A.C.’s legacy a mixed bag

Not having a head for numbers or legal matters, I began looking for an expert in real estate finance who could explain what the A.C. Bohrnstedt lawsuit was all about in simpler terms. Brian Cox, of Cox & Associates, LLC, has always been personable and kind so I sent him the articles about the lawsuit and asked if he could form an opinion about whether Bohrnstedt was the personification of Snidely Whiplash or if he could have been the victim of circumstance and some unsound advice.

What Brian provided was so much more than I would have expected, and I owe him a huge debt of gratitude. His comments are his opinions based on the historical material I provided him:

‘Educated Guesswork’

“I read through all the material, and then I went into the court’s online file system to see if I could find any more information, and I also used a case research tool I have for the same reason. Though I didn’t find anything more, I did come to several ‘non-definitive’ conclusions from what you provided.

“… By way of starting point, the lawsuit Herbert Haid as trustee of the A.C. Bohrnstedt Co. was for an accounting and return of funds, on the suspicion/allegation that A.C. Bohrnstedt engaged in some underhanded financial dealings that harmed the company and its investors and creditors. Basically, it’s a suit asking him to explain what he did and return what he shouldn’t have received. “By way of answer to whether A.C. Bohrnstedt was a ‘Snidely Whiplash’ sort of wheeler-dealer who deliberately tried to con his investors – I say very likely, yes. Some of the reasons for my conclusion are due to his pattern/history of conduct, and some are due to his actions in this instance.

• “His banking ownership and history general: The articles explain that he previously owned a number of banks before moving to Oregon. It sounds like he routinely ‘gutted’ those banks using the same approach as he used in this instance. What I mean by ‘gutted,’ it appears he would use banks he owned to finance transactions, overstating the value of the security for the loan, and paying himself/ his company using bank funds. This is how loans are routinely made. Bank funds are the monies held on deposit, which at that point in time were not guaranteed by the federal reserve. It was purely a balance of how much the bank had on deposit from all the individual account holders. Once the loans defaulted or failed to meet the stated/inflated value and couldn’t be sold to recover the securitized debt, the bank depositors lost their money and in many instances the banks went under. Because of his banking experience, I don’t give him the ‘benefit of the doubt’ when he engaged in his Oregon banking and/or loan activities.

• “His conduct in this instance: The A.C. Bohrnstedt Co. went into trusteeship (receivership) because the bank board members realized the company was not liquid, meaning its assets exceeded its liabilities. Since it appeared the business was going ‘gang-busters’ buying and selling land at the time it went into trusteeship, this strikes me as odd all by itself. Though A.C. Bohrnstedt Co. was not liquid, A.C. Bohrnstedt made a significant profit. That would not normally occur if liabilities/debts were being paid before A.C. Bohrnstedt paid himself.

• “Here is how/where he made money on this scam: When A.C. Bohrnstedt transferred assets from A.C. Bohrnstedt Co. to the A.C. Bohrnstedt Orchard Company, he did the following: He significantly overstated the value of the land he purchased/transferred (i.e. valued land purchased for $60-$70/ acre, that was selling for $400/acre, to circa $800 on the books for this transfer). Since he was apparently the only market-maker selling land and related orchard services at this time, there is no good market reason justifying this inflated value by basically, doubling the current average selling price – more so since the market was crashing.

• “History: Apparently, this was a plan/approach he used in Minneapolis, which might explain his move out west. Later on, he organized the A.C. Bohrnstedt Co. at Minneapolis. This company proceeded to acquire options and contracts on lands, apparently for the express purpose of inflating the values and then organizing subsidiary companies for the purposes of purchasing the same options and contracts at a large advance over the price paid for same.

“How does this produce money? It’s made in this next step, which is pretty well described in his Minneapolis scheme:

“A.C. Bohrnstedt Orchard used the banks he owned in Lane County/Creswell to finance this transaction, generating a large cash payment to himself/ his subsidiary company(s). These loans were made using depositor funds based on the inflated land values, which included both actual land titles and contracts and/or options – the right to purchase the land as a stated price. These contracts/ options were the majority of what was transferred – an ethereal right to purchase land not worth its stated value. We see from one of the articles that the ‘paper’ that securitized these loans was basically deemed valueless later. It was another bank gutted on the backs of Lane County mom-and-pop account holders.

• “Finally, I draw my conclusion from a ‘results speak for themselves’ approach. The A.C. Bohrnstedt Co. was buying contracts and options to purchase land for $60-$70 an acre and successfully selling the land and orchard services for an average price of $400/acre, so why would the money come up short, the bank not get paid, the creditors not get paid, and the investors losing money and having to cover these debts? Remember, the crash had not yet occurred. There was only one reason – because the liabilities exceeded the assets of the company, and that appears to have only occurred from the transfer of assets (contracts and options) from A.C. Bohrnstedt Co. to the A.C. Bohrnstedt Orchard Company at grossly inflated values (my ‘guesstimate’ is the value was doubled), with the money obtained through financing from A.C. Bohrnstedt’s Lane County banks going to A.C. Bohrnstedt and/or his subsidiary companies.

“In this case, that might explain why possibly they went from his A.C. Bohrnstedt Co. to the A.C. Bohrnstedt Orchard Co. The outcome would not have been so bad – the ‘paper’ could have been sold later – but when the crash occurred, the ‘paper’ went from being worth 50% of the stated value to virtually nothing – because no one was buying, none could be sold.

“As you can see, this is mostly educated guesswork, but I feel fairly confident about the accuracy of it. Please qualify this as my opinions and conclusions drawn from historical articles about what occurred.”

The curious thing about this whole story is that A.C., even after his business interests left Creswell, maintained a fairly good reputation as a community leader and upstanding businessman in the Salem area. He taught Sunday school classes and built up a strong and influential base of friends and supporters. His middle years were devoted mostly to selling life insurance.

A.C. Bohrnstedt’s businesses continued to rack up lawsuits, however. There were several small ones in which banks and people sued to get their money back and most judgments were ones he lost. He was even assaulted according to an account in the Dec. 25, 1915 edition of the Statesman Journal:

In 1917, a minister and his wife from New York won a suit against A.C. Bohrnstedt and his wife, Elizabeth L. Bohrnstedt for $1,559.43. An article, entitled “Minister Wins Action Against Bohrnstedt Co.” appeared in the Statesman Journal on Jan. 24, 1917.

In another lawsuit several years later, Bohrnstedt, his wife, Elizabeth and daughter M. Alberta were accused of watering stock in an auto transport dealership in Roseburg in 1926.

A.C. couldn’t even stay out of trouble in the insurance business. In 1928, Travelers Insurance Company charged that he violated a contract with them and they terminated the contract and retained his agent fees.

Was A.C. Bohrnstedt a misunderstood Dudley Do-Right? Or was he a super salesman who donned the cloak of Snidely Whiplash when needed?

I just can’t help being left with this visual of A.C. twirling his handlebar mustache between his thumb and index finger as he moved through life.



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