Published May 31. 2014 4:00AM Updated May 31. 2014 5:46PM
Acri faces lawsuit for alleged theft of funds, says charges are 'unequivocally untrue'
New London - The New Haven businessman who emerged this week as sole bidder for the Lighthouse Inn was suspended from participating in federal government contracts three years ago after allegations emerged that he misappropriated money from a native Alaskan group.
Anthony D. Acri III's suspension lasted for about nine months, ending on May 1, 2012, according to the U.S. Small Business Administration.
The allegations - reiterated last year in a lawsuit filed by the Kikiktagruk Inupiat Corp. and its subsidiary, KIC Development LLC - state that Acri, his firm, Walton Invesco Inc., and several of his associates stole at least $3 million over a two-year period. Describing them as "unscrupulous business people," the suit filed in the Alaskan Superior Court - later transferred to a federal district court in the same state - alleges they enriched themselves at the expense of the Alaska native corporation that provides funding for the Eskimo people of Kotzebue, in northwestern Alaska.
"Suspension is a serious action ... when it has been determined that immediate action is necessary to protect the government's interest," SBA spokeswoman Tiffani S. Clements said in an email Thursday.
Acri, reached Thursday afternoon, said he was unable to respond to the Alaskans' allegations point by point because the litigation is ongoing and in arbitration. Lawyers for the Alaskans confirmed that "the matter is now being litigated in a confidential arbitration hearing" and declined further comment.
"The allegations they made are unequivocally not true," Acri said in a phone interview. "That all gets worked out in court."
According to the lawsuit, Acri and an alleged co-conspirator, the late Walter Baum of Norwalk, "committed offenses indicating a lack of business integrity or business honesty."
Among the charges in the suit were that the co-conspirators "engaged in a widespread pattern of self-dealing and fraud," used the Alaskan development corporation "to siphon assets and opportunities to themselves" and even went so far as to "bribe government officials in an effort to improperly profit from inflated government contracts."
Acri added that his work with KIC Development, also known as KICD, shows that he is fully capable of restoring the Lighthouse Inn.
"We did take the Alaskan company from zero to $40 million in revenue," he said.
Withdrew earlier bid
Controversy around Acri is not new, as The Day reported four years ago when the New Haven businessman made his first $1.25 million bid for Lighthouse Inn before withdrawing his proposal after a series of break-ins there. More than a decade ago, as head of International Microwave Corp., Acri was a key contractor in the installation of a much-criticized U.S. surveillance system along the Canadian and Mexican borders that cost taxpayers $20 million but, according to a government report, was never fully functional.
Acri bid $100,000 Wednesday to buy the historic Lighthouse Inn, and Mayor Daryl Justin Finizio said at the time that he was inclined to accept the offer to get the property back on the tax rolls. Finizio said Acri had been prequalified to make the bid and had been fully vetted.
Laura Natusch, Finizio's chief administrative officer, acknowledged Thursday that the mayor's inclination to accept Acri's $100,000 bid was controversial since the minimum bid had been set at $500,000. Some have suggested holding another auction on the property starting at a minimum bid of $100,000, or selling it without restrictions requiring that the building be restored and open to the public, which could raise its value.
Acri, who said he has been buying and renovating residential property in the Madison-North Branford-New Haven area over the past months, said he made the lower-than-required bid based on how much money - in the neighborhood of $2 million, according to Finizio - it will take to get Lighthouse Inn up and running.
"The city doesn't want someone to come in and go out of business in a year or two," Acri said.
Acri said his intention was to bring the Lighthouse Inn back to life in much the way it was remembered.
Natusch said Finizio was withholding further comment until he could read the contents of the lawsuit and consult with the city's economic development coordinator and legal department.
"It's the administration's position that we will do all our due diligence in reviewing this information and the details of this development bid before making a final decision on whether to forward this bid to the City Council for approval," Natusch said in an email.
The SBA, on its website, cited evidence that Acri, Baum and four companies they ran engaged in a scheme to "abuse" a native Alaskan group's certification for preferential treatment in the awarding of government contracts. The SBA said the Alaskans had been "locked out of the offices" of their own subsidiary for more than a week - with the conspirators spending that time, according to the lawsuit, "destroying documents and data" to "cover up their improper conduct."
The lawsuit against the alleged co-conspirators, including an Acri associate named Christine Hayes of Virginia as well as the executor of the Baum estate, says the scheme to siphon money from the native Alaskans was uncovered in the spring of 2011 when the SBA conducted its annual review of KIC Development, which Acri headed as president and chief executive. SBA officials, according to the suit, "experienced great difficulty obtaining voluntary and complete information from KICD management" during the course of the review.
After an internal audit and further investigation by the native Alaskan corporation, Acri and Baum attended a confrontational meeting in July 2011, according to the lawsuit, in which the business partners demanded more control of KICD. The Alaskans refused, the suit said, and decided to terminate their association with Acri and take control of KICD.
But when the Alaskans tried that same day to assume control of KICD headquarters in Arlington, Va., Acri and others denied them access for eight days, according to the suit. Finally, on July 22, the SBA sent a suspension notice to Acri and others, and six days later issued a letter of intent to terminate KICD from the preferential-contractor program, the suit says.
"Acri used KICD to engage in multiple self-dealing financial arrangements," the suit says. "Acri and (others) concealed information required to be reported to SBA, including all of the payments to Acri and his company."
Several companies used
According to the suit, Acri had ownership interest in a number of companies that were used as part of the conspiracy, including ACE Construction and RCA Construction, which operated out of KICD offices free of charge in Virginia and Texas. The suit alleges that these subcontractors gained a large share of the profits from development projects ostensibly done to benefit native Alaskans.
In some cases, according to the suit, the conspirators funneled money indirectly to themselves by advancing funds to companies that owed them money. At other times, the suit alleges, KICD made no-interest loans to entities controlled by the conspirators.
One transaction the suit describes as fraudulent involved an "unnecessary" $75 million bond that wound up backing projects associated with entities run by Acri and others, rather than going for KICD construction projects. The suit alleges Acri and Baum were able to collect more than $100,000 each in interest payments by providing collateral for the loan, but used KICD's tax number so that the tax burden on gains from the sales of securities were shifted to the native Alaskan corporation.
"A common theme to most, if not all of these transactions, is that they had their inception in 2009 and 2010 and did not begin to have a material effect on KICD until 2010," the suit states. "They were also largely hidden ..."
The suit outlines as well an alleged scheme centered in Fort Bliss, Texas, where Acri acknowledged previously being involved in a project worth more than $15 million. The suit says that a U.S. Army Corps of Engineers worker and the president of one of Acri's associated companies conspired to inflate the government's estimate for the project by rigging the bid with inside information.
"KICD was compensating ... (the) Army Corps of Engineers employee for business development services," the suit says.
Cole Schaeffer, current chief executive of KIC Development, had no comment about Acri or his company's lawsuit when reached in Alaska Thursday.
Nancy Hill of Norwalk, a former associate of Acri's who is cited in the lawsuit as having a small interest in Walton Invesco Inc., would not go into great detail about her business dealings, saying that many of the transactions were complex and that as far as she knew, the accusations against Acri were false.
She worked for Walter Baum for 28 years and served on a Milford-based charitable foundation in Baum's name that Acri is also involved with, according to online records. She hasn't talked with Acri for more than a year, she said, after being forced into retirement.
But she called Acri a good businessman who enjoys meeting people. Asked how Acri would do at running a resort - something Acri admits having no background in - Hill didn't hesitate.
"He would be perfect for it," she said.