With a multimillion dollar civil case brought by the federal government nearing a settlement, attorneys for former Massachusetts resident Valerie E. Kaan went on the offensive against Banker & Tradesman last week, charging that the paper has made “false representations” regarding Kaan’s recent business dealings in Florida and threatening legal action against the newspaper.

In a three-page letter faxed to B&T on Friday, Boston attorney Thomas E. Dwyer Jr. claimed that an ongoing series of articles regarding Kaan and her felon boyfriend, William W. Lilly, “has caused Ms. Kaan significant business and reputational harm,” and said the paper is facing “imminent litigation” as a result of the stories.

Lilly, who was convicted of real estate fraud in 1991 and sentenced to five years in federal prison, and Kaan are currently negotiating with the U.S. Attorney’s Office in Boston and its Justice Enforcement Team on a $5.1 million restitution order against Lilly. In a civil complaint filed last fall, JET claimed that Kaan, Lilly and three of the felon’s former colleagues had engaged in a conspiracy to conceal Lilly’s position as the true owner of Bay Communities. Prior to his legal woes, Lilly had been a prolific developer in Massachusetts, calling himself the “Condo King” while he built thousands of condominiums in the area. He went to jail for defrauding two banks, including Royal Palm Savings Bank of West Palm Beach, Fla.

According to JET, Lilly subsequently rebuilt his real estate empire from jail through Kaan and the others in order to avoid repaying the restitution. JET is reportedly close to a settlement with Kaan and Lilly on the civil end, while the U.S. Attorney’s Office has refused to discuss whether criminal actions will follow that resolution.

Something Sinister
The most recent series by B&T has focused on Kaan’s real estate activities in Florida, where she and Lilly relocated in 1999. The articles detailed several projects being undertaken by Kaan’s firm, Bay Communities, and featured discussions with current and former business associates on those dealings. Kaan was also approached for comment at her home inside a luxury gated community in Boca Raton, Fla., but refused to do so when given the opportunity.

As part of the research, B&T has contacted several Florida banks which have done business with Bay Communities to gauge whether the institutions are familiar with the federal complaint. In a brief interview with Peter Tocci of Ocean Bank, the loan officer acknowledged the bank has been in discussions with Bay Communities about a project near Daytona Beach, but said he had not been apprised of the restitution matter or Lilly’s alleged role in the company. In his letter, Dwyer maintained that B&T had “implied something sinister” to Tocci about Kaan’s actions, adding that “the continuing business relationship with Ocean Bank may well be at risk.”

Tocci did seem concerned about the legal wranglings facing Kaan and Lilly, stressing that “Ocean Bank is a reputable bank and I am a reputable banker.” He declined to say whether the disclosure would impact future dealings with Bay Communities. Other bankers spoken with, including officials at Palm Coast Holdings and People’s First Savings Bank, said they were equally in the dark about the JET charges.

In the meantime, as Kaan and Lilly near their settlement with JET, Bay Communities appears to be facing difficulties at some of its projects, which stretch up and down the east coast of the Sunshine State. At least three contractors and service professionals have filed liens against the company for non-payment, while its sales force has been shaken up by a series of departures and sudden firings. Some of the employees who have left have told B&T they are owed back pay.

Among the Florida contracting companies which have taken action against Bay Communities is Master Craft Plumbing of Daytona Beach, owed $23,682; CSR Rinker of Jacksonville, owed $49,799; and A&W Construction Services of Ormand Beach, which has a $125,579 claim against the firm. According to sources, those problems have led to delays in completing construction at the Las Brisas condominium complex in Palm Coast. One buyer of a unit confirmed as much last week, saying she and her husband were originally told they could move in last August, but found out recently that the move-in has once again been delayed indefinitely. The buyer, who requested anonymity, said she and her husband are preparing to pull out of the project.

“I really don’t know what to do now,” said the woman.

Bay Communities has also taken swift legal action against a former saleswoman, Karen M. Salle, who resigned from the firm last Monday amidst claims she was owed back pay and charges of other problems with the employer. Dwyer said in his letter to B&T that the company believes Salle took material from the company prior to her leaving. The firm has since obtained an injunction against her from sharing any of that information or from contacting customers in the process of buying Bay Communities residential units from her.

Dwyer also questioned Salle’s reputation, maintaining that “her veracity is highly questionable.” He warned B&T of using Salle’s comments or any materials she may have taken upon her departure. Salle did indeed contact B&T by phone last week, and leveled a series of charges against Bay Communities. Salle said she left because she feared her customers were in jeopardy from the construction delays, and stated that she is owed a significant sum by the company.

Another former employee, Len Kelley, said he is also owed several thousand dollars in back commissions. Kelley was fired from Bay Communities’ sales team in July. He is currently pursuing that matter through the courts, said Kelley, who had served as director of sales and marketing during his nine-month stint with the firm. Kelley said he has met Lilly in the past, but didn’t talk about the business. Kaan was equally elusive, he said, estimating they conversed only about 15 minutes over the course of his employment. While adding that he was unaware of the charges against Lilly and Kaan, Kelley said he felt something was amiss.

“It’s a pleasure to be away from there,” said Kelley, who also voiced support for Salle.

Kaan Lawyer Warns of Suit Against B&T

by Banker & Tradesman time to read: 4 min
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