Federation of Connecticut Taxpayer Organizations

Robert V. Matthews escaped severe penalties in state scandal, but now mired in bankruptcies, foreclosures, and unpaid taxes "I'm hoping this will help me simplify my life and learn more about myself." Robert V. Matthews, on his financial turnaround

By Don Michak� Journal Inquirer�� January 26, 2010

*******************

�� You could call it karma.

Robert V. Matthews, who paid only a paltry ethics fine despite his key role in the scandal that brought down ex-Gov. John G. Rowland, last year learned a lot more about corporate bankruptcy, forced foreclosures, and unpaid tax bills.

The real estate developer who, as a longtime buddy and benefactor of the corrupt governor, secured at least $29 million in state contracts, subsidies, and rent during Rowland's decade in office, was never charged with any crime despite lengthy investigations by federal prosecutors and securities regulators.

Similarly, while the legislative committee that considered impeaching Rowland found that Matthews greatly had inflated the amounts he paid to rent and then purchase a condominium Rowland owned in Washington, D.C., it was the antiques dealer that Matthews used as a "straw man" in the scheme who was convicted on a federal tax charge. Matthews escaped indictment.

Moreover, when state ethics regulators finally acted against Matthews last year, the one-time Middlebury resident was fined just $2,000 for having showered Rowland with various gifts, including a free four-day vacation at his seaside manse in Palm Beach, Fla., and a round of golf at the Country Club of Waterbury.

The ethics fine seemed exceptionally light, since within days of that vacation state officials had offered a $2 million loan to a Pennsylvania company in which Matthews and Rowland's economic development commissioner had a financial interest and which the corrupt governor during the golf outing had personally lobbied to move to a building Matthews owned in New Haven.

Nonetheless, while Rowland spent about a year in a federal prison camp, Matthews and his wife, a former model, went on to live the high life -- wintering in Palm Beach and summering at their second and third multimillion-dollar homes in Litchfield County and Nantucket.

They drove luxury cars with the vanity license plates "1-CT" and "2-CT," hosted a charity ball at their landmark mansion on "billionaire's row" in Palm Beach, and regularly appeared in photographs in the "Shiny Sheet," what the Social Register set in South Florida calls the gossipy Palm Beach Daily News.

At the same time, Matthews -- who while Rowland was governor had purchased a former Southern New England Telephone Co. building in New Haven for $500,000 and later sold it for $27.5 million -- began building what the Miami Herald would come to dub his "development dynasty."

Two former hotels in Nantucket and Palm Beach were at the center of what a Matthews news release said would be a collection of "ultra-elite properties for those who appreciate the very best."

The first was the 19th century Point Breeze Hotel in Nantucket, which a company controlled by Matthews, NHM Realty, bought for $3.7 million in 2005. He set about converting the historic hotel into a private club and a luxury condominium project, with prices starting at $1.5 million. A grand opening celebration featured actor Jim Belushi doing a "Blues Brothers" performance, and Matthews talked about creating an upscale boutique with a restaurant run by world-famous French chef Daniel Boulud.

The second was the former Heart of Palm hotel in Palm Beach, which Matthews planned to convert into 79 "beautifully furnished and thoughtfully equipped studios and suites," at prices between $1.25 million and $3 million. The "Palm House" renovation was supposed to cost $20 million, and Matthews said the "intimately scaled, five-star luxury destination" would open in 2008.

The Matthews company running the two hotel projects, Matthews Hospitality Group, announced it also planned to acquire more properties in Vermont, Colorado, and the Caribbean.

Matthews, meanwhile, set about building for his own family an even bigger mansion in Florida than the five-bedroom, 10,000-square foot British Colonial-style landmark that one of his Connecticut companies, First Naugatuck Capital, had purchased for $6.2 million in 2002. He paid $7 million for a 40-year-old single family dwelling up the beach, demolished it, and built a $15 million, two-story "Mediterranean-style" residence with a motor court and open terraces he called "Casa Bendita, or "Blessed House."

Any blessings for Matthews, however, came to an abrupt end last year, when the credit crunch and subsequent economic collapse took its toll:

* In May, the Palm Beach Daily News reported that Matthews owed the Internal Revenue Service $501,000 in back taxes. Meanwhile, Matthews and his wife, Mia, were also revealed to be the single-largest delinquent property tax debtors in Palm Beach County, owing $264,450 on their Casa Bendita property in 2008. That amount has since ballooned to $289,461, according to the Palm Beach County tax collector.

* In June, Matthews' lenders seized the Point Breeze project after calling in a $40.6 million construction loan and forcing his company, PB Realty Holdings, into involuntary bankruptcy. Two lawsuits charged that Matthews, who allegedly owed nine subcontractors about $2.4 million, had taken the loan from TD Bank and "used it for his personal gain."

* In September, Matthews also lost the Palm House project to foreclosure when it was sold for $10 million to another real-estate developer, who reportedly had bought a $22 million note on the property the day before. Matthews told the Palm Beach Daily News that he had put $40 million into the project but couldn't find the necessary capital to finish it after the market tightened.

* In November, a 24,000-square-foot office complex Matthews owned on Palm Beach's tony main thoroughfare, Royal Palm Way, was sold at a foreclosure auction. The building, which houses a JP Morgan Chase Bank branch and was bought by Matthews for $8.4 million in 2005, was sold for $12.5 million. Matthews' lenders had alleged that he and his company, Royal Palm LLC, owed them $20 million.

Matthews, who has owned a home and an adjacent parcel in Washington, Conn., last year also has found himself targeted by three lawsuits in Litchfield Superior Court, including two foreclosure complaints.

He also found himself a defendant in two more foreclosure complaints lodged in New Haven Superior Court, including one set for trial next month which the New Haven Independent described as targeting his office building at 59 Elm St., "the last jewel in jet-setting Bob Matthews' New Haven empire."

Matthews has declined to take telephone calls from the Journal Inquirer.
But in November he told the Palm Beach Daily News that 2009 was "a humbling year."

"I'm hoping this will help me simplify my life and learn more about myself," he said. "I hope to look back at this and say, That's one of the best things that's happened to me.'

"I'm probably not the only real estate investor who has lost some buildings in the last year," he added. "I know people that have lost a lot more money, and it's not publicized."