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Archive for Wednesday, November 24, 2010

Lawrence City Commissioner Lance Johnson being sued over $1.95M bank loan

November 24, 2010

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Lawrence City Commissioner Lance Johnson is being sued over a $1.95 million loan that has gone bad and whether a bank should be allowed to seize some of Johnson’s assets.

Emprise Bank has filed a lawsuit in Douglas County District Court alleging that Johnson improperly transferred ownership of eight pieces of Lawrence property into a trust controlled by his wife in order to “hinder, delay or defraud” the bank in its efforts to collect on the loan.

“The lawsuit alleges that some of the personal assets were transferred to others in such a manner as to try to keep them from being available,” said Robert Coykendall, an attorney representing Emprise.

Both Johnson and his attorney, Chris Sook of the Sloan Law Firm, declined to comment on the matter.

The lawsuit alleges that in February 2008 one of Johnson’s companies, RKJ Properties, received a $1.95 million loan from Lawrence-based The University National Bank. The loan later was transferred to Emprise Bank.

Emprise alleges that as part of the loan Johnson signed an “unlimited personal guaranty” that pledged many of Johnson’s personal assets as collateral for at least a portion of the loan.

The lawsuit states that RKJ Properties has defaulted on the $1.95 million loan. But when Emprise sought to collect on Johnson’s personal guaranty, it learned that he had transferred multiple pieces of property into a trust controlled by his wife, Jennifer Johnson, who also is named in the lawsuit.

Emprise is seeking to have that transfer ruled null and void. It also alleges Johnson transferred his ownership interests in three companies — Smoky Hill Properties, St. George Investors and the Lawks Group — to the trust controlled by his wife. Emprise is asking for those transfers also to be ruled null and void.

The lawsuit is not the first sign of financial trouble for Johnson, who is the president of the Lawrence-based civil engineering firm Peridian Group. In June, the Journal-World reported that Johnson was more than $150,000 behind in property taxes both in Douglas and Johnson counties.

The bulk of the unpaid taxes was related to RKJ Properties, which owns commercial real estate in Gardner. Johnson’s ownership interest in RKJ Properties brought up questions of whether he properly disclosed his financial dealings to voters prior to being elected to the city commission in April 2009.

Johnson did not list his ownership of RKJ Properties on his statement of substantial interests, a public form listing business interests of candidates for office. Johnson previously has said the omission was unintentional. RKJ was behind on its Johnson County taxes during the time Johnson was campaigning for the commission.

Johnson’s term on the commission expires in April. He has not yet announced whether he plans to seek re-election.

Comments

Richard Heckler 3 years, 4 months ago

College Hill Taxes Unpaid

One of the principals who is developing the corner at 9th & New Hampshire in Lawrence was quoted in the Journal World a few weeks back as asking for 'help' from the city with regards to financing the project. That same person was noted in a Capitol Journal article a month ago as being behind on and in default on a loan and property taxes associated with a development project in Topeka. Because those financial irregularities were not picked up and reported in our local paper, for some reason, I am sending along a link to the Topeka paper's article for your own perusal.

Quotes from the article:

Developers for a project to revitalize central Topeka's College Hill business district are in breach of their contract with the city because they failed to pay Shawnee County $130,196.77 plus interest for property taxes due May 10.

"First, the developer is currently in default under its loan obligations in excess of $16 million to the private bank group led by CoreFirst," he wrote. "In the event default of the loans is not remedied, the private bank group may move to foreclose on the property or appoint a receiver."

Topeka's city council voted in 2006 to provide about $5 million in tax-increment financing for a $30 million project in which Washburn-Lane Parkway Renovation built 183 apartments and 24,000 square feet of retail space on property it had acquired in the College Hill district, just northeast of Washburn University.

Developers Bill Newsome, Doug Compton and Steve Roth, of Lawrence, and Henry McClure, of Topeka, agreed to pay off TIF bonds issued by the city over a period of up to 20 years using the increase in property tax and sales tax revenues the city collected after the project was constructed versus the tax those same properties generated before the development was built.


Link to the article: http://cjonline.com/news/2010-10-28/college_hill_taxes_go_unpaid

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TopJayhawk 3 years, 4 months ago

This just in....... The City of Lawrence has just been foreclosed. Film at eleven.

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swan_diver 3 years, 4 months ago

Lance Johnson is another in a long line of business shills who seek a 'seat' on the 'Lawrence City Commission' in order to do what they can to underwrite their own personal business interests, and those of their comrades, by feeding, directly or indirectly, at the public trough.

Do folks realize that this con artist 'won' his seat on the commission with only 38% of the ballots cast at election in 2009, because of the fraudulent Manager-Commission governing system in Lawrence, and it's 'beauty-contest' electoral sham, which gives voters three choices to toss around, instead of an up or down on a given candidate?

The system is working just the way the corrupt 'political class' inside Lawrence City Hall and several of KU's political science-related departments want it to. Johnson is just the latest carpet-bagging loser to make that point.

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Richard Heckler 3 years, 4 months ago

Let's demand a new system and vote in Fair Vote America : http://www.fairvote.org/irv/

Demand a change on the next ballot.

Incumbents say NO to the voters while officials live in glass houses and digest corrupt money.

We need public financing of campaigns. Citizens cannot afford special interest money campaigns for it is the citizens that get left out. Let citizens vote on this issue. http://www.publicampaign.org/

Who would be against Public Funding? The special interest money providers plus their bought and paid for politicians!

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Richard Heckler 3 years, 4 months ago

America Is Over Stored

This decade's building frenzy produced a bumper crop of new retail space. But the occupants haven't materialized.

The carnage in retail hasn't been this bad since an anarchist bombed Chicago's Haymarket Square in 1886. In January, Liz Claiborne said it would shutter 54 Sigrid Olsen stores by mid-2008; Ann Taylor announced that 117 of its 921 stores would be closed over the next three years, and Talbots axed the Talbots Men's and Talbots Kids concepts and 22 Talbots stores. (Those muffled screams you hear are Connecticut preppies trying to suppress their rage.) Even Starbucks has scaled back its yearlong saturation-bombing campaign.

Blame that exhausted marathon runner, the American consumer. Fueled by cheap credit instead of PowerGel, she looked great at Mile 16, but bonked at Mile 23 and is now crawling to the finish line. Sales fell in December, putting the cap on a miserable Christmas season. Last week the government reported that retail sales rose 3.9 percent between January 2007 and January 2008.

But back out inflation and sales of gasoline, and retail sales fell in real terms in the past year. Clearly, demand is down.

And supply is up. This decade's building frenzy produced a bumper crop of new retail space—from McStrip malls built near new McMansions, to hip new boutiques in the ground floors of hip new Miami condo buildings. But as is the case with those McMansions and condos, the occupants for new retail space haven't materialized.

In the fourth quarter of 2007, the national retail-vacancy rate rose for the 11th straight quarter to 7.5 percent—the highest level since 1996, according to research firm Reis, Inc.

With new projects coming online—34 million square feet of retail space will be completed in 2008—the rate is expected to spike further to 8 percent. In the parlance of the trade, many chains are simply over-stored.

Con't http://www.newsweek.com/id/112762

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Richard Heckler 3 years, 4 months ago

"Boom town Economies" are risky business. Banks should not have been a player but instead more of a watch dog on tighter restraints. The financial community knows all "boom town economies" bust sooner of later.

No doubt Lance Johnson wants to play with the big boys and girls however got in over his head and ego.

How many more are out there in Larryville?

These housing and retail markets are still in big trouble due in large part to the Bush/Cheney fiasco and due in part to reckless behavior by some in the real estate/development community. Douglas County movers and shakers want to be Johnson County movers and shakers without the common sense and market to match = reckless decisions and reckless local government spending.

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Clevercowgirl 3 years, 4 months ago

Has anyone mentioned that estate planning may be involved in the trust? Not a vehicle to defraud? Okay, I'll duck now.

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sunny 3 years, 4 months ago

Pretty sad if you ask me! Why is it Democrats in Washington don't need to pay their taxes and that is ok with you all.

Johnson hasn't been convicted of anything.....

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toe_cutter 3 years, 4 months ago

Have you ever seen the episode of The Sopranos where they have a crooked appraiser giving huge values for properties to get big loans which they walk away from and pocket the money?

Makes you wonder about Johnson and his partner Jeff Hatfield. I used to rent a duplex owned by those two.

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nowthetruth 3 years, 4 months ago

Congratulations Jennifer and Lance! You have done a fantastic job of building a horrible reputation. All of your hard work is null now that you are known for your fantastic way of handing your financial matters. Pack up, move, start over! Lawrencians will never forget this stuff......

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Richard Heckler 3 years, 4 months ago

"HowEmprise alleges that as part of the loan Johnson signed an “unlimited personal guaranty” that pledged many of Johnson’s personal assets as collateral for at least a portion of the loan.

The lawsuit states that RKJ Properties has defaulted on the $1.95 million loan. But when Emprise sought to collect on Johnson’s personal guaranty, it learned that he had transferred multiple pieces of property into a trust controlled by his wife, Jennifer Johnson, who also is named in the lawsuit.

Emprise is seeking to have that transfer ruled null and void. It also alleges Johnson transferred his ownership interests in three companies — Smoky Hill Properties, St. George Investors and the Lawks Group — to the trust controlled by his wife. Emprise is asking for those transfers also to be ruled null and void."

How were all of those transactions accomplished without notifying Emprise Bank? How were all of those transactions accomplished without approval from Emprise Bank?

Is this type of financial activity business as usual in Lawrence,Kansas?

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Richard Heckler 3 years, 4 months ago

Lance Johnson should be held accountable absolutely!!! His collateral is likely not worth $1.95 million due to super inflated property values at the time the loans took place. Lance should resign. The person who was next in line last election should be invited to fill that spot providing that person is not a developer type with too much debt and many conflicts of interest.

So should the financial institutions be held accountable for lending out too much money to the would be wealthy... during periods of "boom town economics".

How did Compton finance his new project? Who is going to live there? Who are these mystery tenants? Where are they? Then again these are questions City Commissioners should also be asking instead of assuming real estate is as solid as a rock...this is what took the nations economy down the tubes aka turning a blind eye.

There are an estimated 10,000 homes on the market in the KCMO metro which suggests a buyers market. Deals can be had in KCMO which could produce serious competition for the Lawrence markets.

Lending should have been subject to tighter restrictions during "boom town economics" cuz lending institutions should know "boom town economics" is not sustainable and produces super inflationary property values.

Taxpayers should press for dumping the Free Lunch tax dollar give aways!! Here’s what happens: http://www.democracynow.org/2008/1/18/free_lunch_how_the_wealthiest_americans

http://www.uua.org/events/generalassembly/2008/commonthreads/115777.shtml

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Sigmund 3 years, 4 months ago

So when Sue Hack "technically" violated the financial disclosure law but was never "technically" punished, the City Commissioners shed more tears than Glenn Beck watching a Frank Capra movie. There were promises of transparency and reform blah blah blah. Apparently accurately filling out and financial disclosure forms isn't more transparent nor reformed. As far as I can tell nobody gives a $hit when City leaders willfully break the rules. http://www2.ljworld.com/news/2007/nov...

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budwhysir 3 years, 4 months ago

What??? he has yet to announce his intent to run again in April??? Unthinkable... I mean who would ever think there was any possibility he would be allowed to run let alone be elected again....hmmmm

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Catalano 3 years, 4 months ago

Interesting that this did not even make the 6:00 news this evening. Hmmmm.

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GovJunkie 3 years, 4 months ago

...and while all of you are taking the councilman to task for being underwater on his commercial property and not wanting to pay for something that has diminished in value well below what it will ever bring on the open market, please provide the same level of contempt for all the "homeowners" who had no skin in the game and chose to walk away from homes, even when they could still pay the mortgage because they were underwater and didn't want to pay for something that was not worth what it used to be...

I live on a two-way street!

GJ

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michaelclayton 3 years, 4 months ago

Lawrence developers owing other Kansas counties property taxes seems to be the rule of the day. Compton has a similar issue brewing with his College Hill development in Topeka It will be interesting to watch how that plays out. It might be a good idea for the City of Lawrence to proceed with caution with these people.

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Richard Heckler 3 years, 4 months ago

Is Lance Johnson still owing delinquent property taxes?

Time for Lance to resign resign resign!

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sierraclub 3 years, 4 months ago

The $1.95 milion dollar loan to Lance Johnson was probably at a decent and fair interest rate. Banks give the lowest rates to the best or preferred customers while the lower working class get the shaft and high interest rates. Case in point, the people who actually NEED the lower interest rates get shafted while the BETTER customers get the best interest rate. The bank is getting what they deserved. They gave up the loan, they accepted the risk. If all of this is true, Lance had better like prison! Fraud is fraud. Taxes put Al Capone in jail, not his crimes. It is not what you know, it is what you can prove.

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thelonious 3 years, 4 months ago

There was actual collateral, the properties themselves. But sometimes collateral diminshes in value (like in a real estate crash), so the personal guarantees are a back-up to the primary collateral - call them secondary collateral. This is absolutely standard practice, this bank was prudent and was neither sloppy nor foolish (except for perhaps not checking into his character deeply enough), and does not deserve what they got - what they have is someone who pledged 1) properties, and if they were not sufficient b) personal assets, to pay back a loan. So the value of his properties no longer cover the loan amount and he has to pony up personal assets - that's the way it works, and what he allegedly did instead (try to hide assets to avoid paying back the bank), if not criminal, is certainly unethical and dishonest, among other things it could be called.

Assuming the facts of the story are correct, let me ask you, would you loan him money, and if so, how many layers of collateral would you ask for? I am thinking that I would ask for any secondary collateral to be placed in escrow to avoid the kinds of shenanigans he has allegedly engaged in.

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OldEnuf2BYurDad 3 years, 4 months ago

Someone name a rich or well-to-do person in Lawrence that they admire and respect. Someone "loaded" who they don't have a gripe against.

It's been my experience that it's the greedy poor who have the biggest complaints about the greedy rich. People who embrace moderate living don't put so much energy into judging the rich.

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LJ Whirled 3 years, 4 months ago

Prudent bankers make loans secured by actual collateral, not on personal guarantees. To do otherwise is sloppy and foolish, and the bank deserves what it got ...

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michaelclayton 3 years, 4 months ago

Is this the reason that Johnson was a no show at last nights Commission meeting? And, was Johnson's absence related to Doug Compton pulling his parking garage proposal from a vote/discussion last night?

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macon47 3 years, 4 months ago

i would feel sorry for him because of the down market but if the market would have remained strong and he kept his pockets full, would he feel sorry for me? not a chance

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Richard Payton 3 years, 4 months ago

I wonder what Charlie Rangel would say....?

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pace 3 years, 4 months ago

Chamber types like Lance and "dirty Sue" when they get caught feel they are too special to resign. They bought the ads that got them elected, they lied about their finances to present a better face. No honor is involved, just business.

We need community education about how important it is to vote and really know who you are voting for. Slash ads, lies and tricks should offend us more, sway us less.

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blindrabbit 3 years, 4 months ago

We need a change in the form of government! Strong Mayor as opposed to the lacky's we seem to continue to elect in the current Commissioner Form. Need a more professional, accountable individual.

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Flap Doodle 3 years, 4 months ago

Can he claim immunity under the Chris Dodd rule?

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ResQd 3 years, 4 months ago

Laughing hysterically because it would not surprise me if the allegations were true. No wonder this city is in such a mess!

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Ricky_Vaughn 3 years, 4 months ago

Money doesn't make good people, no sir.

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michaelclayton 3 years, 4 months ago

Johnson did a few things wrong.

  1. failure to disclose financial interests
  2. failure to pay property taxes
  3. failure to make loan payments
  4. fraudulent transfer to wife's trust

So does this explain why the Compton parking garage matter wasn't discussed last night?

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BigPrune 3 years, 4 months ago

Commercial loans and their guarantees offer many options for a bank to use in order to call the note. Pretty much anything can be used as an excuse. Much different than a consumer loan or a home loan. People don't realize.

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OldEnuf2BYurDad 3 years, 4 months ago

I guess one reason why I step up to defend someone like him is because I admire anyone who's willing to take some risks. It takes guts to try and be a mover and a shaker, so I kinda think most of you are, to be frank, just jealous.

I think it's great that he's pursued his dreams, even if he failed.

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beebo 3 years, 4 months ago

Original loans were made on the appraised property values at the time of the loan. Since then, the values have dropped dramatically and so the old loan that WAS 80% of the appraised values is NOW 120% of appraised value and therefore not allowed without more capital being added by the borrower. If the borrower had the capital they wouldn't have borrowed the money to begin with. The banks cannot renew the loans without the borrower putting more money down to get back to 80% of appraised value. Hope this help re: your question.

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blindrabbit 3 years, 4 months ago

Sigmund and Just--- Was waiting for you to finish your comments on the issues of ex-commissioners ingratiating themselves while in office. Don't know too much about Mike Rundles issues; but really leery about Sue Hack's dealings. Her involvement in the Decptera (Decifera) hand-holding while being a commissioner as well as being an invested party was about as blatant as I can remember around here. Apparently not sufficiently egregious enough to disqualify her to lead "Leadership Lawrence" for the Chamber. Maybe we ought to screen these candidate better.

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Liberal 3 years, 4 months ago

Can we blame this situation on Obama? He says that money needs to be available and that banks are sitting on piles of cash. Yet banks are not lending without requiring huge sums of cash.

Many developers are trying to renew loans that on average are 3 year terms. Only to find out that the feds have put such a squeeze on the banks that they can not get a new loan, thereby putting the borrower in default. This in turn puts the banks at risk with faulty loans which allows the feds to take over or consolidate them into larger banks. This can happen with borrowers who have never missed a payment. Not saying this is what happened to Mr. Johnson, only that many commercial loans are in trouble not as a result of the borrowers, but the iron fist the current admin has on banks.

Can of worms officially open...

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GovJunkie 3 years, 4 months ago

Comments from the Cheap Seats:

Rest assured, the bankers will do OK... I suspect Emprise took over the note from UNB for substantially less than $1.95 mm... Mr. Johnson may have some explaining to do before a judge, bankruptcy or otherwise, if the transfers are proven to be fraudulent or reversed for cause...and with loans and banks, this is a Federal matter that can have crushing consequences... but the ultimate winners will be... The Lawyers! GJ

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naturalist 3 years, 4 months ago

Wonder if that $150k could be used to give the city workers a bonus?

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4everahawk 3 years, 4 months ago

There for a minute I figured he in some way was linked to athletics! HA He even looks a little like one of them. This is another story that reminds me of how the rich get richer.....dirty business.

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AS 3 years, 4 months ago

Is there a real difference between alleged and a person of "A Person of Interest"!!!!

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superduper 3 years, 4 months ago

The link regarding properties with his name attached adds up to about $5.5 million and that is only in Douglas county. One thing to note to be fair, the search shows all properties that the person had interest in, not CURRENT interest in. For example my name comes up with 3 yet I currently only have one. He obviously has many properties in Johnson County as well. It would not be at all uncommon to have a few million of that in loans, and I don't mind that but....the accusation is that he knowingly defrauded that banks to hide assets is just wrong. If he is found guilty that will be the end of him...for awhile at least.

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Stuart Evans 3 years, 4 months ago

Porn actors would kill for that name.

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oneeye_wilbur 3 years, 4 months ago

Wilbur would surmise that the banks involved were the real culprits. Sounds like the old days in Lawrence of one bank moving a loan to another to get it off the books before the auditors showed. Lawrence National used to do that. So, now Emprise eager to get a "new" loan is now stuck with an "old" loan.

This is not unusual and a common practice. One reason to have only one bank in a small town, which Lawrence does not.

Johnson's situation is not any different than other business persons in real estate like realtors who have had loans go bad, they just were not able to get another bank to take the "old" loan and make it "new".

The lending practices tightened and Johnson is one of many now caught up in the fiasco.

I say, give them the property. Let the bank have what they claim is theirs. Then the next time they won't want an "old' loan to make "new".

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skinny 3 years, 4 months ago

If the above is true Mr. Johnson needs to resign from the Lawrence city commission and be sent to prison!~

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just_another_bozo_on_this_bus 3 years, 4 months ago

He wanted to run with the Movers and Shakers, and was willing to roll the dice with risky loans. And getting yourself elected to the city commission to look after the affairs of the Movers and Shakers was a good insurance policy.

It'll be interesting to see if that works out for him, or backfires as they throw him under the bus (as Emprise Bank appears to be doing.)

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copyright 3 years, 4 months ago

Here's a snapshot of "a few" rental holdings--plus the personal mansion--though it's likely not all properties are current:

      http://www2.ljworld.com/propertyvalues/?q=lance+johnson
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OldEnuf2BYurDad 3 years, 4 months ago

Many who make their living investing in properties are in his shoes. I know others like him who relied on business models that assumed the easy availability of money, but when the economy tanked, they were unable to continue under their old business model and they found themselves unable to make loan payments.

The issue here is most likely about balloon loans. What guys like him did for many years was take out balloon loans, and then when the loan was due, they'd refi the loan. Well, NO ONE is doing refi loans of that sort any more (three years ago: no problem), so many property investors are defaulting on loans that require massive payments after2 years.

Take it easy on him. There are a LOT of people in the same situation right now.

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Steve Jacob 3 years, 4 months ago

Making loans like this is why University National Bank got put on the FDIC watch list, and guessing they had to ditch loans and raise money to become compliant with the higher banking standards.

Anyways, making big real estate loans like this in early 2008 is odd, the real estate price collapsed around Aug. of 2007 and we where to stupid to figure out what that meant to the rest of the economy until September of 2008.

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jayhawklawrence 3 years, 4 months ago

We don't know anything about the loan agreement or the validity of their claim of an unlimited personal guarantee or the legal view of the contracts.

I think it is very irresponsible to start slinging mud at this stage.

I have some sympathy for Mr. Johnson having the endure the challenges of running a business in this economy because business owners like him create the tax base that Lawrence depends on for its existence.

I would use whatever legal means necessary to protect my business from the banks.

And why couldn't they restructure the loan?

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Seamus 3 years, 4 months ago

Big surprise. The carpetbagger from Hays who has been in bed with the developers since day one is finally being exposed for what he is.

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Amy Heeter 3 years, 4 months ago

To begin with it is a civil suit. Next "it is alleged" I really don't think we should expect him to quit just yet.

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Enoughsaid 3 years, 4 months ago

Oh great, another politician who is a crook. How can this person manage city government, when he can't even manage his own affairs. He should resign and move to Bell California with the other corrupt elected officials.

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whiteguy 3 years, 4 months ago

Suprise' surprise' suprise !

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Gandalf 3 years, 4 months ago

Better yet, make him shovel all the sidewalks when it snows!

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consumer1 3 years, 4 months ago

A good guy??? Lance Johnson, throw his keister in jail like a common thief!!

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jstthefacts 3 years, 4 months ago

Sounds like the dogs eating the dogs.

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somebodynew 3 years, 4 months ago

Well, I don't personally know him - but just reading this article, IF the allegations are true then he certainly doesn't sound like one the the "good guys" I want to have any business dealing with. And he probably shouldn't be partially in charge of the City either.

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KU_cynic 3 years, 4 months ago

Someone who is engaged in financial shenagins of this magnitude and who is unable /unwilling to pay his taxes should not be making decisions like whether or not financial subsidies and tax giveaways should be extended to Lawrence developers or whether the Farmland property should be acquired by the city.

Oh, too late, he has.

Lance Johnson should resign immediately from the City Commission in order to spend 100% of his waking hours trying to resolve his significant personal problems.

Let this be a lesson to Lawrence voters: no more grifters on the city commission.

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Michael Capra 3 years, 4 months ago

its hard times and here gos another good guy thrown to the wolfs

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