Politics & Government

Dream Derailed? Attorney Says Developers Were Victims of Ponzi Scam

Port Harbor's lawyer describes failure to develop historic downtown buildings as a 'multi-level tragedy.'

Despite the number of people who continue to fight to keep two historic downtown buildings from being torn down, there are still plenty who are more than happy to see the buildings go.

And — believe it or not — Robert Duzinske, the remaining owner of a company that had planned to redevelop the buildings, is one of them.

Duzinske's Port Harbor Investment LLC has been involved in a lawsuit with the city regarding the former M&I property at 122 N. Franklin St. since November 2008, and has received a number of code violations and orders for repairs.

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But, as Port Harbor's attorney, Mark Hazelbaker, points out, this unfortunate controversy is not what the developers had in mind from the start.

Harm Modder and Duzinske created Port Harbor to undertake the development and fully intended to renovate it, Hazelbaker said.

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Plans crushed by a double whammy

But then came the series of complicated events that derailed the duo's dream.

Modder, shortly after starting this venture, was diagnosed with brain cancer and started chemotherapy treatments. He died in December.

Despite Modder's condition, the two businessmen still went to the city with a development proposal along with what they thought was the needed financing commitment to fund the project, Hazelbaker said.

Little did they know that the man whom they thought was providing the financial backing, Robert Anderson of Mount Prospect, IL, would wind up in court in Illinois on charges that he ran an illegal money scheme.

"(The city, Modder and Duziske) all have been the victims of a small version of what Bernie Madoff did," Hazelbaker said.

The U.S. Securities and Exchange Commission has charged Anderson with running a Ponzi scheme while operating under the business name Rosand Enterprises. The Illinois secretary of state also had filed an order against Anderson and his business.

"From at least December 2005 through May 2008, Anderson, directly and indirectly through Rosand, raised approximately $12 million from at least 77 investors by selling promissory notes," according to a press release from the commission.

Anderson had presented a half million dollars to Duziske and Modder, Hazelbaker said.

"That gives you the reason to think the guy's real," he said.

City put the heat on developers

Modder spent a lot of time before his death working to clear debris and tending to other odds and ends on the buildings "in order to try to satisfy the city," Hazelbaker said. "On his death bed, he was aware that the city was trying to take this building away from his widow. So, that says a lot.

"Harm Modder never got up and thought, 'What can I do to piss off the city of Port Washington?' … It's a damn shame, all ways around — it's a multi-level tragedy, which is only going to get worse if people try to make rabbits jump out of hats," the attorney added.

Hazelbaker said his client, Duziske, was willing to go along with the recommendation of the court-appointed receiver, Robert Carroll, that the buildings be razed. Carroll assessed the economic feasibility of repairing the buildings at one point during the lawsuit.

"His task was to verify whether it could be renovated or rehabbed or not," said Randy Tetzlaff, director of Planning and Development for Port.

The assessed value of the building and land that was used was $327,700, and the fair market value was found to be $370,800, Tetzlaff said. The value of the white bank building alone was assessed at $158,000.

As a historic building, the cost of repair cannot be more than 85 percent of the value of the building in order to make restoring the structure the most viable option, he said.  The city was looking to bring the building back up to a usable condition.

With renovation estimates all ranging between $300,000 and $600,000, Carroll had no option but to recommend the razing of the two buildings, Tetzlaff said.

Port Harbor and City Attorney Eric Eberhardt had reached a tentative out-of-court settlement that called for the buildings to be torn down, but the Common Council this week held off on approving the deal. Instead, aldermen want to see what other options there are to razing the buildings.

Was asking price too high?

Many city officials have hoped all along that someone else would be able to purchase the buildings and put them to use, but they say the asking price of Port Harbor Investment LLC has sent interested parties running away.

Tetzlaff said the company has been asking about $900,000 for the property, bringing the price to a $1.4 million investment if someone completed the high-end estimate of the needed fixes for restoring the buildings.

But the sale price of the property is none of the city’s business, Hazelbaker said, adding that he doesn't know whether $900,000 is the company’s actual asking price.

"Whether that figure is accurate or not, I have no idea," he said. "My client has suffered enormously as a result of being defrauded. … My client certainly wants to make some money, if possible, or at least cut their losses."


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