On July 31, 2019, the Maryland Attorney General announced that the Office of Consumer Protection Division reached a settlement with Evergreen Management, LLC ("Evergreen") and its owner, Jason Barry Oseroff ("Oseroff") for misappropriation of community association funds. Charges were brought against Evergreen and Oseroff in April of this year, alleging the management company and its owner used community association funds for their own benefit, refused to provide bank statements, falsified, balance, expense and income reports, and transferred funds from one association's account to a different association's account in order to hide any shortfall that resulted from the improper use of the funds. In addition, Oseroff and Evergreen liquidated clients' reserve funds and investment accounts without authorization. As part of the settlement agreement, Oseroff is no longer permitted to manage any condominium or homeowners' associations. In addition, Oseroff and Evergreen must repay all of the monies they owe to consumer and pay penalties; approximately $2.5 Million Dollars.
The actions of Oseroff and Evergreen are, unfortunately, not new. Management theft has occurred several times in the past decade, including major thefts of community reserve funds. Board members have also stolen funds from their associations and, more often than not, once the theft is discovered most people are shocked.
There is no litmus test which will reveal a person's true nature. That is why it is vital for every community association to ensure it has adequate fidelity insurance in place to protect its financials. Section 11-114.1 of the Maryland Condominium Act and Section 11B-111.6 of the Maryland Homeowners Association provide, respectively, that Condominium or homeowners associations with more than four (4) units/lot owners, and gross annual assessments in excess of $2,500.00 must carry fidelity insurance (or a fidelity bond) providing for the indemnification of the condominium/homeowners association against loss resulting from acts or omissions arising from fraud, dishonesty, or criminal acts by: (i) an officer, director, managing agent or other person who controls or disburses funds of the condominium/homeowners association, and (ii) any management company employing a management agent or other employee who controls or disburses funds of the condominium/homeowners association. The amount of the fidelity insurance must equal at least the lesser of: (i) 3 months' worth of gross annual assessments plus the total amount held in all investment accounts, or (ii) $3,000,000.00.
It is disheartening, to say that least, that you cannot always trust those persons elected or hired to run your community and manage your association's funds. But if you take affirmative steps to protect your community's assets by securing fidelity insurance you will be protected. If you have not done so already, now is the time to ensure that your community has fidelity coverage in place and/or increase the amount of insurance coverage, if necessary. Our office would be happy to review your insurance policy and/or assist you in obtaining fidelity insurance coverage.
Please contact any attorney at Nagle & Zaller, P.C. if you have any questions or concerns regarding fidelity coverage for your community. For more information regarding the Evergreen matter, please see the enclosed Press Releases from the Office of the Attorney General. In addition, if you believe your community is owed refunds from Oseroff and Evergreen, please contact our office or the Consumer Protection Division hotline at 410-528-8662 or 1-888-742-0023.