Alum Indicted on Embezzlement Charge (TKE, Arizona)

[exlurker]

A reminder of the need for "transparency" and solid documentation in dealing with fraternity funds -- in this case, money from the sale of a house:


http://www.azstarnet.com/metro/250827

Another reminder: the presumption of innocence applies -- this is only an indictment.

[Tom Earp]

Better wait to see what else may come out of this before anything else is said or added.

[AZ-AlphaXi]

This is my son's chapter of TKE which was recolonized in spring 2006

[Kevin]

This is why it is important that everyone on your housing board be business savvy and that you include in your bylaws a requirement for an annual outside audit of the books.

[EE-BO]

Well said. I am glad you posted this article exlurker because while embezzlement might be rare, the non-financial/legal expertise on Housing Corporations that makes theft easier is frighteningly common.

Our Housing Corporation by-laws very strictly define the purpose of the organization, financial review requirements and the nature of expertise required of the Board, as well as minimum age requirements for members.

Thanks to well-intentioned, but uneducated, management of our own Housing Corp several years ago, we had to pay a $13K delinquent property tax bill this spring for a lease the chapter had many years ago. No it was not theft, but it was still just as expensive.

Financial and legal expertise is also very important as many chapters move to tax-free fundraising models developed by the types of fundraising companies who are also helping fraternities and sororities raise money tax-free. For housing corporations, these are attractive plans, but the use of funds is very restricted- and IRS penalties for misuse can be quite severe.

With real estate prices so high near campuses, there is more pressure to come up with plans using partial tax free funds and/or mortgage debt to buy a house. The days of just getting a few alumni to write a check are definitely dwindling. And thus all the more need for housing corporations to really know what they are doing.

[exlurker]

Originally Posted by EE-BO

. . . while embezzlement might be rare, the non-financial/legal expertise on Housing Corporations that makes theft easier is frighteningly common.

Our Housing Corporation by-laws very strictly define the purpose of the organization, financial review requirements and the nature of expertise required of the Board, as well as minimum age requirements for members.

Thanks to well-intentioned, but uneducated, management of our own Housing Corp several years ago, we had to pay a $13K delinquent property tax bill this spring for a lease the chapter had many years ago. No it was not theft, but it was still just as expensive.

Financial and legal expertise is also very important as many chapters move to tax-free fundraising models developed by the types of fundraising companies who are also helping fraternities and sororities raise money tax-free. For housing corporations, these are attractive plans, but the use of funds is very restricted- and IRS penalties for misuse can be quite severe.

With real estate prices so high near campuses, there is more pressure to come up with plans using partial tax free funds and/or mortgage debt to buy a house. The days of just getting a few alumni to write a check are definitely dwindling. And thus all the more need for housing corporations to really know what they are doing.

EE-BO, I absolutely agree that financial and legal expertise is desirable for housing corporations, and for other alumni/ae entities that advise or support a chapter.

Greeks are by no means unique in this regard. In my professional life I've seen several local or regional nonprofits collapse or suffer heavy financial -- and PR -- damage because boards "trusted" the wrong people and paid little or no attention to financial management and adequate fiscal controls.

[ZetaGirl22]

This happened at my DH's chapter. The head of their House Corp stole A LOT of money from their chapter. Their house was leased by the University, and they found out when their rent payment didnt get paid. It all worked out in the end, but it was scary. The guy was an alum of his chapter. He got kicked out of the fraternity and had charges pressed on him. Never heard what came of it.

[Kevin]

House corporations are an incredibly important and often overlooked aspect of fraternity life. I think it's a bad idea, particularly in the case of young chapters such as mine, that alums are actually expected to know what sort of expectations and duties go along with being a Director of any sort of not-for-profit corporation.

A certain level of ignorance as to 'the rules,' can lead to lawsuits, and other sort of [very, very bad] extra-curricular activity which can have serious negative consequences for the active chapter.

My organization, recently, has slowly been transitioning to a national house corporation (Fifth Point Properties). I think this is a very good thing. While I do enjoy serving on our House Corporation, it is a tremendous responsibility. While we are blessed with a House Corporation whose members are well aware of their fiduciary obligations (at least a couple are on boards for major corporations, and everyone has a significant business or legal background), I can't imagine that the availability of such expertise is always available.

I can't think of any reason why national organizations who know their local chapters have significant assets don't either conduct training themselves for house corporation Directors and executives [actually, there is one -- potential liability, but I really doubt holding a disinterested training session is going to show the degree of control required to create an agency relationship, or make national organizations liable for anything], or do so through an independent third party [which would correct the possible issue].

There's way too much money at stake to leave things to what in many cases will be amateurs.