« Continue Browsing

e-mail article Print     e-mail article E-mail

Published August 03 2010

Bank, jeweler seek dismissal of Hecker suit

Attorneys for Cornerstone Bank, Royal Jewelers of Fargo and one of the jewelry store’s owners are asking a judge to throw out a lawsuit filed against them by the trustee in the high-profile bankruptcy case of Minnesota auto dealer Denny Hecker.

The court is scheduled to hear the motions to dismiss on Aug. 18.

Randall Seaver, the trustee assigned to Hecker’s $767 million bankruptcy case, filed a lawsuit in June against Cornerstone Bank, its holding company, the jewelry store and its part-owner Richard Olson, who also is an investor in the bank and a personal friend of Hecker.

Seaver claims the bank used its personal connections to Hecker to acquire additional collateral from his business interests and a blanket lien in his personal assets, which allowed the bank “to recover more than it would have as a creditor in this bankruptcy case.”

In a motion to dismiss, the bank’s attorney denies the transfers were fraudulent, stating that the bank “was simply attempting to obtain an abundance of collateral in light of (Hecker’s) precarious financial condition.”

Attorney Andrew Moratzka of Minneapolis also argues that a majority of the transfers “were of interests other than” Hecker, and that it’s “therefore impossible for (the bank) to have received an unfair advantage over creditors of (Hecker).”

“In short, this court should not punish (the bank) for attempting to work with (Hecker) on existing obligations six months prior to his bankruptcy petition,” the motion states.

Moratzka and Jon Brakke, attorney for Royal Jewelers and Olson, also argue their clients don’t qualify as “insiders” under the law as Seaver claims.

“An insider must be more than a friend or someone owed money – there must be control,” Moratzka’s motion states.

In a separate answer to the lawsuit, Olson denies that he helped Hecker conceal expensive watches and a pair of cufflinks from the trustee.

Olson “had no knowledge that (Hecker) was proceeding improperly, illegally or in violation of” the trustee’s claims, Brakke states in the answer, adding that the assets were turned over as soon as Royal Jewelers learned of Seaver’s interest in them.

Cornerstone Bank, Cornerstone Holding Co. and Blackstone Financial – a separate entity created to hold Hecker’s bad debt after the bank’s top investors cleared it off the books – filed suit against Hecker in September, claiming a loss of $12.74 million they say Hecker obtained through “materially false financial statements.”

Readers can reach Forum reporter Mike Nowatzki at (701) 241-5528