Paul Koenig Loses Hopeless Appeal

Post by the Hawthorne Hawkman, top photo from Koenig's defunct blog, bottom photo from Johnny Northside.

I can't think of a better way to close out the year than to close out yet another chapter in Paul Koenig's ongoing legal failures.  For those unfamiliar with Koenig at all, Ed Kohler of the Deets compiled a list of (at the time) all the northside blog posts about this guy.  Koenig came on to the radar almost a decade ago, buying up tons of vacant land and putting down "Dream Homes," poorly-built houses with six bedrooms, no basement, no garage, and basically destined to be section 8 rentals.  He and his investment partners lied about how much rent they pulled in, were sued, and lost.

Koenig managed to shift the blame onto his partner, picked up many of the Dream Homes post-foreclosure, and started a new wave of slumminess under various LLC's.  Pamiko, Marklee Construction, and MCK Investments were the most prominent of the three.  Despite siphoning off tons of money to fund a lavish lifestyle, (or perhaps because of that) he couldn't make the payments, let his properties deteriorate, and then lost them to foreclosure.

He has since been involved in a legal battle in which he claims that he redeemed several of his foreclosed properties for a dollar each.  In reality, this fight was little more than a charade so that Koenig could continue to make life miserable for Minnwest Bank with the slim hope that he could temporarily collect additional revenue from these rental units.

Oh, and in the midst of his housing hand grenade exploding across NoMi, Koenig was largely believed to have been the primary contributor to the Jordan Hawkman blog.  Good riddance.

Now, about that ruling...

Who Owns Them Now? (Not Paul Koenig)

Post and top photo by the Hawthorne Hawkman.  Bottom photo from Paul Koenig's now-defunct blog.

When a property becomes owned by a slumlord, or is touched by mortgage fraud, that property is quite unlikely to immediately go back into the hands of a quality owner - whether the house is homesteaded or not.  It's been long enough since the "One Man Housing Crisis" of Koenig/Pamiko/Marklee Construction/MCK Investments/Dream Homes/Did I forget any LLC? collapsed on itself, so its time to take a look at where those houses ended up, starting with...

And the Minnwest v. Koenig Verdict IS...

Post and stock photo by the Hawthorne Hawkman.

The Minnwest v. Paul Koenig, Aaron & Mary Durkop, Komo Group LLC, and Kaizen Property Solutions LLC is over.  Judge Susan Burke granted the Minnwest Bank request for summary judgment, and Minnwest is now the owner of the six properties at issue in this case.  There was a court hearing scheduled for Monday March 21, 2011, but that apparently has been canceled.  I showed the final documents to a real estate attorney, who confirmed they contain the final ruling, unless of course Koenig or any other defendant wishes to appeal.

In the last post regarding this trial, I mentioned that I was missing some previous documents, such as Paul Koenig's affidavit and the Defendants' Memorandum in opposition to summary judgment.  The defendants do make some interesting, although ultimately fruitless, claims.  Such as...

Koenig "Ignores Some of the Most Basic Principles of Mortgage Priority," Appears Set to Lose Case

Post by the Hawthorne Hawkman, photo from Johnny Northside originally appeared on Paul Koenig's blog, used under First Amendment criticism and commentary.

Before we begin, let me get one thing out of the way.  I don't have all the documents or information I need in order to write what I would consider a complete blog post.  But since it's going to be a few days before I have time to get downtown again for what may be the last round of Pamiko court documents, I'm writing with what I've got.  In a way, this is oddly appropriate.  I'm somewhat of a completist, and when I first discovered a $2.5 million-dollar foreclosure, I wanted to do more research and get the whole picture before writing anything.

Instead, my friend, neighbor, and fellow blogger John Hoff told me about "All the President's Men," in which reporters who uncovered the Watergate scandal knew they had a lead on something, but didn't know how big it was going to be.  "Just write what you've got, and people will start contributing more information, and the rest of the story will happen," was essentially what John advised.  And now look where we are, with Paul Koenig and his various LLC's being perhaps the most extensively covered topic in the NoMi blogosphere.

So we press on, knowing the picture is not yet complete, telling the story with what we've got, confident that the rest of the information will indeed follow.  We start with the Affidavit of Minnwest President William Swanstrom, which states...

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...

Koenig's Impact on Minnwest Bank

Post by the Hawthorne Hawkman, image from the Investigative Reporting Workshop blog.

There's a financially nerdy aspect of the Minnwest vs. Paul Koenig legal showdown that I don't think should get lost in the shuffle.  Last year, I compiled quite a bit of information on Minnwest in a Johnny Northside post called "Minnwest Bank Metro - Breaking the Bank."  There's quite a bit of technical stuff to digest there, but the key point in relation to this post is that Minnwest was found to have a dangerously high level of bad commercial debt in comparison to their total assets.  That's a red flag for regulators.

The Investigative Reporting blog link above is helpful because you can drag the mouse over various points on their graphic to see exactly where Minnwest stood from one quarter to the next.  The statistic shown there is slightly different.  It compares the sum of troubled assets with the sum of tier 1 capital plus loan loss reserves.  Basically, the amount of bad debt compared to two kinds of assets a bank has.  I'm pointing out the obvious when I say that the higher ratio this is, the worse off the bank, its shareholders, and those who hold deposits are.  Readers are encouraged to compare the blue line (national median) to the yellowish line (Minnwest's ratio).

The troubled asset ratio comes into play because thanks in part to Paul Koenig's and Pamiko's massive loan defaults, Minnwest Bank was put on notice by the FDIC that they had to improve those numbers--or else.  That order happens to be exhibit 30 in our court case.  Granted, Minnwest made a rash of high-end bad commercial loans, such as when they wound up holding the bag on the failed Ramsey Town Center.  But let's take a look at that graph above and see what connections there are to Koenig's mass foreclosures in Minneapolis and St. Paul.  In the case of the $1.3 million-dollar loan at 4652 Aldrich Ave N, the sheriff's sale was scheduled in the last quarter of 2009, coinciding with a huge jump in the troubled asset ratio that quarter.  That was also the same quarter when 2420 Bryant Ave N ($2.5 million) had a sheriff's sale scheduled, although the intent to foreclose was filed one quarter earlier.  The 1417 Logan Ave N property ($1.5 million) followed the same pattern as the Bryant loan.    According to the Complaint documents, Koenig's St. Paul property ($1.1 million) was foreclosed in the same quarter of 2009 as well.

While I can't say with certainty when exactly the $6.4 million total default bomb exploded onto the chart above, there can be little doubt that the series of Pamiko foreclosures directly led to Minnwest being on the FDIC's naughty list.  Watch out banks, this is what lending to Paul Koenig can do to you.

On an appropriate note, since this post was finished after midnight, it officially hit on the 1-year anniversary of Pamiko Comeuppance Day.  Happy Pamiko Comeuppance everyone!

Paul Koenig's Dollar House Program

After foreclosure, Paul Koenig paid $1 for this.

After foreclosure, Paul Koenig paid $1 for this.

After foreclosure, Paul Koenig paid $1 for this.

After foreclosure...well, you get the idea.

$1

Should Paul Koenig buy a cheeseburger at McDonald's, or a house?  With $2, he can have BOTH!

Post and photos by the Hawthorne Hawkman.  Photos originally appeared on the JNS story, "Pamiko Property Photo Tour."

I'll give Paul Koenig this much:  he's got chutzpah.  What he is trying to do to retain ownership of "his" properties in NoMi (and a few in south) is nothing short of astonishing.  Koenig bought dozens of houses in Minneapolis, and at least one commercial building in St. Paul with four loans from Minnwest Bank totaling roughly five million dollars, and another half-million from Aspen Financial.  These commercial loans were cross-collateralized, a procedure that looked awfully suspicious to many, but may have been at least somewhat of a solid business practice.

Cross collateral means that several properties were the collateral on more than one of the million-dollar lines of credit.  The reason for this is so that if some properties go vacant, in need of repair, or otherwise stop producing income streams to support loan payments, spreading them out this way creates an intermixed income stream to support several lines of credit simultaneously.  In the business world, this model apparently works rather well, provided your borrower isn't a flat-out lying scumbag.

Which, in my opinion, sums up Koenig quite nicely in light of his recent actions.  Minnwest foreclosed on the Bryant property above, to the tune of $2.5 million, along with a bevy of other houses attached to that loan.  They did the same with the $1.1 million foreclosure of a commercial building in St. Paul.  Where it gets tricky is...

Hennepin County Pamiko Court Documents, Round 1

Post and photo by the Hawthorne Hawkman. 

After trekking to downtown St. Paul and finding virtually nothing in Minnwest's Ramsey County civil case against Pamiko, I expected much of the same here in Minneapolis.  Boy, was I wrong.  The Hennepin County case has three file folders marked as full.  (Hennepin rules prohibit the photographing of actual court documents, but the folders and stop markers are fair game.  The other rule in play here is they only allow five documents to be copied at a time.  More than five and you have to fill out a work request and then it takes a week to get done.  Got to love bureaucracy.)

Now, because of the sheer volume of documents and the aforementioned rule, I picked five docs from the first file that seemed pertinent.  We'll be playing catch-up as I'm able to obtain and review the documents.  For instance, I can already tell you that Minnwest's temporary restraining order was denied, although I didn't read the denial to find out specifics yet.  And in another filing, the plaintiffs eviscerate the Koenigs' maneuverings of properties between LLC's during the foreclosure process.  I cannot WAIT to sink my teeth into that one.

The Complaint lists Minnwest Bank Metro as the Plaintiff, and the following defendants:  Komo Group LLC, Kaizen Property Solutions LLC, Paul Koenig, Aaron Durkop, and Mary Durkop.  Komo Group LLC had its office or at least a mailbox at 8632 Tamarack Village in Woodbury, the same address as Pamiko.  The Complaint states, "Upon information and belief, Koenig is the sole member and chief manager of Komo."  Kaizen Property Solutions sounded awfully familiar to me.  Why does that name ring a bell?  Oh, NOW I remember...

Airing Pamiko's St. Paul Dirty Laundry

Pictured above:  The only Ramsey County property confirmed so far as owned by Koenig and financed in part by MinnWest.

Image originally from the Koenigs' blog, republished under First Amendment comment and criticism

Post by the Hawthorne Hawkman, photos originally published on Johnny Northside.

One of the two lawsuits against Paul and Michelle Koenig and Pamiko has been tracked down.  I went to St. Paul first since that would be the harder set of documents to obtain.  I'd love to publish every scrap of paper associated with this suit, but Ramsey County doesn't make it cheap to obtain court documents.  So the following links get you the most telling aspects of the case thus far:

Pamiko Register of Actions, Ramsey County
Pamiko Summons, Ramsey County
Pamiko Scheduling Order, Ramsey County

What these documents tell us, so far, isn't much.  Although there was another item wherein the attorneys for Minnwest attempted to go the direction of mediation as ordered by the judge, and were stonewalled by the Koenigs and their attorney.  As far as the summons and scheduling order go, the most important parts of those documents say...

NXNS Exclusive! Paul Koenig Sued by Minnwest Bank!

This guy, going up against...

...them.

Post by the Hawthorne Hawkman, first photo from Johnny Northside, second photo from www.classicglassandmirror.net.

Last year, when the City Pages and Star Tribune simultaneously published stories on Paul Koenig (pronounced Kay-neg) Comeuppance Day, we wondered when (not if) the Koenigs would be sued.  A source close to one of their many, many creditors said rather ominously, "Just watch the courts."  Well, NoMi bloggers have been doing just that.  For whatever reason, these cases filed in mid-2010 didn't show up on any of our searches until just now.  But the Koenigs and a host of others are now subject to multiple lawsuits from Minnwest Bank.

Johnny Northside passed on to me the Register of Actions for both cases.  I won't have access to a vehicle to get to a scanner until tomorrow, so in lieu of pdf files, the text of each document is retyped after the jump...