Condos now missing $1 million in accounting scandal
Updated 3:48 pm, Wednesday, October 3, 2012
A Westport property management firm is facing more legal trouble in a widening accounting scandal and from fallout from a string of thefts at a Greenwich apartment complex.
This week, Community Association Underwriters of America Inc. filed a lawsuit against Consolidated Management Group, of Westport, and its former controller in an attempt to recover more than $1 million missing from the bank accounts of eight condominium associations that Consolidated manages. This lawsuit and another one brought individually by the Whitney Glen Condominium Association, allege the funds have been embezzled possibly for years.
List of the condos reporting losses: Sound House Condominium Association, Bridgeport Clarmont Association Inc., Norwalk The Hills Condominium Association, Monroe Trumbull Townhomes Association Flax Hill Section I Condominium Association, Norwalk Strathmore Lane Condominium Association Westport Whitney Glen Condominium Association, Westport Crowne Pond Association, Wilton Melody Lane Condominium Association, Fairfield Source: Court records
Westport Police confirmed on Thursday they are investigating the alleged embezzlement but could provide no further information at this time.
Consolidated was named as a defendant in a lawsuit earlier this month stemming from thefts at Greenwich Shore Apartments by property manager Michael Orr that started in 2009. Orr was sentenced in 2011 to 12 years in prison for stealing an estimated $450,000 from residents in the complex.
Greenwich Shore residents Robert and Renee Barton, along with their insurance company, are suing for $180,000.
Repeated attempts to contact Consolidated via email and its former controller by phone were not answered.
Windsor Locks-based attorney Stuart G. Blackburn, acting co-counsel for Community Association Underwriters of America, declined to comment.
In its complaint, CAUA charges Consolidated with failing to properly supervise employees. The insurer says it anticipates having to pay out out more than $1 million to cover the losses at the condominium complexes.
The money at issue comes from fees that residents pay for maintenance and future renovations. Court documents indicate that someone at Consolidated was shuffling money between condo association accounts. Finding out exactly what happened without cooperation from the perpetrator could take some time, according to one expert.
"It could take weeks or months to unravel," said forensic accounting expert and certified public accountant Christopher Gallo, who has a firm in Shelton.
Gallo said even if investigators can trace the movement of all the money, there often is a dead end, where the money was converted to cash or sent out of the country.
email@example.com; or get updates at http://twitter.com/financialmines.
Clarification: RDM Financial Group is not affiliated in any way with Consolidated Management Group of Westport, a condominium management company that is dealing with an accounting problem. RDM's sign appeared in a photo in Sunday's business section as well as in the web version because it is a tenant of the same building where Consolidated is headquartered.