Paula Chin in Board Operations on February 14, 2020
A clear-cut election protocol is your best defense against proxy fraud, and putting one together is relatively simple. There are six steps to take:
Get legal advice. Consult with your attorney, and ask him or her to draft the protocol document. “Boards shouldn’t do this with their managing agent, because he or she won’t necessarily understand all the legal implications,” says Steve Wagner, managing partner at the law firm Wagner, Berkow & Brandt. “Generally, co-op counsel should know how to do it, but if there has been a lot of rancor in past elections and counsel hasn’t been effective, it’s time to bring someone else in.”
Check your governing documents. If your governing documents allow proxies, the forms are typically sent out with the meeting notice, but they can also be made available at the management office or online. It’s up to boards to decide whether they want to use a general proxy that gives the holder discretion to vote as he or she wishes, or a specific proxy that provides the holder with explicit instructions on how the owner wants to vote. Boards can require voters to turn in proxies beforehand, which makes it possible to check signatures against the co-op’s records before the actual balloting. “That’s a good way to head off problems early,” Wagner says. “But it does require an amendment to the bylaws.”
Authenticate the proxies. On election night, Wagner recommends having a spreadsheet that lists each shareholder’s name, apartment number, and the number of shares held, then checking a photo ID before handing out ballots. Both proxies and ballots should be authenticated by marking them with stamps, initials, or a designated watermark to ensure they’re not tampered with or copied. “It’s also a good idea to have the proxy attached to the ballot, so if a shareholder actually shows up at the annual meeting, he or she can revoke the earlier proxy, since only the one dated last is valid,” Wagner says, adding that in the contested election at the Great Neck Terrace co-op, all of the 60 fraudulent proxies were dated at the 7 p.m. start time of the meeting. “It was a little too brazen,” he says.
Tally the proxies. As for the all-important tallying, in addition to impounding ballots overnight, board members must not be present during the actual counting. “If you have two very contentious sides, you can allow representatives from each to be present, but not the candidates themselves or members of their family,” Wagner says. There must be a thorough, careful check of proxy form signatures against your co-op records, such as proprietary leases and recognition agreements.
Enforcement. The best-laid plan, however, won’t be effective unless it’s strictly enforced, which is why Wagner recommends that larger buildings hire a third party, such as Honest Ballot Association, to serve as inspector of the election — and instruct its employees to follow your protocol to the letter. “It puts people on notice and has a chilling effect on fraud,” he says. “I’ve seen this system used over and over again, and it’s always successful.”
Contested elections. In cases where the election is contested, boards should give challengers two or three business days to submit a written statement; if the complaint seems valid, you need to have your inspector verify the results before certifying them. “You don’t want a dark cloud over the board,” Wagner says, “and you want to avoid litigation if there is another way to resolve things.”
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