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Continued: Hecker won't wipe out $767 million in debt through bankruptcy

  • Article by: DEE DEPASS , Star Tribune
  • Last update: March 13, 2010 - 1:25 AM

Besieged auto dealer Denny Hecker this week gave up his desperate court fight to get out of debt so he can focus his energies on staying out of prison.

In a surprising twist, the defeated auto mogul agreed with the bankruptcy trustee that his $767 million debt will not be forgiven.

Just a week ago, Hecker bitterly declared that the trustee in his personal bankruptcy case "quite frankly would like to see me in the street with a sign that says 'Will work for food.' "

On Friday, Trustee Randy Seaver filed a motion seeking U.S. Bankruptcy Court approval of a settlement that ends months of legal fighting with Hecker over his debts and assets. Hecker's attorney estimates the debt now stands at $400 million because some assets have been disposed.

If approved as expected, the settlement means that Hecker will carry massive debt for the rest of his life. As part of the deal, Hecker's girlfriend gets to keep the $30,000 dog he gave her as a gift.

Hecker's bankruptcy attorney, Bill Skolnick, said the proposed settlement was not Hecker's idea, but he accepted it so he could focus on his criminal case. Hecker, 57, who once owned 26 auto dealerships and other businesses, is facing 25 federal counts of wire fraud, conspiracy, money laundering and bankruptcy fraud. He has pleaded not guilty and lives at his Medina home under nightly electronic curfew while awaiting trial.

The criminal case could take a major turn on Monday. Hecker had retained two leading criminal defense attorneys, but Bill Mauzy and Marsh Halberg are asking a federal judge to let them quit because Hecker has no money to pay fees. Hecker could end up with a federal public defender.

The deal to end Hecker's bankruptcy battle was signed by his attorney Tuesday, the same day a federal grand jury slapped him with additional fraud charges. Seaver signed it late Thursday and filed the court motion Friday morning. A hearing is scheduled for April 7 before U.S. Bankruptcy Judge Robert Kressel.

The deal ends at least one chapter in a long and messy case. Hecker filed for bankruptcy last June claiming $767 million in debt and just $18.5 million in assets. Various creditors soon accused him of fraud -- charges that Hecker denied. Kressel decided last month not to forgive $83 million of Hecker's debt because he allegedly lied in his personal bankruptcy case about his access to thousands of computer records that he claimed had been seized by police.

One consequence of Kressel's ruling and this week's agreement is that Hecker will have a hard time ever getting credit again, attorneys familiar with the case said. That could be a moot point because, if convicted, Hecker likely would face a long prison term. The federal fraud charges carry a maximum term of 20 years for each count.

Suicide note contained clues

Seaver had previously filed a lawsuit with the court in January requesting the judge not forgive Hecker's debt because he hid hundreds of thousands of dollars in assets with the help of his girlfriend, Christi Rowan, and his former father-in-law, Bill Prohofsky. Prohofsky was found dead in an apparent suicide last week and left a note leading authorities to information about where and how Hecker hid assets.

Under the bankruptcy agreement, Hecker does not admit guilt. His homes, cars, jewelry, furniture and other assets will continue to be liquidated by the trustee. Though the settlement allows Rowan to keep her $30,000 German shepherd, she is still under an order to turn over $425,000 worth of other gifts and cash that Hecker gave her in the last couple of years.

The liquidation of Hecker's assets is expected to bring just pennies on the dollar to hundreds of creditors. Chrysler Financial alone is still owed more than $300 million after years of financing many of Hecker's auto dealerships, his Advantage Rent A Car company, and other auto lease and fleet businesses.

Seaver's attorney, Matthew Burton, said the settlement saves the time and effort of litigating the debt discharge. He also noted Seaver's allegations that Hecker hid assets from the court and said, "We think that the loss of this [debt] discharge helps to preserve the integrity of the bankruptcy system."

The recent indictments accuse Hecker of defrauding the bankruptcy court and of various schemes against Chrysler Financial and Suzuki in which he allegedly manipulated loan documents to borrow larger sums than he was qualified to receive.

Hecker, who has denied wrongdoing, has also been accused of failing to turn over customers' tax license and title fees to the state and failing to pay off customers' liens on trade-in vehicles, federal prosecutors said in their complaint filed last month.

When reached by phone Friday, Hecker was asked if his bankruptcy settlement might affect whether he settles with federal prosecutors. He noted that he has pleaded not guilty and "unless you hear otherwise you just have to go with what was said before."

Dee DePass • 612-673-7725

  • about this series

  • More than two years of coverage tells the story of Denny Hecker, 58, and his journey from well-known Minnesota auto magnate to convicted felon currently serving a 10-year federal sentence.

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