LaSaracina owes trusts $4.2 million, probate judge rules

F. Robert LaSaracina, the Norwich accountant who's been targeted by federal investigators, must pay more than $4.2 million to an estate he "willfully mismanaged," a probate judge has ruled.

Judge James Kelley, in a decision filed Monday in Norwich Probate Court, found that LaSaracina, while acting as trustee of nine Kauppinen family trusts from 1997 to 2009, engaged in "self-dealing with regard to trust assets"; commingled trust assets with personal business assets; and mortgaged trust real estate "for no reasonable purpose discernable by this court."

Kelley found LaSaracina, a certified public accountant, "has caused irreparable harm to the trusts by 'lending' money … to other clients … family-owned business interests and client-owned businesses in derogation of the fiduciary duties."

Norwich attorney Mark Block, who is representing LaSaracina in the probate case, said late Monday afternoon that he had not had a chance to fully review Kelley's decision and had not discussed it with his client. LaSaracina has 30 days to appeal the ruling in Superior Court.

Attorney Hubert Santos, who is representing LaSaracina in connection with the federal probe, could not be reached to comment.

Fredrik Holth, the New London attorney who succeeded LaSaracina as trustee of the Kauppinen trusts, noted Kelley's ruling was "appealable" and declined to discuss it, saying only, "I think the beneficiaries will be relieved."

Linda Kidder, a Waterford attorney appointed conservator of the trusts in August 2009, also declined to comment. In July, Kidder filed a memorandum in probate court that detailed allegations of fraud and mismanagement against LaSaracina.

None of the attorneys connected with the case would speculate on LaSaracina's ability to pay the amounts Kelley specified in his ruling.

A number of Superior Court suits filed against LaSaracina, including foreclosure actions involving mortgages on his place of business and Norwich home, indicate he is being pursued by a number of creditors.

In the most recent suit, filed late last month, Foxwoods Resort Casino alleges that LaSaracina bounced three $10,000 checks to "MPGE," or Mashantucket Pequot Gaming Enterprises, in October 2008. According to the suit, LaSaracina has made partial payments totaling $22,675 and still owes $7,325, "plus interest, costs and attorney's fees."

During a Sept. 21 hearing in probate court, LaSaracina invoked his Fifth Amendment privilege against self-incrimination. At that time, Santos argued unsuccessfully for a delay in the proceedings, saying the extra time would enable his client to locate records FBI agents had seized during a late-July search of his West Town Street office.

A day before the probate hearing, LaSaracina had appeared as a witness in a New London Superior Court trial pitting Sovereign Bank against Michael Thomas, the former chairman of the Mashantucket Pequot Tribal Council. LaSaracina, who earlier in the case had testified to handling some of Thomas' finances, repeatedly took the Fifth, refusing to answer questions posed by an attorney for a Thomas business adviser.

Judge Joseph Q. Koletsky ruled last week in favor of Sovereign, finding that Thomas had defaulted on a line of credit extended by the bank and owed more than $6.5 million in principal, interest and legal fees.

In Monday's decision, Kelley, the probate judge, "disallowed" LaSaracina's account of his handling of the Kauppinen trusts. The judge instead relied on a "layman's accounting" prepared by Thomas Marien, a certified public accountant hired by Holth, the successor trustee.

The layman's accounting, Kelley wrote, estimated a "current calculable loss" to the trusts of more than $2.2 million - the difference between the current value of the trusts and what that value should have been, "but for the fraudulent self-dealing of the former Trustee."

In addition, Kelley noted that the layman's account estimated a "future projected loss" to the trusts of nearly $2 million. He ruled that LaSaracina must pay the trusts a total of more than $4.2 million. He also ordered LaSaracina to file a revised account of his handling of the trusts and pay more than $134,000 in accounting fees to Holth and $75,000 in fees to Kidder.

According to the memorandum Kidder filed in July, LaSaracina started administering the nine trusts in the names of the late Lillian and Frederick Kauppinen in 1997. Three trusts were set up for each of the Kauppinens' three children: Riitta Haley, Frederick V. Kauppinen Jr. and Ilona Kauppinen. Initially, the trusts were funded by assets that included commercial real estate on Greenmanville Avenue in Mystic, now the site of an Econo Lodge, and a Friendly's restaurant; vacant land in Hartford; and vacant land in Voluntown. There were no mortgages on any of the properties.

At a Dec. 21, 2009 probate court hearing, LaSaracina reported there was a $1.3 million mortgage on the Mystic parcels, the trusts' only remaining assets. He also disclosed two loans from the trusts, one for $700,000 to Thomas, the former tribal chairman, and another for $170,000 to Robert Matthew Industries Inc., which is a corporate name for Salem Country Gardens, a business owned by LaSaracina's son.

Both loans were personally guaranteed by LaSaracina.

b.hallenbeck@theday.com