The property manager and bookkeeper for former Mashantucket Pequot chairman Richard "Skip" Hayward, who was headed to trial in New London Superior Court for felony embezzlement charges, has resolved her case by pleading guilty to a reduced charge and paying $12,000 in restitution.

Karen M. Sullivan, 53, formerly of Waterford, pleaded guilty to fourth-degree larceny Friday and was sentenced to two years probation.

Skip Hayward is credited with reviving the Mashantucket Pequots in the 1970s and leading them through the development of Foxwoods Resort Casino. He and his wife, Carol Hayward, were expected to testify at a trial scheduled to begin April 23 before a six-member jury.

Sullivan was charged in 2016 with embezzling more than $123,000 from the Haywards while managing a dozen properties they owned under the business name Bannerstone LLC.  The couple fired Sullivan in 2014 and reported the alleged thefts to Groton Town Police in 2015.

Sullivan pleaded not guilty to the initial charges of first-degree larceny, first-degree forgery and identity theft. She was facing a felony conviction and prison time if found guilty, but was prepared to defend herself at trial, according to her attorney, Sebastian O. DeSantis.

The Haywards also were ready to testify, according to prosecutor Stephen M. Carney.

Negotiations between the state and defense continued as the lawyers argued pretrial motions and continued assessing the evidence. On Friday, Sullivan accepted the state's offer to plead guilty to the misdemeanor larceny charge, serve two years of probation and make an immediate restitution payment of $12,000.

She paid in cash, according to the court record.

"The money we were able to identify with a high degree of confidence beyond a reasonable doubt was $12,000," Carney said Monday. "Considering she had no criminal record, we made an offer of a Class A misdemeanor."

The Haywards were notified about the plea agreement and "they expressed their concerns to us," Carney said.

The Haywards told police 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 he 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."

The Haywards said Sullivan used the business accounts 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.

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.

Sullivan's attorney, DeSantis, 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.

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