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Conflicted

People in co-ops and condos always complain about conflicts — so long as they belong to someone else.  But they rarely see their own even if they should be as clear as the nose on their face.

Recently I got an email from a newly elected board member at a fancy Long Island City ultra high rise.

“We finally got a majority,” she triumphed, “only they re-elected the President even thought he’s got so many conflicts, special deals with contractors, free parking when everyone else pays. You name it.”

“Doesn’t sound good,” I responded though by now I’ve heard this kind of stuff often enough that I know never to take what the complainer says at face value.

“And he’s accusing me of   having conflicts.”

“Really!”

“Yeah, just because I’m a broker who sells apartments in the building.  Can you believe it?”

Earth to Ms. X. You do have a conflict – or at least the potential for one. As a director you should be protecting shareholders. But as a broker your interest is making commissions, which means you might favor your transactions over those of others.

“There’s nothing wrong with what I’m doing,” she obviously hadn’t heard what I was thinking, but didn’t say. “I mean it’s not illegal or anything.”

“Not illegal,” I agreed cause under New York’s Business Corporation Law so long as you disclose your interest to the others, if a majority of the board still votes for the transaction it’s OK.  But unwise,” I sensed I was fighting a losing battle. “You might think of recusing yourself,” I offered, though I realized that in co-ops and condos that’s often a meaningless formality.  So long as you have one ally on the board, odds are all you have to do is pick up the phone to find out what happened when you weren’t there.

Not a week later I found myself face to face with another conflict – this one a double. As part of my due diligence before hiring a architect for our building to review shareholder alteration plans I contacted a few references.

“They’re great,” the board member gave an unqualified recommendation. ”I even used them when I renovated my own apartment.”

“Before you got on the board,” I naively assumed.

“No, I was on the board,” he didn’t seem to get it.

How could an architect on the one hand hired to push through an individual director’s renovation plans, on the other protect the building against the parts of those plans that might adversely affect it or its shareholders?  He can’t — no more than the renovating board member could serve both his interests and those of the residents he’s supposed to represent.

But once board members go down this road there’s no turning back. One conflict inevitably leads to another till before you know it, that’s just the way business is done, all of which can lead to a Lindsay Lohan like train wreck, co-op style. The best way is to avoid temptation, and not go there to begin with.

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