A former aide to retired West Publishing Co. executive Gerard Cafesjian is raising troubling questions in a federal lawsuit that could expose embarrassing family secrets and worse about the wealthy 87-year-old.

John J. Waters Jr., 56, of Eden Prairie, sued Cafesjian in March seeking $5 million for what he called "deferred compensation."

But Cafesjian, who splits his time between Roseville and Naples, Fla., countersued and says in court filings that he doesn't owe Waters a dime. He said that his longtime former employee embezzled more than $3 million from him over at least a decade, and that he's now trying to "extort his way out of this by threatening scandalous revelations."

Cafesjian, a patron of the arts and Armenian causes, is the primary benefactor of the historic State Fair carousel that now bears his name in St. Paul's Como Park.

Waters, who is acting as his own attorney, could not be reached for comment.

The latest dustup in the lawsuit pertains to Waters' plans to depose Cafesjian's wife, Cleo. His prospective list of questions appears intended to reveal infidelities by Cafesjian, potentially embarrassing things about the Cafesjian children and a granddaughter, and Gerard Cafesjian's use of friends' private jets, including one belonging to Dwight Opperman, the former CEO of West Publishing who runs a venture capital firm in Minneapolis.

Some questions appear intended to raise concerns about defections by some business associates, about Cafesjian's cash purchases and about his tax reporting.

"I've prosecuted a number of embezzlement cases. They always involve a shocking breach of trust. But I've never encountered an embezzler who turns around and sues his victim and then threatens to expose personal secrets about the victim," said Andrew Luger, a former federal prosecutor whom Cafesjian hired to find his missing money.

"It is an outrage, and Mr. Cafesjian won't stand for it," he said.

Cafesjian tried to quash his wife's deposition.

"Mrs. Cafesjian is 87 years old and in failing health. She has dementia, hearing loss, cognition, cardiac issues, spinal compression, collapsed vertebra and exhaustion," he said in an affidavit. "She simply cannot endure any more pain."

Magistrate Judge Leo Brisbois said Waters could submit questions to her in writing.

U.S. District Judge Richard Kyle is considering a motion by Cafesjian to dismiss the case.

Waters started working for Cafesjian in sales and marketing at West in 1994. He says Cafesjian reaped about $300 million from his shares in West when Thomson Corp., now Thomson Reuters, bought the company in 1996. Waters left with Cafesjian to manage his investments and philanthropic activities. His employment contract called for a salary of $84,000 a year, plus up to $36,000 more in bonuses, at Cafesjian's discretion. It says nothing about deferred compensation.

But Waters claims Cafesjian modified the terms in an oral agreement that provided for deferred compensation based on the value of Cafesjian's holdings. Over the years, Waters has represented Cafesjian in business deals in Armenia and elsewhere around the world.

Cafesjian says in court filings that after Waters quit in 2009, his replacement found previously unknown bank accounts and discovered the alleged embezzlement.

Richard Ostrom, a retired FBI agent who works as a private investigator, traced the missing cash. He concluded that Waters embezzled the money, converted some of it to cash and funneled additional funds to various accounts he controlled or shared with his wife, his daughter, an Armenian exchange student, and his then-girlfriend, Cheri Kuhn. Waters divorced his wife and married Kuhn, who is listed as a co-defendant in the case.

In an interview, Ostrom said, Waters told him that if Cafesjian thinks he can take any action against him without repercussions, "Mr. Cafesjian does not realize what he is getting into."

Cafesjian denies any wrongdoing.

Dan Browning • 612-673-4493