Jundts agree to $1.8 million settlement of company debts

A Wayzata money manager and his son will pony up $1.8 million today, and perhaps another $1 million or more later, to settle debts for Jundt Associates Inc. [JAI] under an agreement filed in Hennepin County District Court.

The settlement, signed by Judge Gary Larson late last week, is the result of months of legal wrangling and a report from a receiver about JAI's finances. James Jundt, a major GOP donor and former co-owner of the Minnesota Vikings, once played host to President Bush at his Lake Minnetonka mansion.

A receiver determined that James and Marcus Jundt "intermingled the assets of JAI with their own" to the extent that their personal assets could be considered to satisfy the obligations of the corporation. In a report filed late last month, the receiver said he would move to collect nearly $11 million from the Jundts personally, money that in the receiver's judgment had been wrongfully taken from the company.

The Jundts' lawyer, Michael Meyer, said the father and son disagree with the amount, but wanted to settle the dispute rather than engage in long litigation. "Admittedly, the company was run as a closely held family company. Typically, some blurring goes on," he said. "But there was never any intention on the part of either of the Jundts to leave creditors unpaid."

The agreement said the Jundts agreed to a settlement that "provides for payment in full of the costs of receivership and the claims of JAI's creditors, including [Paul] Bottum."

The agreement stems from an August ruling by Larson determining that JAI owed former employee Bottum $1.8 million in unpaid bonuses and interest. The judge determined that JAI had reneged on promises to pay Bottum bonuses related to the hedge fund's performance in 2000 and 2003. Bottum's lawyer, Andrew Parker, successfully moved to place JAI into receivership after attempts to collect the judgment failed. (About half the $1.8 judgment to Bottum has been appealed by JAI.)

James Jundt owns a 32,000-square-foot mansion on Bracketts Point Road along 1,700 feet of Lake Minnetonka shoreline. In August 2006, Jundt threw a fundraising event there for now-U.S. Rep. Michele Bachmann, with Bush as the main attraction. The 16-bathroom house is for sale for $53.5 million.

Next up in the case: a hearing before Larson on attorneys' fees. Parker is seeking to have the Jundts pay Bottum's attorney fees of "several hundred" thousand dollars.

Depending on the outcome of the appeal of Bottum's judgment and the request for attorneys' fees, the Jundts' payment could climb.

Parker said one of the most shocking discoveries in the receiver's report was that the Jundts, within days of the order of the judge, directed their biggest client to pay all outstanding management fees, nearly $1 million, to them personally rather than to the company. Noting that the ruling from August was only against the company, Parker said the Jundts were leaving the company with nothing.

The receiver's report then discloses that within days, the Jundts, as directors of the company, held a board meeting to close the company. In addition, James Jundt informed the company's largest client that he was leaving to open a new firm elsewhere.

"The receiver's report confirms that once this judgment came down, they closed their company, took the money and left town," Parker said.

The receiver, James Bartholomew, a principal at Lighthouse Management Group Inc., raised many questions about JAI.

In 2000, James Jundt gave his JAI shares to his son Marcus and "corporate formalities" such as annual shareholder meetings were not held while the bylaws were "either ignored or violated," the receiver said.

He also determined that JAI paid the salaries of people who worked on non-JAI business and personal investment matters, benefiting the Jundts and other businesses.

Meyer said Marcus Jundt often directed his own money to the firm in bad years.

The receiver also said that JAI maintained two jets. Although JAI maintained that 47 percent of the hours flown were for business, the receiver's analysis found that number could be as low as 18 percent. Based on the receiver's analysis, JAI incurred $5.1 million in jet costs related to personal or nonbusiness use of the jets that JAI paid for. He noted that James Jundt stated in depositions that he considered jet use to be part of his compensation.

Jundt Associates started in 1982 and managed large corporate pension plans and other tax-exempt investments.

Rochelle Olson • 612-673-1747