Banking magnate heir says he can’t repay creditors

A man who was thought to be one of the wealthiest in South Dakota is insolvent.

Tom Vucurevich, the heir to banking magnate John T. Vucurevich, notified creditors through his lawyer that he doesn’t have the money to pay millions of dollars in claims. Those claims were generated when Vucurevich struck deals with some of the former lenders and business partners of his son, Kent Vucurevich, who in 2011 was forced into bankruptcy.

This summer, about 20 creditors, including the city of Sioux Falls, received a report detailing in stark language the finances of Tom Vucurevich and his wife, Claudia. The report, compiled by Michael Dell, a CPA for Vucurevich, and independent economist Donald Frankenfeld, was updated as new information became available.

“Taking into account the liabilities and claims against Mr. and Mrs. Vucurevich, together with the assets that Mr. Dell and I have been able to identify and reasonably value, Mr. and Mrs. Vucurevich are insolvent,” the report said. “Moreover, the magnitude of the disparity between assets, on the one hand and liabilities and claims, on the other, is such that, even if some assets have been missed or improperly valued by us, Tom and Claudia Vucurevich remain insolvent even after adjustments are made.”

Those conclusions sent a shockwave through the pool of creditors, who have claims of more than $11 million against Tom Vucurevich. But to some of them, it’s inconceivable that the fortune built up by banking legend John T. Vucurevich has evaporated.

“It’s a huge surprise to a lot of, lot of people, and there’s still some skeptics out there that think he’s hiding a huge, huge, huge amount of money,” said Glenn Boomsma, a lawyer representing some of the creditors in deals with Tom Vucurevich and Kent Vucurevich’s bankruptcy.

In an email, Tom Vucurevich said that like other investors, it’s difficult to always keep taxes current. He referred questions to his lawyer, Mark O’Leary. O’Leary said in an email that he doesn’t discuss matters related to his clients.

Insolvency would mark a stunning downfall for the Vucurevich family, which for decades has been among the most prominent in South Dakota, particularly West River, the nexus from which John Vucurevich built a banking empire that spanned eight states.

The patriarch of the Vucurevich family could have been the lead character in a Horatio Alger novel.

Born in 1912, John Vucurevich came to the United States from Yugoslavia when he was 8. He settled with his parents and two brothers in Lead. After leaving school in the 10th grade, he worked a series of jobs, eventually opening a grocery store and hotel, serving in the Army during World War II and the South Dakota Legislature.

He bought his first bank in 1951.

After his death in 2005, a foundation in his name was fully funded. The John T. Vucurevich Foundation had assets of more than $107 million in its latest public tax filing, and regularly distributes about $5 million a year to charities, universities and nonprofits, cementing John’s legacy as one of the greatest philanthropists in state history.

The creditors who have pursued first Kent Vucurevich and later his father believe that, besides endowing the foundation, John T. left behind trusts for the family.

In his review of Tom Vucurevich’s finances, Frankenfeld noted that, “The many holdings of the late John T. Vucurevich were complex and sometimes confusing, owing to a similarity of company names, interlocking or overlapping ownership, and a myriad of financial and capitalization issues. Moreover, some transactions occurred more than 20 years ago, which makes reconciliation difficult.”

Frankenfeld said he was unable to talk about the report because of client confidentiality.

The review concluded that  Tom and Claudia Vucurevich received a share of the $77 million in proceeds from the 2006 sale of Glacier Bank in Montana. The Vucureviches’ lawyer says their share of the sale was only $447,951. Based on the findings of insolvency, it appears the money is gone.

The analysis was sent to creditors along with an offer from O’Leary that both Tom and Claudia Vucurevich were willing to agree to confessions of judgment with creditors who agreed to certain terms. It would have required creditors to drop bids to get judgments against the couple in court.

“In our view, a collaborative effort involving all interested parties in structuring a plan that will allow Tom and Claudia to meet their obligations is far, far superior to litigating claims in the current environment,” O’Leary wrote in the letter dated June 24.

It’s not clear how many of the creditors took up the offer. Several of them were already in litigation against Tom Vucurevich or entities he controls, including the city of Sioux Falls. The city’s lawsuit seeks to recoup $279,000 in utility costs from the high-end Arbor’s Edge development, where Kent Vucurevich was a partner in the project.

When asked what an insolvency would mean for the city’s lawsuit and the taxpayers who funded the improvements at Arbor’s Edge, Diane Best, an assistant city attorney, declined to comment.

Officials from several of the banks that have claims against Tom Vucurevich also declined to discuss the issue, saying they are prohibited by federal law from discussing customers’ finances. Plains Commerce Bank is seeking $4.7 million, according to the financial analysis, the largest claim. Other banks include Wells Fargo, Valley Exchange Bank, Quoin Bank, First Premier Bank, First Dakota National Bank, Great Western Bank and Black Hills Community Bank.

“Tom is a great man,” said Jason Appel, the executive vice president at Plains Commerce. “He and his family have done a lot for the state and Rapid City. He has said he is going to sort his way through this, and we believe him.”

Ted Thoms, a former business partner with Kent Vucurevich, is one of the creditors who thinks the Vucurevich family is hiding assets.

“Those assets were used not that long ago to get big loans,” Thoms said. “So either they defrauded the banks because the assets didn’t exist, or they are defrauding us now because the assets honestly do exist.”

Vince Purtell, who also has a claim against Arbor’s Edge for a loan that was backed by Tom Vucurevich, was also surprised by the insolvency claim.

“I don’t know Tom Vucurevich, but it was my understanding that Tom Vucurevich was a wealthy man,” he said.

As for the future of his claim, Purtell said he doesn’t think about it much, leaving it in the hands of his lawyer, Boomsma.

“When the music stops, there will be some of us who don’t have chairs,” he predicted. “I hope I’m not one of them.”

CORRECTION: A story in Sunday’s edition contained incorrect financial information about Tom and Claudia Vucurevich. A financial analysis showed that the couple received a share of the $77 million in proceeds from the sale of Glacier Bank in Montana. The Vucureviches’ lawyer said their share of the sale was only $447,951. The amount was incorrect in Sunday’s edition.