What Percent of Lake Minnetonka Properties are Earned?

For those of you not familiar with Twin Cities geography, allow me to lay out the Twin Cities metro to you.

In the center you have two major cities; Minneapolis and St. Paul. The Mississippi flowing through both, cutting Minneapolis in half as it flows southward, and then cutting St. Paul in half as it turns and flows northward, inevitably turning south again and making its run for the Gulf of Mexico. Surrounding the two city centers is an oval of inner suburbs, which in turn is surrounded by outer suburbs, with houses getting progressively larger and the yards bigger the further out along the radius you go. But depending where you are (north, south, east or west) of the metropolitan hub, more or less generally determines what kind of neighborhood you live in.

Bar “pockets of resistance” such as Edina, St. Louis Park, and so forth, the inner suburbs are more or less blue collar, old school neighborhoods, pock-marked with crime ridden extensions of the poorer parts of Minneapolis and St. Paul.

The northern suburbs are predominantly blue collar. The running joke in the Twin Cities is if you are in Anoka you should wear your “good” snowmobile jacket if you have a wedding.

The eastern metro is filled with farms and ranches and apple orchards, with epicenters of limousine liberal smugness manifesting themselves in the forms of trinket/antique shopping towns like Stillwater.

The south is kind of a hodgepodge of varied sorts, but you’re generally solid white collar.

But the west…ohhhhh, the west. Let me tell you about the west.

For directly west there is a lake called Lake Minnetonka. And Lake Minnetonka is no ordinary lake, it is a many-multi-chambered, multi-bay, multi-isthmus lake. Tons of shoreline, nestled within coves, within peninsulas, within hidden lakes, all interconnected to allow boats and yachts the best sailing bar going to Lake Superior. If you do not have a map, you can get lost, but you won’t care because it is the most beautiful lake in the state. And it is because of these traits that it was only a matter of time that it would come to house the richest of Minnesota’s rich.

Every bit of lakeshore has a mansion on it that can compete with any other mansion throughout the world. You can go to various bars along the lake and see nothing but Beamers, Mercedes, Ferraris, and Lotuses being valet parked for their owners. You can see boats that are just as big as what they have on the North Shore bay in Chicago. You can go there and see the most poshly dressed and done up people and think you’re in Milan. But you’re not, you’re in fly over country.

Naturally, if you’re a normal hard working Joe, this is a foreign world to you. A world of peppered hair investment banking types ordering $15 martini’s. A world where trophy wives drive their Lexus SUV’s to the local towns at 11AM to meet their trophy comrades because they don’t have to work. A world where 17 year old high school kids have nicer cars than you’ve ever had. It is a world you just can’t relate to. But I have a dirty little suspicion about this world, and that suspicion is it’s like the “Barbie Girl” in the “Barbie World”;

It’s fantastic.

But it’s made of plastic.

What first aroused my suspicion to this ultra-elite world is when working in banking I would get an inordinate amount of real estate developers who claimed residency in the area. In my book I regale the story of a man I called “Zorba the Swede” who I titled such because he was always super tan when he came into the bank, even in January. Minnesotans do not pull off that “Greek guy in a speedo with a lot of chest hair” tan in January (let alone July). But this guy did and he hailed from Wayzata (the capitol of this elite area). Regardless, it was the likes of Zorba and his ilk and their uncanny ability to reside in the Lake Minnetonka area that raised my eyebrow. And the reason my eyebrow was raised was not the tans they were sporting, but their tax returns.

Most of them showed losses.

It seemed odd to me that if you showed losses on your tax returns that you could somehow live in the Lake Minnetonka area. Matter of fact, unless your tax return showed at minimum a $1.5 million salary a year, I don’t see how you could even afford to live in the “slums” of Lake Minnetonka. But somehow they did.

But the excuse I received was universally the same;

“Oh, Zorba made money, he was just trying to low his tax bill by showing losses. But rest assured he was a very successful real estate developer/surgeon/businessman, which is why he needed an emergency $4 million loan this afternoon. You understand of course, it’s just business.”

Funny thing was I never understood.

I understood they weren’t making money. I understood they had overleveraged themselves into property that would never sell. I understood there was a housing crash coming. And I understood that even if they had $30 million in assets, if they had $35 million in debts, they were insolvent. But I never understood how somebody who was LOSING money could afford a $10 million mansion on Lake Minnetonka, and still don’t to this day.

Time would go on and sure enough there was no limit to the number of “Zorba’s” out there. Real estate developers. Non-descript businessmen. Investment brokers. All showing losses. None posting profits. But invariably all living in the fanciest zip codes money could buy.

But as the housing crash started its decline, it was interesting to see how many of these “super-successful” business men failed to provide their most current tax return. Or their most up to date personal financial statement. Or just give us projections or estimates of what their current financial situation was. They would hem and haw, and ultimately balk, but according to my supervisors;

“Well, they’re very successful men. They are so busy making money, they don’t have time to get their tax returns in on time. That’s why they always file extensions.”

Funny, I never understood that either.

In any case, what I suspected ultimately proved to be true. The majority of these “super successful business men” were in short nothing but financial deadbeats. Losers who couldn’t even manage a lemonade stand to profitability. Inferior little middle-aged brats who didn’t have the guts, nor the aptitude, nor the intelligence, nor the skill to genuinely work up the wealth they farcically paraded around. And some were so egregious in their financial masquerading they begat the attention of their friendly neighborhood federal investigators;.

Adam LaFavre once the darling of real estate circles is under investigation for a litany of things.

Michael Parish of Parish Development plead guilty to a $50 million strawbuyer and fraud scheme.

And Bruce Nedegaard, convicted felon, turned real estate mogul, who, tragically died of cancer before he could be sentenced for fraud, tax evasion and a whole host of other no-no’s.

But just three men do not make the 50,000 or so Lake Minnetonka area residents all financial deadbeats. There are people who ethically (or at least, legally) earned (cough cough! - inherited) their multi-million dollar lakeside homes. Genuine wealth and empires have been produced providing billions in profits and thousands of jobs. But as the housing market has collapsed and with it the economy, the wheat is being separated from the chaff and I am now questioning what percent of the Lake Minnetoka residents are genuine captains of industry earning their “elite” rank, and what percent are just a bunch of financial deadbeat posers.

Three events or observations have piqued my suspicion.

First was last week when it was a rare beautiful October day, I decided to take my motorcycle (that’s right ladies, the Captain is a bad boy) and cruise around the 98 miles of shoreline on Lake Minnetonka. What amazed me was just how many homes were for sale. A brand new mansion for sale here. A partially completed dream house there. And an old school estate up for auction there. Two large “luxury condo” developments on the lake were nothing but ghost towns and I remember reading about the developers and these much heralded developments as the local paper fawned over them as local celebrities. In short, it was shocking to see Minnesota’s richest neighborhood having the same, if not, a higher percentage of the homes for sale as your local suffering blue collar neighborhood.

Second was a story told to me by an acquaintance who lives in the area about a young, budding socialite couple who live in the area and live in one of the nicer houses. However, they actually don’t own the $5 million home. It is owned by the mother in law who lets them live there RENT FREE as if they were a 20 year old college couple trying to pay for tuition. Worse still, the “business” the husband runs is perpetually losing money and needs a constant cash infusion from the mother in law. Meanwhile they drive around in nothing but the finest luxury cars and SUV’s while wining and dining at the local restaurants where drinks are $10 a shot. Fine, the house may not be up for sale, but how many live-in-my-mom’s-basement-at-the-age-of-40 “successful” investment bankers are there? I want that set up.

And finally was the now disgraced Tom Petters. Multi-billion dollar business mogul who lived in Wayzata and was recently paid a visit by the local, state and federal law enforcement representatives who were quite insistent he come with them. Posing as only a poser could, he was heralded by scores of magazines and newspapers as a “super successful” businessman (who no doubt had trouble getting his tax returns in on time too), only to turn out to be crook who defrauded billions from his victims. However, it was not his arrest that crystallized by suspicion into an outright thought, but that he had a magazine called “Lake Minnetonka Magazine.”

I saw the magazine once and it reminded me of the time I was invited to one of the “popular kids” parties back in high school. Shocking as this may be, I was nerd back in 1991, and for me to be invited to this party sounded more like a set up than anything else. It turned out to be a genuine invite by one of the nicer popular kids, but when I got there, instead of this wild crazy party with the cheerleaders running around topless, all it was, was the cheerleaders watching a video of themselves cheering at a recent football game and the jocks watching the same. All they were doing was watching themselves on the VCR. It was the most boring party I had ever been to and I remember leaving only after 10 minutes to go play some Dungeons and Dragons with my friends.

Regardless, the point was this magazine was the exact same thing. A “hurrah for us” fest. A magazine where a bunch of people read about themselves and the parties they went to. It was nothing but them masturbating over themselves. Articles about “Joe Schmoe and Jane Jones-Schmoe (note the hyphenated name) hanging out with real estate tycoon Bob Bobson and his Minnesota Viking’s cheerleader Bambi Bames as they discuss which boat they’re going to buy.” Or “banking heiress Jessica Johnson and some friends party it up at the local club – rumor is she is dating star investment banker and most eligible bachelor, Lance Winthrop!”

It was all of the observations mentioned above, combined with the fakeness of this magazine (not to mention the owner himself was now proven to be a deadbeat) that made me think it wasn’t just a few bad apples in Minnesota’s most elite neighborhood, but that something closer to 25-33% of the population were indeed posers.

Now, admittedly you cannot get rid of nepotism. Undeserving people will inherit the fortune their parents worked up. But what angers me the most about this is the attitude these elites have. I’m not talking about me being jealous or envious, I’m talking about the hypocrisy these people have. It’s one thing to build up an empire from scratch, buy a mansion and drive your Lotus around and live the jet set lifestyle. You earned it. You deserved it. You produced wealth and earned so much money, not to mention employed people along the way that you deserve to sit on the docks of Lake Minnetonka while you sip your $10 martini and say, “I’m one of the best. I am indeed one of the greatest.” I applaud you.

But if you are what I estimate to be that 25-33% of losers who just inherited it, or borrowed it, or worse, just stole it, not only should you have shame, you should be taken to a back alley and have every undeserved penny beaten out of you. Not because you have it (however you may have gotten it), but because of your insistence that like all the other subprime deadbeats, thieving bankers and other entitlement princes and princesses out there, that you’re ENTITLED to it. And what’s really goading is when you flaunt it.

The dead beat, live at home, son in law who isn’t man enough to make a profit to support himself and has to live off of his mother in law driving a luxury car? Back alley with a baseball bat.

Partying it up living off of embezzled funds, posing as some big time hot shot “businessman” with $40 million in assets and $50 million in debts soon to be bailed out by the taxpayer as you throw the economy into recession? Back alley with a baseball bat.

And Tom Petters with his house he owned (well, “he” never really owned it);

Back alley with a baseball bat, broken glass, rubbing alcohol and a blowtorch.

Now I’ve said it before and I will say it again, because I think those of us who work for a living, who manage to spend within our means, only to bail out financial deadbeats like these, really need to hear it (since it’s only true)

We are better people than you.

We don’t pose, we’re legitimate.

We don’t steal, parasite, inherit then flaunt, or borrow with no intention of paying back, we earn.

We are the ones who make this country and any other country great. And while you may have your Beamers and your Lake Minnetonka homes and your fancy parties, you’re not fooling any one. Your net worth is negative. The waitress with a positive checking account balance has a higher net worth than you. You are the losers and we are the winners.