Waters embezzlement trial: Boss’s mistress said Waters never gave her cash

Feb. 28--The longtime paramour of the late Gerard Cafesjian testified Thursday that while he would sometimes give her money as gifts, it was never delivered by the man accused of embezzling from him.

That man, John Waters Jr., had claimed in a 2012 deposition that one of the reasons he had withdrawn large sums of money from Cafesjian's accounts was that Cafesjian routinely had him deliver cash to the woman, Roseville artist Laurel O'Gorman.

O'Gorman, called as a government witness in Waters' mail- and wire-fraud trial, watched a TV monitor as Assistant U.S. Attorney William Otteson played a video clip from Waters' deposition in which he claimed he made 10 to 15 payments to the woman, which he said ranged from $2,000 to $5,000 each.

O'Gorman told Otteson that wasn't her memory.

"I do not remember if John Waters brought me cash in an envelope," O'Gorman testified. "It would be very unusual, since Mr. Cafesjian was the one who gave me cash."

She said the cash usually amounted to $2,000 to $3,000, and he gave it to her two or three times a year as a gift, "but I never knew when."

Cafesjian -- a renowned art collector -- also had her on retainer as an art consultant and paid her monthly. In that capacity, her salary was $52,000 last year.

Cafesjian, a former West Publishing Co. executive and shareholder who reaped millions when the company was sold in 1996, died in September at age 88. His wife of 65 years, Cleo Cafesjian, died in March at 87.

Waters, 57, of Eden Prairie is on trial in U.S. District Court in Minneapolis, accused of 15 counts of wire fraud and four counts of mail fraud. He also faces three counts each of income tax evasion and filing false tax returns because he failed to report the money he allegedly took as income.

An IRS agent who examined Cafesjian's books said Waters had taken $4.2 million of his boss's money. The government has claimed the embezzlement went on from at least 1999 through March 2012, when Waters quit working for Cafesjian's foundations and companies.

Witnesses have said Cafesjian placed complete trust in Waters to run his business affairs. Cafesjian's daughter, Kathleen Baradaran, testified Thursday that Waters was her father's "right-hand man," and a woman who worked in the office told jurors that the two men spent so much time together she initially thought they were father and son.

Otteson and colleague Sarah Hudleston have called 13 witnesses so far. At the end of the day Thursday, they told U.S. District Judge Ann Montgomery they would probably recall the IRS agent for some brief testimony Friday, then rest their case.

Defense attorney Reynaldo Aligada Jr. said he didn't know whom the defense might call to the witness stand Friday.

Waters worked for Cafesjian at West and then managed the millionaire's business and philanthropic interests when West was sold and Cafesjian retired in 1996. The government says Waters siphoned money from Cafesjian's accounts, then deposited it into accounts he controlled.

Among them was an account for Waters' then-mistress, a topless dancer-turned-real estate broker he later married. The government says he put up to $775,000 into the woman's account.

In a 2012 civil suit he filed against Cafesjian, Waters claimed the withdrawals were appropriate. He said they were mostly loans against deferred compensation that Cafesjian had promised him under a verbal modification to the employment agreement they had signed when he went to work for Cafesjian.

People who worked in Cafesjian's office, as well as an accountant and a lawyer who did estate planning for Cafesjian, have testified they never saw evidence of such an agreement -- nor was any deferred compensation reported on the foundation's tax forms as required by the IRS.

O'Gorman testified that she met Cafesjian in 1978 and said under cross-examination by Aligada that that was the year their romantic relationship began. He would have been 53 while she was 31; her online vitae said that from 1977 to '79, she was a teaching assistant at the University of Minnesota, where she earned a Master of Fine Arts degree in 1979.

Cafesjian had a keen interest in art and was quite the collector, and he brought her to West to head one of his pet projects, "Art and the Law," which featured traveling art exhibitions that always opened in St. Paul.

She said that when West was sold and the new owner discontinued the award-winning program, Cafesjian gave her a check for $10,000.

She also said that Cafesjian loaned her money to buy a condo in Florida -- Otteson showed the jury the loan agreement -- and that she, not Cafesjian, made the payments. She paid off the loan when she sold the property in 2007.

Under cross-examination, she said that through the years, Cafesjian gave her art, jewelry and gems. Aligada asked her how many, and she replied that it would be hard to say.

"Why?" the defense attorney asked.

"There were many gifts," she said.

David Hanners can be reached at 612-338-6516.

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