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Anonymous claims against mayor fail fact-check

Flyer part of a sustained effort to defame Orlyn Kringstad through false allegations

Marshall Helmberger
Posted 7/27/19

TOWER—The new mayor here continues to face false and defamatory attacks that have intensified since the suspension of city clerk-treasurer Linda Keith last month. The source of the latest …

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INVESTIGATION

Anonymous claims against mayor fail fact-check

Flyer part of a sustained effort to defame Orlyn Kringstad through false allegations

Posted

TOWER—The new mayor here continues to face false and defamatory attacks that have intensified since the suspension of city clerk-treasurer Linda Keith last month.
The source of the latest attack is unclear, since the effort by critics of Mayor Orlyn Kringstad has taken the form of an anonymous flyer posted around Tower’s Main Street. But the nature of the flyer and some of the allegations it raises are similar to those written by Tower Ambulance Director Steve Altenburg shortly after last November’s election. Then-clerk-treasurer Keith included Altenburg’s screed in the city council packet under correspondence, which was highly unusual given the nature and timing of Altenburg’s claims. Kringstad handily defeated Altenburg and a third candidate in that election.

Orlyn Kringstad
The latest flyer again focuses on a Tower Economic Development Authority loan to Tower Vision 2025 and Tower Harbor Shores, falsely accusing Kringstad of utilizing the $125,000 loan funds to purchase a lake cabin on Eagles Nest Lake, at a cost of $90,000, as well as to finance purchase of a used pickup truck.
Tower Harbor Shores, which has since assumed liability for the entire loan, is a limited liability partnership in which Kringstad, at one time, was a principal. Kringstad and a handful of investors formed Tower Harbor Shores in 2016 to develop a planned 20-unit town home project at the city of Tower’s harbor, although Kringstad has since divested himself from the project.
The flyer also alleged that Kringstad, back in 2008, had “inflated the value of his [Edina] residence and stiffed his mortgage company for $400,000 on a 100-year old house that wasn’t worth squat.”
Real estate sales and acquisitions are relatively easy to verify since such transactions and any mortgages associated with those purchases are public record and typically available online. Yet the authors of the flyer apparently failed to avail themselves of such records, and those records—which the Timberjay did review—disprove the claims of the individuals who are distributing the flyer.
The Timberjay also reached out to Kringstad about the vehicle purchase, for which public records are not typically available and Kringstad did provide information on the purchase, including bank records showing the outstanding balance on the vehicle loan.
Here is what the various records show:

  • According to the St. Louis County Recorder’s Office, Kringstad and his wife Marit, along with Kringstad’s sister, Kathryn Scott, did purchase a lake cabin on Eagles Nest Lake in October of 2016 for $105,000, or slightly less than the county’s estimated market value for the property of $120,400. The Kringstads purchased a two-thirds interest in the cabin (worth approximately $70,000), while Scott purchased a one-third interest. There is no evidence that Kringstad used any proceeds from the TEDA loan in the purchase of the cabin. In fact, it would have been impossible since the Kringstads purchased the cabin several months before Kringstad and then- TEDA president Marshall Helmberger approached the Department of Iron Range Resources and Rehabilitation about the possibility of a loan to cover a funding gap to pay for early development costs for the town home project. The IRRR provided the funds as a grant to TEDA, with repayment proceeds to become part of a revolving loan fund. The Eagles Nest cabin was financed primarily through a ten-year, $84,000 mortgage through Frandsen Bank, which remains current with approximately $72,000 in debt yet to retire. The fact that the mortgage continues to be retired according to the original schedule is evidence that no funds were improperly diverted for the purpose of paying off the debt owed on the property.
  • According to Hennepin County real estate records, the Edina residence where the Kringstads purportedly “stiffed their mortgage company,” was actually sold by the bank in foreclosure in October 2008, at the height of the housing crash, for $463,000, or well above the claimed $400,000 mortgage on the property. Kringstad had purchased the older farmhouse-style residence and undertook major renovations which greatly enhanced the value of the property before he and his wife Marit were hit by business losses stemming from the 2008 financial crash, which forced the foreclosure and loss of a previously-successful retail business. The home, located in Edina, is currently valued on the real estate website Zillow at $628,735.
  • According to St. Louis County and state records, the Kringstads purchased a commercial building on Tower’s Main Street for $108,600, on a contract for deed, on March 23, 2017, after having rented the building for several months for a retail business. The Kringstads made a down payment of $11,860 on the contract and began making payments while working out the terms of a mortgage to purchase the building outright. In December 2017, the Kringstads registered a mortgage of $76,527 on property, which allowed them to convert the contract for deed to a warranty deed. The mortgage remains current.
  • While records on vehicle purchases aren’t public data, Kringstad did provide the Timberjay with bank records on the purchase of his used 2015 Chevrolet Colorado pickup, which he purchased in late October of 2017. The entire purchase price on the vehicle was financed and the outstanding loan principal, as of July 23, 2019, was $23,656.


Loan payments were based on paid invoices

Misappropriating the TEDA loan funds would have been difficult since the funds were issued by the city of Tower in a number of payments, which were based on actual paid invoices, mostly for architectural and design work and marketing, which were related to the town home project.
Those invoices were reviewed by city staff, with final authority for payment resting with the clerk-treasurer. The payments were also reviewed by IRRR staff and the grant was officially closed out in August of 2017. Tower Harbor Shores continues to make interest payments on the loan with approval of both TEDA and the city council. The town home project has been unable to advance primarily as a result of the city’s continued delays in finalizing a plat for the project, which has prevented the town home developers from executing legally-enforceable purchase agreements.
Given that the TEDA loan is presently current, it’s unclear why Kringstad’s critics focus their attacks on the loan. If money was misappropriated, as they have claimed, it would be investors in the Tower Harbor Shores project who would actually be affected. Yet one of the biggest investors in the project, Michael Wood, of Biwabik, said he has “no concern” that funds were diverted. While Wood has not been deeply involved in the project’s finances, he said he is aware that “there were significant architectural expenses for the project, which are legitimate expenses.”
Project manager Jeremy Schoenfelder confirmed that and suggested that the current attacks on Kringstad appear personal, without regard for the interests of the city or its efforts at economic development. From a legal standpoint, said Schoenfelder, it wouldn’t matter in either case if the reimbursements that Tower Harbor Shores received had been diverted for personal use. “We provided paid receipts, which is what the loan required,” said Schoenfelder. “They are valid receipts, which means we fulfilled all the terms of the loan. But on top of that, Orlyn didn’t do that.”
Schoenfelder noted that architectural costs alone for the project were already well over $100,000, while marketing and legal costs, consulting fees, and loan interest payments were all further tapping the company’s available funds. “And we’re eating many of the soft costs,” he said. “I would normally charge a consultant’s fee for my work, but I’m not doing that.”
Schoenfelder said he’s trying to remain focused on how to advance the project given the ongoing inability of the city to deliver a finalized plat for the harbor area. “I don’t have time for the saber-rattling and chest-pounding,” he said. “It’s irrelevant. It’s just white noise.”

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