|1211 Knox Ave N|
|2402 4th St S|
|2616 Cedar Ave|
POST IN PROGRESS - more hyperlinks to add back stories will be added later.
Physicists widely point to "The Big Bang" as a likely starting point for our universe, and although they can surmise the origins of the universe, there are two questions such a theory leaves unanswered: 1) Why did matter exist in the first place? and 2) What CAUSED the Big Bang? We can measure up to the first few nanoseconds, but still are unable to fill in the gaps these conundrums leave us.
Likewise, NoMi blogs (more famously on Johnny Northside) have chronicled the downfall of Paul Koenig, Michelle Koenig, and their various LLC's - Pamiko, MCK Investments, and Marklee Construction. However, we never really answered the questions of why Koenig was allowed to acquire so many properties in the first place (technically in the second place, since he screwed over north Minneapolis first with the Dream Homes and then through Pamiko). Nor have we understood what was the spark that set off the 80-foreclosure powder keg.
Well, after finding a confession of judgment on the Dream Homes lawsuit (a previous JNS post chronicled much of that suit, but had not come across its conclusion), I now have a theory about what started Pamiko's foreclosures over a year ago. Bear in mind, this is only a theory, and there may be equally valid theories out there - although I sincerely doubt "Intelligent Design" is one of them.
First, a brief history...
Paul Koenig first arrived on the scene in NoMi through the Dream Homes fiasco, where he and David Kohlenberger, and their spouses Sharon Kohlenberger and Michelle Koenig, purchased scores of vacant lots throughout the metro area. Most were concentrated in the Hawthorne, Jordan, Near North, Willard-Hay, and McKinley neighborhoods of north Minneapolis. Their plan was to build pre-fab homes on these lots, most of which had would have six or more bedrooms, no basement, and no garage. The homes were, unfortunately without irony, called Dream Homes, and the houses looked like crap. They started several LLC's to manage the acquisition, construction, rental, and resale of these properties. Those entities were Dream Home Development LLC, DPK Properties LLC, and KOKO Property Management.
Well, thanks to the fact that they were all lying to each other and their investors over what kind of income the properties really produced, and how much they might be worth, the whole thing came crashing down before they could acquire as many properties as they wanted. However, it did lead to a moratorium on new construction in north Minneapolis. Then two of the investors who were scammed fought back and filed a lawsuit against the Kohlenbergers, Koenigs, and their various LLC's (which by that time included Pamiko Properties LLC, MCK Investments, and Marklee Construction).
Fast forward a few years: Pamiko wound up owning many of the Dream Homes, and had purchased scores of other rental properties as well. Like before, many were concentrated in the same north Minneapolis neighborhoods. Most were, at best, poorly managed or maintained. Some residents over on Hillside Avenue in Jordan began complaining to me about Pamiko/Koenig right around the time I found a property in Hawthorne that was being foreclosed on for the dollar amount of $2.5 million.
This, and a series of other questionable financing practices, led us to investigate Pamiko further, and we just kept on finding more and more horror stories. It turns out that the type of commercial loan the Koenigs received might have been quite common. However, there is enough of a trail of malfeasance to make many NoMi residents (myself included) believe that there has been some level of criminal fraud that took place. The Koenigs lost these properties to foreclosure as well, leading to a second round of scores of foreclosures in NoMi caused by one person in the span of roughly five years.
In his discussions with Jordan residents, Koenig led them to believe that the interest rates on his loans with Minnwest Bank were just raised arbitrarily, and that led to his financial woes. However, in discussing this scenario with another personal banker, it seems that's quite unlikely. What is more probable is that these loans that Koenig had included clauses that would trigger a "default rate," or a significant increase in the interest rate based on the belief that the borrower had either committed fraud or was in a position where the loans were unlikely to ever be repaid. The question then becomes, what triggered that default rate switch?
And that, my friends, leads us back to the confession of judgment. Stephen Kranz and Donal Parks (that is "Donal" without a d at the end), along with Round Table Properties LLC, sued the Koenigs, Kohlenbergers, and pretty much every LLC either of them had used for property acquisition, management, or development, as well as the Realtors involved in the scheme. When Kranz and Parks bought six Dream Homes, they did so based on a promise that the properties generated a certain amount of income from Section 8 and also from neighborhood non-profits.
Problem was, that second source of income simply didn't exist. It was the Dream Homes entities paying themselves and inflating their bottom line. In the course of the lawsuit, the Kohlenbergers admitted to the fraud, and the Koenigs managed to pin the blame entirely on them. Kranz and Parks won two separate judgments, one for an even $1,000,000 and a second or $75,000.
The people on the losing end of those judgments were Dream Home Development LLC, DPK Properties LLC, KOKO Property Management LLC, David and Sharon Kohlenberger, Michael Czarnik, Edina Realty, and Realtors Jay Jasper and Tammi Panning-Jasper. While the Koenigs weren't directly mentioned, and while their main LLC's (Pamiko, Marklee, and MCK) were taken off of the confession of judgment, They still had contributed to the operation of DHD, DPK, and KOKO at the times material to the lawsuit.
Furthermore, the three properties photographed above, 1211 Knox Ave N, 2616 Cedar Ave, and 2402 4th St S, were among 71 properties listed in the suit and confession of judgment as ones transferred back and forth between the Koenigs and Kohlenbergers. Oh, I forgot to mention that detail. In an attempt to hide assets that might have been considered in this litigation, the Koenigs and Kohlenbergers were transferring properties to themselves or their various LLC's. Those three properties above were ALSO owned by Pamiko and were included in the multi-million-dollar bundled commercial loans Pamiko had through Minnwest.
Remember, the whole reason Koenig said he went into foreclosure was because the bank jacked up his interest rate. But that would only happen if caused by something else. Now, if you had just won $1,075,000 in judgments against someone who was transferring assets/title back and forth, what would you do? I know I'd file a lien against ALL properties and ALL assets that my debtor owned. If that happened with some of the properties with a Minnwest Bank lien on them, it could have started the whole domino effect of Pamiko foreclosures.
And if we understand how things all got started in the first place, then hopefully we can keep them from happening again.