Bankers who are friends of Denny Hecker were accused this week of recording false repayments on his outstanding loans and engaging in other wrongdoing to mislead regulators and prevent the shutdown of their Cornerstone Bank in Fargo, N.D.
Randy Seaver, the trustee in charge of liquidating Hecker's bankrupt estate, filed a lawsuit Monday asking the court for a judgment against the bank and its owners in excess of $11 million.
According to the complaint, Hecker's rapid spiral into bankruptcy "threatened the very existence of Cornerstone Bank," which had lent Hecker "enormous sums of money through loans that were undersecured and became nonperforming and ultimately uncollectible."
The loans were made by Hecker's longtime friends and bank co-founders, Richard and Brent Olson.
Cornerstone lent various Hecker entities at least $7 million and approved a separate $3 million loan to another party with Hecker's personal guarantee. The loans, some of which were undersecured, fell into default and the Olson brothers falsely claimed that some loans were paid off, Seaver's complaint said.
Hecker's bankruptcy attorney, Barbara May, said in an interview Tuesday that Hecker was saddened by the trustee's lawsuit. "He said, 'These are good honest people who don't deserve to be in this,'" she said.
May added that she isn't surprised by Seaver's actions. She called Hecker's case "a tar baby."
"Anyone who gets involved at all gets maligned. Denny can hardly buy a burger at McDonald's without the trustee accusing McDonald's of conspiring with him," she said.
Neither the Olson brothers nor their attorney could be reached for comment.
In a statement, Cornerstone attorney Brad Sinclair accused Seaver of making false allegations against the bank in "retribution" for a lawsuit Cornerstone filed against him. Cornerstone contends that $425,000 in proceeds from last year's sale of Hecker's Brainerd dealership wrongly went to the bankruptcy estate instead of Cornerstone, which had a lien. The bank is fighting the matter in federal court.
Cornerstone dealt with all Hecker loans "appropriately," by reassigning its interest in the debt to the separately owned Blackstone Financial, Sinclair contends. Bank officials said Tuesday that "like other lenders," they entered into loan transactions based on false financial statements by Hecker.
The lawsuit Seaver filed Monday said that Cornerstone Bank lent Hecker $800,000 in earnest money to build a luxury condo in Aspen, Colo., in November 2007. Hecker had a year to close the purchase of the $6.8 million condo. When he failed to do so, it caused the forfeiture of Cornerstone's $800,000.
The bank also lent $3 million to Hecker's Rosedale Dodge in May 2008 and $4 million to a separate HogRider Investments entity with the help of a personal guarantee by Hecker. All the loans were undersecured and eventually went into default.
"By October of 2008, Cornerstone Bank and the Olsons were acutely aware of Hecker's severely strained financial condition," the complaint said.
In a Dec. 20, 2008, e-mail obtained by Seaver, Richard Olson told Hecker that an independent auditor who was a "former regulator dude, says we are done if this $6.8 million is not out of the bank. This will take the bank down when regulators come in January. ... Desperate for ideas!! Please help!!"
Prior to that e-mail, Hecker had already pledged to his then-financing partner, Chrysler Financial, that he would not take on more debt or pledge additional assets to secure old loans. Hecker lost his line of credit from Chrysler Financial in late 2008 and began folding some of his 26 dealerships.
Regardless, the Olsons and Cornerstone bank "actively induced Hecker in late December 2008 and January 2009 to enter into a series of transactions in which Cornerstone .... gained millions of dollars of additional unencumbered collateral from entities owned by Hecker and a blanket lien in many of Hecker's individual assets," court documents said.
The arrangements were made without any additional loans, but involved Hecker transferring to the brothers his interest in a $1.8 million undeveloped parcel of land in Forest Lake.
In a court filing Seaver called the transfer "fraudulent." He asked for the court to rule that the deed belonged to Hecker's largest creditor, Chrysler Financial.
Various transfers by Hecker -- including several Rolex watches -- to the Olsons "appear to have enabled Cornerstone Bank to avoid regulatory scrutiny in relation to its improvident loans to Hecker" the complaint said.
Seaver alleged that the bank "scrubbed" Hecker's loans from the books and replaced them with loans supposedly made to various corporate entities that were actually owned by Hecker.
Seaver also accused the Olsons of using their family owned Royal Jewelers to help Hecker hide assets from the bankruptcy court, namely "multiple wrist watches worth tens of thousands of dollars."
Dee DePass • 612-673-7725
