Association board members at the Surf Club condominium in Palm Coast, Fla., have retained an attorney to determine whether Bay Communities improperly tapped into a reserve fund set aside for maintenance and repairs.
Regardless of who is really at the helm, it appears that Bay Communities is steering into choppy waters with its development activities along the Atlantic Ocean in Florida.
Already embroiled in a battle with the federal government, which claims the company is secretly being run by felon and Massachusetts native William W. Lilly, Bay Communities is now sparking concerns over the use of a reserve fund at a Florida condominium complex where it has a substantial investment. The company is also facing legal action from several former employees over such issues as back pay and discrimination, joining a host of vendors and contractors who have sued to recover unpaid funds for various services from the firm, which began its existence in the Bay State and now is headquartered in Palm Coast, Fla.
We are litigating against that organization, acknowledged Steve Hunt, owner of a real estate media firm in St. Augustine which is supposedly owed money by Bay Communities for advertisements run on the company’s behalf. Hunt would not discuss details, but sources estimated his losses in the $65,000 range.
At the Surf Club condominium in Palm Coast, association board members have retained an attorney to determine whether Bay Communities improperly tapped into a reserve fund set aside for maintenance and repairs. The Surf Club property is part of a larger condominium development known as Matanzas Shores that includes several stand-alone residences and a number of undeveloped lots owned by Bay Communities.
We are investigating to see whether all is well, said Ronald Brown, retained by the Surf Club board to examine Matanzas Shore’s financial records and to see if certain rights held by the original developer also apply to Bay Communities. Others claim Bay Communities is not paying its proper monthly assessment for the lots it owns at Matanzas Shores.
The mounting Florida controversies come as the U.S. Attorney’s Office in Boston continues its four-year battle to recover $5 million in restitution owed to the government by Lilly, who was convicted for real estate fraud committed in Massachusetts during his days as the self-professed Condo King in the 1980s. Under the auspices of the Justice Enforcement Team, the government claims Lilly is the real owner of Bay Communities, charging that company principal Valerie E. Kaan, Lilly’s live-in girlfriend, is a straw pretending to control the company to help Lilly avoid paying the restitution.
Kaan and Lilly now live in Boca Raton, Fla., having migrated there from Massachusetts in 1999 soon after Lilly was released from Allenwood Federal Prison Camp in Pennsylvania.
Located in Palm Coast, a fledgling coastal city located just north of Daytona Beach in Central Florida, Matanzas Shores was originally developed by ITT Corp. several decades ago. As such, the developer was named Declarent of the complex, a designation that gave the company certain rights over how the property is operated, including control over the Matanzas Shores Owners Association. Bay Communities principal William F. Harkins, for example, is president of the MSOA board. The Surf Club Condominium Association is a subgroup of the MSOA.
According to some residents at the Surf Club, the board is questioning the financial situation of the master association, and as such, retained Brown to review the reserve fund to see if several unexplained withdrawals are appropriate. In a letter to residents of the single-family homes, who are members of another subgroup, the Surf Club board said members are very concerned about the unauthorized use of reserved funds and said it appears that the only way to protect the owners in Matanzas Shores is to take legal action and demand that the master association board act in a fiduciary capacity for its members.
Calls to Kaan’s attorney, Boston lawyer Thomas E. Dwyer Jr., and to Harkins at Bay Communities’ Palm Coast headquarters, were not returned by Banker & Tradesman’s press deadline.
Brown would not discuss the case in detail, offering only that he is evaluating the records and other issues, including whether Bay Communities should retain the Declarent status. We’ll decide in the next few weeks what action should be taken, he said.
On ‘Radar Screen’
Meanwhile, a former employee has already filed suit that charges Bay Communities owes her $180,000 in back wages, while another has reportedly hired an attorney to pursue a similar claim. In addition, the head of the Florida Division of Banks said last week that Bay Communities is on our radar screen regarding the company’s dealings in the Sunshine State.
We have that name planted on the front of our mind when we go in to examine one of our institutions, DOB President Alex Hager said last week, but added he could not say whether the agency has uncovered any evidence of wrongdoing by the firm. In previous articles, Banker & Tradesman has detailed a number of unusual Florida real estate transactions involving Bay Communities and Kaan, in which she has purchased parcels already owned by her company, sometimes then trading the property to a third firm owned by her and her mother, Gloria Kaan.
The internal dealings occurred mostly at The Sanctuary, a 167-lot development in Palm Coast owned by Bay Communities. Kaan has also acquired and sold Sanctuary lots first purchased from Bay Communities by Novas Homes, a Palm Coast general contractor whose owner was indicted earlier this month for embezzling $4 million from a title company. Some of those funds may have been used to buy Sanctuary properties, according to investigators.
On the employee wage case, attorney Jerome Mitchell said last week that his client, Karen Salle, was retained as an unlicensed real estate agent to sell property on behalf of Bay Communities. She left the company earlier this year, but Bay Communities allegedly refused to pay her back wages, claiming that she was not entitled to the money because she was not a licensed agent.
Among other things, Mitchell is charging fraud against Bay Communities, maintaining that the firm never intended to pay Salle when they hired her. They did this on purpose, Mitchell said, adding it is a practice he has seen in the past. Sources said another former employee, Carol Finley, has also hired an attorney to recover back wages. Finley was unavailable for comment.
Finley and Salle are among several employees who reportedly have had difficulty getting paid by Bay Communities, with some sources claiming that bounced checks are a norm with the firm. I stayed there way too long, said James Fleming, who worked from January until September as Bay Communities’ marketing specialist.
During his time with the firm, Fleming said he dealt with numerous bounced checks and angry suppliers or contractors clamoring to be paid. Every time I turned around, there was a new problem coming up, said Fleming, who now works for another development firm in Palm Coast.
As for the ownership issue, Fleming said he was under the impression when he took the job that Harkins was the president of the company. I never even knew there was a Bill Lilly or a Valerie Kaan, said Fleming, although he now insists that both Harkins and Kaan take a back seat to Lilly. The convict would regularly interact with Fleming on advertisement and marketing issues, he charged.
Mr. Lilly is involved tooth, nail and claw in that company, said Fleming. All the direction comes from him.
