A construction business owned by Ansonia Mayor David Cassetti owes the Internal Revenue Service more than $100,000 in back taxes and faces foreclosure for not making payments to its mortgage lender.
Cassetti has owned the business, Birm-1 Construction, since 1986.
The mayor said part of the reason the taxes are not paid is because his former accountant embezzled “hundreds of thousands” of dollars from the company.
Cassetti said he filed a complaint with city police last summer.
On Wednesday, Ansonia Corporation Counsel John Marini released a letter dated Feb. 20 from an Ansonia detective acknowledging police are looking into a larceny complaint from Cassetti.
A copy of the detective’s letter is embedded below:
Ansonia Police Department Lt. Andrew Cota also confirmed detectives are working on a case.
In addition to federal taxes, Cassetti said his company owes about $15,000 in back taxes to the City of Ansonia. He said he’s chasing clients who owe him money, which is why his company owes money.
“I have a lot of money owed to me right now,” Cassetti said. “I’m hoping by the end of June to have things paid off . . . I’m making every effort to pay the tax.”
The Federal Tax Liens
In the past two months the IRS has filed three liens on 10 Riverside Drive, the address of Cassetti’s Birm-1 Construction and Birmingham Management Group, a company launched in 1997 of which his son is now president.
On Feb. 4, the IRS filed a $29,708.43 lien on the property, representing unpaid taxes from 2012 and 2013.
On Feb. 17, the IRS filed a $48,677.08 lien for unpaid taxes from 2013.
On March 9, the IRS filed a $24,107.28 lien against the business. It was again for unpaid taxes from 2012.
The liens total $102,492.79.
Cassetti said the taxes have not been paid because he is owed money by clients and because his accountant ripped him off.
He declined to name the accountant.
The mayor said the company’s woes stem from the theft, which he discovered last year.
“I had a financial guy working before I left. He embezzled quite a few hundreds of thousands of dollars of money,” Cassetti said.
Cassetti alleged the embezzlement had been going on for about a year and a half when he found out about it.
“I’m going after him,” Cassetti said.
In addition to the tax liens, Cassetti faces a handful of lawsuits alleging Birm-1 hasn’t paid money it owes on mortgages.
Between January 2002 and November 2006, Cassetti signed mortgages with Naugatuck Valley Savings & Loan on Birm-1’s Riverside Drive headquarters and two properties it owns on Beaver Street in return for $700,000.
The mortgages were bought in 2013 by Hayden Asset VII LLC, a Delaware-based company controlled by a New York City-based real estate investor.
In liens filed at City Hall in February, Hayden alleged Birm-1 still owes money on the mortgages.
According to one of the lawsuits — filed by Hayden Asset against Casetti, Birm-1, and SALJD Riverside Properties, LLC — Cassetti stopped making monthly payments on the mortgage from November 2012 through January 2015.
State business records list Cassetti as the principal manager of SALJD Riverside Properties. It is one of three lawsuits involving Cassetti and his various companies.
The mortgage holder is now seeking foreclosure of the mortgages and possession of the company’s properties.
Cassetti said Wednesday that he’s disputing Hayden Asset’s allegations.
“I was with Naugatuck Valley Savings & Loan,” he said. “They sold the note, which sold it to another bank, which sold it to another bank, and now a hedge fund owns it . . . As far as I’m concerned I think (they) breached the contract.”
Cassetti said he has hired accountants and lawyers to negotiate with the hedge fund controlling his mortgages.
Cassetti said he’s “winding down” Birm-1, and transitioning ownership of his other company — Birmingham Management Group — to his son.
Will People Care?
Cassetti, a Republican, was elected mayor in 2013, defeating Democrat James Della Volpe, a seven-term incumbent.
The mayor, who just announced he’ll seek a second term, is popular and approachable. And he’s lowered taxes twice in a city where the median household income is $45,505.
The opposition acknowledges he is a strong candidate.
Edward Adamowski, a First Ward Alderman and chairman of the Ansonia Democratic Town Committee, said Cassetti’s legal woes do not bode well for the city now managed by Cassetti.
“How can you run a city when you’ve bankrupted a company, when you’re not paying your bills?” Adamowski said.
But on the evidence of the 2013 election, Adamowski doubts voters feel the same way. And this is the second time Cassetti’s private business dealings have been questioned.
Two months before the 2013 election, Adamowski pointed out Cassetti owed the city about $15,000 in property taxes.
Cassetti quickly paid the amounts due after the company’s tax debt was raised publicly.
“Of course your taxes should be paid,” Cassetti said at the time. “It just was an oversight in my office. Everything was on the bottom of the pile.”
Cassetti went on to win the mayor’s race by more than 700 votes.
“Obviously it’s not a big deal to the residents,” said Adamowksi, who is mulling a run against Cassetti in November.
“I think a lot of people in the city know that he’s in that position, and I don’t know if they care,” Adamowski said. “I might sound like a jerk by saying it, but to me, as a resident — exclude me from being an Alderman — as a resident it doesn’t look to me like anybody cares.”
Irving Reed, chairman of the Ansonia Republican Town Committee, did not return a call for comment.
Marini, a former Republican Alderman, a former leader of the city’s GOP Party and now the city’s corporation counsel, said lots of companies go through tough economic times.
“It was a business hit hard from the economy, but at the same time it’s finding new life,” he said. “Anyone that’s ever operated a major business would understand that’s just how it goes.”
He then lashed out at Democrats.
“The individuals that have brought this up, the Democrats, they’re people that don’t understand how to run a business,” Marini said. “They’ve never operated a business. It’s clear from the last 10 years they have absolutely no idea what it takes for a business to succeed. So it’s really not surprising that they would bring this up.”
How Serious Is This?
The IRS liens plainly state Cassetti owes the government money and threatens “additional penalties, interests and costs” if he doesn’t pay up.
An IRS spokeswoman declined to comment on the matter or the agency’s regulations in general.
She emailed the Valley Indy a link to the IRS website’s section on business taxes.
Thomas Groth is a Bethel-based lawyer who specializes in helping people resolve disputes with the IRS.
He said it’s “somewhat routine” to see the agency file a lien on a property owned by a business with unpaid taxes.
The IRS may pay closer attention to Cassetti’s debt because a chunk of it (roughly $61,000) is unpaid employment taxes. That’s Social Security, Medicare or income taxes.
“The IRS does take those types of taxes more seriously,” Groth said. “The government sees that as someone else’s money. You’re withholding from your employee’s paycheck with the understanding that you’re going to remit it to the government, and you’re not remitting it to the government.”
But usually the IRS is willing to work with companies, assuming the owner isn’t doing things such as drawing a massive salary and tooling around town in expensive cars.
“With any type of tax issue, the IRS is going to look at your current situation,” Groth said. “The IRS, while they do have awesome collection abilities, they are willing to work with taxpayers in current compliance. They’re not interested in working with taxpayers who continue to rack up additional liabilities.”
Isn’t This Private?
While campaigning for mayor, Cassetti touted his experience as a self-made businessman as a reason to vote for him.
His offices at Birm-1 on Riverside Drive served as the backdrop for the announcement of his mayoral bid. He said running the company gave him “a clear understanding of what true leadership is.”
He touted the company’s $2.5 million valuation and 14 employees.
A person’s private business dealings are open to scrutiny when the person seeks public office, according to Richard Hanley, a journalism professor at Quinnipiac University in Hamden.
“A public official who owes taxes is going to be covered differently from some ordinary citizen who owes taxes because the public official is conducting the public’s business,” Hanley said. “It’s up to the journalist to provide the information and let the public decide whether it’s worthwhile or not relative to their understanding of the civic responsibility of holding office.”