No Bank Recs Cover Theft

Vacation Rentals

A Sleazy Underbelly of a Vacation Rental Company in Miami

A former CFO ,took the reins of a Vacation Rental Company in Miami and asked the principal who hired him for access to banks, accounting and bank reconciliations.  When that principle hesitated he tells me he immediately knew something was askew.

Two weeks later, that principle was forced to turn all information over and within a week the new CFO reconciled the bank accounts and found that this principle had removed $80,000 deposited as capital contributions from new principles that had recently made capital investments.

The CFO was asked to do a forensic review of the Vacation Rental Company.  Here were his findings.

$650,000 in sales taxes collected were not paid.

The CFO asked the principal’s secretary why she was not using the vacation property management system to determine what was due and owing to unit owners in the rental pool and instead was recalculating what was due on an excel sheet.  She said because the principle instructed her to remove 10% off the top from funds owned before creating the fraudulent owner folios.

Because cities and condominium board of directors were cracking down on vacation rentals this company, without permission, was entering into contracts using employees names instead of the corporate name at times without the employee’s permission.

Staff working over 40 hours a week were forced to sign contracts prepared by the principle stating that they were independent contractors.  Benefits were denied them, over time was denied them and they all work was overseen by the principle.

The CFO states he came into an office with no backup or support for any financial transactions.  No invoices. No bills.

Several months after beginning his tenure he ran criminal backgrounds on all staff uncovering many criminal records some of staff that was interacting with guests.  No background checks had been made.

Many disputes were filed for credit card transactions due to the poor condition of units and/or actions by staff.  It was the policy to reject every dispute and collect as much as possible.

Upon beginning the CFO knew the principal who initiated hiring him by a name he had been using in the prior 5 years of their contact and friendship.  When the CFO entered the office he was embarrassed not to be able to find the principal’s name anywhere.  He asked the secretary who informed him that the principle, his wife (in the company) and several employees all used fictitious names.

Before his resignation the CFO did background checks on the principles to find that 3 out of the 4 had “shady” backgrounds with histories that reflected the same.

This began as another story where not having bank reconciliations hid fraud and criminal activity.  It is a similar story to that discussed previously in this blog where a hotel controller made away with a 6 figure embezzlement.

Companies like this give vacation rentals a bad name.  They should be better regulated.

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