Latest news with #GrotonHousingAuthority
Mint
3 days ago
- Business
- Mint
Failed Muni Bond Draws FBI and Sparks `Ponzi-Like Fraud' Claims
(Bloomberg) -- Before the lawsuits started piling up in courtrooms across Connecticut, before his employer accused him of running a 'massive Ponzi-like fraud,' and before the FBI showed up, Robert Cappelletti looked well on his way to pulling off one of the greatest muni-bond coups of all time. The plan Cappelletti had put together was so audacious it bordered on the fantastical. The housing agency he ran in Groton, a sleepy town of some 40,000 people along Connecticut's Thames River, would sell $750 million of bonds to jumpstart a $4 billion project to transform a bunch of run-down shopping plazas into a sprawling, up-scale development. There'd be a new train station, a hospital, almost 2,000 apartments and dozens of shops and restaurants. It would have been the biggest local bond issue in the state's history and expanded the tiny Groton agency far beyond its role managing two apartment complexes. And yet Cappelletti — a part-time employee with a mixed record running other housing agencies in the state — breezed through a series of crucial steps needed to complete the sale. He got approval from the five-person board that runs the agency; crafted a brief financial projections statement; scored an investment-grade bond rating; and started the process of lining up buyers for the debt. It was only when the bond sale collapsed this winter and Cappelletti was removed from office that the complex financial web that he had spun across Connecticut for years came to light. Cappelletti engaged in double-dealing, created shell companies and failed to disclose loans he took out, leaving, in the process, a trail of financial wreckage across the state, lawyers for the Groton agency alleged in the most high-profile case against him. In February, they sued Cappelletti for fraud, claiming he borrowed at least $3 million without the commission's knowledge through subsidiaries he controlled. In subsequent court documents, the authority alleged Cappelletti also took 'millions of dollars' from non-commercial lenders and other 'questionable entities' that were then transferred to others, including businesses owned by his brother, David, that received about $1 million. The housing authority's attorneys are working with the FBI, which is investigating, according to people familiar with the matter who asked not to be identified discussing internal matters. 'Everybody is disgusted,' said Ric Silver, who lives in an apartment in Pequot Village, a 104-unit complex managed by the authority. Cappelletti declined to comment through his attorney, Joseph Martini, who also declined to comment. Cappelletti's brother, David, who was named as a co-defendant in the suit last month, also declined to comment. On June 2, in court papers filed in connection with the Groton case, Ivan Ladd-Smith, another lawyer for Cappelletti, said he intends to deny the allegations. A press official for the FBI declined to comment. Robert Frink, the chair of the Groton Housing Authority, said the board has opened an investigation but is 'unable to go into greater detail at this time.' That Cappelletti drew so little scrutiny as he pushed ahead with the deal is a testament to the vulnerabilities in the vast network of government agencies struggling to provide affordable housing to low-income families across America. To finance new projects and try to address the housing crisis, the local agencies routinely sell municipal bonds, a loosely regulated corner of the securities market where deals are often just rubber-stamped. Many of the agencies have been plagued by mismanagement, poor oversight and corruption. Since 2023, prosecutors have brought bribery and fraud charges against housing authority officials in Ohio, North Carolina, Georgia, Pennsylvania, Illinois, Montana and New York, where 70 former and current New York City Housing Authority officials were ensnared in a historic case. In Connecticut, the events in Groton are drawing fresh scrutiny to the more than 100 independent housing agencies across the state, which only has enough affordable rental homes to meet the needs of about one-third of the lowest-income households. 'Until we fix the regulatory disconnect,' said Robert Boris, chair of Groton's economic development commission, 'bad actors will continue to exploit it and working families will continue to the pay the price.' Cappelletti, 58, has worked in public housing for two decades. A graduate of Assumption University, a Catholic school in Worcester, Massachusetts, he joined the housing authority in Stamford, Connecticut, in 2002 to run the city's Section 8 voucher program, according to his LinkedIn profile. In 2009, he became the executive director for the Meriden Housing Authority and five years later tacked on a similar part-time job for the Waterbury Housing Authority. Just before starting at Groton in 2016, he left the post in Waterbury. There, an investigation found he had used $56,653 of public funds to buy a Chevrolet Silverado for business and personal use even though he wasn't entitled to a vehicle, had slid someone onto the payroll without the agency's approval and allowed a contractor to live rent-free in an apartment managed by the agency in exchange for painting work. Cappelletti and Waterbury reached a separation agreement that included no admission of wrongdoing. The Groton job was a relatively modest one — mostly the oversight of 174 rental units — that Cappelletti could do while still running the agency in Meriden some 50 miles away. Cappelletti, though, envisioned much bigger things for Groton. A manufacturing hub just off the Long Island Sound, best known for its naval base, General Dynamics Corp.'s submarine factory and the sprawling research facility for the drugmaker Pfizer Inc., the town had a relatively strong economy. But that had left it with a shortage of affordable housing, and its main commercial corridor was lined with aging, strip-style retail. Cappelletti called his development project Groton 2030. It'd reserve 20% of the 1,925 apartments for lower-income residents, a key selling point to the authority's board, which approved the project in June 2023. Per the plan, Cappelletti would oversee the project himself through a development arm of the housing authority instead of hiring an experienced developer or soliciting bids. One of the housing agency commissioners who signed off on the plan, Joe Greene, soon had regrets. In an interview, Greene said he had reluctantly approved the bond during a last-minute video call but had doubts after asking for details. Cappelletti never presented a real business plan, Greene said, and the town had not received formal notice that one of its agencies was planning a massive bond sale. At odds with the rest of the board, Greene resigned that September. Two years later, he remains mystified by it all. 'I still don't know how you're going to pay off a $750 million bond in a five-year timespan when you don't own the property and when there was no business plan,' he said. 'People were amazed at the amount of money.' With the approval in hand, Cappelletti put the deal in motion. He had the Groton authority pay $25,000 to a New Jersey-based investment banker, according to a check register obtained under a freedom of information request. The authority also hired Connecticut law firm Pullman & Comley as bond counsel and obtained an 'A' rating from Egan-Jones based on a few financial projections it turned & Comley declined to comment. Eric Mandelbaum, general counsel for Egan-Jones, said the firm can't comment on particular transactions but 'stands behind its work and record, which are based on methodologies that are publicly available.' Related Story: A New Ratings Game: 3,000 Deals, 20 Analysts, Lots of Questions The sale bogged down after that. Month after month, its completion kept getting delayed. Then, in May 2024, it all started to unravel on Cappelletti when the Groton commissioners received subpoenas ordering them to travel across the state to provide sworn testimony. Months earlier, a lawsuit had been filed against Cappelletti's Meriden Housing Authority and a subsidiary, Maynard Road Corp., that had defaulted on a $16 million loan. The lender, Titan Capital, subpoenaed the Groton commissioners because Cappelletti had made $629,000 of loan repayments with funds pulled from their agency, not Meriden's. The Meriden agency is now on the hook for about $30 million — to repay the Titan loan with interest as well as $12.5 million owed to Citizens Bank for a project in Bristol, Connecticut. Back in a September 2023 board meeting, the Groton commissioners had asked Capelletti about the cash used to pay off Titan, which was recorded as an expense for the Groton 2030 project. They were assured they'd be reimbursed when the bond deal closed, minutes of the meeting show. But the Meriden lawsuit raised new questions, and when Groton commissioners started digging, they found that companies controlled by Cappelletti had bought properties in Winchester, Connecticut, and Fitchburg, Massachusetts to redevelop. Cappelletti also allegedly forged a resolution to approve $2.7 million of lease agreements for the authority, according to the February lawsuit filed by the Groton agency. 'This case involves the discovery of a massive Ponzi-like fraud,' lawyers for the agency said in a court filing. 'Over the course of at least seven years, Cappelletti accepted millions of dollars in funds from non-commercial lenders or other questionable entities.' In January, the agency suspended Cappelletti and canceled his contract. The FBI probe continues and the lawsuits are wending their way through Connecticut courts. 'Our focus now,' said Frink, the chair of the Groton Housing Authority, 'is to ensure a complete and fulsome investigation.' More stories like this are available on
Yahoo
14-03-2025
- Business
- Yahoo
Court grants injunction in Groton Housing Authority lawsuit
New London — A New London Superior Court judge on Thursday granted a temporary injunction prohibiting the Groton Housing Authority's former director and property manager from acting on behalf of the authority and its affiliates. The housing authority's former Executive Director, Robert Cappelletti, and former Property Manager Jamie Lee are ordered to not take any action involving equipment, bank accounts and properties owned by the housing authority, its nonprofit Greater Groton Realty Corp., Northeast Redevelopment LLC. and Northeast Redevelopment Services. Cappelletti and Lee must disclose usernames, passwords, account numbers and pin numbers for associated accounts and computers by 4 p.m. March 21. They are prohibited from transferring, selling, purchasing or taking other action on assets owned by the housing authority, Greater Groton Realty Corp., and a number of limited liability companies. Judge Scott Chadwick granted the injunction after lawyers for the housing authority and Greater Groton Realty Corp., Cappelletti and Lee came to an agreement on the injunction. The stipulation states that neither Cappelletti nor Lee admits the allegations in the Verified Complaint or that grounds for an injunction exist." A password-protected copy of backup data from the desktop computer, email accounts, QuickBook and other accounts will be provided to the court. Judge Chadwick said a hearing will be held to receive the information and to potentially entertain a motion to seal it. Lee, attorneys for Cappelletti, Lee and the Groton Housing Authority, and Groton Housing Authority Board Chair Robert Frink and Vice Chair Nancy Codeanne would not comment Thursday after the court order. The lawsuit In January, Cappelletti was suspended as executive director of the Groton Housing Authority, which then ended its shared services agreement with the Meriden Housing Authority. Lee, who was placed on administrative leave, resigned from her position. The Groton Housing Authority and Greater Groton Realty Corp. filed a lawsuit on Feb. 21 accusing the two former employees and possibly others of denying "access to their computers, checking accounts, and financial records as part of what appears to be a substantial misappropriation or misuse of Housing Authority credit, cash, tangible assets and equity." The complaint alleges that Cappelletti had listed for sale, without authorization, property owned by the Greater Groton Realty Corp. in Winchester, which he had purchased without the knowledge of Greater Groton Realty Corp. and the Groton Housing Authority, and that Lee had refused to turn over records. The lawsuit accused them of breach of fiduciary duty, common law fraud, constructive trust, civil conspiracy and violation of the Connecticut Unfair Trade Practices Act. The lawsuit says Northeast Redevelopment LLC was created as a property development arm of the Groton Housing Authority. The lawsuit accuses Cappelletti of creating another limited liability company, Northeast Redevelopment Services LLC, to transfer or use "Northeast Redevelopment LLC assets for his personal gain. Among other allegations, the lawsuit accuses Cappelletti, who is listed as the Meriden Housing Authority executive director and secretary of its development nonprofit Maynard Road Corp., of using Groton Housing Authority funds to make payments to Titan Capital. Titan Capital gave a loan to the Maynard Road Corp. The lawsuit claims that Cappelletti executed a loan agreement on behalf of Northeast Redevelopment LLC. for equipment. He then leased some of the equipment to Maynard Road Corp. without consent of the bank, and the bank is pursuing a court action to recover the equipment and full payment of the defaulted loan. The lawsuit alleges that Cappelletti on behalf of Greater Groton Realty Corp. executed promissory loan notes to Maynard Road, though it is unclear if the funds were sent or if they were repaid, and authorized a $400,000 promissory note on behalf of Greater Groton Realty Corp. to Delta Absorbents. It says that $100,000 from a Pequot Village I & II and Grasso Gardens account was wired to Leasing Innovations Inc., and the relationship between the housing authority and Leasing is unclear. The lawsuit also alleges that Lee wired $56,000 to a person believed to be a relative of Cappelletti. The lawsuit further alleges that Cappelletti in 2019 purchased property in Fitchburg, Mass. for $1.4 million on behalf of Arden Ventures LLC., of which Lee and Cappelletti are members and which has the address of the Groton Housing Authority. He presented a development proposal for an apartment complex for which he said Greater Groton Realty Corp. would be the property manager and Northeast Redevelopment Services the developer. Greater Groton Realty Corp. did not authorize this. The complaint further claims that Lee and Cappelletti signed a consent of all directors on behalf of Greater Groton Realty Corp. that said the board approved purchasing the Fitchburg properties for $1.4 million, but neither Greater Groton nor Groton Housing Authority approved this. Town Manager John Burt said last month that the authority is investigating its finances and working with the Federal Bureau of Investigation. Groton Housing Authority Board Chair Robert Frink said in a statement last month that the housing authority retained Rose Kallor LLP, which has started an internal investigation, and also anticipates retaining a forensic accountant.
Yahoo
23-02-2025
- Business
- Yahoo
Scandal wracks Groton Housing Authority
Groton — Why does a subsidiary of the Groton Housing Authority owe almost $100,000 in back taxes and fines on a blighted former nursing home property it bought on the other side of the state? Why did former director Robert Cappelletti take out a now-defaulted loan for $1.75 million of equipment that the bank that financed it can't find? And why are Cappelletti and former property housing authority Property Manager Jamie Lee involved in a web of limited liability companies, including one that allegedly spent $1.4 million to buy land in Massachusetts to build an apartment complex? These are just some of the many questions a law firm hired by the authority is now probing. The town has also said the authority is working with the FBI. On Friday, the housing authority sued Cappelletti and Lee, alleging they and possibly others are blocking access to authority computers, checking accounts and financial records while misusing its assets. The 28-page lawsuit details numerous allegations including defaulting on a loan by an authority affiliate, hiding equipment from a bank, using a limited liability company to transfer assets for Cappelletti's personal use or gain, buying two properties in Winchester, Conn., without telling the authority, faking a housing authority resolution and spending $1.4 million for land in Fitchburg, Mass. Emails and documents obtained by The Day through Freedom of Information Act requests show that town and authority officials are trying to wrap their arms around 'potential financial irregularities' involving some of the authority accounts that its Board of Commissioners say it learned of just last month. Town Manager John Burt has said the authority is investigating its finances and working with the FBI. In addition, authority board Chairman Robert Frink said in an email to Burt that a forensic investigation will start with records obtained from the authority offices. Frink said that when the authority became aware of potential financial irregularities involving some of its accounts last month, it suspended Cappelletti and placed Lee on paid leave, pending an investigation. The board also canceled an agreement with the Meriden Housing Authority, effective Feb. 11. The Meriden Housing Authority and Groton Housing Authority had shared Cappelletti as an executive director for the past nine years. The cancellation ended Cappelletti's employment by the Groton authority. Meriden Housing Authority board chairman Cornelius Ivers said Friday he has not been shown any evidence Cappelletti has done anything wrong. Ivers said Cappelletti remains the executive director of the Meriden Housing Authority, a position he has held for more than 15 years. He added Cappelletti has done a great job for us. The Meriden Housing Authority, along with its nonprofit arm, Maynard Road Corp., has also run into legal problems, as it's been sued over an unpaid loan. Lee was placed on paid administrative leave by the Groton authority on Jan. 19. Jim Loughlin, an attorney for Lee, said in a Jan. 28 email to the authority's attorney that he has not been provided with information about the investigation. Loughlin said Lee was resigning immediately, citing a 'hostile work environment and adverse employment action.' Loughlin's office said this week his policy is not to comment, while Cappelletti and Lee did not respond to requests to comment. The Groton Housing Authority runs the 70-unit Grasso Gardens and 104-unit Pequot Village housing developments for low-to-moderate-income elderly people or people with disabilities. Frink has said the board has hired a property management company to continue serving tenants while Burt said there's been no impact on residents of the two projects. The housing authority operates as a Connecticut Housing Finance Authority program, and CHFA said it has been made aware of the situation but has no involvement with any investigation and would not be able to comment. The state Department of Housing said it does not have oversight over local housing authorities. The Winchester properties Documents show Greater Groton Realty Corp., the authority's nonprofit arm, owns two adjoining properties in Winchester, a town in Litchfield County, that it purchased in 2019. One is a 1.78-acre property, a shuttered nursing home appraised at $1.08 million that it purchased for $260,000. The other is a 0.48-acre adjoining parking lot worth $39,400, that the Greater Groton Realty Corp. purchased for $0, according to Winchester records. Geoffrey M. Green, Winchester's assistant town planner, said there are no current permits or applications for the properties. He also said there is an active blight violation for the nursing home site, which is accruing daily fines of $99. As of Friday, the total fine owed was $59,202. Ashley Kelsey, Winchester's collector of revenue, said $36,377 in back taxes on the property, as well as $1,265 in outstanding taxes for the parking lot, have been referred for collection. Questions about loan Town and authority emails show questions have been raised about an unpaid $1.75 million loan for equipment that a bank and local officials say has not been located. Texas-based TransPecos Banks has been demanding payment of the loan given to Northeast Redevelopment LLC, a limited liability company affiliated with the housing authority, which operates as its construction arm. On Friday, TransPecos Chairman Patrick Kennedy Jr. said Northeast stopped paying the loan, which the bank made with the intention that it would be used for equipment to drill geothermal wells to bring heating and cooling to housing projects, last March and the loan is now in default. TransPecos Banks has filed a lawsuit against Northeast Redevelopment to repossess the equipment. He said when bank representatives came to Groton last month, it became clear that housing authority commissioners did not know about the loan or the equipment, though they recalled heavy equipment being used several years ago to drill geothermal wells for two new units. On Friday, Kennedy said the bank feels sorry for the housing authority and the town and will work cooperatively with the authority. TransPecos Banks said it had financed the equipment through a lease to Northeast Redevelopment LLC, guaranteed by the authority and Greater Groton Realty Corp. The 2020 lease lists equipment, including plow trucks, a pickup truck, a tandem axle trailer, geothermal equipment, a sawmill, and a towable generator. Northeast Redevelopment LLC, under managing member Greater Groton Realty Corp., was created in 2018 and dissolved in 2021. Greater Groton Realty Corp. filed a certificate of organization to create another company, Northeast Redevelopment Services LLC, in 2019. In a February 2024 correspondence to TransPecos, Cappelletti wrote that the housing authority issued bonds, of which Northeast Redevelopment Services is the beneficiary. He did not specify what the bonds were for but wrote that once they were received by the end of the month, the plan was to pay the loan based on a bank schedule. Still seeking payment four months later, the bank informed Northeast Redevelopment Services that it had failed to make payments on time or make alternative arrangements and demanded payment of the entire loan, plus interest, within 10 days or the bank would take action, including repossessing the equipment or filing a lawsuit. In an August 2024 email to the bank, Cappelletti wrote that Northeast Redevelopment Services was in the process of closing on the bonds and expected to receive funds by the end of the month. 'The funds will be adequate to catch up on the delinquent balance this month and next month we would like to pay off the entire remaining loan amount,' Cappelletti wrote. Last December, a bank attorney wrote to Cappelletti and Greater Groton Realty Corp. President Nancy Codeanne, an authority member, that the last payment was made in March 2024 when the balance was $1.6 million, but interest, late fees and legal costs had since accrued. The letter pointed out that Cappelletti had been assuring the bank earlier in the year that bond financing was being pursued to pay off the loan. Last month, Kennedy emailed Frink that he wanted to see where the geothermal equipment, vehicles and other equipment were located. As of last week, the equipment had not been located, Burt said. Authority attorney Cindy Cieslak said the authority will not be answering further questions about the investigation as the matter is under review. Town seeks information Following a Jan. 14 executive session with town councilors, Town Attorney Kristi Kelly wrote a letter to Frink requesting financial statements and resolutions for loans, bond issuances, corporate ownership changes, and other transactions from corporate entities involving the Groton Housing Authority or Greater Groton Realty Corp. She also requested an inventory of fixed assets, including equipment or personal property purchased with loan proceeds or used as collateral. Burt said the Town Council wants to stay informed to ensure there's no risk to any residents of housing authority properties. He said councilors also appoint the authority's commissioners, so it's important they are comfortable with its leadership. He said the authority receives no funding from the town. In the letter, Kelly raised a list of 'concerning facts' that came to the council's attention. Kelly wrote that, according to TransPecos Banks, Lee and Cappelletti represented that Northeast Redevelopment Services had $1.3 billion in bond money in a trust that it would use to pay the loan. But Kelly said the authority's bond counsel has indicated she is unaware of any bond issuance over the past 18 months but that she's still owed $21,000 for other work. Kelly added that there was a memorandum contemplating a $1 billion bond offering by the housing authority last year, but she said that timeline does not match claims that bonding took place in 2023 and proceeds were in the authority account by the end of that year. That bonding would have been for the envisioned Groton 2030 plan, a residential and commercial redevelopment project by the housing authority and its subsidiaries Northeast Redevelopment Services Inc. and New Groton LLC. Kelly's letter also points out there have been membership changes in the limited liability companies connected to the authority. For example, in January, Greater Groton Realty Corp. was dropped as a member of Northeast Redevelopment Services LLC.
Yahoo
15-02-2025
- Business
- Yahoo
Groton Housing Authority suspends executive director
Groton — The Groton Housing Authority has suspended Executive Director Robert Cappelletti and terminated a shared-services agreement with the Meriden Housing Authority that has been in place since 2016. Groton Town Manager John Burt said Friday the Groton Housing Authority has also undertaken an investigation of its finances and is now working with the Federal Bureau of Investigation. 'The town and I have grave concerns about potential financial issues at the Housing Authority, but we're working hand in hand with the GHA board, and we'll work through the process,' Burt said. The Groton Housing Authority Board of Commissioners hired CBIZ of New Haven to 'provide forensic investigative services to GHA,' according to minutes of a Jan. 17 special meeting of the Groton Housing Authority. The termination of the contract with the Meriden Housing Authority was effective Tuesday, according to a letter from the Groton Housing Authority to the Meriden Housing Authority provided to The Day under a Freedom of Information Act request. The Groton Housing Authority and the Meriden Housing Authority have had an agreement in which Cappelletti, the executive director of the Meriden Housing Authority, also serves as the executive director of the Groton Housing Authority and the Greater Groton Realty Corp., a subsidiary of the Groton Housing Authority. CT Insider, which has been reporting on litigation involving the Meriden Housing Authority and Maynard Road Corp., an associated nonprofit that supports development but has been sued over alleged nonpayment of loan, first reported the news. Jamie Lee, who served as property manager for Groton Housing Authority, was placed on paid administrative leave on Jan. 19. Burt said she subsequently quit. Cappelletti and Lee could not be reached for comment Friday. Robert Frink, the chairman of the Groton Housing Authority Board of Commissioners, declined to comment. The new property manager for the Groton Housing Authority is Hartford-based Imagineers, LLC., while the GHA maintenance foreman and resident services coordinator will continue to be housing authority employees, according to minutes from a Feb. 5 GHA meeting. The Groton Housing Authority manages the 104-unit Pequot Village housing complex and the 70-unit Grasso Gardens housing complex. Cornelius Ivers, chairman of the Meriden Housing Authority, said he is happy to have Cappelletti back full-time. He called Cappelletti 'one of the excellent executive directors in the state,' and said he has 'done a tremendous job for us up here.' Ivers said Cappelletti was not suspended because of wrongdoing but because the agreement between the two housing authority was set to end. Ivers said nothing is going to be found from an audit and investigation.
