Friday, October 11, 2019

Oshkosh arena developer asks to hire financing broker to turn promised TIF payments from city into cash

The bankruptcy judge overseeing the case must still give his approval for proposed hiring.
By Miles Maguire
The owner of the Menominee Nation Arena is seeking permission to hire a high-risk financial specialist to turn a string of promised payments from the city into a lump sum of cash that can be used to start satisfying creditors and to fund operations.

In an Oct. 9 filing, Fox Valley Pro Basketball Inc. identified Chicago-based Hillenbrand Partners as the firm it wants to use to “securitize” roughly $5 million in tax increment financing that the city has promised to pay in annual installments each November over the next 17 years.

The promised money carries a floating interest rate, initially set at 5 percent. Hillenbrand’s job would be to find an investor that would pay cash up front to the arena owners in exchange for the rights to the future ongoing payments.

“The financing could be through a loan, assignment of rights or a sale,” lawyers for Fox Valley said in a court filing.

Hillenbrand is headed by Eric Hillenbrand, who is described in court papers as having “a personal friendship” with one of the top officials of Fox Valley, Walter Koskinen, and also a “relationship with the Menominee Nation in matters that are unrelated” to the arena’s bankruptcy case.

The Wall Street Journal has described Hillenbrand as a pioneer in developing the market for high-risk loans tied to commercial real estate.

“Mr. Hillenbrand is the founder and chief executive of Hillenbrand Partners, a Chicago firm with $200 million in capital that specializes in buying the riskiest portions of bonds backed by mortgages on offices, retail stores and other commercial properties,” the Journal said in 2008.

The market for such loans dried up following the 2008 financial crisis but has been growing again over the last five years or so.

Hillenbrand’s stature is such that the Journal wrote an article in 2013 taking note of his return to dealing in high-risk commercial real estate loans. “Mr. Hillenbrand’s comeback is the latest sign of recovery for the real-estate and structured-finance markets,” the paper said.

Before starting his own firm, Hillenbrand worked for Morgan Stanley, J.P. Morgan, Bank One and First Chicago, according to his social media resume.

The proposal to hire Hillenbrand would need the approval of the judge overseeing the arena bankruptcy case. According to court papers, the firm would receive a retainer of $5,000 and could be paid up to $75,000. Hillenbrand himself could charge $300 an hour for his work on the case if the engagement agreement is approved.

Hillenbrand’s firm had previously worked on efforts to obtain financing for the arena, according to Fox Valley’s court filing. Those efforts were stymied by environmental issues at the arena site, which have since been resolved.

Hillenbrand did not respond to a request for comment.

Friday, October 4, 2019

Lawyers for former UWO officials say criminal case is weak, ask for dismissal or 'bill of particulars'

From left, sttorneys Raymond Dall'Osto and Steven Biskupic are representing former Chancellor Richard Wells and former Vice Chancellor Thomas Sonnleitner in a criminal case in Winnebago County Circuit Court.
By Miles Maguire
The criminal case against two former UW Oshkosh officials is so weak, their attorneys say, that the state needs to put up or shut up.

Lawyers for former UWO Chancellor Richard Wells and former Vice Chancellor Thomas Sonnleitner argue that the case should be dismissed or prosecutors should be required to “file a bill of particulars specifically stating what facts, specific conduct, actions and/or statements and other evidence exists” to support the criminal charges.

Wells and Sonnleitner have been accused of five counts of misconduct in public office and face up to $50,000 in fines and almost 18 years in prison. They have been charged with exceeding their legal authority in facilitating financial transactions between the university and its fundraising arm, the UW Oshkosh Foundation.

The foundation prevailed in its legal battle with the University of Wisconsin System after two judges ruled that the UW System had misinterpreted the state constitution and other laws.

The defendants’ lawyers in this case argue that those legal rulings cut the legs out from under the criminal charges.

“Because the factual basis for the felony criminal charges against Wells and Sonnleitner are limited to and based upon an alleged constitutional violation, and no such violation exists as a matter of law, all of the charges against both them should be dismissed as a matter of law,” the lawyers said.

Wells is represented by Raymond Dall’Osto, a prominent Milwaukee-based defense lawyer. Sonnleitner’s lawyer is Steven Biskupic, a former U.S. attorney for the Eastern District of Wisconsin. They filed the latest brief jointly on Oct. 1.

Even if the defendants have violated state law, prosecutors also have to show that Wells and Sonnleitner knew that they were exceeding their legal authority as top university officials when they were working on the foundation’s real estate deals.

Specific facts “showing that the defendants' actually knew that their conduct was unlawful at the time they committed the alleged acts is required,” their lawyers said. “The criminal complaints against both defendants are devoid of such essential facts establishing the requisite knowledge on the part of each defendant.”

The state has until next month to reply.

The case is before Winnebago County Circuit Court Judge John A. Jorgensen, who said he expects to issue an oral ruling Jan. 15.

Thursday, October 3, 2019

Oshkosh arena owner gets some breathing space



By Miles Maguire
The developer of the Menominee Nation Arena has lived to fight another day in its bankruptcy case as it has secured the OK to move ahead with $500,000 in temporary financing.

But two major hurdles remain: finding a way to monetize a promised string of city incentive payments and booking acts that will turn a profit for the facility.

“We are very pleased with the efforts of all parties involved to work toward resolving Fox Valley Pro Basketball’s financial issues,” said Jerome R. Kerkman, a lawyer for the developer and owner of the arena, in a press announcement issued Wednesday evening.

Earlier in the day Kerkman had outlined in a bankruptcy court hearing how his client hopes to move forward with a goal of clearing the decks by the middle of January.

Aside from legal bills, which Kerkman said would be substantial, the arena should be close to breaking even in January and February.

Up until now, he said, the cash-strapped arena did not have enough money to book artists who could draw big crowds and generate profits. “We just didn’t have the cash that artists require to make a deposit,” Kerkman said. “That is going to change,” he said.

Kerkman told the court how Fox Valley had worked to satisfy the concerns of creditors, especially the largest one, Bayland Buildings Inc., which is owed more than $13 million. A key step will be providing payments to Bayland based on certain leases and sponsorship agreements for advertising at the arena over the next few months.

“Both sides have agreed to stand down and try to get to a plan” of financial reorganization, Kerkman said. Wednesday’s agreement is “basically to give us breathing space with an opportunity to get to a plan.”

As the debtor in a Chaper 11 case, Fox Valley has the exclusive right to propose a reorganization plan for 120 days, which would run to mid-December. Kerkman said the parties have agreed to extend this period to the middle of January because of the end-of-year holidays.

One factor that seems to be motivating the creditors is the recognition that the project could go into liquidation, which would be handled under Chapter 7 of the bankruptcy code. Some creditors have had to rethink their positions because “parties are concerned if this case tanks into a 7,” Kerkman said. “If this goes into a 7, the sponsorships may dry up, and there may not be any funds.”

A big question mark is how much money that developer can raise by selling off the future stream of city payments promised under a tax increment financing (TIF) agreement. The goal is to raise $4 million to $5 million.


Those funds would serve as “seed money for payments on the effective date of the plan,” Kerkman said. Expanded bookings would then provide revenue “to fund any kind of payment stream under the plan.”

The city had resisted making the initial installment of TIF funds but decided in late September to release most of the money, close to $400,000, so that the arena can continue to operate.


Fox Valley says it is close to hiring a broker who specializes in securitizing TIF payments, which involves selling off the future payments at a discount in exchange for an immediate lump sum of cash.

The ability of the broker to find a willing investor to pay enough cash is critical to the reorganization plan, which Kerkman said could be in place by early next year.

“The only thing that will sort of change that is really whether we need more money with the TIF,” he said.


City Manager Mark Rohloff said he had no comment on the court agreement but added there has been no discussion about increasing the amount of money in the tax incentive agreement.

Tuesday, October 1, 2019

Around the Winnebago courthouse: OCI nurse has sex with inmate; also probation, meth, sex registry cases

By Miles Maguire
A city woman pleaded no contest Thursday to charges that she engaged in a sexual relationship with an inmate while she worked as a registered nurse at the Oshkosh Correctional Institution.

The woman, 51-year-old Cherie L. Nelson, “had previously been walked out” from a nursing job at Dodge Correctional Institution and was working as a contract nurse at Milwaukee County Jail when investigators met with her in April, according to a criminal complaint.

OCI staffers became concerned when they discovered emails between an inmate, Shaun Lynch, and Nelson, and started to monitor calls between the two. “The conversations were sexual in nature and seemed to indicate there had been oral sex performed by the defendant on inmate Lynch and oral sex performed on the defendant by Lynch,” according to the criminal complaint.

The contact began in the context of a tuberculosis exam, when the two started talking about the inmate’s tattoos. In addition to sex, Nelson apparently provided the inmate with cards, money and intimate photographs, according to the criminal complaint.

Judge Teresa S. Basiliere sentenced Nelson to 24 months’ probation. An initial charge of second degree sexual assault by correctional staff was reduced to fourth degree sexual assault, court records show. The defendant was represented by Brittany Running, and Amanda Gibbs Nash was listed as the prosecutor.

***

A 41-year-old Oshkosh man with a long history of criminal convictions had his probation revoked Sept. 19 after he was caught trafficking marijuana shortly after getting out of jail.

Ross A. Wendorf had entered no contest pleas in March to two counts of dealing marijuana, for which he received a three-year suspended sentence and a 90-day jail term with work release, according to online court records. In June he was connected to a suspicious parcel that the Dodge County Sheriff’s office intercepted, opened and then delivered to an address in Rubicon.

Text messages on the cellphone of the woman to whom the package was addressed were traced to Wendorf, who has nine prior criminal convictions, according to a court document.

The package contained five and a half pounds of marijuana in vacuum-sealed bags, according to court records. Wendorf told a probation agent that his role was limited to explaining how to ship the marijuana and that he expected to get only half an ounce to share with his wife.

At a revocation hearing, Judge Barbara Key called the situation “a total failure of supervision” with “the offense being committed literally upon leaving the jail door.”

She ordered Wendorf to state prison for 18 months and ordered extended supervision for another 18 months. Wendorf was represented by Raymond Edelstein, and Margaret Struve appeared for the state.
***

A Jefferson Street man who caught the attention of police because he was drinking malt liquor and behaving oddly in front of neighborhood children pleaded no contest Thursday to methamphetamine possession and was sentenced to 24 months’ probation.

Police said they found David J. Van “fidgeting with something in his pockets” and when they asked asked him what it was, he pulled out “baggies and a cut straw,” according to court papers.

Van, 37, was represented by Ben Szilagyi before Judge Barbara Key. The prosecutor was Eric Sparr.

According to court records, Van is currently in the Waupaca County Jail, where he is awaiting trial on charges that include meth possession, maintaining a drug trafficking place and bail jumping.

***

A 58-year-old Oshkosh man was sentenced Sept. 23 to 90 days in jail for a sex offender registry violation that dated back almost two years.

Dwayne L. Porter pleaded guilty to charges that he had failed to confirm his home address with state officials starting in 2017. According to court records, a complaint was filed in June 2018, but Porter did not appear in court for almost a year after that.

During that time, Porter is thought to have lived on West 9th Avenue, Broad Street and Main Street, court records show.

Porter was put in the Wisconsin Sex Offender Registry Program based on his 2003 conviction in La Crosse County on a charge of third degree sexual assault.

The jail term was handed down by Judge Karen Seifert. Porter was represented by Hannah Kottke, and the prosecutor was Tracy Ann Paider.