How to bankrupt a corporation

One way to destroy a corporation financially is to hire the wrong company to manage the corporation’s finances. That’s what the president of a Berkeley, California, corporation did late in 2012. The strategy is succeeding brilliantly.

One of the most effective ways to bring a corporation to its financial knees is to put it into the hands of an arrogant, ignorant, and incompetent manager.

That’s exactly what the president of a Berkeley, California, corporation did late in 2012. Almalee Henderson, president of Berkeley Town House Cooperative Corporation (BTH), signed a contract with Bay Area Property Services (BAPS), making BAPS the manager of BTH. Thus began a financial slide into an even more precarious plight than BTH was already in.

At the time that BAPS began managing BTH, BTH had woefully inadequate internal financial controls. Its president and manager had essentially blank checks: They were spending money at their sole discretion. The board of directors, which by law was responsible for approving all expenditures, simply dozed while the corporate officials wrote checks. This regime had already resulted in the loss of an entire year’s corporate operating budget on payments to an unlicensed and uninsured contractor for work that failed so miserably that it will cost almost twice as much to correct it as BTH paid for it.

In stepped BAPS with the promise that it would cure the corporation’s financial ills. But there was no basis for such hope, because BAPS already had a poor reputation and Henderson’s secret contracting process did nothing to assure that only qualified management firms would be considered.

So, not surprisingly, BAPS in a mere nine months has brought BTH even closer to financial ruin than it already was.

Two months ago I sounded the alarm in a memorandum that I read out loud and delivered to the board of directors at a meeting of the board. I described seven financial requirements imposed by law on the corporation. For each of them, I pointed out that BAPS had failed to assure BTH’s compliance.

In the intervening two months:

  • The board of directors has not responded to my memorandum.
  • BAPS has not responded to my memorandum.
  • None of the violations reported in my memorandum has been corrected.

Thus, BAPS has further cemented its credentials as a corporate demolition specialist.

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