Dear Co-op Counselor; HELP!

Dear Co-op Counselor:
We just discovered that our site manager was embezzling money. What should we do?
Please advise.
Inquiring Member

Dear Inquiring Member:
Your first call should be to your Cooperative Attorney to spearhead coordination of the effort. They will work with you and your other professionals to take immediate action to assure the thief no longer has access to accounts and no further exposure exists. The second call will be to the police to begin the criminal process. Having a police report is often beneficial or necessary to get the insurance carrier involved.

Police also routinely use their own powers to start gathering information and documents from third parties such as banks which will assist you in verifying preliminary losses from the theft, prior to an audit. In some circumstances, the Inspector General may need to get involved if federal funds may have been taken as well.

The insurance carrier should also be contacted that same day. Your management agent should have secured the appropriate policy pursuant to their management contract. This policy is absolutely invaluable,
particularly in circumstances where the employee/site manager may be otherwise uncollectible.

Quantifying the total loss often requires an independent audit. Sometimes the losses are easy to calculate by Management and your Cooperative Attorney. However, since your insurance carrier often will cover the costs, in part or in full, of the audit, don't hesitate to incur this expense as this tool may find not easily detected stolen items.

The process is not often quick or simple, but working in tandem with your professionals is essential. Your Cooperative Attorney will work with you to coordinate this process and will also be able to advise
when or if it is appropriate to file a contemporaneous civil action to recoup monies. Often, law enforcement may not prosecute if you immediately file a civil action, or if you recoup your money in part or in whole. So working with your Cooperative Attorney is important to avoid prejudicing your claims or leverage on the thief. Most states
have some form of treble (triple) damages for this type of theft.

There are also ethical issues involved in this process during the negotiation process that your Cooperative Attorney can advise you about. The goal first and foremost is to make the Cooperative whole. A good
game plan and proper coordination will make this difficult process easier. Your members are counting on you to get their money back, and these tips will help!

Signed: Creighton D. Gallup, Esq.