it’s easy to see how this develops and how they “feel” more for us than for their [condo] budget and the owners in a building.

The second scenario goes like this: there is a board that does not care or does not know better so it’s easy when a little something goes wrong, the manager calls you and you find the solution and charge a bit more for the repairs than you would do if the manager or board knew what they were doing, and then you point out that something else is wrong (even if it is not) and you “fix” this as well. A lot of guys [contractors] don’t see anything wrong with this because “If they are so stupid and have so much money to throw around, why shouldn’t we have a piece of the pie, we work hard”.

So when you have a board that is not knowledgeable and especially when they know or think that the condo is aging, it’s real easy to get them to spend, even if these “repairs” could wait a few years or it’s easy to overcharge a bit. And when on top of this the board depends on a manager that is on your [contractor's] side, well you have it made.

A third scenario is that the manager sorts of rigs the contracts so that you end up getting the best bid and you win. She can do this because she knows who charges too much or more or better she lets us know how much the others propose to charge so we get this right. Or else we provide a real low bid and ask for more money later on during the repairs.

And the fourth scenario is that someone benefits directly. We either provide free services to presidents or other board members, the managers at their home, the management companies, their parents or we give them real nice gifts for Christmas, sometimes it’s tickets for games, appliances, a fat gift card or small envelopes with cash.

Finally I’ll add that when a board is ineffective and the manager doesn’t like to have too much work, and a contractor is doing a special contract job, the contractor always goes back to ask for more money, either because “something new came up that couldn’t be predicted,” or because “it’s taking much longer than anticipated.” Of course the boards or the managers always approve the increase. That’s why boards and managers should be careful how they word their contracts for a job. They should do it for the job and not for the time spent or other contingencies.

I’d say that nearly all contractors will do it given the opportunity; if your client is stupid or doesn’t care, why not? No harm done and good for job creation. But we don’t do it if a president knows what’s what and runs his ship well.

— February 2011, Toronto

Letter: Our Board has three Directors and two of them are related. In addition, one of these two had caused a lot of damage in the common elements and had been ordered by the previous Board to pay for these damages. [He/she] never did and instead got [himself/herself] elected along with a relative. So my condo Corporation is ruled by a Board that has a conflict of interest and one of the first things that this Board did in its first months was to order the Corporation to pay for the over $12,000 in damages caused by this Board member. We are not a large Corporation and this hurts.

— February 2011, 905 area, ON

Note to Readers Updated January 2012: Many letters describing similar conflicts of interest on the part of boards or specific board members have been received--however, most of these letters come from other board members rather than rank-and-file owners. Conflicts of interest are often subtle and generally not noticed by owners: These occur, for instance, when various board members get elected with the goal of getting rid of rules that they do not personally like or generally break...or to get a contract for some repairs, or want to get even with someone, etc.

Letter: I am the new accidental president of a condo that is about 6 years old. Because I do my business from my unit, I kept noticing how often the plumbing company was on site in the past couple of years. The plumbing costs kept escalating but no one else seemed to notice it. But there were other problems and three board members resigned and I somehow got in. The first thing I did was to look at all these invoices from the plumbers and I noticed that many of them were vague, others were repeat work on the same problem, or work done for one problem that wasn't even part of our equipment in one case, and other things like this. We decided to look around for another plumber and initiated a bidding process for one maintenance issue. The manager was very upset about this and that was our first observation; our second observation is that after 6 months, the number of times that the plumbers have needed to come here has come down by two thirds.... and so has our costs. I will let you draw your own conclusions... Now each time the plumber or any other contractor has to come on site has to be accepted by either myself when I am here or the vice president when I am out.

— February 2011, Toronto

Letter: Many of us owners have gotten together because we feel so helpless. We had an excellent president that we trusted but [he/she] moved away and now we are at the mercy of this management company that gives more and more maintenance work to their set of companies that they have for their other condos (we have checked this out) and a lot of us think that we are being taken for a ride because a lot of this work is not necessary and it is constant. At the AGM, it's interesting but sad to see how the lawyer, management company and auditor, all get along like old friends and back each other up as well as our useless and less than moral board, all of this at our expense. I call this the "road show" because these people always meet each other at the AGMs of a bunch of other condos and have developed ties with each other so that they really serve themselves and their industries rather than the condos that they are paid to serve. We owners really come last in all of this even though this is our money. We are disempowered and treated as if we were children. We feel helpless and it's only going to get worse. What can be done?

— February 2011, Greater Toronto Area

Note to Readers: This is only the first of several letters exchanged with this owner and the answers revolved around their calling a requisitioned meeting to replace their board. However, the conclusion was that they would not be able to muster enough votes for this purpose because only 35% of owners are resident owners.