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CONSTRUCTION-RELATED THEFT
Inflated or Fabricated Change Orders
How it works:
Contractor submits low bid, then
issues dozens of inflated or unnecessary change orders after
project begins.
Window example :
Add “surprise” lintel or waterproofing repairs after
removing old windows.
40-Year example:
Add repairs for catwalks, electrical panels, or concrete
damage not noted in original report.
Why it’s hard to detect:
Blamed on “unforeseen
conditions”; engineer and GC both sign off. |
OVERPRICED IMPACT WINDOWS
How it works :
Bid out windows at $70–$90 sq ft when market rate is
$35–$45, then split difference. Engineer and GC inflate real
measurements throughout the building, hoping no one will
notice. They pocket the difference.
Techniques used:
Claim supply
chain issues or “custom sizes,” Bundle cheap glass under
luxury
pricing, Charge
for labor twice (in bid and again in change orders)
Why it’s hard to
detect: Residents
aren’t allowed to compare vendors individually; window specs
are technical and confusing. Boards refusing to share
submitted bids with owners. |
COLLUSIVE ENGINEERING REPORTS
How it works:
Engineer inflates
damage to force unnecessary repairs or total replacement.
Window example:
Claim old windows
don’t meet
new wind-load
specs when they do, or claim required egress when not
applicable.
40-Year example:
Fail portions of
structure or electrical systems that are functional but old.
Kickback loop:
Engineer refers
board to a preferred vendor in exchange for a cut. |
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VENDORS
“PREFERRED LIST”
How it works :
New manager or management companies often terminates
contracts with existing suppliers and vendors — such as pool
maintenance, housekeeping, landscaping, security, elevator
service, pest control, and janitorial contractors — and
replaces them with their own “preferred partners,” then
charge those vendors a fee or quietly take a cut under the
table. |
“GHOST WORK” OR POOR MATERIALS
How it works:
Bill for work
that is never done or use substandard materials hidden
behind finishes.
Window example:
Use lower-grade
glass or skip waterproofing membrane.
40-Year example:
Don't replace
rusted rebars or corroded conduits—just patch over.
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SHELL VENDOR OR INSIDER COMPANY
How it works:
Board member, manager, or relative owns or secretly controls
a vendor company that wins the contract.
Fraud scope:
Can
skim 20–50% profit margin.
Why it’s hard to
detect:
Shell vendor
looks legitimate on paper, has a basic website, and submits
formal bid.
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COMMINGLING OR DIVERTING FUNDS
How it works:
Delay deposits or blend reserve/special assessment money
with operating accounts.
Why it's risky:
Violates Florida Statute 718.111(14) (commingling).
Used for: Earning
interest, skimming temporarily, or hiding shortfalls. |
DOUBLE PAYMENTS & DUPLICATE INVOICING
How it works:
Submit two invoices for the same work—possibly with slightly
altered dates or descriptions.
Fraud scope:
Payments are processed manually, or accounting systems are
not reconciled.
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FALSE VENDOR INVOICING
(PHANTOM VENDORS)
How it works :
Create a fake vendor and send invoices for monthly
“maintenance” or “consulting” fees.
Fraud scope:
Recurring $2K–$5K invoices don’t raise alarms.
Why it’s hard to detect:
Manager or BOD approves
payment; no one verifies service
delivery. |
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LOST CHECKS OR ACH DIVERSIONS
How it works:
Redirect vendor payments or insurance proceeds to a
similar-sounding bank account.
Fraud scope:
Inside access from management company or BOD usually needed.
Hard to discover. |
FALSIFIED RESERVE TRANSFERS
How it works:
Transfer reserve funds “temporarily” to cover inflated
expenses—never replaced.
Fraud scope:
Capital projects like windows, elevators, roof.
Why it’s hard to detect :
Mislabeling transfers in QuickBooks or using vague chart of
accounts. |
REBATE / KICKBACK SCHEMES
How it works: CAM
or manager gets undisclosed“rebates” or under-the-table
payments from
Insurance agents, Attorneys, Contractors, Engineers
Why it’s hard to detect:
Manager never receives money
in association records. |
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RECORD MANIPULATION /
WITHHOLDING
How it works:
Refuse to provide accounting records, bank statements, or
bid comparisons.
Fraud scope:
Helps hide overpayments, Undisclosed vendors, Faked
approvals
Violates: Florida
Statutes 718.111(12) (record inspection rights) |
NO-BID CONTRACTS OR EMERGENCY BIDS
How it works:
Management rushes approval of a vendor, claiming emergency,
skips competitive bidding.
Window example :
Claims price would increase if contract not signed
immediately.
Board role:
Usually either ignorant or complicit. |
SELF-DEALING
How it works:
Board members steer
contracts to family or affiliated businesses.
Window example:
Board member’s or Owner’s Representative’s cousin or friend
is the installer; entire project gets inflated.
Why it’s hard to detect:
Vendors renamed, or familial
link not disclosed. |
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SELECTIVE UNIT UPGRADES
How it works:
Board approves building-wide windows but adds premium
features (tinting, impact rating, interior trim) to their
units only.
Why it’s hard to detect:
Paid by common funds or
general assessments. Residents assume everyone is getting
the same thing. |
MEETING MANIPULATION
How it works:
Board fails to disclose contract approval meeting or buries
items in vague
agendas.
Violates: Open
meeting and 14-day notice requirements under FS 718. |
FORGED OR BACKDATED APPROVALS
How it works:
Management or board “re-creates” minutes or approval
documents after the fact to justify illegal contract.
Fraud scope:
Large capital projects requiring owner votes. |
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BOARD MEMBERS RECEIVE FREE REPAIRS & UPGRADES IN EXCHANGE
FOR BUILDING-WIDE CONTRACTS
How it works:
Contractors are quietly instructed to provide premium
upgrades — such as high-end windows, new floors, or custom
cabinetry — to board members’ personal units at no charge.
In return, the contractor secures the association-wide
contract for the same scope of work. These perks are never
disclosed to owners and are buried within inflated project
costs. |
BOD CREATES FAKE LLCS TO ACQUIRE FORECLOSED UNITS
How it works: The
Board of Directors (BOD) secretly forms LLCs under
relatives' or associates' names. These LLCs then purchase
foreclosed units
at below-market rates during court auctions. The board
intentionally withholds foreclosure notices from unit owners
and avoids discussion during public meetings. Once acquired,
these units are rented out or resold at a profit — all
without disclosing the connection or sharing profits with
the association.
Why it’s hard to detect:
BOD never disclosed to
owners that units are going into foreclosure. |
"LEGAL EXTORTION" THROUGH FRIVOLOUS LAWSUITS OR FINES
How it works:
Boards or management companies use association attorneys to
threaten or file frivolous lawsuits or excessive fines
against dissenting owners. These actions are often used to
silence whistleblowers, force unit sales, or cover up fraud
by shifting attention.
Tactics include:
Selective enforcement of rules, manufactured violations, or
aggressive legal threats over trivial matters.
Why it's dangerous:
Owners often feel isolated
or financially pressured into giving up their units, while
the association racks up legal fees — which are then charged
back to all owners. |
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MULTI-PARTY
COLLUSION
(THE MOST
EFFECTIVE THEFT MODEL)
The most profitable and hardest-to-detect thefts involve all
parties working together:
1. Engineer:
inflates scope
2. Contractor:
submits bloated bid
3. Manager:
fast-tracks approval and hides documents
4. Board:
pretends to “review” and approves deal
5. Management Company:
misclassifies payments,
delays financial reconciliation, and charges a substantial
percentage of the total project cost as a “management fee.”
Each takes their cut—and no single party appears solely
responsible. |
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