Trustee: Hecker had $200K as taxpayers paid his lawyers

At a time when Denny Hecker claimed to be too broke to pay for a lawyer and was being represented at taxpayer expense, he had access to more than $200,000, mostly in "stolen" funds, for his lavish lifestyle, the trustee in the former auto mogul's bankruptcy case said in a court filing today.

Unless Hecker is incarcerated, he will continue to "take wrongful advantage of every possible situation" and continue to "waste" money meant for creditors, the trustee, Randy Seaver, said in the legal memorandum. Hecker also should be required to repay the taxpayer money used for his defense before his former private attorney, Bill Mauzy, can be reinstated, Seaver said.

Prosecutors in Hecker's criminal case agreed, saying in their own filing that Hecker has "made a mockery of the court system."

"He has behaved as if the rules of this Court and the bankruptcy court do not apply to him and as if nothing can get in the way of his desired lifestyle," the memo from prosecutors with the U.S. Attorney's office continued.

A hearing to consider whether Mauzy can return to the case and whether Hecker should be required to refund taxpayers is scheduled for Monday.

Hecker pleaded guilty last month to bankruptcy fraud and conspiracy to commit wire fraud. He wants Mauzy to handle his sentencing, said Hecker's court-appointed attorney, Brian Toder.

"Denny Hecker and Mauzy have a close, personal relationship. They've always had one," Toder said. "All the heavy lifting has been

His other attorney, Barbara May, said the filings from Seaver and prosecutors are "all theater."

"Their responses are designed to poison the water for the sentencing," she said.

Hecker and Mauzy did not immediately return calls for comment.

Both filings from Seaver and prosecutors say Hecker violated an April court order requiring him to repay the federal government for his court-appointed attorneys if he ever could afford to hire a private attorney.

In the filing, Seaver detailed how Hecker spent money from insurance policies and other sources, including some not previously made public, and prosecutors said they think Hecker has had — and continues to have — access to other money owed to his now-defunct businesses.

"So, while he was being represented at taxpayer's expense, he had full, although largely illegal use of over $200,000 in just a two-month period. This sum is significantly more than the average American family earns in over two years," Seaver's memo said. "Of his options — repaying the government, turning the funds over to the Trustee, or selfishly spending the money — he chose the most self-indulgent option."

Once the owner of a network of automobile dealerships and a large leasing company, Hecker filed for personal bankruptcy in June 2009, owing $767 million largely due to personal guarantees he made on business loans. Earlier this year, he gave up efforts to have his debts forgiven, agreeing to be on the hook for any debt that remains after his assets are liquidated.

Hecker was charged with defrauding his lenders and the bankruptcy court, but reached a plea bargain with prosecutors last month and now faces up to 10 years in prison. Mauzy had dropped out of the case in April, saying he hadn't been paid, and a judge granted Hecker's request for a publicly financed attorney.

Two weeks ago, Mauzy asked to be reinstated to represent Hecker in the sentencing phase of the case, claiming that someone had paid his retainer fee on behalf of Hecker.

U.S. District Court Magistrate Judge Susan Nelson ordered that the unidentified benefactor testify at Monday's hearing as to where the money came from and whether he or she can repay the entire cost of the court-appointed attorneys. Last week, Chief Judge Michael Davis announced he would preside over the hearing, rather than Nelson.

Much of Seaver's memo to the judge repeats allegations that first surfaced in August about Hecker acquiring and spending money from $150,000 in life insurance policies that should have been turned over to the bankruptcy estate. Seaver says Hecker's girlfriend, Christi Rowan, helped him spend the money.

Now Seaver says Hecker also received — and cashed — more than $32,000 in checks from a New Hope company called Automotive Concepts., and gave that company a $2,900 check made out to one of his former companies, according to the filing.

Seaver's memo includes copies of pre-paid credit card statements that Hecker and Rowan used between mid-June and the end of August. The statements show routine expenses for groceries, gasoline and prescriptions, but also more than $900 for three plane tickets, more than $1,100 in charges at an upscale Edina salon, more than $200 at a tanning salon, $156 at Lord Fletcher's On the Lake and more than $700 at J. Crew. Rowan's statement showed expenses incurred in Scottsdale, Ariz., and Dallas.

Last week, Hecker said he didn't have any of the insurance money left. Previously, he had turned over $45,000. The documentation Hecker provided last week, as a result of a bankruptcy court order, showed he spent more than $108,000 in June and July. He characterized the expenses as payments for bills, medical expenses, living expenses and debts, including a unpaid tab at Manny's Steakhouse in Minneapolis and outstanding dues for two country clubs.

Seaver said Manny's recently gave him the $2,700 payment.