Bookkeeper accused of embezzling from Mashantucket icon is headed to trial

The former property manager and bookkeeper for Mashantucket Pequot chairman Richard "Skip" Hawyard is expected to dispute at an upcoming trial in New London Superior Court an allegation that she embezzled more than $123,000 from Hayward and his wife Carol Hayward over a 13-year period.

Jury selection is scheduled to begin Wednesday in the case of Karen M. Sullivan, 53, of Waterford. The trial is tentatively scheduled to begin April 23.

Sullivan has pleaded not guilty to first-degree larceny, first-degree forgery and identity theft. Arrested by Groton Town Police in November 2016, she has been free on a $20,000 bond while her case was pending.

Hayward is credited with reviving the Mashantucket Pequots in the 1970s and leading them through the development of Foxwoods Resort Casino. According to court documents, the Haywards formed a business, Bannerstone LLC, in 2001 to manage a dozen properties they owned and hired Sullivan as their property manager/bookkeeper.

The Haywards went to Groton Town Police in April 2015 with a complaint that Sullivan, whom they said they had fired in September 2014 for "lack of performance," had embezzled from them over a 13-year period.

They said Sullivan was in charge of all financial transactions and prepared a monthly report that Hayward reviewed. Hayward told the police the monthly reports appeared accurate, though they never saw bank or credit card statements or tax documents.

Following Sullivan's termination, the Haywards said they received a notice from the IRS showing they owed $51,300, plus penalties and interest, for unpaid payroll taxes for Sullivan in 2012-2014. They said Sullivan was responsible for preparing and paying the taxes and had been withholding from them letters in which IRS officials warned the company of the unpaid taxes and the intent to seize assets. The Haywards said they obtained statements from Dime Bank and two credit card companies that revealed "an exorbitant amount of discrepancies from the accountings Sullivan had been preparing for them over the years."

They said there were hundreds of unauthorized transactions from their business bank account and two credit cards that the Haywards had issued to Sullivan for business use only.

The Haywards said Sullivan used the business acounts to pay for her cellphone bill, groceries, doctor and dental bills, personal trips, online purchases and purchases from Kohl's, Home Depot, liquor stores and Sullivan's business, which was called Take Shape for Life. She allegedly paid the credit card bills by making unauthorized electronic transfers from the Bannerstone checking account.

Additionally, police said their investigation showed also that Sullivan had forged Skip and Carol Hayward's names on dozens of payroll checks made out to herself.

In taking the case to trial, Sullivan turned down an offer from prosecutor Stephen M. Carney to plead guilty in exchange for a two-year prison sentence, five years probation and repaying the Haywards.

If convicted, she faces more than 20 years in prison, but Sullivan's attorney, Sebastian O. DeSantis, said Sullivan has a strong defense. He said the Haywards were responsible for paying Sullivan's payroll taxes and only decided to press charges against Sullivan because the IRS was refusing to forgive them for late fees and interest on the $51,000 in unpaid taxes until they filed a police report.

"What happens to a person who doesn't do payroll taxes is that they are subject to IRS prosecution," DeSantis said Monday by phone. "The IRS takes it very seriously, and they are pursuing Hayward for it. Hayward is trying to say it was Ms. Sullivan's fault and responsibility. Her position was that she told them they needed to file (the payroll taxes) and they didn't do it."

The Haywards have sold many of their properties in recent years, but DeSantis said police reports indicate the couple still owned the Gales Ferry Post Office, and that the government in 2015 began seizing rent from the building because of the unpaid tax bill.

k.florin@theday.com

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