Former car dealership has a tangled past

News that the Cloquet Police Department is investigating the former Cloquet Ford Chrysler Center after receiving more than a dozen complaints didn't surprise people watching the former business's Facebook page, which was littered with complaints.

As outlined by police chief Derek Randall and Facebook followers, the issues range from people going to get tabs and then finding out they don't legally own the vehicle, because the title was never transferred, or people trading in a vehicle and the loan not being paid off, leaving them paying on a loan for a new car and the old car they don't own anymore.

The problems are easy enough to describe, but what happened to cause those problems is still unclear. Randall said it's uncommon for his department to get involved with financial issues, so they are investigating and working with the state. They're still in the investigation phase, he stressed, adding that he doesn't know if it's a criminal investigation yet. They would like to talk to anyone who's had issues, so they can collect as much information as possible.

He stressed that they've had no complaints about the new business at the former Cloquet Ford Chrysler site at 701 Washington Ave. in Cloquet.

The new business, Wood City Motors, is owned by the Duluth-based car dealership group Evergreen, which owns dealerships in the Twin Ports and across the state and region including Kia of Duluth, Kia of Mankato, Kia of St. Cloud, Iron Trail Motors on the Iron Range, NorthStar Ford and Volkswagen of Duluth, Sonju Two Harbors, and several dealerships in Wisconsin.

Cloquet Ford Chrysler, aka Cloquet Motors LLC, was originally started and owned by three people: husband and wife Alan and Reneé Birman, and Mike Larson, who the Birmans described then as a silent partner in the business.

Last summer, a story in the Pine Knot News reported that the Birmans had "stepped back to a more silent role" while "previously silent partner" Mike Larson had taken on a more active role. At the time, Larson said he was trying to stabilize the course of the business.

The Birmans - who had been very involved community members at one time - sold their home at 1 Park Place in Cloquet for $527,000 in November 2020 and told friends they were moving to Texas with their young son.

Then a bankruptcy filing on July 9 of this year - reported in the Pine Knot News on July 30 - showed the Birmans with an address on Howard Gnesen Road in Duluth.

The Chapter 7 filing claims the Birmans have assets of $47,445 and unsecured debts in the amount of $3,648,019 plus $60,000 in unpaid taxes.

According to the bankruptcy filing, the vast majority of the Birman's debts are business loans: $1.2 million owed to Westlake Financial in Los Angeles, California, $740,000 to AFC in Osseo, Minnesota, $500,000 to the Small Business Administration, $393,078 to American Guardian Funding, $90,000 to Ford Credit in Colorado as well as Chrysler in Michigan and more. Many of the creditors are in the business of providing loans, some of them specifically for car dealerships, or a revolving line of credit. More local business debts include $267,395 to North Shore Federal Credit Union and $200,000 to Frandsen Bank and Trust. A total of 33 creditors was listed on the original bankruptcy filing.

In late August, bankruptcy judge William Fischer ordered that the bankruptcy trustee could examine two years of the Birman's Woodlands National Bank account, which the trustee requested "in connection with the large transfers from the debtors' business checking account to the debtors' personal account," according to court documents.

On Oct. 5, attorneys for Cloquet Motors LLC and Mike Larson filed an adversary complaint alleging that the Birmans had wrongly stated they owed nothing to Cloquet Motors.

"The debt owed to CMLCC is unknown and is based on an illegal diversion of company funds for the personal benefit of the debtors," the complaint alleges.

Neither the Birmans nor Larson returned phone calls from the Pine Knot News.

The bankruptcy case is ongoing. The most recent action was the fraud complaint filed by Cloquet Motors LLC.