Thursday, December 31, 2009

Applying Some Horse Sense to Pamiko-gate

Guest post and photo by the Hawthorne Hawkman

Thanks to the tireless work of many JNS readers, quite a bit of information has come to light regarding Pamiko, the Koenigs, and their previous Dream Homes venture into NoMi-land. Quite a few posts and more than 150 comments later, I thought I'd try to boil things down a bit; apply some common sense, or horse sense, if you will. And since a lot of folks might be hesitant to wade through the legal documents posted here, I plan to focus on that.

But first, let's start with some numbers...

The Star Tribune reported a breakdown of where Dream Homes were located by neighborhood. They rounded percentages, so we might not get an even 100%:

Willard-Hay: 21%
Hawthorne: 21%
Near North: 20%
Jordan: 14%
Phillips: 7%
McKinley: 4%
Central: 2%
And the following neighborhoods with just 1%: Lind-Bohanon, Webber-Camden, Cleveland, Logan Park, Harrison, and Whittier.

Here's a breakdown of Pamiko properties by neighborhood based on lists on this blog. The same disclaimer about rounding numbers applies, as well as a reminder that some Dream Homes are still (temporarily, at least) owned by Pamiko.

Jordan: 28%
Hawthorne: 23%
Near North: 16%
Willard-Hay: 8%
McKinley: 7%
East Phillips: 3%
Folwell: 3%
And the following neighborhoods with one property (roughly 1.5%): Ventura Village, Whittier, Lind-Bohanon, Webber-Camden, Phillips West, Logan Park, and Central.

These numbers clearly indicate that the Koenigs have basically caused irreparable harm to the same four neighborhoods (Hawthorne, Jordan, Near North, and Willard-Hay) TWICE in the past decade. Also, I want to point out the Dream Homes fiasco came crashing down in 2005, right in the middle of the housing boom. Buying a house was so easy back then that pretty much all you had to do was stand on a street corner and say in a slightly raised voice, "I've been thinking about buying a home." Within moments, dozens of mortgage brokers would lunge at you from out of nowhere, thrusting their business cards into your hands. Even if you somehow didn't qualify for a mortgage, the volume of business cards alone would give you the raw materials to build a better structure than what the Koenigs were putting up at the time.

So how exactly does one fail at such a venture in a historically friendly financial climate? The legal documents provide a bit of insight into that question. But before Koenig failed for the first time at housing in north Minneapolis, he managed to fail at paying his bills entirely. It's ironic that one commenter said Koenig would complain about things like welfare fraud, where people are living off of government money without deserving it.

See, included in the list of creditors who didn't get their money is a list of about every level of government that collects funds from you and me. $6,173 owed to Hennepin County, $1,545 to the IRS, $24,835 to the state of Minnesota, $135 to the city of Eden Prairie, and $326 in bounced checks to the license bureau (If I had to guess I'd say it was for the license tabs so he could keep on driving his Lexus). That's $33,014 that the rest of us paid for with our tax dollars. Now maybe there was a legitimate reason for the bankruptcy and the discharge of those particular debts, but it still diminishes one's credibility when complaining about other people supposedly living off of the government.

The bankruptcy also shows $10,853 in association dues discharged, and my personal favorite bit, $19 to Blockbuster.

Some folks have speculated as to how Koenig got access to credit after the bankruptcy, but keep in mind when this was happening, credit was much looser. You could qualify for a conventional mortgage and most other lines of credit a mere two years after the discharge of a chapter 7 bankruptcy, provided you didn't have any new bad debt since then. (And some subprime mortgages were available the DAY AFTER a discharge of bankruptcy.) That gave him just enough time to turn around and inflict Dream Homes on our neighborhood.

Anyone unfamiliar with what a Dream Home is only needs to drive through north Minneapolis and keep your eyes peeled for a gigantic yellow box, usually with no basement, cheap vinyl siding, no garage, and virtually no distinguishing features whatsoever. That's a Dream Home, which was apparently called such by the Koenigs and Kohlenbergers without a sarcasm font. With no garage, no basement, and six bedrooms, these houses were constructed in such a way that they were and always will be dependent on a property manager. Where will the lawn mower and rakes, snowblower and shovels, and other tools be stored? There isn't a place for the basic accessories to owning and maintaining a home.

Most Dream Homes are currently non-homesteaded, and owned by landlords who have multiple properties. At least one, 2818 Aldrich Ave N, is owned by Highland Bank - meaning it was in all likelihood purchased by Danna D III and then lost to foreclosure. The plan was to build upwards of 350 such homes, and all I can say is thank God they went under before they got much past 80.

I've gone through the legal documents posted here, and I'm not sure if they're complete or if perhaps the cases haven't been fully settled yet. Heck, I'm not even clear about who was lying to who about what. But it is obvious that our neighborhood caught the fallout from their little war. Here's what appeared to have happened:

In August of 2006, Stephen Kranz, Donal (legal docs say "Donal," so if this is a misspelling of "Donald," this blog has not made the error) Parks, and Round Table Properties LLC sued Paul Koenig, Michelle Koenig, Pamiko Properties LLC, and MarkLee Construction LLC. "Dream Home entities" were also listed as relevant parties: DPK Properties LLC, Dream Home Development LLC, and KOKO Property Management LLC, as well as David and Sharon Kohlenberger.

A side note here: The Koenigs appear to have either a narcissist streak or are rather uncreative. DPK = David, Paul, Koenig/Kohlenberger. KOKO = Koenig/Kohlenberger. MarkLee Construction consists of the middle names of Paul and Michelle Koenig. Heck, even Paul, Michelle, Koenig = Pamiko. It's like a slimy version of Donald Trump. Ok...slimiER.

So the plaintiffs here essentially alleged that they were owed money from some Dream Homes they invested in, that they were lied to about the income streams that were being generated, and that the Koenigs and Kohlenbergers were attempting to transfer properties in a way that would prevent them from collecting money owed. A total of 71 properties with a $2 million dollar value was detailed. The plaintiffs alleged insider activities and said that six sales had already happened, resulting in $270,000 being made from those sales.

Also sued were Michael Czarnik, an agent of Dream Homes, and three Realtors, Jay Jasper, Tammi Panning-Jasper, and Amy Jasper-Fenske. Tammi is singled out as acting as a dual agent in the sale of six Dream Homes. Dual agency, or representing both the buyer and the seller, is fairly uncommon and can much more easily allow Realtors to engage in and get away with fraud.

Specifically, the plaintiffs alleged that Jay and Tammi provided a Dream Homes sales brochure that showed rental income of $2,247 per month per home. This dollar amount consisted of two separate portions: Section 8, and a "subsidy" from third-party charitable organizations established to supplement HUD rent payments - specifically to supplement Dream Home's "unique six bedroom houses." DHD (Dream Homes Development) claimed to have contact with over 30 such non-profit organizations, and had been receiving supplemental rent payments from them "for a long period of time."

Based on this information, the plaintiffs purchased six properties. But what was the ACTUAL non-profit subsidy amount?

The court documents allege: "On September 24, 2004, Kranz and Parks discovered that the 'subsidy or grant money' was not coming from third-party non-profits, but that DHD was paying this money out of its own pocket. Kranz and Parks subsequently discovered that defendants' representations concerning the amount of income each rental property generated on a monthly basis, and the multiple sources of that income were false. No non-profit or charitable organization had been supplementing rent payments with grant or subsidy money. That source of income simply did not exist." (Emphasis mine)

Also, Kohlenberger, DPK, and DHD owed plaintiffs money as a refund of $5,160.87 in overpaid closing costs. The defendants issued a check to repay that amount. Well, apparently the plaintiffs never called Mystic Lake Casino or the License Bureau to find out what happens when you try to cash a check from the defendants. And a jury might not be able to do so either, since the Koenigs had filed a motion to have the bankruptcy information excluded from the court proceedings.

The Kohlenbergers settled for $1,000,000, but it's not clear if they actually PAID Kranz, et al. The Koenigs, on the other hand went on to blame this whole thing on the Kohlenbergers. They sued the Kohlenbergers for $1.2 million over the transfer of four properties. Interestingly enough, they claimed that they were "personally liable" for the unsettled debts related to the properties. Wait a minute...I thought this was all done through LLC' why are the Koenigs "personally" liable? Could they be mixing personal and business enough to be held personally liable for the colossal scale of foreclosures and slumminess they've inflicted on our neighborhood?

In their suit, the Koenigs attest that the Kohlenbergers listed properties that didn't even exist. This accusation jumped out at me because I thought the Koenigs were doing the same thing with Pamiko properties this time around. Since my notes weren't clear, I went back to Hennepin County and double-checked. It turns out my notes are inaccurate, and there are no currently known fictional properties associated with the Pamiko issues listed on this blog.

The Koenigs also alleged that the Jaspers were listing several Dream Homes for sale without properly notifying them. The Dream Homes, according to the Koenigs, were selling for almost $300,000 at the time. Which leads me to wonder once again, what kind of people can't work together to make money when properties are selling for $300,000 in NoMi?

And that's the summary of the court documents posted on the JNS pdf site. It is not known by anyone on this blog whether this case has been settled. And even though the neighborhood has clearly paid the highest price here, we don't even know who will fix up these homes, how much that might cost, or who might be the next round of buyers. What we do know is that the Koenigs can't shovel enough sidewalks in NoMi to make up for the damage they've caused.


MeganG. said...

Here's today's edition of the horsey-set lifestyle of the Koenigs {might I add I find great irony in the fact that one of their lucky race tracks shares the exact name of one of the unlucky neighborhoods that has given its left kidney to the Koenig family}:


"Three Wins!!!!!"

We had three horses running in the closing weekend of the spring meet at Hawthorne. We didn't drive down to Chicago to watch the races though because two horses were running Sunday afternoon and the third ran yesterday afternoon and we would have needed to be back home Sunday evening. We should have taken yesterday off and gone.

We started with Spantastic trying for his first win in his fifth career start and he got it! We named him for Denard Span of the MN Twins. He is a three year old and we were thrilled to get a win with him. When we receive our win photo I'm planning to send a copy to Denard and I may send a second copy asking him to autgraph it.

In the last race on Sunday afternoon we got another win with Lead On. This must be about his 5th win for us now.

Yesterday afternoon was Elle's turn for the trifecta! Jesse Campbell rode Elle Tish Slew to another win in the third race of the day. What a lucky weekend!

Anonymous said...

Paul did file BK, he then disputed everything on his credit report. He got a $300.00 starter credit card and continued to rebuild his credit.

Fast forward to the Dream Home days and I will tell you how they started out. They had to use Michelle's and Sharon's credit because David had also filed bk. After both wifes hit 10 personal loans each they hit a point where they couldnt get anymore loans. After some creative work and the hire of a former banker they came up with the bucket lines of credit.

You are correct in that it is Donal Parks, he was partner with Steve Kranz who is the cousin of Jay Jasper.

The non-profit was created by the Dream team to bridge the gap in rent received. Their business plan was to rent the homes out at the max section 8 rents over $2000 including all utilities. Because infact they only could rent most homes out for a 4bedroom section 8 voucher of about $1400 including all utilities. So on a home that was built for about 180k, average finance 260K and electric base board heating a person in their right mind would not buy or finance a Dream home. They hired a drunken friend of Dave's to run the non profit. Brenda did try to raise $ but with no luck. So DHD was transfering funds from accounts when needed to show payments. After Brenda checked into treatment they shut down the non profit.

As far anyone getting $ from Dave, I would only assume their was nothing to collect. Dave liked to spend $, bought a home in Bear Path, bought a home for his daughter and a car for his other daughter. What a great Dad, I believe that the daughter with his new grandchild lost her home and Dave had to take back his daughters car when the repo man came knocking for his Lexus.

The employees of DHD also sued Paul for unpaid wages and expenses. I was told that they got pennies on the dollar.

Johnny Northside said...

First, for the record, none of this is verified and the comment is anonymous.

Now, addressing the writer of the comment, who we will call Anonymous At 8:11....

How do you know this stuff? And are you in touch with the authorities? Do I know you? Have we already spoken? Can I put you in touch with the authorities if you are not already talking to them?