According to records at the Flagler County Registry of Deeds in Florida, real estate developer Valerie E. Kaan has purchased numerous properties multiple times, both as an individual and through entities associated with her company, Bay Communities.

PALM COAST, Fla. – When it comes to buying real estate, Valerie E. Kaan must be supremely confident in her selections.

Kaan’s firm, Bay Communities, is a ubiquitous presence in this fledgling city just north of Daytona Beach, Fla., joining dozens of other real estate speculators seeking to profit from the area’s unrestrained growth of the past five years. In Kaan’s case, however, that fervor has been even more pronounced, or so it would seem given her bent for repurchasing the same properties multiple times.

In a recent search of Florida real estate records in Flagler and Volusia counties, Banker & Tradesman identified dozens of instances where Kaan has acquired properties and land that various entities under the Bay Communities umbrella had already purchased. In a few instances, a third Kaan firm has subsequently bought assets that had been first tied up by a Bay Communities company and then by Kaan individually.

The activity provides an additional twist to the ongoing saga of Bay Communities. Kaan, a Massachusetts native who now lives in Boca Raton, Fla., is embroiled in a legal dispute with the federal government over charges that she is a straw shielding the company’s true owner, real estate felon William W. Lilly. A settlement that would have had Kaan repay $5 million owed by her live-in boyfriend Lilly for his real estate crimes reached an impasse last month, prompting the U.S. Attorney’s Office in Boston to reopen its civil case against Lilly, Kaan and several other parties, including Bay Communities principal William F. Harkins, a longtime business associate of Lilly.

In the search of property records, B&T found Kaan repeatedly buying lots at the Sanctuary, a 115-acre property acquired by a Bay Communities offshoot in 1997. The parcel was subsequently divided into 167 lots. While a few homes are in various stages of construction, mostly by third-party developers, Kaan has easily been the most prolific buyer of parcels in the sandy, barren property. At the Sanctuary alone, Kaan acquired at least 37 lots between April 1998 and this past October, purchasing them from Bay Investments of Palm Coast, the Bay Communities entity that controls the property. Most of the lots she purchased remain undeveloped.

The motivation behind the repeated in-trading remains unclear. Harkins was unavailable when Banker & Tradesman went to his Palm Coast office, and did not return subsequent phone calls to discuss the situation. Citing the pending legal action by the federal government, Kaan’s attorney refused to discuss the transactions between his client and her companies.

The attorney, Thomas E. Dwyer Jr., did rail against Banker & Tradesman, repeating earlier pledges to file suit against the newspaper due to its ongoing coverage of the Kaan/Lilly activity and the federal case.

“We have previously put Banker & Tradesman on notice that we intend to initiate a civil lawsuit because their reporting has in many cases been both false and defamatory,” Dwyer said last week. “It now appears that we are entering into a phase which requires an aggressive response by my client, Valerie Kaan.”

In any event, one result of the property sales between Kaan and her firms has been a substantial capital infusion, with more than $1 million in mortgages obtained to finance the Sanctuary transactions alone. In December 1999, for example, Kaan received $364,000 from Washington Mutual Bank to buy Lots 42, 43 and 44 from Bay Investments of Palm Coast. In September 1999, First South Bank of Jacksonville, Fla., gave Kaan $175,000 to buy Lot 28, while this past July, Kaan purchased Lot 58 backed by a $175,000 note from Crown Bank of Casslebury, Fla.

Among those expressing ignorance at the connection was William Livingston, whose Palm Coast Holdings sold the Sanctuary to Bay Investments. Whenever Bay Investments sells a parcel, it must secure a release from Palm Coast Holdings, paying the firm between $16,000 and $43,000 depending on the quality of the lot. Livingston, who acknowledged he has met Kaan before, said last week he had not noticed it was she who was purchasing the lots from Bay Investments.

“I can’t think of any reason to do it that way,” said Livingston, but he also stressed that, “It’s none of our business who is buying them.”

Adding to the intrigue was the formation in December of Recovery LLC, a firm that lists Kaan and her mother, Gloria Kaan, as directors. That company has recently stepped in and purchased lots previously owned by Valerie Kaan and Novas Homes, a Palm Coast development company to which Bay Investments had previously sold several lots at the Sanctuary. One of the lots, No. 31, had been owned by Bay Investments and Valerie Kaan prior to being acquired by Recovery LLC this February.

‘All Our Vigor’
The Sanctuary is not the first property at which Kaan has employed the practice of buying assets more than once. At the Ormand Heritage condominium complex in nearby Ormond Beach, Fla., Bay Investments at Ormond Heritage obtained a $4.3 million loan in March 1998 from Ocwen Federal Bank of West Palm Beach, Fla., purchasing 40 units in the deal. Kaan subsequently acquired many of those units through her firm, again obtaining mortgages worth hundreds of thousands of dollars from various banks. Later, Kaan would sign a quit-claim deed to Bay Investments when a third-party buyer stepped in to acquire the units individually.

Unit 705, for example, was purchased by Kaan in late 1998 along with eight other units obtained by Bay Investments earlier that year. Kaan paid $1.86 million for those eight units, securing a $136,000 loan from Washington Mutual for No. 705. When buyers Russell and Jean Young purchased Unit 705 in April 1999, Kaan conveyed the property to Bay Investments via a quit-claim deed, with Bay Investments then selling the condo to the Youngs.

Calls to the various banks involved in the dealings provided little insight into the practice, with officials who did respond either declining comment outright or indicating they will not discuss the matter until further review. A spokeswoman for the Florida Division of Business and Professional Regulation said its records do not show Kaan as a principal at Bay Communities, instead listing Harkins and broker George “Jay” Batten. The spokeswoman, Pat Parker, would not say whether DBPR is investigating the company’s practices.

Christopher Alberto of the U.S. Attorney’s Office in Boston also would not discuss the Kaan case, or any specific transactions. Alberto, who heads up the Justice Enforcement Team involved in the civil action against Kaan and Lilly, did say that “any irregularities” in Bay Communities’ activities “will be reported to the appropriate law enforcement authorities.”

A hearing on reopening the civil case against Lilly and Kaan is slated for Thursday, May 17. Alberto would not say why the negotiations broke down, but pledged that JET intends “to pursue the case with all our vigor.” The JET team is comprised of the U.S. Attorney’s Office, the Federal Deposit Insurance Corp. and the U.S. Probation Office, plus several other agencies. It claims Lilly, who during the heyday of his Massachusetts real estate dealings dubbed himself the “Condo King,” rebuilt his real estate empire while serving five years in a federal prison, allegedly using Kaan, Harkins and several accomplices to conceal Lilly’s involvement in the company.

Dwyer insisted that the two sides are not as far apart as it might seem by JET’s actions, especially given that both sides had agreed to the amount that needs to be paid the government. The money is owed by Lilly for losses incurred when his real estate scams in Massachusetts during the 1980s caused the failure of two banks, including one in West Palm Beach.

“There are a couple of collateral issues that, unfortunately, remain to be resolved,” Dwyer said. “I am confident that we will reach a favorable resolution acceptable to both sides over the next one to two months.