William W. Lilly
Self-proclaimed ‘Condo King’

After a prolonged legal battle with the federal government, real estate felon William W. Lilly has agreed to pay $5 million in restitution for real estate crimes committed in Massachusetts more than a decade ago. Now, prosecutors must decide whether to pursue criminal charges against the self-proclaimed “Condo King” and several colleagues for allegedly concealing Lilly’s assets.

Lilly, who spent five years in federal prison before being released in 1997, had claimed he did not have the funds to meet the restitution order. A team of federal agencies led by the U.S. Attorney’s Office in Boston felt otherwise, charging Lilly was hiding assets in real estate companies set up by his longtime girlfriend, Winthrop native Valerie E. Kaan.

The Justice Enforcement Team, known as JET, is a special unit charged with collecting restitution owed to the federal government. The group has recovered millions of dollars since its inception in 1996, although the Lilly settlement will be the largest to date, said Assistant U.S. Attorney Christopher Alberto, who heads up JET.

“This is an important success for JET after a three-year investigation,” Alberto said after U.S. District Court Judge William G. Young accepted the agreement during a hearing Tuesday. “The team was skillful, it was meticulous and it was persistent in enforcing the criminal restitution order against William Lilly.”

Lilly is to pay $500,000 by March 16, another $250,000 in 12 months, $1.5 million after two years and $1 million after the third and fourth years. He is to make a final payment in five years of $750,000. Lilly is ordered to make the payments himself, but they are backed up with guarantees by Kaan. Prior to reaching the new settlement, the rate at which Lilly was paying the restitution would not have seen his obligation completed until 2352.

‘Complex Case’

In what Alberto termed “an extremely complex case,” JET traced more than 750 real estate deals involving companies that Kaan ostensibly controls, including properties in Amesbury, Revere, Charlestown and Malden. The firms later purchased properties in New Jersey and Florida, although most of the activity has been in the Sunshine State. Kaan and Lilly now reside in a $3.6 million mansion in Boca Raton along with their two children.

Attorney Thomas E. Dwyer Jr. said Kaan is relieved the matter has been resolved, adding she is “looking forward to continuing her successful career as a real estate developer.” Dwyer, who maintained Kaan settled only because it was disrupting her businesses, quoted her as saying, “I am finally able to enter into loan agreements with every major bank in South Florida. There are many banks that want my business, but the lawsuit was an impediment. This impediment is now removed.”

Despite repeated efforts by Kaan to quash potential criminal charges that might stem from the case, Dwyer acknowledged there is no such stipulation. Nonetheless, he said he has “absolutely no concern” that future charges might be brought. “As I said, the dispute with the government has ended in all ways,” Dwyer said, citing legal experience as the basis for his opinion.

But JET had characterized Lilly’s efforts to conceal the assets as a conspiracy, charging that Kaan and three longtime Lilly cohorts with helping the felon. Alberto stressed that “this settlement gives them no criminal waivers or protections.” Because JET handles only civil matters, any potential criminal issue would likely be addressed by others at the U.S. Attorney’s Office in Boston. U.S. Attorney Michael Sullivan did not return a phone call to discuss the matter.

Also on hand at the Tuesday hearing was attorney Stephen R. Delinsky, who was representing Boston attorney Robert G. Kline, one of the three Lilly colleagues who allegedly aided the financial cover-up. To settle his piece, Kline agreed to extend the statute of limitations on the case to provide for a trial should Lilly or Kaan fail to make the payments. Others charged in the alleged conspiracy included Swampscott contractor John Thompson and William F. Harkins, a former Andover resident who now supposedly runs the Florida real estate operations for Kaan.

Delinsky also expressed confidence that the dispute is over for his client, predicting there will be no criminal follow-up. He added that Kline agreed to extend the statute of limitations simply to end the ordeal. “This is a dismissal of the case,” Delinsky said. “It saves Mr. Kline a tremendous amount of effort and legal fees, and the likelihood of the government ever reactivating this case is near zero.”

The Lilly imbroglio is just the latest legal brush for Kline, who served as the Condo King’s lawyer throughout the 1980s. Kline was indicted in 1992 for allegedly helping defraud Dime Savings Bank on condominium loans at a North Attleboro property involving another developer. An attorney in Kline’s office was found guilty, but a judge dismissed 101 counts against Kline in 1994 after deriding prosecutors for not pursuing Dime officials more aggressively.

Lilly was convicted in 1991 of defrauding two banks out of more than $10 million after falsifying mortgages for his condominium projects. He was later convicted of a separate land-flipping conspiracy while awaiting trial on the initial charges and was sent to Allenwood Federal Penitentiary in Pennsylvania. While there, Lilly allegedly rebuilt his real estate empire through Kaan, a would-be ventriloquist who reportedly met the Condo King while a massage therapist for her father’s health club in Lynnfield.

After taking a weekend real estate course, Kaan began acquiring condominiums and single-family properties throughout Massachusetts, often receiving monies to do so through a company run by Kline. Kaan would mail information to Allenwood, where Lilly would then determine how much to pay, according to the government and Banker & Tradesman sources. He then allegedly directed the marketing and maintenance efforts of the properties by telephone. In a U.S. Department of Justice report in 1999, Lilly was cited for making more than 10,000 phone calls in a 10-month period while imprisoned, including hundreds to Kaan and Kline.

In a related development last week, Young said he made a mistake in his dismissal a few months ago of the civil charges against Lilly, Thompson and Harkins. Young had concluded that the trio had not been properly served, but said Tuesday he had erred and reinstituted the case against Thompson and Harkins. Young gave the pair 60 days to respond to the settlement issue, suggesting they might take a path similar to Kline and agree to waive the statute of limitations.

‘Condo King’ Restitution Settlement Is a Crowning Achievement for JET

by Banker & Tradesman time to read: 4 min