Is it an end or a beginning? In the case of felon William W. Lilly, that is perhaps the biggest question emanating from last week’s news that the real estate scam artist has finally agreed to pay more than $5 million in restitution owed to the U.S. government.

In a civil complaint filed by the Justice Enforcement Team, a unit of U.S. Attorney Donald K. Stern’s office, Lilly and four colleagues were cited for allegedly helping to rebuild Lilly’s real estate empire while he was in a Pennsylvania prison cell. Although it appears that Lilly has now acquiesced to avoid a civil trial, the complaint nonetheless details a vast conspiracy that some observers consider grounds for criminal charges.

“There’s no doubt” it [Lilly’s conduct] would be criminally illegal, claimed one former law enforcement official familiar with the case. “It’s really open and shut.”

Documents accompanying the complaint certainly lay out a detailed summary of Lilly’s latest alleged scam, including transcripts from phone calls between Lilly and the others made while he was at the Allenwood Prison Camp between 1993 and 1997. The self-proclaimed “Condo King” was convicted in 1991 of defrauding two banks out of millions of dollars to finance several Bay State condominium projects he was involved in developing. He was paroled in 1997 and moved into the opulent, newly constructed Lynnfield home of his live-in girlfriend, Valerie Kaan, before they relocated to Florida last autumn.

Those discussing real estate issues and other matters during Lilly’s time at Allenwood included Kaan, Boston attorney Robert G. Kline and developer William Harkins, who allegedly played a leading role in running the real estate operations. Kaan has been dating Lilly since 1988, while Kline, Harkins and contractor Phillip J. Thompson were all part of Lilly’s inner circle prior to his legal woes.

Among the more interesting moments in the transcripts of recorded phone calls made by Lilly from prison were his reference to Allenwood being “better than Harvard” University, Kaan pining over her lover’s absence and Kline expressing concern that Lilly was becoming overextended in the real estate dealings. Harkins also jokes with Lilly that he doesn’t want any money for his efforts. Instead, he tells a laughing Lilly that “when the book comes out, I want one chapter.”

JET has been investigating Lilly since 1997 following a series of articles by Banker & Tradesman that questioned Kaan’s rags-to-riches ascension from a destitute woman evicted from one Lynnfield home in the early 1990s to where she soon after began purchasing hundreds of units of housing from New England to Florida. Sources at the time told B&T how Kaan would keep in constant contact with Lilly via phone and send him photos of potential acquisitions for him to review from his jail cell. He also allegedly instructed contractors working on the properties and handled the marketing of those being put up for sale.

In affirming those practices, the JET investigation showed that Kaan began her buying spree in Charlestown, paying $15,000 for a decrepit condominium. It was renovated by Thompson and sold for $67,000. Using a supposedly fictitious real estate company, Kaan then allegedly bought dozens of other homes and condominiums on behalf of Lilly. The JET team contends the proceeds later were used to buy a $3.6 million mansion in Boca Raton, Fla., where Lilly, Kaan and their two children now reside.

At this point, it is unclear what ramifications may come from the civil complaint. Samantha Martin, a spokeswoman for Stern’s office, declined comment on whether the case is being reviewed from a criminal angle, while JET chief Christopher Alberto also would not discuss the matter.

Alberto refused to provide details about the settlement until it is finalized, but he did acknowledge that the Lilly case is a milestone for JET. Although the group – unique in law enforcement circles – has recovered millions of dollars in restitution owed to the U.S. government since being founded in 1996, the Lilly repayment would easily be the largest victory to date. To date he has paid only $40,000 of the $5.1 million, which is owed to the Federal Deposit Insurance Corp. as part of his conviction.

“If the case is settled, it will be a great benefit for the taxpayers as well as the JET team,” Alberto told B&T. “The whole idea is to make sure restitution orders are enforced, and that is what we are trying to accomplish here. That is our mission.”

‘Major Deal’
Kaan, meanwhile, issued a brief statement on the matter via her attorney, Thomas E. Dwyer Jr., in which she said, “Based upon my discussions with attorneys for the government over the past several days, I consider this matter to have been settled. We are now in the process of committing our agreement to writing and I expect that a settlement agreement will be executed in the very near future.”

Efforts to contact Harkins and Thompson were unsuccessful, but Kline’s attorney, Stephen R. Delinsky, defended his client’s role in the matter. While refusing to answer specific questions, Delinsky said that Kline “vigorously denies all of the allegations in the complaints concerning him and affirmatively states that at all times concerning the matters alleged that his conduct was legal, proper and ethical.” Delinsky also said that Kline believes that “the complaint against him will be dismissed with prejudice in the not-too-distant future.”

Kline played an active role in Kaan’s real estate dealings, lending her more than $300,000 at one point to buy a condo development in South Boston. In one recorded conversation, Harkins expresses his frustration in dealing with Kline, while an exchange between Kline and Lilly on Sept. 25, 1996, indicates the attorney’s concerns over the amount of activity ongoing. Noting one deal with 23 closings and “a major deal going on in New Jersey,” Kline advises Lilly to slow down.

“You’re trying to put a quart of water into a pint bottle,” said Kline. In one 10-month period, when Lilly made an amazing 10,000 phone calls from prison, Kline’s office received more than 500 calls. JET charges that during those phone conversations, Lilly “raised money for real estate purchases, coordinated real estate closings, negotiated deals … and otherwise directed Kaan, Kline, Harkins and Thompson.”

In filing the civil complaint, JET provided more than 100 pages of phone transcripts, but based on page numbers stamped on those released it appears there may be more than 1,000 pages available. It is unclear whether those documents will be subsequently released, but the ones provided do offer an interesting picture of Lilly’s dealings. Along with the alleged co-conspirators, other phone calls include conversations with Lilly’s son, Joseph D. Lilly, and another Massachusetts felon, Richard G. Kayne.

In one conversation, Kayne and Lilly discuss the woes of Barry King, who was indicted for bilking investors of $8.7 million and ultimately sentenced to 46 months in prison by U.S. District Court Judge Nancy Gertner. While claiming that King would receive a harsher sentence were he tried before Judge William G. Young, who handled Lilly’s case, Lilly argued that Gertner would be more lenient. “She doesn’t give that kind of time for the white collar [crimes],” Lilly told Kayne.

In another discussion with Harkins, Lilly lauded the contacts and information he had received while in prison, advising Harkins to “sign up for five [years] and come here, too.”

“This is the place to come – Allenwood University,” jokes Lilly.

Civil, Criminal Issues Dethrone ‘Condo King’

by Banker & Tradesman time to read: 5 min