Official FranklinSquires Website, by Rick Koerber

ALPINE | 27 DEC 2008 | Over the Christmas holiday, I was in a conversation with a member of my family regarding FranklinSquires and a particular real estate transaction this family member had entered into with New Castle Holdings, LLC.  After giving it some deep reflection, I thought it might be valuable to share some of my thoughts related to this conversation with the interested public.

To give you just a brief description of the situation – this member of my family had taken the “Preferred Buyer / Retail Investor” real estate training once offered through FranklinSquires and had subsequently purchased an investment property from Hill Erickson, LLC (a FranklinSquires related entity).  After the home was purchased it was subsequently leased (with an option) to New Castle Holdings, LLC (also a FranklinSquires related entity).  New Castle paid a decent option consideration fee – in cash, up front, and while the home was never successfully re-leased to a new prospective buyer or tenant, New Castle did make full and timely payments on the home for quite some time.

However, in late 2007 when the real estate/credit crisis really started to affect the marketplace, New Castle was unable to sustain its cash flow needs.  FranklinSquires, previously the major financial investor in the company was both unwilling and unable to invest more capital to keep operating expenses current.  The practical consequence of this economic reality was that my family members, along with several other New Castle creditors were left to experience the very unpleasant situation of having investment homes (and in this case a empty home with no rental income) and steep mortgage obligations without the benefits offered by New Castle, which benefits had long been taken for granted.

Of course I never pressured this family members into taking the real investor training (I wasn’t even their trainer), and I never sought to have them purchase a home from Hill Erickson or to lease it to New Castle.  But, as many people understand – things were very exciting with FranklinSquires related companies for some time, and through their own ambition my family members had sought out the opportunities, worked with my staff, and consummated the related transactions.  I was aware of the situation from a distance and was happy that members of my family had reached their own independent conclusion to do business with these companies.

During this liquidity crisis and continuing thereafter, New Castle sought to aid the great majority of its real estate Lessors by freely abandoned its lease option claims without a fight, to enable creditors (such as the case with my own familiy members) to take an immediate active hand in the situation.  It should be noted, that frame the beginning of this crisis until the present day New Castle has never abandoned its financial responsibility to repay its debts.

While it is true that every student who participated in the “Preferred Buyer / Retail Investor” training received substantial instruction as to risks and risk management related to real estate investing – the hard reality of economic difficulty is always a challenge to fully anticipate or to endure emotional and/or mentally.   None of us, for example, adequately anticipated the details of the current market environment or the specific situation related to New Castle.

So, this Christmas season, after spending several months investing more money into the home in an effort to make it more “rentable,” my families investment home still sits empty and like many others, my family members have exhausted their financial resources trying to manage their responsibility.  To their credit, they’ve been great.  They’ve taken 100% responsibility for their actions and have been more than patient in working with New Castle (and with me).   The current strategy with the home is to try and get the bank to accept a “short sale” since the real estate values in the area (both resale and rental) have plummeted.  If the bank won’t accept this solution—which given the track record of this particularly brain-off institution is very likely—foreclosure looms and coupled with the serious financial losses already sustained, the damage to my family member’s credit will also be quite substantial.  This is the situation faced by an untold number of investors all over the country – most unrelated to me or my businesses, but nevertheless experiencing a very common difficulty.

So, after Christmas dinner, as my kids were busy picking up their toys—before we headed home to beat out the snowstorm—there I stood, in the middle of the living room, discussing these very difficult circumstances with my family.  I personally feel horrible about their situation.  Even though I was not personally involved in any part of the transactions related to this property, I have an unquestionable feeling of compassion and responsibility.  Even though these investors are doing everything that they should be doing – and are expressing none of the childish, temper tantrum like emotional Nihilism of so many other similarly situated Americans – I can’t help but feel a strong desire and internal commitment to do everything in my power to “not give up” on their situation and to ensure that I leave no stone, that is reasonably within my power, unturned, in ensuring that New Castle makes good on its finanical obligations.  And, lest I be misunderstood, I don’t mean to suggest that these feelings are unique because the situation involves my family.  I have these same feelings for almost all those similarly situated who chose to do business with New Castle, Hill Erickson, and/or Founders Capital.

These feelings of sympathy and commitment on my part don’t exist because I have personal, legal or contractual obligations to the creditors or investors in these comanies, because I don’t.   I remain steadfastly opposed to those emotionality juvenile members of society who seem to think that all business executives should shoulder all of the legal and contractual responsibility for every investor’s decision when it results in a loss.  Those who have done business with any company where I’ve been affiliated, associated, or in any way involved as an executive, have done so as adults.  They have made their own best judgments, while they pursued their own desire for the possible benefits.   Just as neither I, nor any of these companies would have ever asked for an unearned handout from the upside profits of any such transactions (and for years there were many), I would never except such “unearned” responsibility for those who are now experiencing the unforeseen consequences of their own choices.  Just responsibility is a virtue, and in our culture it is in short supply.  Likewise, I refuse to indulge in the nonsensical hysteria so prevalent today which demands of  all businessmen that they give way all profits and at the same time assume all responsibility for all of the risks associated with choices made by informed, mature adults – despite the nature and terms of the actual business agreements involved.

Steve Forbes put it well, recently, in his article entitled, “How Capitalism will Save Us” when he wrote:

A chilling result of the [current] crisis will be furthering the deadly process of criminalizing business failures. In the old days when an enterprise failed, the proprietors often ended up in debtors’ prison. One of the significant advances of civilization and economic progress was the idea of limited liability, which took hold in the 19th century…Limited liability thereby set off a positive explosion of risk taking. Our standard of living today would be where it was in the 1850s were it not for the wide use of limited liability. But in recent years…corporate scandals, federal and local prosecutors began actively pursuing evidence of fraud whenever a big business went bust. Yes, there has been corporate wrongdoing, and miscreants have been tried and jailed. But many noncriminal individuals have been pursued….[and]the itch to indict remains.”

>>>Learn more about capitalism

Just because someone has lost money does not mean “fraud” has occurred nor does it automatically mean that anyone has done something wrong or that the government should have a prima facia reason to suspect as much.  Yes, there may have been, what in hind sight looks to all involved like miscalculations.  Yes, there may have been under-performances, and in some instances outright bad decision making.  But, these are human elements that we all understand and deal with on a daily basis—in our personal and professional lives.   So, too – in situations like the one where I was discussing the present difficulties facing my family members because of a real estate investment they made, in relation to businesses with which I have been closely associated – we are all faced with the good old fashioned notion of adopting a dose of “dealing with it.”  We can deal with it.  If we work together, we can probably deal with it much better than we might initially anticipate.  But, to “deal with it” requires that we give up the pursuit of the “unearned” in both benefits and guilt.

It was shortly after my conversation with family this past Christmas day that I realized I had a message I wanted to publish.

My message is for both those who remain optimistic and confident, and for those who are looking for someone to blame – related to the economic difficluies faced by creditors and investors of FranklinSquires related real estate companies.

Some have asked me if I feel any sorrow or any regret.  My answer is no.  I do not feel personally sorry or regretful for the actions I’ve taken.  Do I feel sorrow when I see the difficulty faced by those who have lost money.  Of course, I’m human and most of these people are my friends and associates.  I too have lost quite severely during this difficult time.  But, I do not and cannot accept the unjust demands of any victims feeling an entitlement to my feelings of sympathy or sorrow.  Unlike most businessmen similarly situated, I have not given up.  I am not a person who quits easily.  I am a not a person who turns the other way when the path ahead looks difficult, even extremely difficult.  This is why I have not given in to the financial advise of many lawyers and accountants who suggested early on that I simply put all these businesses into bankruptcy.  While I acknowledge legitimate reasons to do so – I resist such action to the best of my ability – so long as I believe there is a better way.

I am not a person who finds satisfaction in being sorrowful.  I look at the present situation as a motivating force.  With hindsight I can see clearly where better decisions could have been made.  But, who hasn’t had that same experience.  In business (as with all meaningful areas of life) leaders are not afforded the benefit of hindsight—in advance.  This is why the personal attributes of fortitude, conviction, relentlessness and tenaciousness are so highly prized among those investors with “eyes to see” and so impossible to be pretended away by the amateurs, the insincere, and the glib.

I have an impeccable reputation for repaying debts, for sticking something through for the long haul, for meeting legal and financial adversity in a way that makes long term success possible.  While I have gained a small, almost insignificant choir of critics during these very trying times – their judgment is worth less to me than the trust and respect given by so many loyal and respectable friends, associates, clients and creditors.

A friend once said to me, observing that I spend so much time defending myself and FranklinSquires, that he’d “like to hear” me apologize to investors and creditors for the economic losses they’ve experienced.    My first response was to point at that most investors and creditors, at least the ones who actually did business with FranklinSquires or related companies, have been paid and/or repaid in full.  My second response was to point out that those calling for such apologies are usually not deserving of them.  Most of the Internet critics, for example, are cowardly anonymous posters whose association with me or my companies cannot be substantiated.  In several cases over the last few years we’ve discovered that it is often the same individual posting under multiple pseudonyms.  One case the person turned out to be a 15 year old son of someone who had been misinformed, and was someone who had never done any business with me or any of my companies.  Also, regarding the small hand full of so-called “media sources” – these have also been people who’ve in most cases never done business with me, with FranklinSquires, or with companies where I had any decision making influence whatsoever.

Most people, longing for such admissions by me or businessmen like me, are simply second-handers, life long victims, looking for any place to hang the blame for their own frustration and unhappiness and who have almost not chance of improving their own life – unless and until they take a good long look in the mirror.    Sensing my frustration as expressed through these answers, my friend quickly changed the conversation topic.  What he didn’t know, what he couldn’t know, was that his remark (though made over six months ago) would not be forgotten.   I have thought a lot about his question.  I’ve thought about it mostly, as I’ve watched a seemingly endless stream of businessmen, corporate executives, small business entrepreneurs, and even small “mom and pop” business operators being paraded across even news stories, newspaper headlines and Internet news releases talking about the current economic climate, their regrets, their apologies, and their feelings of guilt and desperation.   No matter how I try, I find it very difficult to identify with these people.

I do not feel guilt.  Nothing associated with FranklinSquires or any of my partners or any of “my businesses” has come to my attention where I feel anything similar.  Yes, I wish we had done better job in many instances.  But, the game is not over.  I set out to create FranklinSquires and the several businesses associated with it to be successful.  We’ve had an extremely difficult year, (actually its been almost two years now) but I have not given up on this objective and I intend to continue earning the reputation I spoke about earlier.

In the middle of our current crisis, I don’t think its time for apologies.  Its time for mental toughness and fortitude.  Its time for courage and conviction.  These are virtues that few seem to value today.  But, these are the virtues that will survive the current crisis (financial and cultural) plaguing almost every aspect of our lives.

Of course I have an emotional reaction to those whose own actions have brought them into financial hardship.  Even when I see those who went against my advise and did not follow the principles I teach – now experiencing hard times, I feel sympathy.  For the clients, creditors, and investors in FranklinSquires and our related companies – I feel more than sympathy, I feel a desire to keep at it.  I, unlike so many others, remain committed.  To be candid, I’ve been surprised at how many of my close friends and associates have essentially “given up” in the face of our current adversity.   I’m surprised that all of the original FranklinSquires partners have sought to satisfy their own obligations by looking elsewhere and in the same spirit  I’m surprised at how many people seem to fall prey to the “grass is always greener” syndrome and can’t stick through long, difficult struggles.

Perhaps even more to the point, I am surprised at how many people can’t seem to understand how government corruption, unjust regulation, eradicate professional oversight and malicious regulatory pressure – has created the current economic climate in America where we are so ripe, as a people, for disaster.  It is true with FranklinSquires, it is true with all business in Utah, and it is true across the United States and beyond.  These things, the implements of tribalism, socialism, and victims turning relentlessly to government, are the enemy to progress, peace and a healthy society -  not the American businessman.  It is the American businessman who has so much to offer.  It is an entrepreneur who looks at a difficult situation and strive to create more value than he consumes.   It is the lover of freedom who resists that temptation to seek the unearned – or to distribute the unearned in either benefits or guilt.  Yet, it is now the American businessman who so many want to see behind bars.

I have had innocent friends arrested and charged with criminal wrong doing over the last year, and many – many government agencies of threatened me repeatedly with the same treatment.  This is all part of the package deal.  An American can’t expect to really stand up for freedom, for opportunity, and for the fruits of personal liberty – and cower when such threats come.   There are many strategies to fight the tyrants, and I am no expert on all of them.  But, one things that is certain with me is that the fight is inevitable for all who refuse to cowar.  For some it has already begun, for some it is looming on the horizon, and for the great majority (thankfully) we still have some time to fight back the nonsensical, albeit hysterical calls for businessmen to be put in jail.

If the standard for jail time – is poor judgment, bad decisions, or economic failure – perhaps those who were calling for such unjust treatment of entrepreneurs and businessmen would take a second look.  I do not mean to defend the guilty, the actual fraudsters, or those who prey on the innocent through deception.  But, there are not nearly as many of these kind as there are innocent men and women who are now being accused.

The present economic crisis all boils down to the essential way we each view money.  Some – talk endlessly about how unimportant money is, how success is measured by so many other things, and yet when they loose a dollar (or a million dollars) through their own speculation and greediness – start looking around for the lynch mob or at least the federal grand jury.  Others, love money so much that they refuse to consider that it is the ability to create value -  for self and thers, in this life that ultimately brings happiness, not merely the power to consume.  Finally, there are those few who understand the principle underlying my message – and who love life in a way that is essentially foreign to the professional victim classes.  Losing money, time, credit and reputation – are all indeed tragedies in their own sphere.  But the far deeper tragedy is to loose this sense of life – to loose touch with the idea that no economic loss can compare to the loss of personal character.

To those who are willing to look into the days ahead with optimism, I think 2009 has much to offer and am still up to bat myself, (standing a the plate so to speak) in a game that has several innings left to play, despite the frustration of those who might have already left the stands (or who might be tempted to quit prematurely).  I am thankful for those remaining, committed friends.  I am excited for those students, clients, and associates who have embraced the basic principles that lay at the core of this organization and of my personal philosophy.  I am even anticipating the return of many who might have become entangled in webs of bitterness, frustration and victimhood but who will eventually see that the way forward is the best option available for each of us.

We have huge challenges ahead (speaking for both FranklinSquires and as an American).  There is a turbulent wind ahead – and ugly challenges.  This is true all across America – and beyond.  Nevertheless, FranklinSquires is setting out again.  The secret to our success (and to the success of anyone bold enough to resist modern trends) will be to hold fast to that which is immovable, to set our faces like flint, and to keep a hold of that eternal anchor which binds men’s souls.  It is with eyes wide open, and with my own face firmly set – that I can say to friends, associates, clients, creditors and all other interested – I hope you’ve had Merry Christmas and with you look forward to the New Year.

In Prosperity; despite any current adversity, I sincerely wish for you a very Happy New Year.

C. Rick Koerber
President & Founder
FranklinSquires Companies, LLC
Email: rkoerber@franklinsquires.com
Web: www.rickkoerber.com