A February trial date at the U.S. District Court in Boston has been set in the case of “Condo King” William W. Lilly.
Despite claims that a settlement is near in the ongoing civil action against developer Valerie E. Kaan and felon William W. Lilly, a federal judge last week set a February trial date to determine whether the United States already has an enforceable agreement with the couple.
A larger issue, meanwhile, is whether the U.S. Attorney’s Office has agreed to drop criminal prosecution against the pair in order to resolve the matter. Sources said U.S. Attorney Michael Sullivan’s office will not pursue criminal charges in the case, but there is some dispute as to how broad that edict is and whether it is tied directly to the pending civil settlement.
Through the Justice Enforcement Team, a group operated out of Sullivan’s office, Kaan and Lilly have been charged with trying to defraud the government out of $5 million in restitution owed by Lilly for real estate crimes committed in Massachusetts in the late 1980s and early 1990s. The case has dragged on for more than three years, even though both sides had supposedly reached a final settlement last autumn.
Judge William G. Young reopened the case earlier this year after the 2000 agreement fell apart and has reportedly set the February trial at the U.S. District Court in Boston to determine whether it was a binding deal. Kaan’s attorney, however, expressed optimism last week that the situation will be resolved before that point via an alternate repayment plan.
I expect the matter to be successfully concluded within a short period of time, Thomas E. Dwyer Jr. told Banker & Tradesman on Friday. He would not discuss the negotiations further, although one source said the initial payment would be in the $500,000 range, with the remainder to be spread out over several years. Under the payment plan established by the U.S. Probation Office after his release, Lilly is supposed to pay an estimated $1,200 per month in restitution, a pace that would not see the fine paid in full until the year 2352.
Dwyer was also not specific regarding the prospect of criminal prosecution involving his client, except to say that, I’m not the least bit concerned about it any longer.
Sullivan’s office did not return phone calls by Banker & Tradesman’s press deadline, while Assistant U.S. Attorney Christopher Alberto, who is handling the civil restitution issue, was unavailable for comment. Judge Young’s office also did not return phone calls by deadline.
Regardless, sources did maintain that Sullivan’s office has opted against filing criminal charges stemming from information uncovered in JET’s investigation. But one official insisted that prosecutors merely determined they would not pursue perjury charges against Kaan involving sworn statements during the restitution inquiry. The source claimed there is no connection between that decision and Kaan’s supposed willingness to repay the money owed by Lilly, who now lives with Kaan, his longtime girlfriend, in a $3.6 million mansion in Boca Raton, Fla.
‘Resulting Investigations’
Formed in cooperation between such agencies as the Federal Deposit Insurance Corp., the U.S. Marshal’s Office and the U.S. Probation Office, JET has been pursuing the civil case against Kaan and Lilly since 1998. Headed up by Alberto, the group claims that Kaan has been acting as a straw for Lilly to help him hide assets and avoid repaying the restitution. Lilly was convicted in 1991 for defrauding two banks during his reign as the Bay State’s self-professed Condo King, a time when he developed thousands of condominium units prior to the market’s crash. He was subsequently sent to Allenwood Federal Prison Camp in Pennsylvania before being paroled in 1997.
Lilly, according to JET, is the true owner and operator of several companies run under the umbrella of Bay Communities, a real estate development company. The agency claims Lilly, who is barred from practicing in the real estate field due to his fraud convictions, guided Kaan as she rose from a health club instructor and struggling ventriloquist to a real estate operator owning hundreds of units of condominiums and other property from Massachusetts to Florida.
Initially, Kaan allegedly mailed photos of properties to Lilly in prison, from where he supposedly decided whether to buy them. He subsequently guided the marketing and sales effort of the company as well, according to JET, which alleges Lilly made 10,000 phone calls from Allenwood during a 10-month period. A Winthrop native, Kaan also allegedly enlisted help from several of Lilly’s colleagues, including Swampscott contractor John Thompson, Boston attorney Robert G. Kline and former Boston developer William F. Harkins, who now runs the Bay Communities’ office in Florida.
Kaan and Lilly departed Massachusetts for Florida in 1999 along with their two children and Kaan’s parents. Since that time, Bay Communities has established itself in the Palm Coast area, located on the Atlantic Ocean just north of Daytona Beach. The company and various entities have since acquired a large development tract in Palm Coast, as well as several dozen condominiums.
In another twist to those operations, the owner of a Florida company that has done several deals with Bay Communities was arrested last week and charged with stealing more than $4 million from a Florida title company. The firm, Novas Homes, was involved in a series of unusual transactions at The Sanctuary, a 167-lot development owned by Bay Communities in Palm Coast. Novas Homes acquired lots that were later repurchased by Kaan and, in some cases, subsequently sold to a third firm owned by Kaan and her mother, Gloria Kaan.
The arrest of Novas Homes principal Jose Gutierrez was made by the Flagler County Sheriff’s Office. A newspaper article quoted Flagler County Sheriff James Manfre as saying there are ties between Bay Communities and the money stolen from the title company, Southern Title. Manfre, who did not return phone calls from Banker & Tradesman, told the Daytona News Journal that there will be resulting investigations related to Novas and its activities at The Sanctuary.
