Gilbert's Wind Drift community is one of thousands of organizations to suffer a financial loss as a result of fraud, a crime which experts say is siphoning billions of dollars from businesses nationally.
According to a 2006 study by the Association of Certified Fraud
Examiners, "United States organizations lose 5 percent of their
annual revenues to fraud."
Wind Drift Board President Larry Rice said that he wishes that his
community had learned earlier about the simple controls that might
have protected it from losing at least $200,000 to fraud and theft,
allegedly committed by the owner, Tim Reedy, of their HOA management
Chandler police arrested Reedy, of Chandler-based Reedy Group
management company, on Jan. 18 on charges of fraud and theft, charges
Chandler police said in February that their investigation led them to
believe Reedy stole a minimum of $500,000 from at least 12 Valley
HOAs. The police said they expected the amount of funds stolen and
HOAs affected to increase.
Since the theft, Rice said the board has implemented several new
safeguards that allow the HOA more oversight of their new management
"We get the bank statements directly," he said. "Only
the president and the treasurer can sign checks now."
Rice said the Wind Drift HOA board has also assumed responsibility for
hiring an independent auditor to review its financial records
annually. Previously, he said, Reedy would hire the audit company.
Rice said he hopes the media attention Wind Drift's case received
"If we'd known about his happening to someone else before (it
happened to us) we would have been more careful," he said.
Former Phoenix police fraud investigator, Paul Hill said he saw a
staggering number of fraud cases during his tenure with the department
that involved small business owners and organizations.
Hill, who is currently an agent with the fraud division of the Arizona
Department of Insurance, said time and again he worked local fraud
cases that involved small business owners who were too trusting of
their employees or contractors.
"They had no idea this person would do this," he said.
"A lot of times they were small businesses that grew fast. It's
the plumber or woodworker who knew everything about plumbing but when
the company grew they handed the finances over to their office
Hill suggests people set aside their personal feelings about longtime
friends or employees and establish protections against fraud.
"Take away the temptation," he said. "Make sure there's
never too much power in one person's hands."
Hill suggests that organizations have a certified fraud examiner audit
their company for weak spots that a criminal could take advantage of.
And if an organization or small business owner suspects that they have
become the victim of fraud, Hill suggest they get their records in
order or even consult a fraud expert before coming to police.
"Most agencies are overloaded," he said. "You need to
be organized. I hate to say it but the less organized you are, the
more at risk you are for having your case put on some shelf."
Hill suggested victims of fraud set a meeting with their police
department's fraud investigators, ask that the fraud supervisor be
present for the meeting and get information about how the agency would
like the case organized before filing it with police.
"If you do this work at the beginning you have a better chance of
building a case later," he said.
Kathleen Barney, a senior fraud expert with the Phoenix office of
national accounting and consulting firm Eide Bailly, LLP, said the
most important advice that she gives business owners is that they must
create a "perception of detection."
Barney said she is handling several fraud cases that involve theft
from Valley HOAs.
"It's hard for an HOA," she said. "You hire a board and
then they hire a management company who has complete control of your
finances. There are few checks and balances."
"People are reluctant to pay for an assessment to find where they
are at risk (for fraud)," she said. "But they always wish
they had once they are victims."
Barney said fraud assessments done by an Eide Bailly fraud expert
range from $2,600-$3,900, depending on the size of the organization.