March 15, 2004

Board of Directors

Sapphire Bay Condominiums West

6345 Smith Bay

St. Thomas, VI 00802



Ladies and Gentlemen:

I have discovered a number of situations where the Bi-laws of SBCW are not being adhered to, and or irresponsible financial practices are being followed. I believe that all the following matters need your immediate attention and action:


  1. Steve Kerschner Is Not Entitled to Be a SBCW Board Member or President of the Board:
  2. The SBCW By-laws ARTICLE II Board of Directors, Section 1. Number and Qualifications, sentence 3 says: "Thereafter the Board of Directors shall be composed of five persons, all of whom shall be owners or spouses of owners or owners of mortgages, …."

    Condominiums in the Virgin Islands are defined by Chapter 33, Title 28, of the Virgin Island Code, known as the Condominium Act. Ownership of Condos, like ownership of Real Property and Vacant land must be filed with the government.

    I commissioned a title search of the VI government records. That title guarantee is attached. The title guarantee, dated February 26, 2004 (American Title Insurance Company), shows that Barbara Kerschner is the Sole owner of Unit D-13, and has been the sole owner since 1990. Furthermore, the VI government sends tax bills to Barbara Kerschner at her address in the States.

    As recently as last week, Frank Barry, at the request of Bill Dzio (owner of two units at SBCW) checked with Steve Kerschner to see if he was the owner. According to Mr. Barry, Mr. Kerschner, said he became the owner by the "Quick Claim Deed" in 1991.

    There is no record of such a deed transfer. Four owners have told me that when Mr. Kerschner was first elected to the board eight years ago, this "Quick Claim Deed in 1991" was his story then.

    I understand that Mr. Kerschner is in the construction business; therefore, he should be familiar with the fact that a "Quick Claim Deed in 1991" does not determine ownership, unless it is filed with the appropriate office in the VI government.

    No one apparently bothered to check out his story until I did last week.

    Certainly Mr. Kerschner should be prevented from being a Board member until a complete investigation is conducted.

    Two things are important:

    1). Apparently Mr. Kerschner did not have the qualifications to be on the Board, and President of the Board,

    2). He has apparently been dishonest with the owners he represents.

    I understand that after Mr. Kerschner found out that I and other owners had found out that he was not the owner of record of D-13, he filed a Quick Claim Deed in the VI government offices last week.

  3. Uninsured Funds Problem Must Be Fixed:
  4. The Board of SBCW has substantial moneys at one bank and one brokerage firm, which are not insured. This situation should be fixed as soon as possible, so all funds are insured.

    Note: The SBCW audited statement for the year ending June 30, 2003 warns: (Page 13, NOTE J)

    "The association maintains cash balances at one bank and one brokerage firm. The Federal Deposit Insurance Corporation (FDIC) insured cash accounts at banks for up to $100,000. Cash equivalents maintained at the brokerage firm consist of amounts held in a money market fund. This account is protected by the Securities Investor Protection Corporation (SIPC) up to $500,000, including up to a maximum of $100,000 for cash."

    The association has approximately $317,000 at one bank as of June 30, 2003 and $959,000 at one brokerage firm at June 30, 2003."

    This warning from the CPA’s has been before the Board at least since September 2003. Why has nothing been done to fix it?

  5. Investing SBCW Funds in Marketable Securities Must Stop:
  6. During the year 2003, the Board of SBCW moved $845,741 from "Cash and cash equivalents" to invest in marketable securities. I see nothing in the Bi-laws which allows the Directors to put these funds at risk. Certainly having one of the Directors be responsible for such a risk places that Director under undue pressure. These investments should be liquidated and the moneys should be kept as "Cash or cash equivalents".

    I understand that Bud Wood has been delegated by the Board to make investment decisions on these moneys. Is there a Board resolution covering his authority? If so, please provide me with a copy of the resolution.

    I tried to audit this item in the SBCW chart of accounts, as the By-laws say that I am allowed to do, but Frank Barry, on the instructions of 4 of the 5 Board members, prevented me from performing the audit.

  7. The Present Signature Authority Resolutions are Unnecessary and Risky:


On March 10, 2004. Bill Dzio and I were meeting with Frank Barry and Betsy the bookkeeper. Frank told us that he (Frank Barry), Steve Kerschner, Bud Wood, and Joseph Shook, (an owner who is not an elected member of the Board) each have signature authority for the SBCW bank account up to $25,000 (twenty-five thousand Dollars).

According to Mr. Barry, the bank resolutions authorizing these four individuals to cash checks allow each one of these four individuals to cash checks (up to $25,000) with one signature. I believe this is unnecessary, a very uncommon practice, and very risky.

Perhaps Frank Barry should be authorized to sign checks amounting to several hundred dollars without a co-signer. All other checks should be signed by two authorized persons.

I would suggest that Betsy, the bookkeeper, rather than Joe Shook, would be a more appropriate co-signer of checks.

Please provide we with a copy of all current Board Resolutions for our Bank Account(s) and Brokerage Accounts.

5. Frank Barry’s Credit Card Is Used to Pay for SBCW Expenses:

Bill Dzio and I were told by various SBCW condo owners and by Frank Barry that he uses his personal credit card to purchase items for SBCW, such as services for the repair and maintenance of the water plant. By using his credit card, he says he gets a "Perk" by getting "Miles" for dollars spent. The more money charged to his card, the more miles he gets. This creates a conflict of interest, since his interests are not parallel to the interests of SBCW. We were not permitted to audit the books to determine how much money is charged to his credit card. SBCW should pay all bills by check or should get its own credit card to pay bills.

I tried to audit the SBCW chart of accounts to discover more about moneys charged on his credit card, as the By-laws say that I am allowed to do, but Frank, on the instructions of 4 of the 5 Board members, prevented me from doing it.


6. Frank Barry’s Vacations:

I am told that Frank Barry is due four weeks vacation, but by my estimate he took far in excess of that over the last year. Frank told me that SBCW does not have records of when Frank Barry takes vacations, and for how long he was gone each time. I strongly suggest that his vacation policy be reviewed by the board, and that each vacation he takes be approved in accordance with the policy – and accurate records must be kept.

Frank told me that the reason he takes so many vacations is that he works Monday through Saturday (he showed me a paper, dated over 10 years ago, saying he worked 6 days a week). When I confronted him with the fact that the sign on the SBCW office door says the office is open only Monday through Friday, he said that he worked during the winter 6 days a week, but the office is not open on his 6th day of work, Saturday.

My wife and I are here all winter. Frank Barry is at the beach most Saturdays with the golf cart we provide him parked at the beach with his clothes strewn over the cart. Other Saturdays he is off the Island, on vacation.

Frank Barry can certainly get what work there is to do, done in 5 days a week. It is against the interests of the owners to have him off the island as many weekdays as he is.


  1. The Illegal Alien we Hire "Off the Books":

Last week, Bill Dzio and I were told by Frank Barry that one of our full time employees was paid "Off the Books". He says that Betsy the bookkeeper knows about it.

I tried to audit this item in the SBCW chart of accounts, as the By-laws say that I am allowed to do, but Frank, on the instructions of 4 of the 5 Board members, stopped me.

I have three questions:

    1. Who approved this practice with Alien workers? Was there a Board vote on this matter – is it covered in past minutes of the Board? Did any of the Board members know about it?
    2. If we pay this person, how are we hiding the money we pay this individual in cash? I called Jeanne Brennan, CPA, and the SBCW auditor. She claims she knows nothing of the off the books transaction, and she doesn’t know where the off the books transaction is being hidden.
    3. What is our financial and criminal liability due to knowingly hiring an illegal person and not reporting the employee to the Immigration Authorities, the IRS and others?




George R. Simpson

Owner, C-4, Sapphire Bay Condominiums West

340-774-2402, Cell: 631-357-9502