Why It’s Not Enough for Just the Police to Crack Down on Community Association Fraud

The firm’s latest Miami Herald “Real Estate Counselor” column was authored by shareholder Shari Wald Garrett and appears in this past Sunday’s edition of the newspaper.  The article, which is titled “Why It’s Not Enough for Just the Police to Crack Down on Community Association Fraud,” focuses on recent cases of alleged theft and fraud at Florida community associations. It advises associations to do their part to prevent becoming a victim, rather than just relying on law enforcement to investigate and prosecute perpetrators.  Shari’s article reads:

. . . As a couple of recent cases from Volusia County and Broward County illustrate, local police and law enforcement agencies are now aggressively pursuing such allegations, but the onus remains on associations to prevent theft and fraud by making effective use of proven safeguards.

The case involving Julius Bruggeman, the 76-year-old former condominium association president and property manager for the Smyrna Beach Club, has been the subject of several Central Florida newspaper and television reports during the last few weeks after a news release and wanted notice was issued by the Volusia Sheriff’s Office. According to the press release, he has been charged with grand theft, an organized scheme to defraud, and racketeering involving approximately $1 million that he allegedly stole or misappropriated from the association over the last 10 years.

The investigation by the VSO Financial Crimes Unit began last April when its detectives first received complaints from the condominium’s residents alleging Bruggeman was embezzling funds from the association’s bank accounts. The officers subsequently executed search warrants for the association’s offices and Bruggeman’s residence, which was found to be completely void of his personal belongings other than a few pieces of furniture. They were told by building staff that he had abruptly moved out just a few days earlier, and he seemed to be in a hurry.

The VSO’s seven-month investigation found Bruggeman had almost complete control over the association’s finances. He had been able to install friends as fellow board members, for whom he had authorized the purchase of health care policies using the association’s funds.

In addition to paying himself an annual salary of approximately $70,000 for his management services, Bruggeman is accused of using approximately $800 to $1,000 of the association’s funds per month to purchase personal items such as food, clothing and health supplements. He also is accused of using association funds to purchase televisions and kitchen appliances for unit owners, who would then pay him money that he would keep for himself.

A financial audit conducted after his hasty departure from the community revealed that budget shortfalls tied directly to his activities resulted in the doubling of owners’ monthly association fees. The other board members whose healthcare was paid with the association’s funds returned the money during the course of the investigation, and the association was fined $20,000 by the Department of Business and Professional Regulation for allowing the mismanagement to occur.

Today, Bruggeman’s whereabouts remain unknown, but VSO detectives believe he may be in or near Portland, Oregon.

In the Broward County case, Michael Curtis of BDM Property Management has been arrested on charges of grand theft and perjury alleging he and his company stole $439,000 from an insurance settlement that had been paid for Hurricane Irma repairs to the Fairways of Sunrise Homeowners Association.

According to a report earlier this month by NBC 6, records from a civil court case show Curtis signed an insurance settlement agreement for $444,000 for the community in January 2020, but investigators say an unauthorized check was issued to his company days later for $439,000. Video recorded at a meeting with the Fairways homeowners in June 2021 reflects Curtis telling them that the insurer’s attorney found a loophole that led to the company having the case dismissed, and nothing was paid to the association.

His perjury charge is for allegedly lying under oath in the ensuing litigation when he testified he was unaware of any money having been paid to the association by the insurance company.

While it appears from these recent charges and arrest that law enforcement agencies are now investigating and prosecuting such allegations more aggressively than in the past, what cases of fraud and embezzlement typically all have in common is communities ceding too much control to one or a few individuals with too little oversight.

Recovering funds lost to malfeasance can be extremely difficult, so communities should prioritize putting in place the most effective safeguards and preventative measures to help avoid becoming a victim. Some of the best practices include requiring two signatures on all checks, keeping the stockpile of blank checks securely locked away, avoiding community debit/ATM cards (which are prohibited by Florida law), conducting monthly reviews of all account and financial statements by multiple directors/managers, and maintaining adequate insurance coverage to protect against such losses. Associations should also conduct independent audits of all financial records by certified experts on a regular basis. . .

Shari concludes her article by noting that community association directors and property managers have a great deal of control over the purse strings for the enclaves they serve, so the potential for fraud and embezzlement will presumably always be present. She advises residents who suspect any wrongdoings in their communities to turn to local and state law enforcement agencies for investigations, which are now much more likely to be pursued than in the past. However, she counsels that to help avoid becoming victimized and having to turn to law enforcement and the justice system, associations should make effective use of these and other preventative measures and precautions.

Our firm salutes Shari for sharing her insights into the takeaways from these recent cases of alleged association theft and fraud with the readers of the Miami Herald.  Click here to read the complete article in the newspaper’s website.

Shari and the firm’s other South Florida community association attorneys write about important matters for associations in this blog and our Herald column, which appears every two weeks on Sundays, and we encourage association directors, members and property managers to click here and subscribe to our newsletter to receive our future articles.