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Thursday, January 19, 2017
January 2017 View Previous Magazine Features
 

Casting a Vote, Counting It Twice?
By: Nena Groskind

Pick up any condominium publication – including this one – or attend an industry convention, and you will almost certainly find someone writing or talking about the difficulty of finding owners willing to serve on association boards. So it was somewhat surprising to see a recent spate of articles detailing reports of fraud in condominium elections. Are there really owners who are so desperate to serve on boards that they are willing to manipulate the election results? Apparently so.
The Miami Herald reported that Florida officials are investigating complaints of fraud or other election “irregularities” at 30 percent of the common interest ownership communities in that state. In Delaware, a member of an association board has been accused of tampering with 70 ballots in an attempt to sway the election of trustees, and in Pennsylvania, a jury recently convicted the chairman and secretary of a board of falsifying ballots as part of a scheme to “stack the deck” in board elections.
Kenneth Bloom, CPA, a principal in the Massachusetts accounting firm Bloom, Cohen, Hayes, found himself in the middle of a contested election when he discovered ‘irregularities” in some of the ballots his frim was tabulating for an association client. “Some had clearly been plagiarized,” he says, and some owners who had submitted proxies also voted in person at the annual meeting. “It was a huge mess,” he says. “The attorneys got involved – very appropriately.”
Election fraud in condominiums is fairly rare, Bloom says, “but when it happens, it is extremely ugly.”

Procedural Flaws
Clive Martin, counsel in the Boston office of Robinson & Cole LLP, has found that the most common election problems result not from fraud but from flawed election procedures. Martin and other industry executives say owners who challenge election outcomes are most likely to target: Voter eligibility, failure to follow election rules, and proxies.
An owner unhappy with a vote to ban smoking in his community successfully challenged the election by noting that some of the people who voted were not listed as owners of their units – an all-too-common problem, according to Martin, who notes, “Owner information often is not fantastically accurate. Many things can happen,” he explains. “One spouse deeds ownership to another, or to a parent or a child, or they create a trust,” and those changes often are not reported to the association. As a result, the owner casting a vote may not be the owner of record. Although there was no evidence of fraud in the smoking ban vote, Martin notes, the discrepancy did provide a basis for overturning the election.
An association represented by Ellen Shapiro, a partner in the Massachusetts law firm Goodman, Shapiro & Lombardi, LLC, got into trouble when the board ignored a provision in the governing documents specifying that proxies were to be delivered to the clerk of the board, and had them delivered instead to the management company, which was tabulating the election results. The election wasn’t overturned, but the board did get into a prolonged tug-of-war with the clerk, who was insisting on seeing the proxies – a battle he ultimately won.

Problems with Proxies
Proxies are particularly vulnerable to challenge, Shapiro says, because they aren’t always structured carefully or controlled properly to ensure their integrity. Because there is no requirement that proxies by notarized, they typically aren’t, Shapiro notes, “so there is no way to verify that the person named on the proxy actually signed it.”
That doesn’t mean that proxy fraud is prevalent, she emphasizes. On the contrary, “it takes a lot of planning and a lot of work to forge proxies. It is not nearly as easy as people think.” The problem, she says, is not so much the existence of fraud as the suspicion of it. “People are inherently suspicious,” she says. “They think the potential for fraud exists” and proxies are a ripe target for that suspicion – justified or not.
The challenge for community associations is to design elections that will at least address those suspicions if not entirely eliminate them. Industry executives offer these suggestions for assuring owners that the election process is honest and fair.

Election Advice
1. Establish election procedures and protocols well before the election and make sure owners understand them. Owners are more likely to question election results if there are no rules governing them, or if the rules aren’t well-publicized and well-understood. If associations don’t establish reasonable and effective election rules for themselves, Martin warns, “they may get stuck with a state law mandating voting procedures for all condominiums.” (See election requirements sidebar on page x.)

2. Make sure the rules the board establishes are consistent with the association’s governing documents. Equally important, Shapiro emphasizes, “Boards should follow their rules 100 percent.” The election rules should specify, among other details:

• Who is eligible to vote
• Who is eligible to run for office
• The process for nominating candidates
• How notice of the election will be provided – and how much in advance it should be sent to owners. Some attorneys suggest sending the notice by certified mail to document compliance with the notice requirement.
• The quorum requirement for the meeting at which the vote will be held and the vote required to elect candidates – whether a percentage of votes cast or a simple majority.
• How election disputes will be resolved. The rules should note specifically what disputes, if any, will require a new election. “It is so easy to get hung up on procedural niceties,” Martin notes, that you lose sight of the goal, which is simply to ensure the election is fair. “You don’t want to exalt process over substance,” he says, by allowing technical flaws to invalidate an otherwise valid vote.

3. Well before the election, have owners verify the accuracy of the owners-of-record information used to determine voter eligibility. Make sure residents understand that if they aren’t the owner of record – for example, if a parent is living in a unit that has been deeded to a child, the parent must obtain a proxy from the child in order to vote.

4. Pay particular attention to proxies. “People misunderstand them like crazy,” Martin notes. One common misunderstanding: A proxy is not the same as an absentee ballot. Governing documents specify that ballots must be cast “in person or by proxy,” he explains, and an absentee ballot doesn’t meet that definition. An absentee ballot also won’t count toward the meeting’s quorum requirement, Shapiro points out To reduce risks of proxy manipulation – and suspicions of their integrity, industry executives suggest that boards:

 Create an “official” proxy form and make it clear that only proxies on this form will be counted.
 Draft the proxies carefully, distribute them well in advance of the election, and specify, among other details, how early they can be submitted, the deadline after which they won’t be counted, and to whom they can be assigned. For example, you might want to specify that if no proxy holder is designated, the proxy will be assigned by default to a board member.

5. Make voting as easy and convenient as possible for owners – and make it anonymous. Some associations are turning to on-line elections for this purpose (See sidebar on page x.)

6. Keep good records. Document that the board has followed its election procedures and retain all ballots and proxies for at least a year after the election.

7. Be proactive. “The board should be engaged in the election process,” Martin emphasizes. “Publicize the election and encourage owners to participate”

8. Make the election process transparent. Have an independent third party count the votes and open the proxies in the meeting, and announce the results at that time. “The more an association relies on impartial players without a vested interest in the outcome of its elections, the more likely owners will view the elections as fair,” Martin suggests. The independent third party could be the association’s attorney or even the management company, he says. But it shouldn’t be the board.
Unfortunately, Shapiro notes, association attorneys and managers aren’t always viewed as impartial by suspicious owners. For that reason, she suggests designating owners (who aren’t on the board) to count the ballots. “Pick one person who thinks the election may be rigged, one who thinks the process is fine, and have a third owner act a moderator. Getting owners involved in the election process can help to allay suspicions about it,” she says.
But even the most painstaking efforts to ensure transparency and fairness in the election process won’t overcome what Shapiro terms the “innate paranoia” of some owners, who will be suspicious no matter how much oversight you have or who provides it. “You can’t do anything with people like that,” Shapiro says. “Ultimately, common sense has to apply. The board has to say – ‘We think the process is fair. If you don’t like it, challenge it in court.’”

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