| Developer says it was defrauded by controller |
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Friday, June 6, 2008 Lisa R. Schoolcraft Staff writer Vista Realty Partners LLC -- which built the Lindbergh Vista apartments and is building Woodside Vista in Union City and Marquis Vista in Atlanta -- filed suit May 19 in federal court in Atlanta against its former controller, Cary Smith. Smith was hired by Vista in May 2007, and then fired in February this year. Vista claims it wasn't the only company damaged by Smith, and says it has uncovered a record of criminal embezzlement and fraud dating back to the 1980s. "Throughout the past three decades," Vista's complaint charges, "Smith has continually converted and misappropriated hundreds of thousands, if not millions, of dollars, oftentimes furthering his fraudulent scheme using the United States mails and wires, committing bank fraud, and committing various theft crimes." Smith had not yet responded to Vista's lawsuit as of Atlanta Business Chronicle's June 4 press deadline. Attempts to reach him via e-mail and a previous attorney were unsuccessful. Vista claims that Smith has continued to harm the company by alleging tax fraud, insurance fraud and making false statements against Vista, its CEO Ed de Guardiola and other Vista employees. Smith has allegedly "demanded in excess of hundreds of thousands of dollars or he will make his accusations 'public,' " the lawsuit said. Smith allegedly contacted Travelers Insurance Co. in April, accusing Vista and de Guardiola of insurance fraud, and Travelers is now planning to cancel Vista's account, the lawsuit said. Vista is still tallying up what the losses to the company might be, said Alison Danaceau, an attorney with Carlton Fields PA in Atlanta who represents Vista. Vista, which also builds townhouses and condominiums throughout the Southeast, alleges Smith falsified his résumé, had several employers from 1980 to 2007, and has been arrested on various criminal charges, including theft by taking, forgery, passing bad checks, and theft by deception in various metro Atlanta counties. Kurt Ronn, CEO of HRworks in Atlanta, said the problems Vista faces are not uncommon among small businesses. When hiring an employee who touches company money, businesses need to do credit and criminal background checks, as well as educational background checks, Ronn said. "If you are going to hire someone with direct financial control, you have to do a background check," he said. That cost is about $100, he said, and should come back in 24 to 48 hours. An educational background check may take longer, but an employer can always make employment contingent on the veracity of results, Ronn said. An employer can get "so excited by the opportunity that they don't do the due diligence," said Henry Perlowski, partner and co-chair for employment law team at Arnall Golden Gregory LLP. "The diligence, conceivably, can turn up bad news, but you need to know that." An employer also must spell out what a fiduciary officer can and cannot do in the business, he said. That would include not sending business e-mails to personal accounts, or divulging business or trade information to other companies, he said. Employers should have a job application that must be signed by the applicant, verifying the information is correct, Ronn said. "If it turns out the person falsified an application, he has lied to the company," he said. An employee handbook spelling out policies, including falsification of the job application, is also crucial, he said. Smith had full financial control of Vista funds, the lawsuit claims. He was responsible for all financial accounting of Vista and its affiliates, managed its accounts payable and receivable, and was responsible for the payroll accounting records, the suit said. "Smith was permitted a great deal of autonomy in performing his job duties," the suit said. But one of the largest costs, particularly to small companies, is the lost focus of running the business, Ronn said. "This takes time away from customers and producing the widgets they produce," he said. "It is enormously costly to have a bad hire."
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