Another financial setback for Curtis Carlson Nelson

Curtis Carlson Nelson, grandson of a Minnesota business legend, is prepared to acknowledge that he'll spend his foreseeable future under mounds of debt that he likely will never repay.

Nelson, onetime heir to the Carlson fortune, has agreed in court documents to tell a bankruptcy judge on Wednesday that he wants to waive a discharge of his debt -- an unusual move for a debtor in a bankruptcy case. If approved, the waiver would remove the legal bar against suing Nelson that was imposed when he filed for bankruptcy 10 months ago.

One of Nelson's attorneys told the Star Tribune Friday that Nelson still hopes to at least partially satisfy his creditors, despite the deep hole he is in.

"We're seeking to work with the trustee to develop a plan for global resolution in this matter," said Dorsey & Whitney attorney William Michael in an interview. Nelson did not respond to interview requests.

The picture that emerges from Nelson's bankruptcy proceedings is that of a man with no job, no foreseeable source of meaningful income, and one who is cut off from a family fortune that was created through the stunning business successes of the late Curt Carlson -- Nelson's namesake -- and that of his mother, Marilyn Carlson Nelson.

Bankruptcy attorneys who aren't involved in the case say there are only two reasons a debtor would waive the discharge of his debt.

"One is that he's got so many people coming after him ... he just doesn't have the funds to fight," said John Neve, a bankruptcy attorney with the Neve Webb firm in Minneapolis. "Another would be that they've got good grounds that he engaged in fraud and he doesn't think he can beat them."

Barbara May, a sole practitioner who, like Neve, represented auto magnate Denny Hecker in bankruptcy, agreed.

"A debtor would waive discharge if he didn't want findings made or published that he's a crook or a fraud or a swindler. That would be the only time that I would do it," May said. "You don't want a federal judge making findings that the debtor doesn't deserve a discharge because the schedules are fraudulent."

Both of those scenarios seem to apply to Nelson. He's broke. And several creditors -- including a longtime friend -- have accused him of frauds and misrepresentations.

Curtis Nelson is scheduled to appear before U.S. Bankruptcy Judge Robert Kressel with secured and unsecured debts totaling $41.3 million accumulated through failed business deals and a rock-star lifestyle.

The Nelson case is in the hands of Randy Seaver, the take-no-prisoners bankruptcy trustee who squeezed Hecker for every asset he could find.

The same is likely for Nelson.

"Randy Seaver is not a guy who will go away," said Mark Kalla, a restructuring and workout attorney in the Minneapolis office of Barnes & Thornburg. "He wants to find out where the assets are. Seaver will want to get as many facts on the record as he can, because waiving a discharge is a very significant event."

Nelson filed for Chapter 11 bankruptcy protection in May 2011 seeking to reorganize his finances. But that proved hopeless and the bankruptcy was converted into a Chapter 7 liquidation proceeding in August.

The Chapter 11 adviser for the U.S. Trustee's Office, Michael Fadlovich, said in filings that Nelson had no job and no meaningful source of income.

"He has no apparent ability to generate income at a level which would make anything approaching a meaningful payment on his aggregate debt. In fact, he now doesn't even generate enough income to support himself," Fadlovich wrote.

A downward spiral

Nelson's slide became public in 2007 when he sued his mother and Carlson Companies after he was passed over for promotion and eventually left the company. His most recent failed business venture was an automotive marketing company called Visible Customer Holdings. It collapsed in 2010.

Three lawsuits have been filed over alleged misrepresentations by Nelson in the Visible Customer enterprise.

Two are by lenders -- including Crown Bank of Edina -- that say Nelson gave them fraudulent financial statements to back loans.

The third is by Siamak Masoudi, a former employee of Visible Customer who said Nelson, his longtime friend, had misled him about the company's prospects, resulting in losses exceeding $500,000.

According to Masoudi, Nelson also misrepresented the company's software to customers, spent its money on extravagances and helped himself to company funds.

"Nelson misused funds from Visible Customer to charter a private jet for a personal vacation with his girlfriend to Las Vegas," the suit says. "While the company was laying people off and asking for pay cuts ... Nelson spent thousands of dollars redecorating the office and creating a 'zen' room for meditation."

Masoudi said in his lawsuit that Nelson swore to him that he had quit drinking and taking drugs as a condition of seeing his children. But he said Nelson's behavior became erratic as the company was failing, and he voluntarily admitted himself to a treatment center in March 2010.

According to a 2009 personal financial statement provided for one of his now-defaulted loans, Nelson listed a personal net worth of $29.4 million.

His most recent financial statement in the court file, dated June 2011, shows Nelson holding a cash balance of $119.80.

His Wayzata home, once valued at $6.9 million, is now in foreclosure.

David Phelps • 612-673-7269 Dan Browning • 612-673-4493