The “Condo Industry” And The Art of Corruption

During the month of May 2017 The CBC published several articles dealing with the most common election frauds during the Annual General Meetings (AGM) of Condominium Corporations in The City of Toronto. Often unscrupulous individuals use and abuse loopholes in the Condominium Act, forge proxy signatures to take over The Board of Directors and dispense lucrative contracts to friends and cronies supposedly to provide goods and/or services critical to the “common good” of a condominium, but in reality designed to make rich contractors richer.

One of the most interesting articles that caught our attention is the following one titled:

“Condo board approved energy contract that benefited a member's colleague”

http://www.cbc.ca/news/canada/toronto/element-condo-perfect-clarity-1.4116032

What is so interesting about this article is the sad reality that fraud has been elevated to an art form that makes a big mockery of our “Democratic System”. So resourceful were the conspirators in a scheme targeting several downtown condominiums that “In one case a condo owner who had died years earlier was supposedly able to sign a proxy ballot. Other residents claim their signatures were forged.”  

Of course other colourful methods were used to enhance the chances of fraudsters in their quest for a hostile takeover of Condominium Boards. From handing blank proxy forms to forging unit owners’ signatures, to...

Reading the following 2 articles will paint a more accurate picture of the sad reality of the condo industry managing billions of dollars collected in the form of maintenance fees.

“Court battles, forgery allegations and questions over who controls Toronto highrises”

http://www.cbc.ca/news/canada/toronto/condo-boards-toronto-1.4113053

“Questionable proxies shut down Charles Street condo election, sources say”

http://www.cbc.ca/news/canada/toronto/questionable-proxies-shut-down-charles-street-condo-election-sources-say-1.4118643

After reading the above mentioned articles can we connect the dots and figure out why the lawyer (The Chair Person representing the corporation/unit owners) prompted by a member of the management team left the head table during our 2017 AGM, and put an end to the efforts of the scrutineers to review the log book and the proxy forms?

None of us should be surprised about the questionable move made by the lawyer or the unethical approach used by the management team to organize the election and being very selective in what the scrutineers can or cannot see. Remember the emails and the replies we received after suggesting to The Board the notion of adopting the highest level of transparency and strict ethical principles promoted by “Elections Ontario”. The management company on behalf of our Board replied: “Board elections are not public office elections”, meaning we don’t care about ethical standards as long as we are complying with the letter of the existing laws.

Meanwhile, the tragedies of Board elections are taking place day after day with politicians watching with utter indifference the saga unfolding in the more than 1000 condo corporations located in The GTA. Politicians are claiming that the new revised law, once implemented in 2018 (rough estimate) will invest more power in the hands of unit owners, and hopefully put an end to the corrupt practices used during Board elections. 

In the meantime, it would be very "nice" if managers, boards of directors, and condo lawyers began applying the spirit and ethics of the new rules that will be in effect to protect condo owners' rights and enhance their well-being. But, so far, the hundreds of letters received (by Anne-Marie Ambert, Ph.D. The Administrator of the web site below) indicate that this is not happening.

http://www.condoinformation.ca/action

Admin “The 215 Forum” © 2017 

Condo Owners & Politicians of Ontario

Almost two months ago we had our Annual General Meeting (AGM), and the election process ended up in a big fiasco that undermined the integrity of the entire arrangements used by the management company to organize the election on behalf of The Board, and shape the final figures used to declare one of the two contestants as the winner.

When the management company was accused of preventing scrutineers from having access to critical documents needed to eliminate double voters, a lawyer emailed the accuser a letter mostly designed to intimidate The Alliance and convince those making the allegations that there was nothing wrong with the process used by the management company.

If we use the existing standards of “The Condo industry”, we may label the argument of the lawyer as valid. If we use the standards of “Elections Ontario”, the chronological development of events paving the way for the victory of The Board supported election winner are unethical.

The Minister in charge of protecting Condo owners in Ontario was contacted to put an end to the mockery of democracy that characterizes Board elections during AGMs. The Minister did not even bother to acknowledge the reception of the letter up until April 09, 2017 the day this article was published. After reading the letter reproduced in full below this text, you decide how much the politicians of this province are dedicated to protecting your most valuable asset-your condominium.

Admin “The 215 Forum” © 2017 

==============================================================

Attn: Minister Tracey MacCharles,

The Ministry of Government and Consumer Services

6th Floor, Mowat Block

900 Bay Street

Toronto, ON M7A 1L2

February 19, 2017

Dear Minister,

Currently, The Ministry of Consumer Services is gathering input from the public about “The Protecting Condominium Owners Act, 2015” (PCOA) that received Royal Assent on December 3, 2015, marking the first overhaul of the province's condo law in over 16 years.

If protecting the “Condominium Owner” is the key target of PCOA, I can guarantee you the same abuses perpetrated against owners under “The Condominium Act, 1998” will persevere, simply because the new and the old Acts indicate that Board elections must be held, but nowhere there are any references or details outlining how elections should take place, what kind of safeguards should exist to protect the integrity of Board elections, and what kind of ethical standards should prevail if the end result of an election is challenged.

In hundreds of condominiums across the province, after every Board election condominium owners repeat the following saying many historians attribute to The Soviet dictator Joseph Stalin:
“Those who cast the vote decide nothing. Those who count the vote decide everything.” 

Allow me to explain why condominium owners are so overwhelmed by cynicism, and a powerlessness to put an end to a travesty of justice and a mockery of what democracy should be by The Fourth Level of Government in our country, a.k.a. The Board of Directors of a Condominium Corporation.

A Condominium Management Company prepares elections in a condominium on behalf of the ruling Board. During The Annual General Meeting (AGM) two volunteer scrutineers are selected by the lawyer of The Corporation chairing the meeting. Without providing any instructions, or advising the scrutineers on the discrepancies they should look for when reviewing the figures, the lawyer directs the two volunteers to a table where documents prepared by the management company are displayed. Volunteers are expected to buy at face value the figures provided by The Management Company. If they extend the scope of their scrutiny to documents critical to the integrity of the process but unavailable for a close evaluation, the lawyer interrupts his activities at the head table, and joins the Management Team to reinforce the message that there is nothing wrong in the figures/numbers submitted by The Management Company. 

If a gross violation of basic rules of logic is discerned by the two volunteers, such as a mismatch between the number of owners attending physically the annual meeting and the number of ballots casted and counted, the lawyer is quick to point out that many owners joined the meeting late, some voted others refrained and there is no time to review every detail. Needless to mention that the entire process enjoys so much integrity that all the ballots are destroyed at the end of the AGM to eliminate permanently the possibility of a recount, and insure that no candidate who opposes the policies of The Board emerges victorious from an election designed to be and remains thus far a mockery of democracy. The Board is treated as a “Private Club” where membership is by invitation only.

The tragedy detailed in the previous paragraphs was conveyed to legislators 2 years ago, at a time when Onatrio as a Province had accumulated more than a century of democratic tradition. Legislators assumed, albeit naively, that without any explicit instructions management companies will adhere to election integrity rules, clearly outlined by “Elections Ontario”, to organize elections at The Board level. The assumptions made by legislators were wrong, and the lack of specifics kept the gates wide open for all forms, shades and grades, of abuses designed to protect corporate vested interests at the expense of condo owners.

If decision makers do not clearly underline in the new Act (PCOA) the pivotal role of conforming with the legal/ethical standards of “Elections Ontario”, the voting process in the majority of condominiums of Ontario will remain a mockery that comes closer to elections held in dictatorships such as the defunct Soviet Union, and subsequently our elected politicians should remove from the website of “Elections Ontario” the following statement:

“Voting turns the idea of democracy into reality. It is the basis of any free society.”  
http://www.elections.on.ca/en/resource-centre/learning-about-elections.html  

Central to the whole issue of electoral integrity at the level of the Fourth Government, The Board of Directors of a Condominium Corporation, are the following facts:
[1] Verifiability/auditability: voting results can be verified after the initial count.
[2] Transparency: the process is open to outside scrutiny.
[3] Neutrality: electoral procedures or materials do not favor one candidate or party over another.
[4] The organizing party carries the burden of proof. Every document used to tally numbers should be submitted to a full review without excuses or obstacles erected to hide unethical means used to favor Board supported candidates.

Allow me to highlight also the importance of defining “Ethical behavior” or what ethical standards should be in all matters of governance. Canadian courts and more specifically court decisions reached in Ontario, British Columbia, and Newfoundland have pointed out that ethical behavior in a dispute “… goes beyond the application of the letter of the laws and rules, and relies on an internal set of values (temperance, courage, justice, fairness, transparency…) that push an individual to serve the “Common Good” without any explicit instructions from the laws to do so.”

For the last 13 years I have monitored closely the AGM elections, in our own building and other condominiums in The GTA, which are an integral part of a political discourse between a governing body (The Board), with the authority to collect and spend millions of Dollars, and subjects (unit owners) who have a legal obligation to comply with any decision imposed on the group. The way The Board is handling the AGM elections has lost its moral structure and purpose, and has been converted into an affair of group interest and personal ambitions, under the lame justification that Board elections are not elections for provincial or federal public offices, and No Board in Ontario has any legal obligation to follow standards promoted by “Elections Ontario”, and complying with the standard practices of “The Condominium Industry” is more than adequate to run Board elections.

Here, I find it very appropriate to quote Mohandas Gandhi who, in attempt to discredit the “standard practices” of the colonial ruling elite of India, argued that “An error does not become a truth by reason of multiplied propagation, nor does truth become error because nobody sees it.”

With all due respect Madam, you cannot protect and shape a new future for the more than one million condominium owners in Ontario by maintaining extremely flawed practices from the past. And based on the previous statement I hope you will issue the proper instructions to your staff and the review committee currently gathering proposals, to include one vital phrase to the Condo Board Governance section dealing with votes: “Board elections must be based on the ethical and legal principles promoted by “Elections Ontario”.

Failure to adopt such an important measure, will remind us and the rest of the world that, from 2002 to 2011 we sacrificed 158 men and women of our Armed Forces to save Afghanistan from the clutches of religious fanaticism, and to spread a democracy entrusted with the vision of building a brighter future for that nation, while ironically we allowed the growth, in our own midst, of a local brand of corporate fanaticism that knows no boundaries in its quest to safeguard its greed and vested interests.

Yours truly

Name Removed-An Alliance Member

==================================================================

 As a condo owner, if you are convinced that Minister Tracey MacCharles should do more to protect the integrity of Board elections, contact her directly by using one of the following options:

Constituency Office

300 Kingston Road, Unit 7
Pickering, Ontario
L1V 6Z9

Email: tmaccharles.mpp.co@liberal.ola.org

Phone: 905-509-0336
Fax: 905-509-0334

 

Federal Investigations of The Condo Industry

After reading our previous article titled “Accountability, The Elusive Goal“ a unit owner emailed me a set of concerns and requested a clarification on the issue of “Trusted Contractors”, and how maintenance contracts and equipment purchases are awarded to companies selected by the property management team and rubber stamped or scrutinized and endorsed by The Board of Directors of a condominium.

When addressing the issue of contracts in the condominium industry, the amount plays a very critical role. In general, most Boards allow the Senior Property Manager to use her/his discretion to award contracts under $10.000.

Above $10.000 the “De Jure” practice is to:

(a)  Solicit bids from qualified suppliers who have the means and expertise to finish a project safely and efficiently.

(b)  Tenders are compared and analyzed by The Management Company and a recommendation is submitted to The Board. Sometimes complicated factors are involved, and the lowest bidder for a project may not be the most efficient to finish a project with minimum disruption of the day-to-day activities in a condominium. 

Now the “De Facto” reality of bids, tenders, and contracts. When you have more than 1 million condo owners in the Province of Ontario, and the average condominium (depending on the number of units) has an annual budget of $1.000.000 and up, the industry becomes very easily the target of unscrupulous greedy, and corrupt practices. Like any other industry, “The Condo Industry” is not immune to the phenomenon of “Bad Apples” when billions of dollars exchange hands and hundreds of contractors, engineers, and self-styled experts/consultants are competing to grab and swallow the biggest portion of the pie.

To paint a reasonably accurate image of the phenomenon labelled as “The Bad Apples of The Condo Industry” we will do a quick analysis of what the Canadian media delivered to the attention of condo owners during the last five years, then cover a recent investigation launched by the federal agency known as “The Competition Bureau of Canada”, rely on the outcome of another investigation spearheaded by another federal agency “Canada Revenue Agency” (CRA), and last but not least allow readers to reach their own conclusions.

The poster child of Canadian journalists who have covered the bad practices of the condo industry is The Minto Plaza. The upscale 434-unit Condominium at 38 Elm St., near Bay and Gerrard, was victimized twice during the last 6 years, and the legal procedures launched to recover thousands of dollars in unauthorized expenses and contracts gone wrong is not over. For more details use the following link:

http://www.theglobeandmail.com/news/toronto/queens-park-slow-to-deal-with-condo-management-issues/article29573958/

  

In September 2016, law firms specializing in “Condo Laws” released multiple articles on their web sites, mostly addressed to management companies and Board of Directors, about the most appropriate methods to deal with the massive probe launched by The Cartel’s Directorate of The Competition Bureau of Canada.

http://davidsoncondolaw.ca/competition-bureau-investigation-how-should-corporations-respond/

Competition Bureau spokesperson Marie-France Faucher confirmed to The Globe & Mail that “The bureau is looking into allegations of bid-rigging and conspiracy in the supply of condominium refurbishment services in the Greater Toronto Area,”. Both are considered to be criminal charges under the federal Competition Act.

The scope of the Bureau’s investigation is impressive considering the fact that, like any federal institution, it has a limited number of forensic accountants, analysts, and investigators mobilized to review thousands of repairs and renovation projects, where the money trail is diluted between several layers of consultants, contractors and sub-contractors. 

According to court records, The Bureau managed to compel 141 condominium corporations, spread across the GTA, to hand in thousands of  records related to “the budget, tendering, bidding, negotiating and awarding of a contract for renovations to the common areas of the condominium corporation’s building(s).”

Considering the fact that The GTA has approximately 1000 Condominium Corporations, scrutinizing 14% of Condo Boards is a gargantuan task that clearly indicates to the average condo owner, that illegal activities centering on assigning contracts are not isolated events, contrary to all the efforts made by “The Captains of The Condo Industry” to convince us that dishonesty, theft, and unethical practices are very rare in the field of condo management. For additional details check the following links:

https://www.thestar.com/business/2016/05/26/competition-bureau-launches-condo-renovation-probe.html

http://condomadness.info/corruption-price-fixing.html

As mentioned earlier, The Canada Revenue Agency launched also its own investigation under a project code named “Non-Profit Organization Risk Identification Project” (NPORIP). The project-NPORIP, basically investigated the amount of unreported revenues made by non-profit organizations, including condominium corporations,  that are earning and failing to report income, for a long list of reasons that include diverting money into private pockets. For more details use the following link:

http://www.ontariocondolaw.com/2016/04/articles/financial-issues/cra-non-profit-revenue-findings-slowly-trickling-out/

http://www.condoinformation.ca/condos-financial-structure/misuse-of-funds-and-fraud

 In conclusion, after putting all the facts together, we can safely conclude that “The Condo Industry” is not the most shining example of honesty, transparency, and unflinching dedication to the common good.

It has its fair share of bad apples, and it is up to every condo owner to exercise proper vigilance, attend annual general meetings, and have the courage to challenge the questionable narratives and dollar figures received from management companies and Board of Directors.

Admin “The 215 Forum” © 2017  

Accountability, The Elusive Goal

On March 01, 2017 the CBC published an article written by journalist Trevor Dunn titled “Mississauga woman's bitter battle with condo board not uncommon, experts say”.

http://www.cbc.ca/news/canada/toronto/condo-conflict-board-1.4003022

It is the odyssey of a one bedroom condo owner on Kimbermount Avenue in Mississauga named Alexandra Isa, who for the last seven years has been waging an uphill battle to hold The Board of Directors of her Condominium Corporation accountable for an unnecessary upgrade of a boiler that came with a price tag of $200.000.

All the details of the conflict that triggered a long tirade of accusations and counter accusations are not available. But based on critical facts published in the article, we can safely shape certain conclusions about the dark side of the condo industry and its ability to convince Board of Directors to invest thousands of Dollars in a project that makes a rich contractor richer, without contributing much to the collective good. 

The following key points dominate the landscape of the story’s big picture:

[1] Occupancy of the building started in 2006.

[2] In March 2010 the boiler was replaced for an upgraded version supposedly more “energy-efficient”, and according to the management company that runs the condominium, the switch has resulted in savings and is more environmentally friendly.

[3] Ms. Isa assuming that she lives in a “Democracy” where transparency and accountability play a central role between ruler and subject, and believing that under existing laws directors have a “fiduciary duty” to act honestly and in good faith when pursuing projects, adopting budgets, and approving expenditures that should technically protect and enhance the investment of each and every unit owner, pressures The Board to provide a study documenting the long-term savings from an upgrade costing the building $200.000.

  

[4] Ms. Isa with great disappointment finds out that accountability does not exist, especially after receiving in May 2016, a letter from The Board’s president that reads: "The Board has no obligation to provide you their rationale or detailed explanations of their decisions nor is the Board required to give you request for proposals or documents of proof costs versus savings and costs versus investment returns.”

Now let us do the math surrounding the argument that the purchase was done based on solid mathematical principles that justified the investment of a huge amount of revenues in a boiler considered more energy-efficient, environmentally friendly, and designed to generate savings.

I consulted an electrical engineer, and based on his professional opinion a boiler that has been operational for 4 years only should not consume more than 15% of the total electrical bill charged to a Condominium Corporation. Let us assume the electrical bill for Ms. Isa’s building is $150.000, 15% of that amount will be $22.500. A more energy-efficient version of the same boiler, under ideal conditions will reduce electrical consumption by 25% of $22.500, which translates into an annual saving of $5.625. Any person who has a basic understanding of mathematical principles, will not waste $200.000 to save $5.625.

Dozens of buildings in Ontario purchase annually energy-efficient boilers to replace old ones that reached the final stage of their operational lives. The purchase is mostly motivated by 2 reasons: A) parts are no longer available. B) The amount of money needed to keep an old boiler running is no longer justifiable, thus the need to buy a new energy-efficient version.

Of course The Board will sell readily to a condo owner the old lament that mere mortals known as directors are volunteers spending endless hours to safeguard the “Common Good”, but they don’t have the adequate expertise to pursue such noble goals without relying on the opinions of “The Experts” who proposed the idea to invest $200.000 to upgrade a four-year old boiler that was fully functional. So the board passes the buck to “The Experts” who have a vested interest in promoting products and services that are overwhelmingly WANTS not NEEDS. Of course the law (The Condominium Act) is designed to support such unethical practices, and there is no legal accountability behind bad decisions that cost a building thousands of dollars, even if the math is based on absurd premises. As long as the advice reaching the ears of the directors is coming from a self-styled expert/consultant, you can blame the expert/consultant or the management company that selected the expert from a list of “TRUSTED CONTRACTORS”. Any attempt to blame the management company will unavoidably mean a concerted attack by “High End” Bay Street lawyers who will haunt you with a lawsuit launched on behalf of a Condo Board known as a "SLAPP”-Strategic Lawsuits Against Public Participation.

 

SLAPP court procedures are legal actions launched for the primary purpose of shutting down criticism directed at Condo Boards, and carry an extremely weak and highly questionable cause of legal action. The plaintiff's goal in a SLAPP is not to win the lawsuit, but is rather to silence a critic/defendant/condo owner by engaging him/her in a war of attrition designed to instill fear of large legal costs tied to the terrifying specter of losing a home in the process of resisting the onslaught of a Board whose members, with a stroke of a pen, can replenish their operational funds by imposing extra payments on top of existing monthly fees. Despite her right to seek accountability, a valid explanation behind wasting $200.000 to make a rich contractor richer, Ms. Isa was crushed under the heavy burden of legal fees, thus leaving the gates wide open for Board members to engage in any form of abuse of power in the future without any hindrances.

Remember no Condominium is immune to the phenomenon known as waste of revenues. And if you are deluding yourself with the notion that no one is above the law in a democracy such as Canada and waste can be easily stopped, you are absolutely wrong. There are groups who can twist and corrupt the law with absolute impunity to drain the operational budget of a condominium, and as long as you have Board members who exclusively listen to the captains of “The Condo Industry”, a unit owner is powerless in his/her pursuit of the elusive goal of stopping financial abuses in a condominium.

Admin “The 215 Forum” © 2017