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.

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