Tuesday, February 16, 2010

Has Paul Koenig Ever Paid ANYONE?

Post and photos by the Hawthorne Hawkman

...Other than himself, of course.

Recently I came across MLS listings for Koenig/Pamiko/Marklee properties for sale. These were interesting because they listed the last sale date and purchase price. Most of the purchase prices were in the $30-50,000 range, but two jumped out at me: 1403 21st Ave N and 2321 Lyndale Ave N. (pictured above. Which one is which? They're Dream Homes, so that doesn't really matter.) The last sale date on these two properties is 6/24/05, they were purchased via Contract for Deed, and the sale price was $1,360,000. On each of them.

Naturally I was suspicious, so I went down to the Hennepin County Government Center to research these documents, similar to the multimillion-dollar foreclosures. This is what I found...

At 2321 Lyndale Ave N, DPK Properties was the owner. DPK was a limited liability corporation run by David Kohlenberger and Paul Koenig as its principals. DPK was one of several entities responsible for the Dream Homes fiasco.

(My notes prior to Pamiko taking ownership of this property aren't as detailed as they are in the next round. It was getting close to 4:30 and I had to hurry to get as much info as possible.)

On 6/25/04, Truck Crane Services Company filed a mechanics' lien for unpaid work, in the amount of $4,500. On 12/17/04, the property went into a voluntary foreclosure with Franklin Bank, and the amount bid at the sheriff's sale was roughly $190,000. No satisfaction of Truck Crane's lien is recorded, but on 3/15/05, a second mechanics' lien for $9,800 was filed for unpaid excavation work. No satisfaction of that lien is recorded either.

On 1/27/06, a $240,000 mortgage from US Federal Credit Union to Pamiko was taken out. On 7/26/06, a limited warranty deed from Franklin Bank to Marklee Construction was recorded. It stated, "The total consideration for this transfer of property is $500 or less." This is believed to be the most accurate assessment of Dream Home real estate value ever recorded. (mortgage geek sarcasm font) We'll get to an explanation of how Marklee Construction entered the picture with the next property. On the same day, Marklee transferred its ownership to Pamiko via quitclaim deed.

On 9/19/08, Aspen Funding LLC had a $500,000 line of credit attached to this property. The same list of Aspen Funding properties as mentioned in previous JNS posts about Pamiko was filed here. For some reason, this document was not filed with the county until 1/16/09. In the interim, US Federal Credit Union filed an intent to foreclose on 11/5/08. The sheriff's sale occurred on 2/6/09 and the amount bid was $241,551.82. Somehow the foreclosure from US Federal was avoided.

On 4/9/09, the Aspen loan was modified and the maturity date was changed to 10/1/09 I did not find a maturity date on the initial Aspen loan, but wasn't looking for one until I saw this. I'm also not clear on why Aspen would give $500,000 to an LLC that had a history of not paying its own workers AND was behind on mortgages. Oh, and it would be repaid in a year? Well, no. Aspen filed an intent to foreclose on 10/26/09, but by that time Minnwest Bank had already been moving in on Pamiko with sheriff's sales on 10/15/09.

Interestingly enough, the $1.36 million-dollar contract referenced in the MLS listing is not recorded against this property.

We get more insight about what happened here from 1403 21st Ave N. On 7/1/04, Urban Initiative/Believers in Action deeded the property to DPK/Dream Homes. No value is indicated, and David E. Whiteford is listed as the vice chair and signatory for Urban Initiative/Believers in Action. On the same day, Franklin Bank gave DPK a $185,000 construction mortgage.

On 11/17/04, a mechanics' lien was filed against the property by Reliant Electric, Inc. in the amount of $3,000. Exactly one month later, Franklin Bank filed an intent to foreclose. On 2/1/05, a voluntary foreclosure agreement was signed, and on 3/1/05 the sheriff's sale occurred with a $197,000 bid. But wait! Franklin Bank came back and offered Marklee Construction the previously referenced $1.36 million contract for deed. This was subject to TWO mechanics' liens: Reliant Energy (now $6,000) and Vern Craven Concrete for $10,500. Once again, it's not clear if these workers ever received a dime.

This agreement listed eight properties:
2321 Lyndale Ave N, currently owned by US Federal Credit Union
2122 Penn Ave N, owned by a private individual, not homesteaded.
2515 Irving Ave N, owned by Paul Koenig, but listed as boarded/vacant since 12/22/09.
621 Penn Ave N, owned and homesteaded by a private individual.
1234 Knox Ave N, owned and homesteaded by a private individual.
2130 Bryant Ave N, owned and homesteaded by a private individual.
2400 13th Ave S, owned and homesteaded by a private individual.
1403 21st Ave N, owned by US Federal Credit Union, with Marklee Construction as the previous owner.

A stipulation in this agreement was that in order to remove a property from the contract, Marklee needed to pay Franklin Bank $170,000 (170,000 x 8 = 1,360,000). This is rather interesting in and of itself because on 1/27/06, US Federal Credit Union gave a loan to Pamiko on this property in the amount of $240,000. On the same day, Franklin Bank transferred the property to Marklee and then Marklee handed it over to Pamiko. This series of transfers, although potentially confusing, would have happened even if the deal were legitimate. But if only $170,000 was needed to satisfy Franklin Bank, then why was the loan amount $240,000 with US Federal?

After this, the same series of events occurred on the same days as 2321 Lyndale:

On 9/19/08, Aspen Funding LLC had a $500,000 line of credit attached to this property. For some reason, this document was not filed with the county until 1/16/09. In the interim, US Federal Credit Union filed an intent to foreclose on 11/5/08.On 4/9/09, the Aspen loan was modified and the maturity date was changed to 10/1/09. Aspen filed an intent to foreclose on 10/26/09.

An interesting footnote is that on the Aspen lines of credit, near the top of one of the first pages, "Michele S Pamiko" is written in cursive, almost as if it were a signature of an actual person. The area where this appears, however, is not a place on closing documents where one would sign.

There are plenty of unanswered questions here. If $170,000 was all that was needed to satisfy Franklin Bank, what happened to the other $70,000? How is it that The principal of one LLC (Koenig) is able to continuously repurchase his foreclosed properties under a different LLC, of which he is still a principal? How is it that Pamiko apparently continued to get access to credit when they were in a state of near-constant default? Did his contractors who had to file for mechanics' liens ever get paid? If so, by whom? Who is Michele S Pamiko? And how is it that in the course of losing scores of properties to foreclosure over the years, the Koenigs are still able to maintain such a lavish lifestyle?

The Koenigs are free to respond with a message or comment to explain their side of things, and it will be published by this blog. JNS readers, if you have more information or ideas, you too know what to do.


MeganG. said...

Well, DUH!!!

OBVIOUSLY they had to pay their race horse trainer and stable fees...


Geez, Hawkman, you said you were kinda smart.

Anonymous said...

How are you seeing all this on MLS are you a licensed realtor?

The Hawthorne Hawkman said...

I may have gotten lost in all the deep intricacies of what's happening here. So I'll do a wrap-up in the comment section:

There's a fair amount here to indicate that Koenig either never paid his contractors for work done. The fact that several of them had to file mechanics' liens is irrefutable proof that at the very least he was severely delinquent in doing so.

But when Koenig is a principal in an LLC that loses a house to foreclosure and then is also a principal in an LLC that buys that very same house, that is very suspicious indeed. If there is an outstanding mechanics' lien at the time of the foreclosure, then typically one of two things will happen: either the foreclosing entity pays the lien or the foreclosure itself wipes out the lien almost like a chapter 7 bankruptcy - something Koenig knows about as well.

So it looks quite possible that Koenig's Dream Homes LLC lost properties to foreclosure at least in part due to unpaid mechanics' liens, then turned around and bought the property with a different Koenig LLC without ever paying the workers who built or rehabbed the house in the first place.

This is purely speculation at this point, and the Koenigs (or anyone else) is free to dispute or affirm it.

The Hawthorne Hawkman said...

Grammar/typo correction: the second paragraph should not contain the word "either."

The Hawthorne Hawkman said...

@ Anon 10:48, I spent six years in the mortgage industry and now I'm a housing director of a neighborhood. I personally don't have MLS access, but I have plenty of ways to get MLS data when I need it.

Anonymous said...

That does not look like the Dream Homes I am used to seeing - too much detail? Are you sure the pictured property is a dreamhome?

Anonymous said...

When a property is foreclosed, the foreclosure wipes out all the liens recorded on the property as of the date of sale, unless the holder of a lien wants to file a Notice of Intent to Redeem after the sheriff's sale and pay off the foreclosing party (bank, usually) who bid at the sheriff's sale. This is called out by statute. If this happened, there would be a Certificate of Redemption filed in property records (and the redeeming party would be in title, too), which is also called out by statute.


The Hawthorne Hawkman said...

There was a second round of Dream Homes with basements, garages, and a bit more detail. I'm not sure of the floor plan for those ones, so they MIGHT not be candidates for immediate demolition like the first round of big yellow boxes.

The Hawthorne Hawkman said...

Also, I identified these as Dream Homes based on the assertions of several Hawthorne residents, not on any "hard data."

Low End Leroy said...

Regardless of whether they are "Dream Homes," they are certainly not homes I dream of living in, by, around, or near.