Life, Death and the Green Bay Packers
Real estate attorney Benjamin S. Stern, of Chernov, Stern & Krings, talks about the global financial meltdown, the importance of the dash, and some football team or other
Published in 2013 Wisconsin Super Lawyers magazine
on November 1, 2013
Updated on March 11, 2021
Q: You’ve been a real estate lawyer since 1966. At what point did you feel the vibrations from the recent global financial meltdown?
A: I started feeling the vibrations when clients, either developers or businesspeople or banks, informed me what was going on. I saw some of the lending practices in 2007 and knew chaos was going to ensue. Basically, the predatory lending practices—and I use that word cautiously—almost grew to the point where, if a borrower could fog a mirror, they could get a loan. Many lenders didn’t care about loan-to-value. They didn’t care about equity in the project. They didn’t care about the financial wherewithal if the buyer was just making loans.
Q: Didn’t banks become less careful about lending because collateralizing mortgages supposedly minimized risk?
A: Right. The first collateralizing of mortgages was done as pools of mortgages on a very conservative basis by the residential insurance component of MGIC [Mortgage Guaranty Insurance Corp.]. They got appraisals. They did 75 percent loan-to-value, and some of the loans in those days were securitized and sold in packages. In the haste to make loans in 2007, the ingredients of good underwriting and adequate appraisals was somewhat cast aside. When you’re dealing with this collateralized debt, you can’t call up a banker and say, “How can we work through this?” Because this has been collateralized and it may be XYZ Financial Institution in New Zealand who brought this package.
Q: Any of your cases seem particularly endemic of the era?
A: I represented a receiver, Seth Dizard, on an incomplete hotel project that had gone into receivership. The receiver’s role was to, in effect, see if the property could get sold. There were many ingredients that went into this particular transaction. One of the borrower entities was an Icelandic entity, and, at that time, basically all of Iceland was in bankruptcy. The lender got taken over by the FDIC. Many subcontractors, to the tune of millions of dollars, had not been paid for their work on the project. This was probably one of the longest-standing receiverships in Milwaukee County.
This went on for three years and it had upwards of 30 to 40 lawyers involved in the case at one time. Our role was to get this property sold, and hopefully up and operating as a functioning entity. It’s located on a very busy street of Milwaukee and has been an eyesore for three or four years. Eventually, the land and building was sold to a purchaser of the loan, who had purchased it from the FDIC. Recently there’s been publicity that they have engaged in a contract to sell the property through the Milwaukee School of Engineering, which is in proximity to this property. It was going to be a hotel and they are going to make it for dorms.
Q: How much was completed?
A: It’s a multistory building. I would say 75 percent to 80 percent complete. It was a textbook case: the read for a law student interested in real estate. If they were really interested in real estate and read this, they might choose another field.
Q: How did you choose real estate?
A: When I graduated law school, I moved to Chicago. I worked for Chicago Title Insurance Company and got to work for a gentleman named Robert Kratovil, who is many years deceased, but he was probably the leading guru on mortgage law in the United States. It got me very interested in real estate.
Q: Had real estate been in your sights or was it happenstance?
A: It was more happenstance. I actually thought I was going to be a litigator—like everybody in law school who had grown up watching television. I worked for the Title Company for a year and a half, then I went to work as counsel for McDonald’s Corporation. The McDonald’s Corporation.
Q: What did you do for McDonald’s?
A: In those days, they had a sale leaseback program, where they would sell the property to you and then for example, lease it back on a 20-year basis and pay you a 10 percent return, which in today’s times would be spectacular. So I got involved with the sale leaseback program: documenting the transactions, negotiating the transactions, and also negotiating and documenting a lot of their mortgage loans throughout the United States. Extremely interesting for somebody who was out of law school a year or two. I was 25 or 26 years old. It got me indoctrinated fairly early into complex real estate transactions.
Q: Was this in Chicago?
A: Downtown Chicago. Then they moved to a suburb of Chicago called Oak Brook. They developed an office building there, and, after I left, an entire campus. They had an institute, which they called Hamburger University. Everybody from the franchisees to the lawyers had to go to Hamburger University. The lawyers had to go for a week, and they would work in a store and see how the operations of the business worked. You would have to take the milkshake machine apart and put it back together again, which was a greater chore for me than documenting a $10 million transaction.
Q: Did you ever meet Ray Kroc?
A: Oh, yes. He was a very interesting, flamboyant individual. He was unabashed about giving you his stance on issues. He’d had several businesses earlier in his career, which failed. I think he was selling, at the time, shake machines, and he saw that the McDonald brothers in California were using a lot of shake machines. So he went out there, saw the operations, thought it was fantastic, made them an offer.
As an aside: When I was leaving, my father, who lived in Green Bay, said to me, “Well, would this be a good stock to buy?” Being on the inside of a corporation is obviously different from being out there in the world. I’d had an experience with one of their real estate people, who asked me about the prime rate. Not “What is the prime rate?” but “What do they mean by the prime rate?” I said, “Oh, my God. This is this huge corporation, and he’s asking me what do they mean by prime rate?” So when my dad asked about buying the stock, I said, “I don’t know if I would, Dad, these people aren’t very bright.”
Up until the time my dad passed away, he said, “I never should have listened to you.”
Q: Why did you leave?
A: I got the opportunity to move to Milwaukee, which was halfway between Green Bay, my hometown, and Chicago. I went to work for MGIC Investment Corporation. I was recruited to work for the commercial subsidiary of that company. I basically got involved with these commercial mortgages and leases at the time we had the first enormous savings and loan crisis in the ‘70s. My job was really doing the predecessor work to what’s been going on in the last five years. The workouts.
They also had a giant in the industry, the man who started the mortgage insurance industry, Max Karl, who was just an outstanding gentleman. When I decided in my 30s to leave the company and start my own law firm, I went to Mr. Karl, and I said, “I’m going to be leaving the company, but I’d like to get some business from the company.” He said, “Don’t worry. You’ll have business from us as long as I’m around here.” He was absolutely true to his word. A real gentleman. It was nice, starting as a solo practitioner, having this company as a client.
Q: It’s ironic, but I can’t look at Max Karl’s name without thinking of Karl Marx.
A: I was up in Northern Wisconsin one year when they were disclosing the earnings of MGIC. They said, “The founder of the company, Karl Marx … ” I said, “They got it a little wrong.” But he was just a superb man, a people person. He cared about his employees. He was emblematic of what you would like the leader of a company and an industry to be. He saw that this was an industry that could be a blossoming industry. He was a pioneer. We don’t have as many pioneers today. We do more in the technology industry than we do in the professional industries.
Q: And you were involved in the recent Derzon Coin Store case?
A: I was appointed a special administrator for a short period of time, overseeing the shutting down of this coin company business while the decision was made as to who the new owner would be. It turned out to be very challenging. We had to secure the premises where the gold, silver and jewelry were located. We had to deal with a myriad of questions and a myriad of problems.
Q: It got a lot of publicity. It had sex …
A: … money, greed, wills: everything people like to read about. As a real estate lawyer, you sort of like to fly under the radar. This was in the newspaper every other day for six or seven weeks. There was nowhere I could go without people saying, “Oh, it’s the coin man.” I chuckle a little bit but it was an interesting experience. [But] when a decision was made as to who the owner of the business was, I was happy to turn over the keys to the new owner.
Q: What drew you to law in the first place?
A: I always liked history, civics. I was not mechanically adept so I wasn’t going to be a doctor. I thought, “I like law. I like negotiating. I like oratory. I like drafting.” That drew me to the legal profession.
Q: And your parents?
A: My dad came to this country from Lithuania when he was 4 and became an entrepreneur … a middleman in the fur business. Between Michigan, Minnesota, and Wisconsin, they probably had 50 percent or more of the mink ranches in the country. My dad bought from the ranchers and sold to the New York manufacturers. That was an interesting process because you had to negotiate when you were buying from the ranchers and you had to negotiate when you were selling to the garment industry. I would see him worried: “Did I buy too high? Did I sell too low?”
Q: Did you pick up negotiating from him?
A: I think so. I would see him negotiating with purchasing the mink and selling it. At the time, you don’t think about it, but later in life, when you reminisce about your youth, you say, “My dad had to negotiate this.” It was not necessarily easy, but I don’t know what is easy out there today.
Q: You grew up in Green Bay. So … Packers fan?
A: Absolutely! In our conference room, we have a picture of Clay Matthews tackling Brett Favre in a Vikings uniform. When people come into the conference room, they love this. Then I go into the story of our family history with the Packers. My mother had a double first cousin, two brothers married two sisters, who was on the original Packers team in 1919. They have a picture in the program every year of the original team, and he’s the first guy on the left in the first row. He was 5 feet 4 inches tall. He was one of Curly Lambeau’s best friends. In 1922, the team was in state receivership. Folklore has it that he gave Curly Lambeau the money to take the team out of receivership, and Curly wanted to do a favor for him. The cousin had a meatpacking company, and he says, “Why don’t you name the team after my company, the packing company?” Folklore has it that that’s how the Packers got their name.
Q: What was your mother’s cousin’s name?
A: Nate Abrams. There’s a picture of him in the program. We’ve had season tickets in the family since 1944, and until last year I’ve gone to every playoff game in the history of Lambeau Field—other than the Ice Bowl, when I was on my honeymoon. I was in Florida, but I watched it on TV.
Q: A good place to watch the Ice Bowl.
A: Yeah, but I was sort of wishing I was there. The Packers in Wisconsin are a treasure. Everybody loves the Packers. If I give a couple tickets for a Packer game to a client, they’re mine for life.
Q: Do you have a favorite era?
A: I love the Lombardi era. Growing up, teenage years, I loved it. It was the Paul Hornung, Bart Starr, Jim Taylor era. It was very exciting. Prior to Lambeau Field, the Packers used to play at a high school stadium, Green Bay East High School. It was called City Stadium. You could take your children in, and they could sit on your knee until they were 11 or 12 years old. I was about 5-foot-10 and I was sitting on my dad’s knee, and people would say, “Get the kid a ticket already! We can’t see over his head!”
Q: There was an HBO documentary about Lombardi that came out a couple years ago.
A: I watched it. I was very melancholy. My wife said, “Why are you getting so melancholy?” I said, “This was my youth.”
Q: What advice would you give a recent law school graduate?
A: I would say they should try a field that they like and which suits their personality. The practice of law is fraught with peril. First, you have to attract a client. Then you’ve got to do the work and do the work well. Then you have to collect your fees from the client. All along the way, there can be detours. If somebody is not geared to all [this], they might be better off in the corporate world. There are many corporations today that are looking for outstanding lawyers to be in-house counsel.
Q: You talked about finding a practice area that suits your personality. How does real estate suit yours?
A: Real estate law has given me the opportunity to be able to negotiate, draft and litigate matters. If I was just sitting in an office drafting documents and not doing the negotiating or not doing any litigating, I would not enjoy it as much. [But] I might have been better suited to be a litigator from the standpoint of liking to be in the arena.
Q: What’s the appeal of the arena?
A: I like being able to match skills against the skills of other lawyers. I like helping people. If I’m in the arena, representing somebody in a real estate dispute, I get self-gratification out of helping somebody out of a dilemma.
Q: What’s stronger: the competitive instinct or the advocacy instinct?
A: I think as you get older, the competitive maybe gets a little less and the advocacy gets a little more. When you’re younger, you’re going to take on the world. As you get a little older, you realize the world will win.
Q: Very true.
A: My oldest daughter followed me into law and actually—it’s every parent’s dream—did better than I did. Unfortunately, three years ago, she developed a rare form of cancer and passed away. Possibly the single biggest tragedy in my life. It puts things into perspective. When I do these mediations, people often start off by saying, “The worst thing that has happened to me is that I stand to lose money.” I say, “The worst thing in world is not the fact that some money is on the line, because, in the scope of life, that’s important, but it’s not the most important.”
Q: Money can be replaced.
A: Money can be replaced but lives cannot be replaced. When my daughter passed away, somebody gave me a poem. It’s called “The Dash,” written in 1996 by a woman named Linda Ellis. It talks about when you go to a cemetery you see a person’s date of birth and date of death, and in between is the dash. It talks about how life should not be measured by the date of birth or the date of death but the dash. The dash in the middle, which is the sum of your life