Capital Clicks

Omaha lawyer named to sort out complex Lincoln estate in $40 million bank fraud case

By: - January 12, 2023 12:21 pm

Banks and other financial institutions in Iowa and Nebraska, alleging bank fraud, have made more than $40 million in legal claims against the estate of a Nebraska businessman. (Photo by Getty Images)

LINCOLN, Neb. — With 12 lawyers looking on, a Lancaster County judge on Wednesday approved the appointment of an attorney to sort out the tangled estate of deceased Lincoln businessman Aaron Marshbanks.

“This is a unique case, which is probably an understatement,” said Brandon Tomjack, who represents Midstates Bank of Council Bluffs, Iowa.

Since Marshbanks, 45, was found dead two months ago in a downtown Lincoln parking garage, more than $40 million of legal claims have been made against his estate by banks, savings and loans and credit unions that maintain they were duped by Marshbanks into issuing business loans that had no or inadequate collateral.

Tracking ‘path of funds’

This Lincoln, Nebraska, home, at 11700 E. Van Dorn St., as well as a guest cottage and a “barndominium,” were part of a residential complex being built by Aaron Marshbanks, a recently deceased Lincoln businessman being investigated for alleged loan fraud. (Photo by Paul Hammel/Nebraska Examiner)

While dozens of rental properties were purchased using the loans, it doesn’t fully account for the millions of dollars in loan proceeds. Court documents have mentioned catastrophic losses of risky investments, purchases of rental homes from northeast Omaha to New Orleans and millions of dollars poured into the construction of a luxury acreage in east Lincoln.

Omaha attorney Edward Hotz, who was appointed as personal representative for the estate, said Wednesday that his first step will be to track down “the path of funds” that were transferred in and out of the several limited liability corporations formed by Marshbanks and between his accounts and those of his financial adviser, Jesse Hill.

Hill has been accused by state banking officials of helping Marshbanks obtain $20 million of the loans by falsely claiming that the businessman had millions in investment accounts and by fabricating financial statements backing that up. On Tuesday, a judge ordered Hill’s accounts frozen as an investigation continues by the Nebraska Department of Banking and Finance and the FBI.

Wife declined estate task

The appointment of an independent, third-party to sort out the estate was necessary after both Marshbanks’ widow and others named in his will declined to serve as personal representative.

Tomjack suggested appointing Hotz, who has experience with settling complicated estates,  as the “successor” personal representative. Tomjack had argued in court filings that sorting out the estate was beyond the capability of Marshbanks’ widow, who likely had a conflict of interest in serving in that role.

Midstates, in its legal claim, has said it is owed more than $2.4 million in unpaid loan proceeds.

The other attorneys at Wednesday’s court hearing before Lancaster County Judge Holly Parsley agreed to the appointment of Hotz.

The next court hearing involving the estate comes in two weeks over a request by a partner of Marshbanks to buy out the estate’s interest.

Micheal Kramer and Marshbanks were involved in an endeavor called MKAM LLC to “flip” 21 residential properties in Omaha and Lincoln. But Kramer, in court files, said that his partner “drained” the equity out of MKAM without his knowledge, for unknown purposes.

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Paul Hammel
Paul Hammel

Nebraska Examiner Senior Reporter Paul Hammel has covered the Nebraska Legislature and Nebraska state government for decades. He started his career reporting for the Omaha Sun and was named editor of the Papillion Times in 1982. He later worked as a sports enterprise reporter at the Lincoln Journal-Star. He joined the Omaha World-Herald in 1990, working as a legislative reporter, then roving state reporter and finally Lincoln bureau chief. Paul has won awards from organizations including Great Plains Journalism, the Associated Press and Suburban Newspapers of America. A native of Ralston, Nebraska, he is vice president of the John G. Neihardt Foundation and secretary of the Nebraska Hop Growers.