The Hammer Comes Down on Koenig's Bankruptcy

Post and video by the Hawthorne Hawkman, audio from a Koenig bankruptcy proceeding.

A whole series of Koenig bankruptcy documents have come my way, and they are quite revealing. Based on what I can piece together here, it looks as if the United States Federal Credit Union essentially forced Koenig into bankruptcy by demanding he either pay them the $1.1 million owed or demonstrate that he does not have funds for a payment plan.

The bankruptcy appears to be involuntary, and was in fact discharged.  Only after that did other financial dealings come to light.  Yet Koenig was less than forthcoming with the trustee regarding his finances.  After the discharge, the case was brought back to life.

The audio file posted here was from a hearing where the judge ordered Koenig's attorneys to cooperate with the trustee.  He brings the hammer down quite convincingly, I might add.

For those who would rather spend seventeen minutes on Youtube watching "In a Gadda Da Vida," a quick summary follows...

Mr. Burton, the attorney for the trustee began by calling Koenig "an infamous landlord in the Twin Cities area."  I like him already.  The trustee subpoenaed information and received a three-page rebuttal instead.  That rebuttal was filled with reasons not normally seen in such bankruptcy proceedings.  In fact, over the past three years these attorneys had filed hundreds of such subpoenas and had never once received objections of this kind.

Burton pointed out that any information available to the debtor in a bankruptcy proceeding should be available to the trustee, but they were met with considerable resistance.  "It was pretty clear that they were not going to comply with the subpoena without the trustee having to take the unnecessary step of seeking relief from your honor."

Mr. Jones, Koenig's attorney, picks up at the six-minute mark.  He claimed that the documents couldn't be turned over because, among other reasons, his client was doing his taxes.  Furthermore, there are over 15,000 applicable documents that would be a considerable cost to reproduce.  (That is, unless someone figures out how to store information on something other than paper...)  Instead of continued resistance, he was open to having the trustees coming to his office to review documents, but doesn't want to turn them over.

Like a majestic lion waiting in the grass until deciding to pounce, our judge chimed in, “Assuming the theory of resistance…a heck of a lot of posturing on Mr. Jones’s part, even assuming that, anybody bother to look into the treasury regulations?”  He cited legalese case numbers that read off like serial numbers of Star Wars droids and said it's “Pretty darn clear it’s an obligation to cough up…the information.”

The referenced sources were meant to restrict, not expand, the ability to withhold information from the trustee.  Even so, the trustee was remiss in not referencing this, and the judge seemed bothered that the motion came before him at all.  Even though the defense attorney was doing the typical "pry it out of my dead fingers" response, it doesn't work that way in trustee/bankruptcy issues.  There are pretty clear entitlements to compel production of this material.

“I don’t think Mr. Jones is very well put to be dithering around for a number of weeks for the production here and certainly wasn’t well put in telling your client that they have no obligation to reproduce” the documents.

“There’s your authority right there”  Mr. Burton should have used it, and “Mr. Jones certainly didn’t find it in anticipation of that hammer coming down at this hearing...There’s no messing around on this stuff.”

The hearing ended with the satisfying thud of the judge's hammer.