THIS TIME: A RE-POST: FOR JEFF DENHAM, BUILDING WEALTH WAS AS EASY AS L.L.C.

This piece was first posted last September.  More people have become interested in the race for the 10th Congressional District seat since then. For some, the background on the incumbent’s finances may not be known and may ultimately influence their participation and or their vote. So, read or re-read!

QUESTION No. 1: Just how wealthy is Mr. Denham? The answer, of course, depends on your perspective. But, by our count, he is worth between $5 million and $15 million. There has to be a range because the federal disclosure forms filed each year do not list specific values but instead give a range of values. Read on and do the math yourself.

Mr. Denham has utilized a specific corporate form for the vast majority of his holdings. He is a member of six Limited Liability Corporations (LLCs). His interest ranges from 50 per cent to 25 percent ownership. We discuss each in the order in which it was created.

DENHAM PLASTICS LLC: The bulk of Mr. Denham’s wealth lies in his 50 percent ownership of this LLC.  It is owned by Mr. Denham and Charles S. Hutchings of San Francisco who is involved in all of the other Denham holdings. The origin of this business is currently described on its website as follows:

“Denham Plastics LLC was established in December 2000 in Salinas, CA. We started out with a 700 sq. ft. building in an industrial park in the center of the packaged salad market. Jeff Denham with an expertise in the produce market partnered with Mike Hutchings an expert in the plastic container industry and formed Denham Plastics LLC.”

The LLC sold and rented plastic containers for agricultural use and recycled these containers.

In his first disclosure as a Congressman for the Calendar Year 2010, he valued Denham Plastics at $1,000,000 to $5,000,000. His earnings from Denham Plastics for 2010 included a salary of $42,154 and “dividends” of $15,000-$50,000.

In July of 2012 a fire of undetermined cause burned down the leased Denham Plastics warehouse at 1037 Abbott Street in Salinas. Most of the inventory was stored outside the building so the company was able to quickly relocate to a much larger facility nearby at 1057 Pellet Ave., Salinas.

The new facility had about triple the space of the burned out one and this allowed the company to double their income, according to a trade publication, Plastics magazine.

This is confirmed by the calendar year 2012 federal disclosure in which Denham Plastics is now shown at a value of $5,000,0000 to $25,000,000. This is the valuation which continues up to and through the most recent federal filing.  Mr. Denham notes the income from this LLC as between $100,000 and $1,000,000, then and now.

MTJ Properties: In early 2013, a new limited liability company was formed with Mr. Denham as a one-third owner. In early 2013, MTJ Properties LLC was registered with the secretary of state and the purchase of the property at 1057 Pellet Ave., leased by Denham Plastics  after the fire was begun.

Escrow closed on June 28, 2013 at which time a note and deed of trust in the amount of $1,312,500 was recorded by the lender JPMorgan Chase Bank. The assessed value of that property at the time of the sale, was $1,820,411.

Mr. Denham, for the 2013 calendar year disclosure, listed his one-third interest in MTJ Properties at $500,000 to $1,000,000. He carries that company at the same value in the latest disclosure.

Kanaha Properties LLC: In late 2013, Mr. Denham and Mr. Hutchins registered Kanaha Properties LLC with the Secretary of State. Mr. Denham discloses a 50 per cent interest in this LLC.

In early 2014, Kanaha purchased a warehouse property next door to 1057 Pellet Ave. for $1,017,500 according to the transfer tax calculation. On February 26, 2014, a note and deed of trust was recorded on that property for $740,000. The lender was JPMorgan Chase Bank.

For 2014, Mr. Denham listed his interest in Kanaha Properties as between $500,000 and $1,000,000 the same figure listed in his most recent disclosure. His income from that property is shown, then and now at $15,000-$50,000.

Cleantec Logistics LLC: This LLC was apparently formed to utilize the newly purchased warehouse at 1073 Pellet purchased by Kanaha. According to its website, Cleantec provides washing and decontamination services to owners of lessees of plastic containers such as those sold by Denham Plastics.

In 2014, Mr. Denham reported the value of his 25 percent interest in  Cleantec as being worth $250,000 to $500,000, the same value as in his current disclosure. Then and now, he shows no income from his interest in Cleantec.

Sphere Material Handling LLC: In July of 2015, Turlock attorney Michael Warda registered this LLC but a required Statement of Interest which discloses the members of the LLC has not been filed. Mr. Warda has been involved in the registration of other LLCs in which Mr. Denham has an interest. Mr. Denham lists a one-third interest in Sphere worth $15,000-$50,000 and no income from that LLC.

Websites which listed addresses for Cleantec and Sphere in Turlock led us to the purchase of a warehouse complex at Sixth and D Streets in Turlock early this year.

680 D STREET, LLC: On January 4th, 2017, Mr. Hutchins registered with the Secretary of State 680 D STREET LLC and on March 9, 2017 a Fresno law firm filed a Statement of Information, as required. That statement showed Mr. Hutchins and Mr. Denham as the only members, without stating a percentage share.

The business address was listed at 2730 Franklin St., #3, San Francisco, CA which is Mr. Hutchins personal address, even though, by that time, 680 D STREET LLC had purchased a warehouse complex at 600-680 D Street in Turlock. Denham Plastics had obtained a business license for that address by March 2, 2017.

Based on a transfer tax calculation, the property was purchased for $2,123,000. A deed of trust dated February 21, 2017, evidence a loan from Pinacle Bank of Salinas in the sum of $1,4255,000 to 680 D STREET, executed by Mr. Hutchins and Mr. Denham as “members” of the LLC.

This holding will not have to be disclosed on the federal form until after the primarily next June.

WORLD WATERS HOLDING LLC: This seems an almost whimsical investment in the company which makes Watermelon Water, a beverage. Others investing and/or promoting Watermelon Water include Beyonce. It becomes more practical when you learn Mr. Denham’s wife, Sonia, is Director of National Accounts for the product, according to Linked-In

Watermelon Water is made from the pressings of watermelons so “ugly” they would not be effectively sold in retail outlets. The product is self-nicknamed “liquid love.”

RECAPPING: The Denham Plastics value is listed as the total value so his 50 percent interest would be, therefore, $2,500,000 to $12,500,000. All of the other LLC values are of his interest but it is not clear whether or not the values reflect the liabilities to the lenders. This gives us this approximation of $5,000,000 to $15,000,000 assuming the values are net not gross.

Mr. Denham has other investments. He has $150,000 to $350,000 in a retirement account, for example. He also has three real estate holdings: The Longview Ave. farm in Atwater; his personal residence in Turlock and a residential property in Washington, DC, which had been listed as a rental but in the latest disclosure is listed and a second residence. All three are mortgaged, two by Valley First Credit Union and the DC residence by JPMorgan Chase Bank.

DISCLOSURE OF LOANS TO THE LLC: The instructions regarding the listing of liabilities both in a manual for members of Congress and on the top of the disclosure form page which contains liability listings says members are not required to disclose “liabilities of a business in which you own an interest (unless you are personally liable)”.

So, unless he had personal liability for the JPMorgan Chase loans to MTJ Properties and/or Kanaha Properties, he was not required to disclose this $2 million relationship.

Many times, lenders require members of an LLC to sign what are called “personal guarantees”. This side agreement, not usually recorded, allows the lender to look to the personal assets of the members in the event of a default, eliminating the shield of the LLC structure.

The loans to MTJ and Kanaha were made soon after the creation of the LLC and the LLCs did not have any assets beyond the properties which were going to be the objects of the loan.

Whether or not personal guarantees were made is a question left to Mr. Denham to answer.

SOURCES: The information herein comes from the federal filings of Mr. Denham available online from the Clerk of the House of Representatives and can be searched by member and year; the records of the Assessor’s and Recorder’s offices of Monterey and Stanislaus Counties, some of which can be obtained online or through a visit to that office; the California Secretary of State’s Business Search page; websites for the LLCs and the City of Turlock’s business license online search tool.

 

 

 

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