Legal Question in Legal Ethics in Maryland
Unauthorized spending by the President of the BOD
My wife sits on the Board of Directors for our Pool/Tennis
Club. Recently, the president of the board, (who has been
reprimanded recently in writing for unauthorized spending of
the club's money on pet projects)decided to do the exact
opposite of what was discussed and agreed upon by the other
15 board members in a board meeting and remove some mature
shade trees and build a shed for some of the club's parking
lot workers at a cost of about $7K. The board met last night
and voted him out as the president. However, the shed
project will probably be scrapped at a lost and the trees
may have to be replaced. The other board members do not want
to communicate this mistake to the rest of the club nor did
they kick him off the BOD or make him pay restitution for
his mistake. The BOD does have insurance but can they be
held liable themselves in a lawsuit for not taking the
appropriate action? Should she suggest sending him
a letter of memorandum? She is on record in the meeting
minutes as not wanting him to remain on the board at all but
should she reitterate that in writing so that she is not
held liable in a lawsuit?
1 Answer from Attorneys
Re: Unauthorized spending by the President of the BOD
The first thing to do is check the declarations and articles of the association that the board of directors appends to. Depending on the structure of the organization, certain voting procedures generally apply. There are various requirements that apply by law to the various forms of organization.
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