June 18, 2012 | last updated June 18, 2012 11:59 am

Figures in CT Colonial Realty fraud in legal disputes

Some of the people convicted in the state's largest real estate fraud, the collapse of Colonial Realty's $2 billion empire two decades ago, are now tangled in lawsuits over defaulted loans and failed real estate deals, some worth millions of dollars, The Associated Press reports.

West Hartford-based Colonial Realty imploded into bankruptcy in September 1990, costing more than 6,000 investors as much as $350 million. Many investors lost their life savings. Most of the nearly 20 people convicted in the scandal got probation, six were sent to prison and Colonial chief financial officer Frank Shuch killed himself while awaiting trial on fraud charges.

Prosecutors said Colonial officials hid the company's failing finances from investors and continued to sell shares in limited partnerships when they knew the company was doomed.

While some defendants were banned for life from the securities business, no one was barred from buying, selling or investing in real estate.

Kevin Sisti, the son of Colonial co-founder Benjamin Sisti, was sentenced to probation for helping hide his father's assets as the scandal unfolded. Today, he's involved in several lawsuits including one over a $6 million investment he made in two Tennessee apartment complexes.

Kevin Sisti, Colonial co-founder Jonathan Googel and former Colonial executive William Candelori also are named as defendants in lawsuits over $8.7 million in defaulted mortgages on property in Groton. The three men aren't accused of wrongdoing but are named peripherally because they have interests in the property — tens of thousands of dollars in lost investments.

Googel was sentenced to seven years in prison for the Colonial fraud, while Benjamin Sisti got nine years in prison. Candelori, a former Democratic state representative from New Britain, got probation for tax evasion in the Colonial case and is now chairman of a regional sewer system authority that is spending $100 million in state aid for a system improvement project.

One person who lost money in the Colonial fraud said he is shocked people convicted in the scam have returned to real estate wheeling and dealing.

"To see these guys go back into business, it's just astonishing," said Wolcott resident Robert Ficeto, who lost $50,000 in the scandal. "From the depth of the injury these people inflicted, they should be barred from doing any real estate (deals) forever."

Hal Hirsch, a trustee for Colonial's creditors in bankruptcy court, said he didn't think anyone can be barred from buying and selling real estate and wasn't surprised that some Colonial players are involved in property deals.

Kevin Sisti, Googel and Candelori deny they're doing anything wrong.

Sisti, of Farmington, said in an email sent to The Associated Press by one of his attorneys that he has borrowed money for his investments but didn't say from whom.

In the Tennessee apartments deal, Sisti is suing business partner Selim "Sam" Zherka, of Katonah, N.Y., in federal court. Sisti claims he gave $6 million to Zherka in 2007 to invest in the apartment complexes but hasn't received any money back, including a promised return of 10 percent a year.

"I'm presently negotiating a settlement with Mr. Zherka, and our relationship continues to be a positive one," Sisti said.

Zherka and his lawyer, Richard Small Jr., didn't respond to messages from the AP.

Kevin Sisti, Googel and Candelori deny they're doing anything wrong.

Sisti, of Farmington, said in an email sent to The Associated Press by one of his attorneys that he has borrowed money for his investments but didn't say from whom.

In the Tennessee apartments deal, Sisti is suing business partner Selim "Sam" Zherka, of Katonah, N.Y., in federal court. Sisti claims he gave $6 million to Zherka in 2007 to invest in the apartment complexes but hasn't received any money back, including a promised return of 10 percent a year.

"I'm presently negotiating a settlement with Mr. Zherka, and our relationship continues to be a positive one," Sisti said.

Zherka and his lawyer, Richard Small Jr., didn't respond to messages from the AP.

Comments

Type your comment here:

Today's Poll Should CT's legislature be in session year-round?<>
ADVERTISEMENTS
Most Popular on Facebook
Copyright 2014 New England Business Media