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“Have you been to the Grill?” asked Decker.
“I have in fact, yes.”
“It seemed like a million other restaurants I’ve been in. Not particularly high-end.”
Tinsdale was nodding before he finished speaking. “I have to admit that I thought the same thing, actually. But the loanwasgranted.”
“Did he have to put up any collateral for the loan?”
“Well, we put a mortgage on the property, of course, and the improvements. That’s standard. And, yes, I would imagine he had to put up some money of his own. We don’t generally fully fund projects like this. We want the borrower to have some skin in the game, so to speak. He was applying for money for the construction and also operating funds to get the business up and going. It’s not like he could start paying down the loan from day one while they’re still building the thing. The interest would be wrapped into the principal and payments calculated off that. Let me just check on a few items.” He read down several more screens. “Okay, yes, he did put up some money of his own. A little over five hundred thousand. That went into the land purchase. And he also personally guaranteed the loan.”
“Is that typical?” asked Lancaster.
Tinsdale gave her a knowing look. “Oh, yes. Especially with a restaurant. Failure rates on those are really high. And if the customer defaults, the bank doesn’t just want to have to look to the collateral. We’re not in the business of running a restaurant. And the resale rates on a failed restaurant operation are not very good. Pennies on the dollar. People figure if a location failed, why would a second try succeed?”
“So, if he personally guaranteed the loan, he must have had some wealth,” said Lancaster.
“Assuredly yes. We would have done a complete financial due diligence on him. And he would have had to show proof of collateral funds and we would have filed a security interest on those assets. Stocks or bonds or cash accounts or whatever the collateral was, giving the bank a secured interest in those assets in case of default.”
“Could you tell us what his net worth was back then?” asked Decker.
Tinsdale hit some more keys. “Let’s see. Okay, we took an interest in some CDs that he had that were worth eighty percent of the loan amount. All told, it shows that his net worth back then was about nine million dollars.”
“Wow,” said Lancaster. “With all that money, why not just fund the construction out of his own pocket?”
Tinsdale smiled knowingly. “First rule of business, when you can, use someone else’s money.”
“Right.”
“What was the main source of his wealth?” asked Decker.
“Seemed to be stocks and bonds mostly. Couple of annuities. It was all liquid.”
“But does it show where his wealth initially came from?”
“No, it doesn’t. But all the assets were legally in his name.”
“And he was the only borrower?”
“Yes, he wasn’t married when he did this deal.”
“And Don Richards did everything by the book?” asked Lancaster.
“Absolutely. All done in accordance with the bank’s loan requirements.”
“What was Katz’s background? Education? Birthplace? History?”
Tinsdale looked over the screens. “Says here on his loan app that he had a BA and an MBA. He listed his occupation as entrepreneur.”
“But again, no source for his wealth other than the net worth figure?”
“Well, it washismoney. That was verified. He might have inherited it.”
“I assumed when he died that the loan rolled over to his widow?”
“No, it didn’t.”
“Why not?”
