Automotive News - April 12, 2010 - 22

22 • APRIL 12, 2010

DENNY HECKER’S

GREAT FALL
MaryJo Webster
autonews@crain.com

Former high roller plunges from caviar to crushing debt — and the last stop could be a prison cell
litany of allegations that he hid assets with help from two of his closest allies: his girlfriend, Christi Rowan, and his former father-in-law, Bill Prohofsky. Prohofsky had become one of Hecker’s go-to guys in the waning months of Hecker’s empire. Before his bankruptcy filing, Hecker gave Prohofsky $80,000 and asked him to use the money to pay bills and provide cash and gift cards to Rowan, the trustee said in a lawsuit in late February. Just days later, the saga took a dark turn. Prohofsky drove his car to an industrial area of the wealthy suburb where Hecker lives and apparently shot himself in the head. He died in a hospital the next day. Federal authorities say they found evidence in the car proving he had aided Hecker in hiding assets. More recently, the bankruptcy trustee revealed that Prohofsky helped Hecker raid his children’s and grandchildren’s trust funds. After taking over as trustee for the funds, Prohofsky in December wired $75,000 from the trusts to a bank account for Hecker’s lawyer, Bill Skolnick. The money was used as part of a deal with the trustee to keep Hecker’s house, but Hecker and Skolnick had led the court to believe the money came from a longtime friend.

ST. PAUL, Minn. — Auto dealer Denny Hecker lived large. He gambled in Las Vegas, married and divorced four women and flew a private jet to vacation homes in Mexico, Aspen and Arizona. In true Minnesota fashion, he had a lake home, with slips for 10 boats. As he flaunted his wealth, Hecker built a bizarre collection of more than 200 businesses, including 15 auto dealerships, a massive leasing company, restaurants and a hunting lodge. He kept it all afloat with debt, mainly supplied by Chrysler Financial, along with a prodigious talent for wheeling and dealing — and, various prosecutors and judges say, deceit and fraud. As his empire crumbled last year, he grew ever more reckless in trying to hold his life together. He looted his children’s trust funds, investigators say. He stormed out of a courtroom yelling obscenities. Disgraced? Of course. But that just begins to describe his personal downfall. Two weeks ago, for want of a mere $5,000 for an alimony payment and for failing to disclose recent transactions, Hecker spent three days in the county jail. That might have been just a warmup. He is facing 25 federal counts that may put him in federal prison for the rest of his life.

Debts of $767 million
The beginning of the end came last June when Hecker, now 57, filed personal bankruptcy, owing a staggering $767 million and with assets of just $18 million. Since then Hecker’s life has become an ugly soap opera, complete with a bitter divorce and the apparent suicide of a relative accused of helping him hide assets. Last week he hit another low point when a U.S. Bankruptcy Court judge held him liable for an estimated $400 million of his debt — an amount he can’t possibly repay. Hecker told the court he had no money to pay his lawyer to fight allegations that he concealed assets and lied to the judge. Creditors will be free to pursue whatever assets and income he may have by garnishing his wages and through lawsuits. Only in the strange world of Denny Hecker could such a mountain of debt be the second-worst bit of news on his plate. In criminal court, he faces federal charges of wire fraud, bankruptcy fraud, conspiracy and money laundering. Federal investigators allege Hecker committed fraud to fuel his lavish lifestyle and filed bankruptcy to avoid paying his debts. Hecker says he committed no crime. He chalks up the wire fraud charges to a “business dispute” with Chrysler Financial.

er lost $200,000 but wasted little time getting back in the game. He convinced Walter Bush, founder of the Minnesota North Stars hockey team and an influential local businessman, to help him buy the Minneapolis Auto Auction, a wholesale market for used vehicles that thrived under their ownership. “I made most of my money buying and fixing broken businesses,” Hecker said in an October interview. “The car dealerships of late have just been kind of a vehicle that got me in motion to do all of the other deals.” He started investing in restaurants, a nightclub, a Canadian fishing lodge, a mortgage company and dozens of real estate properties. By the time he filed for bankruptcy last year, he reported an ownership stake in an interconnected maze of 236 closely held, private companies. Former employees say Hecker brooked few questions from underlings. “Many times he has said, ‘It’s my goddamn company, and I’ll do as I see fit,’” Leslie Gjesdahl, Hecker’s former human resources director, said in a sworn deposition for a 2004 sexual harassment lawsuit involving other Hecker employees. Allegations have emerged over the years that Hecker used his companies as piggy banks, siphoning money from some businesses to feed others — or enrich himself. In 2003 and 2004 two men who managed dealerships for Hecker alleged in lawsuits that Hecker used several means to doctor the books. For example, they alleged, he required the dealerships to pay to his management company $100 or more for every car sold, without documenting it on the dealership books.

Denny Hecker faces $400 million of debt and a list of criminal charges.

Jail time
Meanwhile, in his acrimonious divorce from Tamitha Hecker, he got in trouble last fall for liquidating a 401(k) account without his wife’s consent, an act he described as a “desperate attempt to get cash.” Judge Quam threatened him with jail time if he didn’t repay the $125,000, but he had spent all of it quickly, with a large portion going to his girlfriend. A mystery donor stepped up at the last minute with the money. In late March, Quam again threatened Hecker with jail time because he stopped paying alimony to his second wife, Sandra Hecker. She had been awarded lifetime support after their 10-year marriage ended in 1983. Hecker submitted financial information and an affidavit trying to prove that he lacked the money. But an already-skeptical Quam didn’t buy his story and ordered him to the county jail for 90 days. Quam pointed out inconsistencies, including the fact that during the previous three months Hecker paid his girlfriend $75,000 but didn’t pay his ex-wife the $1,800 monthly alimony. After three days in jail, Hecker came up with the $5,000 he owed — again from an unnamed source — and his lawyers convinced Quam that they needed Hecker out of jail to help them compile the financial documents the judge required. Quam acknowledged that the jail, with the requisite strip search and around-the-clock noise, was a far cry from the life Hecker has lived in recent years. It’s a place, Quam said, “where dignity takes a holiday.” Considering the problems that Denny Hecker still faces, that holiday could become permanent. c MaryJo Webster is a reporter for the St. Paul Pioneer Press

CHRIS POLYDOROFF/PIONEER PRESS

“

You have a trifecta

of legal problems that is

probably unprecedented in Minnesota history.

HENNEPIN COUNTY JUDGE JAY QUAM

”

speaking to dealer Denny Hecker

Hecker, who denied the allegations, settled both cases out of court. An employee at a dealership says it was difficult to see how Hecker funded his lavish lifestyle. “All we thought was ‘My gosh, isn’t the well ever going to go dry?’” said Sue Marcotte, a controller at one of the dealerships until it closed a year ago. “From what I could see at the dealership I was managing, we weren’t doing all that well.”

and business-related real estate deals, said Chrysler Financial in bankruptcy court filings. Hecker personally guaranteed all of it, including, in 2006, a $660 million revolving line of credit that partially financed his purchase of Advantage Rent A Car. But two months ago, a federal indictment alleged that Hecker and one of his top executives, Steven J. Leach, committed fraud to obtain some loans from Chrysler Financial. Hecker’s company, Rosedale Leasing, used the money to buy vehicles and then lease them to rental car companies. Both men have pleaded not guilty. The indictment accuses them of altering documents from Hyundai Motor America and American Suzuki Motor Corp. before presenting them to Chrysler Financial. The alterations to the Hyundai letter made it appear that most of the vehicles being purchased would have a guaranteed repurchase price, when in reality only a few did. In the other, the two men allegedly removed a page, hiding advantageous incentives from Suzuki.

no choice but to close his remaining businesses and file for personal bankruptcy. Also, his fourth wife, Tamitha Hecker, filed for divorce in spring 2009, launching a bitter fight for what’s left of his money.

Credibility problems
Just after his bankruptcy filing last June, Hecker thought he could maintain a semblance of his former lifestyle with a $1 million consulting deal that he negotiated with the sale of a dealership. But the bankruptcy trustee saw it as a diversion of the purchase price and challenged it. Hecker hasn’t gotten a penny from the deal. For Hecker, the well of money was finally running dry. “You have a trifecta of legal problems that is probably unprecedented in Minnesota history,” Hennepin County Judge Jay Quam told Hecker during a recent divorce hearing. One of his worst days came in February, when U.S. Bankruptcy Court Judge Robert Kressel issued what he described as a “draconian sanction” against Hecker for not complying with standard pretrial discovery in a lawsuit with Chrysler Financial. The judge was incensed after learning that Hecker lied when claiming that he lost access to his business records because of federal raids last summer. Hecker’s temper flared as the judge concluded his ruling and awarded an $83 million default judgment in favor of the lender. Hecker quickly stood up, uttered an expletive-laced “unbelievable” and stormed out of the courtroom. His credibility also has been tarnished by the bankruptcy trustee’s

Cut off by Cerberus
Hecker’s relationship with Chrysler Financial ended not long after Cerberus Capital Management, the New York private equity firm, acquired Chrysler and Chrysler Financial in 2007. In mid-2008, when Cerberus cut off his financing and called in more than $500 million in loans, Hecker scrambled to find other lenders to cover his debts — and failed. The following spring a judge granted Chrysler Financial a $477 million judgment against Hecker in a breach of contract lawsuit, leaving him with

Cash from Chrysler Financial
As Hecker’s empire grew, the deals got bigger. Starting with his first dealership in 1979, Hecker built an unusual relationship with Chrysler Financial, which funded his inventory purchases from Chrysler and other automakers. Chrysler Financial eventually started lending him money for personal

Working-class roots
The kid from a working-class Minneapolis neighborhood rose fast, largely because of his charm and a huge appetite for risk. He bought his first auto dealership in 1979 at age 27, but it collapsed in the recession three years later. Heck-

Automotive News - April 12, 2010

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