Buddy Fletcher’s Cornwall Castle Sells for Pennies on the Dollar

(Bloomberg) -- Beyond three sets of gates, down a mile-long drive, rise the fairy-tale turrets of Cornwall Castle. That would be Cornwall, Connecticut.

For almost a century, the estate in the rolling hills 100 miles north of Manhattan stood as a New World monument to Old World grandeur. One owner is said to have been chauffeured in a pink Cadillac. Another, Saul Steinberg, the late chairman of Reliance Group Holdings, flew in by helicopter. Oscar de La Renta and Picasso biographer John Richardson attended parties hosted by a Macy’s executive, Joseph Cicio, the castle’s next lord.

Then Alphonse “Buddy” Fletcher Jr. arrived. The hedge fund manager bought the place in 2001. In June, it was sold for pennies on the dollar.

The fate of Cornwall Castle might seem like a footnote in the tabloid-ready story of Fletcher, 53, whose American Dream narrative of wealth and success ended in bankruptcy. For years, the Harvard graduate and his wife, the venture capitalist Ellen Pao, cut dramatic figures on Wall Street and in Silicon Valley.

Fletcher, whose apparent investment prowess had turned heads in financial circles, gained widespread attention in 2011 when he sued the Dakota, one of Manhattan’s most exclusive co-ops, for racial discrimination. A year later, Pao filed a gender discrimination lawsuit against her employer, Kleiner Perkins Caufield & Byers.

And then the bottom fell out. In 2012, Fletcher’s funds were forced into liquidation or bankruptcy amid fraud allegations and an investigation by the Securities and Exchange Commission. The money manager was accused of inflating his returns and using clients’ money as a personal piggy bank. In 2015, Fletcher was ordered to return $212 million in a default judgment. Fletcher and Pao began divorce proceedings two years later.

Fletcher didn’t reply to phone messages and emails seeking comment, and Pao declined to comment through a spokeswoman.

“We never located any meaningful assets,” said Richard Davis, a bankruptcy trustee who has been trying to recoup the funds. So far, he managed to distribute just $26.5 million to investors.

Which brings us back to Cornwall Castle. In 2001, when Fletcher took out a $4.4 million mortgage to pay $5.9 million for the 330-acre property, it was a record price for a home in the area. Neighbors remember the humming of his helicopter and annual Halloween parties. Fletcher also kept borrowing to buy more land, eventually amassing more than 1,000 acres.

In 2013, as his financial and legal problems mounted, Fletcher put the castle on the market at $8.9 million. There were no takers. The following year, he started falling behind on payments and JPMorgan Chase & Co. began foreclosure proceedings in 2015.

And so it has come to this, with the grand building and the land getting sold off in pieces to pay Fletcher’s debts.

A local conservation group agreed in March to purchase 107 acres under control of Davis, the bankruptcy trustee, for $622,000. And in June, JPMorgan sold the eight-bedroom, 16,800-square-foot castle and 275 acres for $1.6 million, according to David Bain, a real estate broker who handled the sale. Other parcels of Fletcher’s land will hit the market in coming months, he said.

“To me, it was out of a storybook,” said Cicio, who sold the castle in 1988. “Sadly, in the very recent past, they let it dramatically deteriorate.”

A stone barn on the property was ruined by fire in 2013 and never rebuilt. Pipes burst, grass grew long, the roof leaked and plaster peeled. Furnaces and air-conditioning needed to be replaced, mold cleaned and bridges over brooks reinforced.

“It needed everything,” Bain said. By some estimates, repairs could cost $3 million to $4 million. “Not a pretty picture for most buyers.”

Things didn’t used to be this way. Completed in 1925, the castle was built as a fairy-tale retreat for a New York society couple: heiress Charlotte Bronson Hunnewell, who had developed Manhattan’s Turtle Bay Gardens, and her second husband, Dr. Walton Martin. They called it “a chateau.”

“What kind of a sensible, logical person wants to buy a castle?” said Jeffrey Jacobson, whose book, “The Castle: A Cornwall Love Story,” examines the early history of the building. “It’s a stage set.”

Most wealthy buyers today would “have no tolerance to make improvements” to an old castle, said Graham Klemm, a local real estate broker. His namesake firm has handled sales of many of the top residences in the area, including a $10 million house on Lake Waramaug in 2015 that was torn down by its new owners.

But the castle was just the kind of place that appealed to Russell Barton, a developer who recently transformed a former jail in nearby Litchfield into a mixed-use complex featuring residences and a restaurant.

Barton, 68, was smitten by the gargoyles and original lead windows, stonework and seclusion. He also has the resources and the savvy to fix it: He’s spent the past month in a renovation haze, with 20 workers on site doing eight-hour shifts.

“This is a small job for me,” Barton said during a recent walk-through, pointing out newly painted walls and sanded floors, mowed lawns, a fixed swimming pool and restored masonry. “The jail took two years. This will take two months.”

He said he expects renovations to cost about $150,000. He plans to use the castle as a permanent home for himself and his wife, Susan Stone. Its servant quarters will house his company’s headquarters and an ample walk-in closet. For now, the new owners and their Jack Russell terrier occupy a one-bedroom stone cottage by the pool.

“I like this old lady,” Barton said of the property. “Everything about it is spectacular.”

--With assistance from Katherine Burton and Peter Blumberg.

To contact the reporter on this story: Katya Kazakina in New York at kkazakina@bloomberg.net

To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net, Rob Urban, Christine Maurus

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