Attorney · Saint Augustine, FL · Member since 2016 · 242 posts · 234 votes
Don’t let your syndicate become a victim of embezzlement due to economic hardship during the coronavirus pandemic.
You need pay careful attention to money in your syndicate and the people with access to it. When people experience financial stress, embezzlement increases. It always starts with access and an unsharable need. The person usually plans to borrow the funds, believing they can pay it back. When they can’t, they try to justify why they deserved it. By then, the funds are spent and irretrievable.
Partnership embezzlement and investor fraud happens. Don’t let it happen to you or your investors.
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
6y
@Kim Lisa Taylor, thank you for the needed reminder. This is why so many full time investors talk about the need to run background checks on sponsor's and key people. Of course a great sponsor can turn bad, and some here can probably share stories of that happening.
I also always encourage people to ask about financial protections/processes of the sponsor. Who has access to accounts? How are financials reviewed and shared? Obviously, having audited financials is the ideal, but can be burdensome on some sponsors. But having a sound review process and A/P system are important to help mitigate these risks.
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
6y
@Kim Lisa Taylor, thank you for the needed reminder. This is why so many full time investors talk about the need to run background checks on sponsor's and key people. Of course a great sponsor can turn bad, and some here can probably share stories of that happening.
I also always encourage people to ask about financial protections/processes of the sponsor. Who has access to accounts? How are financials reviewed and shared? Obviously, having audited financials is the ideal, but can be burdensome on some sponsors. But having a sound review process and A/P system are important to help mitigate these risks.
Rental Property Investor · Harrisburg, PA · Member since 2018 · 369 posts · 406 votes
6y
Good advice @Kim Lisa Taylor. We have 4 members in our LLC but only 2 of us have access to any accounts, and we check repeated times throughout the week on our balances just out of habit. This should curtail any shenanigans right after they would start...hopefully!
Attorney · Saint Augustine, FL · Member since 2016 · 242 posts · 234 votes
6y
@Charles Seaman, in response to your query, here are some red flags to watch out for:
1. Watch for unauthorized transfers or large expenditures, frequent ATM withdrawals, personal credit cards paid with partner funds, advances on future pay, or reselling interests in the company.
2. Watch for partners with access to investor funds living above their means – buying fancy toys, taking extravagant vacations, holding lavish parties, etc.
3. Watch for people who are raising money collecting it in their own personal accounts to be "turned over".
Believe it or not, I've seen all of these things happen in partnerships or syndications.
To prevent it, let everyone with access to funds know you are watching the bank accounts regularly. Knowing someone else is watching is the best prevention.
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
6y
I'll add on that sponsors should be paying close attention to their property management company and employees. Look at your financial statements and question any transactions that are not clear. If they don't think you pay attention, they will be more temped to steal.
Kind of crazy to think that someone could stoop to that level, but it happens. I've had multiple contractors, an employee and a partner all take a lot of money from the business. It all came from me not paying as close attention as I should. You better believe that I look at the details now!