When Good Managers do Bad Things

In Toronto there’s a few strata corporations and others who are pondering their fate after one manager has apparently defrauded them of up to $20 million.

The Toronto Star reports that Manzoor Moorshed Khan and Channel Property Management have been involved in the following activities –

• registering fake by-laws without committee knowledge authorising multi million dollar loans against the property and then misappropriating the loaned money,
• rigging tender processes on major building projects by creating a company that would come in at the lowest bid to win lucrative jobs and then subcontract the work at half the cost, and
• after securing major works contracts with the lowest bids then varying the work and inflating prices by more than 100%.

At least 7 buildings have identified these situations occurring at their buildings and are taking legal action.  Equitable Trust (who lent most of the money) has advised shareholders of the suspected fraud in relation to four loans with total outstanding balances of approximately $14 million.

Channel Property Management has also ceased trading and Manzoor Moorshed Khan has left Canada.

These are very serious problems and will cause the affected strata corporations and owners severe financial hardship.  It’s also affected Channel Property Management employees and business associates who have been caught up in the frauds.  Plus the whole strata management industry in Toronto is tainted by the revelations.

However, the more long term and serious questions that arise from this situation are about appropriate governance and risk management for executives, committees, managers and management staff at strata corporations (since any one or more of these could do the same) and what, if any, protections by insurance, fidelity bonding, government underwriting or other mechanisms should exist and apply.

It’s a debate that has no easy answers.  But, which we'll have to resolve in the future. 

Francesco …