The Koenig Apologist(s) Might Have a Point

Post by the Hawthorne Hawkman, stock image from www.failblog.org.

In some recent posts about Paul Koenig, one or more anonymous commenters have said that Paul Koenig is at least partially a victim of bad timing, and have defended him to varying degrees.  I've stuck to my opinion that, no, Koenig is pretty much the main character at fault and brought about his own financial demise.  In so doing, I've repeatedly said that Mr. or Mrs. Anonymous should show me somewhere in either the Koenig loan documents or the FDIC-mandated plan where Minnwest is either forced or allowed to arbitrarily change various terms on Koenig's loans.

In preparation for a post still in the works, I read the Affidavit of Minnwest President William Swanstrom, and the corresponding exhibit A.  That exhibit is the loan document for Koenig's $2.5 million loan at 2420 Bryant Ave N.  In that document, a series of events that would qualify as a default are listed.  Those events, in particular the last one, are listed verbatim after the jump...

• Payment Default.  Grantor (that would be Pamiko in this case) fails to make any payment when due under the indebtedness.
• Default on Other Payments.  Failure of Grantor within the time required by this Mortgage to make any payment for taxes or Insurance, or any other payment necessary to prevent filng of or to affect discharge of any lien
• Default in Favor of Third Parties.  Should Grantor default under any loan extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Grantor's property or Grantor's ability to repay the indebtedness or Grantor's ability to perform Grantor's obligations under this Mortgage or any related document.
• False Statements.  Any warranty, representation, or statement made or furnished to Lender (Minnwest) by Grantor or on Grantor's behalf under this Mortgage or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.
• Defective Collateralization.  This Mortgage or any of the Related Documents ceases to be in full force and affect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.
• Death or Insolvency.  The dissolution of Grantor's (regardless of whether election to continue is made), any member withdraws from the limited liability company, or any other termination of Grantor's existence as a going business or the death of any member, the insolvency of Grantor, the appointment of a receiver for any part of Grantor's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Grantor.
• Creditor or Forfeiture Proceedings.  Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Grantor or by any governmental agency against any property securing the indebtedness.  This includes a garnishment of any of Grantor's accounts, including deposit accounts, with Lender.  However, this Event of Default shall not apply if there is a good faith dispute by Grantor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Grantor gives Lender written notice of the creditor or forfeiture proceeding and deposits with lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.
• Breach of Other Agreement.  Any breach by Grantor under the terms of any other agreement between Grantor and Lender that is not remedied within any grace period provided therein, including without limitation any agreement concerning any indebtedness or other obligation of Grantor to Lender, whether existing now or later.
• Events Affecting Guarantor.  Any of the preceding events occurs with respect to any Guarantor of any of the indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the indebtedness.
• Adverse Change.  A material adverse change occurs in Grantor's financial condition, or Lender believes the prospect of payment or performance of the indebtedness is impaired.
• Insecurity.  Lender in good faith believes itself insecure.

I could go and put hyperlinks to posts either on this blog or on Johnny Northside to show that almost every single one of the above conditions has been met by the direct or indirect actions of Paul Koenig or Pamiko.  However, the purpose of this post is to point out the final contractual definition of an "Event of Default."  It's pretty clear through the presence of an FDIC workout plan that Minnwest could "in good faith [believe] itself insecure."  The real question in regards to how much blame Minnwest shoulders in this series of foreclosures that rocked NoMi is this:  did Koenig's delinquencies cause/contribute to the insecurity of Minnwest, or did Minnwest's insecurity trigger changes in the Pamiko loans that then contributed to the foreclosures?

I'm still sticking with my position that this is Koenig's doing, but given some of my previous statements, it's only fair to point out a different possibility.