Hecker’s Bad Business Deal Set for $4.1M Settlement
Denny Hecker's bankruptcy case trustee Randall Seaver on Monday requested permission from the court to accept a $4.1 million settlement-which would resolve a complicated business deal between Hecker, Gelco Corporation, U.S. Bank, and Chrysler Financial Services, LLC.
Eden Prairie-based fleet services company Gelco has agreed to pay the money-of which $2.1 million would go to Seaver on behalf of Hecker's creditors, $1.5 million would go to U.S. Bank, and $500,000 would go to Chrysler.
U.S. District Court Judge Robert Kressel has yet to approve the deal. But if he does, it will be the largest sum of money recovered in the Hecker case to date.
According to court documents filed Monday by Seaver, the settlement relates to a deal that dates back to 2005. In September of that year, Gelco entered into an agreement to buy certain fleet leasing assets from several of the companies that Hecker owned. Gelco agreed to pay $20 million-including an initial $7.5 million and subsequent payments to be determined based on the size and composition of Hecker's leasing fleets. Gelco also took on some of the debt that Hecker owed to U.S. Bank and Chrysler.
Gelco's payments were supposed to be made directly to Hecker's companies. Language in the agreement, however, gave Hecker “unfettered discretion to direct the flow of payments to himself or to any entities in which he possessed a 90 percent ownership interest,” according to court documents.
As of December 2008, the payments were being deposited directly into one of Hecker's personal bank accounts. In November of that same year, Hecker and his companies defaulted on the agreement, which prompted Gelco to stop making payments. In March, Seaver indicated that Gelco breached the agreement and owed the money to Hecker's bankruptcy estate.
“The settlement agreement . . . resolves claims, avoids protracted and expensive litigation, and is therefore in the best interest of the creditors and the estate,” Seaver said in court filings.
Denny Hecker Family Holdings once claimed more than $7 billion in annual revenue and owned 26 auto dealerships.
But the Hecker empire began to crumble during the economic downturn, and his dynasty of auto dealerships, a rental car company, and other ventures collapsed under the weight of more than $700 million in debt.
In July 2009, Hecker filed for Chapter 7 bankruptcy, and court documents indicate that he owed money to hundreds of creditors.
After that, allegations of misconduct began to surface-and in July 2010, Hecker pleaded guilty to one count of bankruptcy fraud and one related to conspiracy.
In February of this year, Hecker was ordered to spend 10 years behind bars for two fraud charges connected to his attempts to defraud Chrysler and other lenders of millions of dollars. Hecker was also ordered to pay $31.4 million in restitution.