The aftermath
The board informed Fine & Deo that Bylaw #10 was invalid as the
Board of Directors never passed it and there was no Special Owners
Meeting. They then fired the law firm for not checking with the board
before registering
the bylaw.
The corporation’s new law firm,
Miller Thomson LLP helped the board inform the owners about Bylaw #10
and made it legal with a resolution from the board and the owners.
The board canceled the contract with the electricity provider and were
shocked at much they saved by going back with a local provider.
The corporation sued Manzoor’s favourite contractor and settled for
$91,000 plus interest.
Bradley Chaplick, an articling student at Miller Thomson investigated
Channel's activities on behalf of the corporation and wrote two reports
that stated that there was evidence of forgery, kickbacks and fraud.
The corporation sued Channel and Manzoor Khan and unfortunately the
case dragged on and on until Chnnel declared bankruptcy and Manzoor fled
the country. The new board then included the old directors
in the lawsuit to try to get the corporation to pay
due to their
failure to act with due diligence but the insurance company gave them
the brush off.
The board spent $60,000 in legal fees getting its affairs back in order.
Lessons
learnt
Most importantly, the board and the owners learnt several good lessons.
The owners must elect a competent and skeptical board that insures that
a rogue director or two do not make decisions in cahoots with the hired
help. Then the owners must read the financial statements and the
minutes of board meetings to see what is going on.
The board needs to insure that all directors participate in the
decision-making, and more importantly, all directors present at the
meetings must sign all of the resolutions. They should also, from time
to time, verify the quotes submitted to their approval by tendering
their own quotes.
Ask all contractors submitting bids to mail their bids in sealed
envelopes to the board of directors. That way a favoured contractor
will not know his competitor’s bids.
They
were lucky
A couple of owners caught on quickly that Channel was not on the level
and Manzoor was able to cheat the corporation for less than a year.
Once they were back on the board, they knew how to stop the gravy train.
Finally, they had the interest, knowledge and determination to dig
through the records and find the tricks and games that Khan pulled.
top
contents
chapter
previous
next