AUTHORS NOTE:

I do not assume that most people want to know, or even care, about my financial condition ... however some people may be very curious because I am a public figure a radio and TV host who often talks about starting a business and building wealth, among a host of other consumer issues. For those of you who are curious, I present this website blog to give you my true story. In telling my story, I am not trying to garner sympathy. I fully accept responsibility for my financial decisions. I will accept the consequences and move on. I will rebuild and be smarter and more successful as a result of this experience. Throughout history, many people smarter and richer than me have gone broke and rebounded.

Here are my reasons for presenting my financial life in an open forum: To show you the formula for building wealth To demonstrate the circumstances that can destroy it To chronicle my rebuilding efforts.

READ ME FIRST
While the name of this website is Why I Went Broke, some people may not consider me broke by conventional standards. Thats because I have an excellent income. In fact, if you take all of my consumer debt and household responsibilities, I can easily pay my monthly bills and have plenty left over. My wife also has an excellent income and savings and is able to lend support to our family. So what do I mean by Broke? For the purposes of this website, here are the factors that define Broke:

I am upside down in my real estate holdings. In other words, the sum total of my real estate debt far exceeds the value of these holdings. This happened when real estate values plummeted in the worst recession in US history. Due to this negative equity position, I am not able to refinance the properties to take advantage of the new lower interest rates. As a result, many of my commercial real estate loans (which usually run 3 to 5 years) have come due are not being renewed. And since I cannot refinance, some of the loans are now in default. That means I am being charged default interest, penalties and legal fees. I have been burning through my lifes savings and home equity trying to keep things afloat, but now my reserves have run critically low. To add to my problems, I lost $1,500,000 when my certificate of deposit was seized by the FDIC when New Frontier Bank was closed (Accounts are only insured up to $250,000). This perfect storm of negative factors has resulted in a major financial crisis hence the word: Broke.

Before I go into detail about my current financial battles, I believe you need background to set the stage.

MY PLAN

Posted by admin on Nov 21, 2010 in The Latest News ... | Right now, I have no choice but to decide which real estate projects are worth keeping and which ones I should let go. This choice will be made based on my assessment of the future. I will try to keep the projects that have hope of rebounding. The others I will surrender. However, banks dont always let you just surrender things and walk away. They have an obligation to try to collect whatever they can from borrowers. My options are clear. I must either negotiate suitable settlements for my outstanding real estate debt, and secure an investor-partner to make this happen or I must seek protection of a business bankruptcy of some kind. Ironically, I have NO consumer debt. What I have written here is the truth. It is a clear synopsis of what can happen when ambition outweighs judgment combined with circumstances beyond our control. For those who care, for those who want to learn, for those with just idle curiosity I will continue to post here with every major development. Stay tuned WHERE DO I GO FROM HERE? Posted by admin on Nov 22, 2010 in The Latest News ... | As I have said before in this blog and several times on my radio and TV shows, I do not want sympathy. I do not deserve it. There are plenty of people in worse situations than I am in. I thank God I have dedicated myself to helping others in my broadcasting career. And as a result, I have excellent income to support my family and to pay all of my regular bills. I thank God that Ive never fallen prey to credit cards nor have I accumulated extensive consumer debt. I thank God that I have excellent income to support my family. In fact, if not for real estate, my life would be near perfect. So now I must decide how to handle this challenge. I clearly do not have the money or assets to pay off the enormous debt in one lump sum. Real estate loans are all but gone, except for some rare cases and investors are difficult to find. WHAT DID I DO WRONG? Posted by admin on Nov 23, 2010 in The Latest News ... | This can be debated for years. What did any of us do wrong? Is someone to blame when they borrowed on their home and the home went down in value and now they cant refinance? Is someone to blame when they lose their job because business has slowed down? And now they cant make their monthly payments? Is someone to blame when real estate prices plummeted more than any other period in US history? Is someone to blame when they were making all of their payments faithfully on loans and suddenly those loans become due and payable in one lump sum? Is someone to blame when banks stop making loans and there is nowhere else to go for money? Yes. Each one of us is to blame for our actions but we can not be held responsible for circumstances beyond our control. Looking back over my rise and fall in real estate, I have concluded that I did several things wrong: I was not satisfied with having an awesome career, great income and a wonderful lifestyle. I felt I had to keep accomplishing more. I assumed the market would continue to increase in value or at the very worst, remain stable.

I departed from my initial formula that made me wealthy. Instead of only buying bargains when the economy was weak, I became more aggressive and kept buying in a stronger economy assuming everything would keep escalating in value. Worst of all I allowed myself to be talked into deals by so-called partners who found the deals but had nothing to lose. Beware of people who have great deals for you but need your money to accomplish them.

THE RECESSION & ME Posted by admin on Nov 24, 2010 in The Latest News ... So now you see why my real estate empire started to collapse. My commercial loans were NOT in trouble. But banks still could not renew them because of FIDC edicts, declining values and a weakened economy. They said: Pay up! And I said: I cant. For a while I dumped cash into my projects to make principal reductions and to get temporary extensions. I kept hoping things would get better. I burned through millions of dollars in savings trying to keep things afloat. I also took out a home equity loan. Then the unthinkable happened: A bank failure close to home which caused me to lose even more money. New Frontier Bank in Greeley was one of the banks I used to finance some of my projects. Because of my business relationship with the bank, I kept a Certificate of Deposit at the bank in the amount of $1.5-million. When the bank closed I lost all of that money. To add to my misery, something else happened when New Frontier Bank closed: All loans were became immediately due and payable. In my case that meant the FDIC expected me to pay off around 30-million dollars! Obviously I was not prepared to pay these loans off in one lump sum. In fact, no one in business is ever prepared to pay off their loans in one lump sum thats why they get loans. So as a result of the recession I found myself with lost cash, lost property value, defaulted loans and depleted savings for trying to keep things afloat. It was a perfect storm for financial failure. THE RECESSION Posted by admin on Nov 25, 2010 in The Latest News ... | There is no question that this recession is the deepest and longest ever experienced in American History. While mild recessions are normal following inflationary cycles, this one has been the worst. The reason? Government interference. Ill explain: When the financial world finally realized that much of their portfolio was based on garbage loans, they panicked and stopped trusting (and buying) financial bonds and they stopped investing in financial institutions. That caused a liquidity crisis meaning the banks could not raise money to loan. The FDIC (which insures bank deposits) also panicked. It realized that it could not afford a major banking crisis. If too many banks failed, the FDIC would run out of money. And if the public caught wind that the FDIC was going broke there would be a run on the banks. That would mean a full-scale depression. Thats when the federal government came up with the Bail Out program. Politicians told us the government bailout was to make money available for banks to loan. We all thought that was a good idea. Both republicans and democrats were in favor of the plan. But really, the bail out money was not to make more loans available. The money was really intended to shore up the capital in US Banks to avoid bank failures. In other words, the main purpose of the bailout was to save the FDIC from going broke. In fact, the FDIC ordered banks NOT to use the bailout money to make new loans and went so far as to tell banks to actually REDUCE their existing loans.

So while one part of Washington was telling the country they were helping banks to make more loans, another part of Washington was telling banks to stop lending and to get rid of their existing loans! The recession wouldve been bad enough without new loans but it was severely worsened when banks started following FDIC guidelines to reduce their existing loans. That meant that most loans coming up for renewal (including mine) were told to either make unreal principal reductions or go elsewhere to refinance. But how could investors and developers go elsewhere when all the other banks were also told to reduce loans? It was a no win situation! Investors and developers had no choice but to put their properties up for sale. And what happens when everyone is trying to sell? Real estate prices plummet. The FDIC over-reaction and subsequent reduction in loans also meant something else much more significant: A loss of jobs! Heres why: When there are no commercial loans, there is no development. That means no hiring of surveyors, architects, designers, excavators, plumbers, electricians, dry wall contractors and other professionals. And there is no buying of carpeting, light fixtures, appliances, building materials and other goods. That leads to slow-downs at factories and retail stores which all leads to less employment. From there it all spirals downward! I am not suggesting that banks shouldve been allowed to continue making bad loans. But that fact is most loans were NOT bad when banks called them due. The FDIC shouldve used the bailout money to shore up their own reserves, then allow existing loans not in default to continue as usual. Calling them due did nothing but cause more panic and devaluations. The FDIC shouldve also allowed new loans to continue for borrowers with good credit and income. Instead the FDIC arbitrarily stopped ALL loans because they were afraid of bank failures. Here is a more technical explanation for those interested. At one time banks were allowed to loan out 14-times more than they held in bank capital. Going into a recession, the FDIC thought that was too risky. So the FDIC reduced that regulation to 7-times capital which was overly restrictive and caused lending to all but dry up. The FDIC also put some additional restrictions on banks, such as the percentage of loans that could be made on real estate, business expansion, cars and other sectors. In other words, the FDIC not only limited the number of loans banks could make but they also controlled the kind of loans they made. That meant that some banks that were totally healthy, had good loans and were making money were suddenly declared weak overnight! Ironically, the FDIC actually caused more bank failures than they prevented. A SHIFT IN THE WINDS Posted by admin on Nov 26, 2010 in The Latest News ... | A few years ago things started changing. I first noticed a slow down in sales. Residential lots came to a virtual standstill, parking lot revenues began dwindling (which signaled fewer downtown professional offices) and offers on my commercial real estate dried up. What was happening? I didnt realize it at the time but the greatest recession in American history was about to unleash itself. What caused the recession? In brief: Years of irresponsible lending and living on credit. At first, the lending and borrowing felt really good to all of us. Money was plentiful because credit requirements were relaxed. More credit created more buyers buyers for goods, buyers for services and buyers for real estate. More buyers equaled shorter supplies. That led to increased prices. Suddenly people found themselves sitting on lots of home equity. People took out equity lines of credit and second mortgages or they sold their old homes to move up! Developers rushed to create subdivisions, builders rushed to build new homes. Cars were selling, major appliances were selling, durable goods were selling and consumables were selling. Demand for goods and services created jobs. And whenever jobs are plentiful, workers can pick and choose where they want to work. So employers found themselves competing for workers. That meant increased wages. Increased wages led to even higher prices. In short, this is called an inflationary cycle. And inflationary cycles are almost always followed by recessions.

ENOUGH WAS NOT ENOUGH! Posted by admin on Nov 27, 2010 in The Latest News ... | I was blessed with a thriving broadcasting career, a vibrant real estate investment portfolio and millions of dollars in the bank. I couldve stopped investing and I wouldve been fine. But I didnt. It seemed like I was looking for that one last BIG deal. The one that would make me sit back and say, Enough is enough. But that never happened. I amassed approximately $60-Million dollars in Real Estate with around $30-Million dollars in loans. That put me roughly at around $30-Million dollars in equity S & L CRISIS OFFERED OPPORTUNITY Posted by admin on Nov 28, 2010 in The Latest News ... | A few short years after building that home, the US real estate market crashed in what became known as the Savings & Loan Crisis (or S&L Crisis). It happened because S&Ls made too many risky loans in an effort to take advantage of the real estate boom and high interest rates. Many loans were fraudulent based on inflated appraisals. As a result many S&Ls failed. Sound familiar? Believe it or not, that real estate crash made me happy. Why? Because everyone was panicking and trying to sell. Prices were plummeting. I thought: I can finally take advantage of low prices. I can get in on the ground floor before the next boom! And thats what I did. During the late 80s and early 90s I bought lots of real estate. People practically begged me to buy their stuff at rock bottom prices and commercial banks were anxious to give me loans because I had good income and great credit. One of the properties I bought was vacant land just off I-25, in an area known as Beverly Hills. It is now called Castle Pines. Other properties included commercial land in Parker and raw land in Douglas, Elbert and Arapahoe counties. During that time and in subsequent years, I made millions of dollars buying, selling and developing real estate. I did several residential subdivisions, commercial buildings and downtown Denver parking lots. BACKGROUND Posted by admin on Nov 29, 2010 in The Latest News ... | While pursuing my broadcasting career I moved to many cities before making my permanent home in Colorado. It seemed that wherever I moved, the area was experiencing a real estate boom! People who had bought low were selling high and making loads of money. I wanted in on it! My problem had always been moving to an area during the boom, instead of before the boom. Colorado was no exception. When I arrived in 1981 real estate prices were quite high. I decided the only way I could afford to own a home was to build it myself. So I bought a piece of land in the Parker area and became my own general contractor. At the time I was working at KOA-TV (now KCNC). Since I was the consumer reporter, I turned my experience into a series for the evening news. THE LATEST FAILURE Posted by admin on Jun 16, 2011 in The Latest News ... | Since Ive last written, I lost a big commercial project I was building. I had invested over $2,000,000 in cash into this project just before the recession hit and I felt I had no choice but to try to finish it or lose my money. The bank that was financing the project stopped funding construction. They claimed I was in default because I did not have the pre-leases required by the construction loan agreement. However, I DID have the pre-leases. Then they claimed I was over-budget. Technically, I was over-budget but had planned on using some of my own money to finish up the project after the construction loan ran out. Unfortunately, the bank never gave me the chance to finish.

Instead they reacted in fear. And their fear of failure actually caused the failure. My attorney said they acted on an anticipatory breach in other words they assumed I would fail, so they pulled the plug! In addition to stopping all construction proceeds they also seized $500,000 my wife and I had deposited in their bank. I was forced to short sell the property to investors and walk away. Could I have sued the bank for pulling the plug on a construction loan agreement when I felt I was not in default? Yes. Could I have sued them for seizing our cash? Yes. But the lawsuit wouldve lasted two years and wouldve cost hundreds of thousands of dollars. During that time, the project would lay dormant. And even if I won the lawsuit, there would be no hope of recovering from the expense and downtime. The project was doomed either way. And It has come to this Posted by admin on Jun 16, 2011 in The Latest News ... | Right now I am down to three major debts. I owe Colony Capital more than $30,000,000 on some of my commercial real estate loans they bought from New Frontier Bank. At one time those loans were secured by valuable real estate and I had more than $20M in equity. But that equity was on paper and after the recession, values went upside down. So when the FDIC closed down New Frontier Bank, it was impossible for me to get those properties refinanced. Colorado Capital Bank is pursuing me for around $3,000,000. The story is much the same here. Values plummeted and the banks had no choice but to call the loans due. And there is simply nowhere to go for new loans. However, this case is a bit more complicated than simply unpaid debt because I believe the bank operated illegally in my transactions. Since I have pending litigation in this case, I cant elaborate. By the way, according to my sources, this bank is also about to be shut down by the FDIC. The third major debt is International Bank. They are pursuing me for an alleged deficiency in a commercial foreclosure to the tune of nearly $1,000,000. So what does it all mean? It means that after 30-years of investing in real estate I am at ground zero or worse. If you add up all the money I made over the years and all the money I have lost or am losing I come out on the losing end. It is not so much the lost money that bothers me but rather the lost time and effort for nothing! Fortunately, I have a career outside of real estate. I will survive. But it is unlikely I will never make up the loses I have incurred. The moral of this story? Pick and choose the times for investing and the times for liquidating. Have an exit plan before you buy and stick to it. Do not keep acquiring to stack up paper equity believing you can always cash it in. Sometimes equity goes away. Bankruptcy: No Other Choice Posted by admin on Jul 18, 2011 in The Latest News ... | I have tried. I have tried to settle my real estate debt to the best of my ability. However, settling debt is not always the best way out. In my case, the only alternative is most-likely to do a business Chapter 7 Bankruptcy. SCENARIO: SETTLING WITHOUT BANKRUPTCY When creditors know for sure that you are not hiding assets, not playing games, not lying or cheating when they know you are a true victim of the real estate market, the great recession and major bank failures when those facts finally sink in they will almost always talk settlement. But what exactly does that mean? Settlement, without bankruptcy, usually means that creditors look at how much they would get in a bankruptcy and simply allow you to pay that amount to them without going through the added red-tape of filing with the courts. In my case, I can almost assuredly settle most of my debt. However, one problem remains: If I settle the debt for a reduced amount, I could be on the hook for literally millions of dollars in income taxes for forgiveness of debt. Forgiveness of debt income is usually not an issue when you are dealing with your primary residence because of the mortgage relief act. But when you are dealing in commercial debt, like I am, phantom income for settled debt can ruin you for life. In my case, if I settled more that $30-Million in debt for 50% I could be left with paying tax on $15Million. That could amount to more than $6-Million in cash! So, even if I was to negotiate a settlement, I could be

ruined for life. And with IRS interest and penalties, it would be im,possible to ever see the light of day. This is why in many cases, business people go bankrupt. It is not because they refuse to pay something on their debt. It is not because they are flat broke. Rather, they are often forced into bankruptcy to escape the tax ramifications of settled debt. SCENARIO: SETTLING WITH A BANKRUPTCY Bankruptcy in my case seems unavoidable for a number of reasons. First, I can not refinance any of my loans because the assets have diminished greatly in value. Second, I can not write a check for the full amount due which is not unusual. After all, thats why we get loans to begin with because we do not have the full purchase price in our pockets to begin with. Third, even if I could strike a settlement, the tax implications would be insurmountable. So does bankruptcy mean I pay nothing on my debt? No! On the contrary. If and when I file a Chapter 7 bankruptcy, I will be forced to bare my could to a trustee. They will see that I am not hoarding things of value. They will examine my finances closely. Then they will determine the amount of unsecured assets I possess (assets are personal items no encumbered by debt and cash). Then, Ill have to turn over those assets to the trustee. In Colorado with various exemptions, the amount high-income people turn over in a bankruptcy amounts to approximately 25% to 40% of everything they own. Since I will be filing on my own and not including my wife, her assets are excluded. My attorney, Stephan Berken and his firm are evaluating my options this week. Stay tuned for more details as they develop.