Embezzler and blackmailer of Cafesjian's millions gets stiff federal sentence

Using what he learned as a personal and business confidante to West Publishing executive Gerard Cafesjian, John Joseph Waters Jr. embezzled $4 million from his boss to finance a double life. Then, as investigators homed in on his scheme, he filed a mean-spirited lawsuit against his former boss, who died last year.

Despite Waters' continued claims of innocence, U.S. District Court Judge Ann Montgomery on Friday sentenced him to nine years in prison for those crimes, one year less than prosecutors sought, but more than the three years Waters' lawyer had asked for.

"You're old enough that I would have thought you'd learned the lesson of Watergate — that the coverup is worse than the crime," Montgomery told Waters during the sentencing hearing in a federal courtroom in Minneapolis.

Still, she was not unsympathetic to his story of working for a difficult and demanding boss. Waters, now 58, worked closely for years with Cafesjian, who earned a fortune at West and was deeply involved in philanthropic projects, especially in support of his family's Armenian heritage.

Waters left West Publishing to work as an aide to Cafesjian at a starting annual salary of $84,000 plus bonuses in the 1990s, eventually earning $250,000 a year with up to $50,000 in bonuses.

Montgomery noted that Waters, at times, was a loyal, hardworking chief of staff to a high-powered man and might have been underpaid. But "at some point around 1999, you made the decision to make your own nest a little better," the judge said, adding, "I bet you sure wish you'd quit or demanded a raise."

Instead, over a decade, Waters stole from Cafesjian, concealing his fraud by making checks out to cash and/or depositing them into the accounts of his mistress (now wife) or a deceased woman named Ani Yeranosyan. He then directed Cafesjian's bookkeepers to make false entries in company ledgers for "household purchases — unallocated," which was the account used for the Cafesjians' personal expenses such as groceries and cable bills.

In 2009, investigators hired by Cafesjian discovered the trail of fraud. Waters quit that year and filed a lawsuit in 2012, claiming his boss had denied him nearly $5 million in deferred compensation that he had promised in a verbal agreement. That lawsuit was eventually dismissed, but not before Waters threatened to reveal embarrassing personal information about Cafesjian and insisted on a humiliating deathbed deposition of his wife, Cleo Cafesjian.

When confronted with his fraud, "things went from bad to awful" and "brought out the worst in you," Montgomery said, adding that the lawsuit showed a "degree of anger and meanness that I can't figure out where it comes from."

She ordered him to pay $5 million in restitution for both the stolen funds and Cafesjian's costs of defending the frivolous lawsuit.

In his comments before sentencing, Waters said, "I maintain my innocence and I will continue to maintain my innocence." He said he would respect the verdict, but that it has been a very difficult time for him and his family. "I am very angry at myself for allowing this to come to this point," he said, before adding that the past couple of years had been a "wonderful opportunity to reconnect with family and friends in a much more meaningful way."

Montgomery sighed before sentencing Waters, saying she knows how hard the sentence will be on his family. She allowed him until Sept. 2 to surrender for his sentence and warned that "running would be really stupid. There aren't many people that escape the [U.S.] marshals when they look for you."

Waters walked out of the room holding hands with his wife, Cheri Kuhn, the former exotic dancer he housed and supported with several thousand dollars a month through his fraud.

Gerard Cafesjian died last September. The carousel at Como Park that he helped restore still carries his name.

His daughter, Kathie Cafesjian, spoke at the sentencing about the how deeply her father trusted Waters and how his betrayal was then "calculated to inflict maximum damage" on her dad.

She described her mother as a loving, generous nurse who did a great deal of volunteer work. She spoke of her father's great sense of humor and how it pained him to see his wife suffer through the deposition about his "peccadilloes."

Leaving the courthouse, the daughter said the sentencing wasn't a "joyous occasion. I'm so sad that any of it had to happen."

Assistant U.S. Attorney Bill Otteson prosecuted the case, along with Sarah Hudleston. "Justice was done today," Otteson said. "Nine years is a serious sentence."

Waters declined to comment, as did his lawyer. He has 14 days to file an appeal. His lawyer indicated in court that he would.

Rochelle Olson • 612-673-1747

@rochelleolson