From opulent roost, the Condo King crows
BOCA RATON, Fla. -- The Condo King spent 5 1/2 years ''away," as he prefers to call those unfortunate years in Massachusetts's Plymouth House of Correction and Pennsylvania's Allenwood Federal Penitentiary, but humbled The King is not. Or repentant, either.
''I am the best, there is no question about it," says William Lilly, who wears an antique diamond pin in the shape of a crown on the lapel of his expensive royal blue suit ''for people who might forget I am The King." In an interview, his first in 13 years, Lilly calls his extraordinary resurrection here in South Florida ''the greatest turnaround in the history of any real estate developer."
Bill Lilly -- who grew up in Revere, ''home of Horatio Alger," as he notes more than once -- always lived large, and that hasn't changed. In Massachusetts, where he was the largest condominium developer before he was convicted of bank fraud amid the great real estate crash of the early 1990s, Lilly lived in a French Provincial-style oceanfront mansion in Marblehead known as The Castle. (''Every king needs a castle," Lilly says.) He was famous for his grand parties that attracted hundreds, and as a high-stakes gambler. He had a fleet of cars that included three Rolls-Royces, a limousine, two Jaguars, a Ferrari, and a BMW, and a 34-foot luxury powerboat, The Insatiable.
Today business is booming again, and the king and his queen, Valerie Kaan, live in a $9.4 million, 13,500-square-foot knock-off of one of those ornate Lake Como estates in northern Italy. The place is stuffed with sculptures, paintings, mirrors, and rugs -- including a 100-year-old Bengal tiger rug -- in the style of those ancient Italian estates. The house has five bedrooms, nine baths, three fireplaces, and a small pool. The upstairs is filled with enormous pictures of Kaan's late father, a Winthrop health-club owner named Mayo Kaan who the couple says -- and others dispute -- was the original model for Superman.
''I must be the most fortunate woman in the world," says Kaan, stylish at midday in a brilliant white dress and oversized antique pearl necklace and earrings. ''I got to live with two Supermen. One was my father. One was Bill Lilly." And she gently kisses him on the cheek.
Lilly, Kaan, and their two teenaged daughters live in The Sanctuary, a gated community that Forbes ranks as one of the nation's 10 priciest neighborhoods. One of Lilly's neighbors, former Tyco boss Dennis Kozlowski, has been ''away" since September, doing 8-1/3 to 25 years for looting his company. Lilly and Kaan have his and hers Rolls-Royces, in black and white, in the driveway, and a new Raytheon Hawker jet on order. They also have a $5.2 million, 96-foot Ferretti yacht with the none-too-subtle name of We Won.
''Does it look like we lost?" asks Lilly, who has taunted the US attorney's office that prosecuted him by mooring the We Won just off the federal courthouse in Boston on several occasions.
Lilly, as always, isn't satisfied. He and Kaan are now shopping for a larger home to hold larger parties -- it will be ''newsworthy, very newsworthy," he promises -- and they are growing the condo business fast. In 1998, the year after Lilly got out of prison, their company, Bay Communities, had $12 million in sales, according to the company. Last year sales rose to $125 million, and will be about $250 million this year, and would have been considerably higher except for hurricanes Katrina and Wilma, Lilly says.
Richard Califano, a senior loan consultant with Washington Mutual Inc., the nation's largest thrift, estimates Bay Communities currently has about 2,000 condo units under development, nearly all of them condo conversions. Califano says all his dealings are with Kaan, the company's chief executive. (Lilly is the chief operating officer.) ''Her credit is without one blemish," he says.
Federal prosecutors have long maintained that Kaan, a one-time ventriloquist and fitness instructor, is nothing more than a front for Lilly. In a civil complaint five years ago, the US attorney charged that Lilly was able to build a multimillion-dollar real estate business while in Allenwood through Kaan and other associates. According to federal documents, Lilly made more than 10,000 telephone calls from prison in one 10-month period, including 3,000 calls to Kaan alone. Lilly would regularly send Kaan out to photograph properties and mail the photos to him in jail.
Lilly says the charges that Kaan was only a straw buyer are ''a joke" -- sexism, in fact, among prosecutors who couldn't accept that a woman could have done all this on her own. What Kaan was, he says, is his star pupil.
''This is my prize student here," he says. ''No one will rival her." But, he adds: ''I could pick up anyone in the street, and in three years I will make them a millionaire if they follow my plan." While at Allenwood, Lilly taught a real estate course to hundreds of prisoners.
Says Kaan, 51: ''I am no fool."
The transcripts of Lilly's many expletive-laced calls to Kaan and others, recorded by the government, appear to contradict their version of events. Lilly would call Kaan's cellphone while she attended real estate auctions and tell her what to bid. He would instruct associates on all sorts of construction and renovation details, down to the size of pipe that should be installed in the plumbing. And he would berate his son, Joseph, on the details of a pending deal. (Joseph, the Condo Prince, eventually went to jail, too.)
In one taped conversation, Lilly is telling William Harkins, his real estate manager, about all he had learned in Allenwood, the federal prison.
Lilly: I mean, really, this [expletive] place is unbelievable. You hear, this is a well, this is better than Harvard.
Harkins: (Laughs)
Lilly: You could never [expletive] -- forget Harvard. Forget Harvard, forget Yale, forget any [expletive] thing. This is the place to come. Allenwood University.
In the civil suit, the US attorney charged that Lilly was hiding assets and he eventually agreed to pay the $5 million in restitution that had accompanied his original sentence. Lilly says he expects to make the final $1.7 million payment within 90 days.
''At its most basic level," says Christopher Alberto, an assistant US attorney, ''the civil case against Lilly, like so many white-collar cases, was about the clash between the forces of greed and justice. Justice won, and hopefully that battle helped rehabilitate him, and deter others from concealing assets in order to escape paying restitution to their crime victims. Maybe a more apt name for his boat would be 'Justice Won.' "
Alberto calls Lilly ''a real estate genius," though a genius who has gotten into trouble by taking ''short cuts that have skirted the law." Thomas Dwyer, Lilly's Boston lawyer, says the government was counting on just that genius when they settled with the Condo King for the $5 million in restitution.
''The government strategy was to invest in Bill Lilly," says Dwyer. ''They were investing in his capacity to succeed."
Eight years removed from prison, Lilly believes he was unfairly singled out for prosecution when the real estate crash came in the early '90s. Lilly was convicted of defrauding two banks of more than $11 million in schemes that included falsifying loan applications for condo buyers and orchestrating illegal land flips that inflated the value of the properties.
''There were literally hundreds of people doing the same thing," says Lilly. ''Being The King, with The Castle and all, they picked on the biggest name. They made me the Michael Milken of Boston."
Lilly's only regret: hiring Boston defense attorney Morris Goldings at the time. Goldings subsequently did his own stretch in federal prison for absconding with $17 million in his clients' money. At last report, Goldings, who was disbarred, was scraping by working as a paralegal and teaching criminal justice at Nova Southeastern University in Fort Lauderdale, just 20 miles down Interstate 95 from Boca Raton.
Lilly and Kaan have never married, a consequence of his legal problems, they say. Their business and assets are in her name. ''We have a relationship that far exceeds any marriage certificate," says Lilly. Says Kaan: ''I love Bill Lilly. I loved him from the moment I saw him."
Last month, 275 of Lilly's friends jammed his house for a party to mark his 60th birthday. Lilly, all 6 feet 2 1/2 inches of him, was joyous in a beaded black tux, with his diamond crown on his lapel. Kaan couldn't have been happier. The guests poured onto the yacht tied up at the dock. Bobby Rydell entertained. When the cake was cut everyone joined in singing the theme song of the night, ''We Won," written to the tune of ''Has Anybody Seen My Gal?" The chorus: ''Everybody loves King Bill."
''Adversity," says Kaan, ''is good for people even if it doesn't seem so at the time. It makes you stronger."
America is the land of second chances. Bill Lilly and Valerie Kaan have made the most of their second chance.
The Lilly file
1980s Built or converted thousands of condominium units in Massachusetts and southern New Hampshire.
1991 Sentenced to five years in prison and ordered to pay $5 million in restitution for his role in an $11 million bank fraud scheme.
1993 Sentenced to five years in prison, concurrent with previous sentence, for falsifying loan applications and orchestrating land flips.
1993 Son Joseph Lilly, the “condo prince,” sentenced to 21 months in prison for conspiring to defraud banks to obtain mortgages for condo units.
2002 Agreed to pay $5 million to settle federal charges that he and four associates hid his ownership of a multimillion dollar real estate business while he was imprisoned.
Steve Bailey is a Globe columnist. He can be reached at bailey@globe.com or at 617-929-2902.To see a video clip of Lilly's 60th birthday party, go to www.boston.com/business. 
