William W. Lilly, the “Condo King,” was profiled in The Boston Globe last week.
The profile in last Wednesday’s Boston Globe painting disgraced Massachusetts developer and felon William W. Lilly as a reformed man building a legitimate real estate business in Florida is not sitting well universally throughout the Sunshine State.
“No question about it, the guy is still a crook,” opined Fort Lauderdale broker Donald P. Marcus, who claims he was bilked out of a $1.3 million commission on a South Florida property bought earlier this year by an affiliate of Bay Communities, the company that Lilly’s girlfriend, Valerie E. Kaan, supposedly controls and where Lilly is listed as an employee. Federal officials have long insisted that Bay Communities was created by Lilly, one of New England’s most prolific condominium developers in the 1980s until he was convicted of various real estate frauds and sent to federal prison for five years.
Often centered on non-payment charges, the ongoing legal imbroglios dogging Lilly and Kaan seem in stark contrast to the riches-laden lifestyle paraded out for the Boston Globe article. The controversial couple posed before twin Rolls Royces and bragged of a Raytheon Hawker jet on order, while a lavish celebration for Lilly’s 60th birthday was described in great detail. The estimated 275 people who showed up for the gala last month in Boca Raton appeared to all be for Lilly, the self-professed “Condo King,” but many of those left uninvited outside the walls of the gated Sanctuary residential complex were not as supportive.
“These are bad, bad people,” offered one Florida businessperson in the midst of suing Lilly and Kaan for non-payment of services. In Flagler County, just north of Daytona Beach, Neil Wein Realty has filed a $2 million lawsuit for commissions allegedly owed its namesake and several brokers on the sale of condos at Surf Club II and III. Part of the Matanzas Shores residential complex, the two buildings were constructed by Bay Communities along a stretch of Atlantic Ocean where much of the firm’s activities have been concentrated since they began acquiring properties there in the mid-1990s.
As with previous Banker & Tradesman articles, officials at Bay Communities did not respond to requests for comment.
If nothing else, the veneer of Lilly’s hands-off control of Bay Communities seemed to be stripped thinner by last week’s Globe article, with the Condo King offering that the operation represents “the greatest turnaround in the history of any real estate developer,” and providing his list of five steps towards real estate success. Lilly previously had denied masterminding the development activities of Bay Communities, telling federal authorities that Kaan runs the show.
Marcus concurred that Lilly played a lead role in the $48 million transaction that is the subject of his lawsuit, but detailed a ploy that did not seem to make Lilly’s top five list. The crafty felon allegedly offered to pay more than other investors for 7350 NW 4th St. in Plantation, an inland neighborhood of Fort Lauderdale. Lilly also agreed to pay the broker’s commission, but failed to do so upon the closing, said Marcus, leading to the legal case.
“In 25 years, I’ve never seen anyone do something like this,” Marcus said. Given the involvement of a respected local law firm, Marcus said he did not find anything untoward with the situation until the property closed and the buyers had vanished.
Citing the ongoing legal matter, principal Neil Wein of Neil Wein Realty declined to comment on his case, but one source said Bay Communities agreed to pay approximately 25 cents on the dollar during a recent mediation hearing. If so, that would mimic a trademark Lilly practice of refusing to pay for services or construction work and then seeking to barter a lesser amount.
The Boston Globe article detailed the ascension of Lilly and Kann into major real estate developers in Florida, with the couple claiming that they have reached $125 million in property sales barely a decade after Lilly was in jail and Kaan, still living in Massachusetts at the time, was reduced to begging money from friends and ultimately was evicted from a Lynnfield residence. The saga has been detailed numerous times in several Banker & Tradesman articles since 1997, including Lilly’s alleged use of the federal prison phone system – thousands of calls were made – to conduct real estate business while in Allenwood Federal Penitentiary in Pennsylvania. Much of the Boston Globe article was spent rehashing the events described by Banker & Tradesman, including a prison transcript in which Lilly calls Allenwood “Harvard University” for con artists.
‘Crazy Bookkeeping’
Also at the Matanzas Shores complex, Bay Communities official William Harkins lost an election last week for a seat on the board of the homeowner’s association after a spirited campaign to prevent Bay Communities from having a majority say on the five-member group. Residents are now alleging voting irregularities that they say has kept two Bay Communities employees on the board, but the loss by Harkins last week ensures that the firm will no longer have the majority vote.
“It’s the best thing to happen since we’ve been here,” said James Fryer, a retired banker and Matanzas Shores homeowner who has clashed with Bay Communities for several years. By controlling the Matanzas Shores Homeowners Association, Bay Communities was able to keep the group’s books from public view, leading the residents to sue their own homeowner’s association at one point to get a look at the figures. Despite losing a legal judgment on the matter months earlier, Bay Communities has only recently released the documents, and Fryer said residents are busy poring through the numbers.
“Their bookkeeping system is really crazy,” said Fryer. Following the board election at a packed community center last week, residents of Matanzas Shores broke out in applause once the results were made known, said Fryer, adding that copies of the Boston Globe article were also handed out at the event. That was not as well received, said Fryer, with some audience members said to actually hiss at the fawning portrayal of Lilly.
“I thought it was sort of sickening,” Fryer said of the article. “It was offensive to see [Lilly] throwing it back in everyone’s face, saying he never did anything wrong, when everybody knows how bad he is and after what he has put us through here.”
Fryer said he also believes the new board members will be more proactive in forcing Bay Communities to come current on its dues and payments to the Matanzas Shores wastewater treatment plant. Besides owing dues of more than $1,000 on several units Kaan owns individually at the Surf Club, affiliates of Bay Communities owe close to $200,000 in dues and another $95,000 for the sewage treatment plant, according to Fryer. The previous board had not enforced a rule to place a lien on those owners in arrears, but Fryer said members immediately discussed that goal at last week’s meeting.
Harkins reportedly told the group that the payments will be made in full by the end of December. “We’ll see,” said Fryer. According to sources, another issue the board is considering looking into is the non-payment of a $75,000 wire transfer from Wachovia Bank sent to the homeowner’s association in 2003 while the board was under Bay Communities’ control. After the bank’s demands to send the payment back were refused, Wachovia attached the development’s beach house and was about to auction it off when the payment was made. “It was insane,” Fryer said of the non-payment.
Other sources spoken with said they believe there are other legal issues still unanswered regarding Bay Communities in Florida, including a long-established practice by Kaan of buying properties from her own company, then quickly flipping the assets. Those deals have also been questioned in the past by Banker & Tradesman, although it is an exercise which Kaan has continued to employ.
