Forest Lake Ford is placed in receivership

Forest Lake Ford will be run by a receiver while its owner tries to repay nearly $4 million in debt to American Express, U.S. District Judge David Doty ordered Monday.

Ira Glauber, an attorney for American Express Travel Related Services Co., told Doty that John D. Berken had defrauded the company with a series of huge charges he made last fall to get cash to pay off former business partners and creditors.

"It was as fraudulent as a $3 bill, your honor -- a crime here in Minnesota," said Glauber, who flew in from New York for the hearing. Berken remained passive as Glauber said his conduct is punishable by up to 20 years in prison in Minnesota.

Eric Rucker, Berken's attorney, acknowledged that the credit charges may not have been the best way to do business. But Berken had no intention of defrauding American Express and has fully accounted for the money, Rucker said.

Berken spent more than $2 million to pay off a bank loan that carried personal guarantees by the business partners, Glauber said. The balance, about $1.9 million, went to pay off Ford Motor Credit Co. for vehicles that were sold in the normal course of business.

"Ford Motor Credit apparently is not very happy with what went on here," Glauber said. The company has cut off of the dealership's line of credit, he added.

American Express had asked Doty to freeze the assets of Berken and the auto dealership, or to take the lesser step of appointing a receiver to oversee the business.

Rucker said the money is tied up in the business. He said its assets include its used car inventory, the building, equipment and auto parts. (New cars are covered by liens from the manufacturers.)

Glauber called Rucker's arguments specious. "There is no building," he said. "They lease the building."

Of the nearly $4 million owed, more than half went to the bank, Glauber argued. "That money is no longer in the business," he said. "The balance of the money, $1.9 million, is no longer in the business either. It was given to Ford Motor Credit."

Doty said he was reluctant to freeze assets, a dramatic action that might harm both Berken and the dealership. "It seems to me a receivership is closer to splitting the baby, as it were," he said.

Doty told the lawyers to promptly recommend the name of a receiver they could agree on, or to provide a list from which he would pick.