INVESTIGATIVE REPORT
Responding to a tip from a reader, this newspaper examined tax records and conducted interviews of local and state officials to bring you this report. For our other investigations, go online to mydaytondailynews.com.
The chief executive for a Beavercreek-based company that stands to benefit from a $1.2 million state loan was a majority partner in a now-defunct limited liability company that owes thousands of dollars in unpaid property taxes, according to Montgomery County tax records.
Dayton city and county officials say they struggle to collect back taxes from limited liability companies, particularly when businesses have dissolved.
“I think this is a good illustration of some of the challenges we have across the city — whether it’s commercial or residential properties — with LLCs (limited liability companies) in general,” Dayton City Manager Shelley Dickstein said.
In January, the Ohio Minority Development Financing Advisory Board recommended approving a 15-year loan of $1.2 million to US Aeroteam, a defense contractor run by its CEO and president, Suhas Kakde.
Kakde was majority owner in a now-defunct real estate holding company, K.K. Enterprises LLC, that owes nearly $150,000 in delinquent property taxes — including taxes on at least one abandoned industrial site that for years has become a playground for arsonists.
K.K. Enterprises is listed as the owner of an empty industrial building at Deeds Avenue and Edmund Street that has had at least five fires since 2007, including one on Feb. 16. No one was injured in that fire.
In an interview, Kakde said he regrets the state of the building, which once housed his automotive parts manufacturing business. The business suffered greatly during the run-up to the Great Recession, he said, and he was evicted even though the business was making lease payments.
“I wish we were never asked to leave (that building), sir, because that was my biggest pain in the process,” Kakde said.
His obligations were discharged through a Chapter 7 bankruptcy; he personally lost $10 million, Kakde said. He maintains he was a good steward of the building, employing about 200 auto parts manufacturing workers there at its height and investing $700,000 to $800,000 to “clean it up,” remedying environmental issues.
“It does not have asbestos,” Kakde said of the building. “It does not have underground tanks.”
K.K. Enterprises, and not Kakde personally, owe the taxes on the building, Montgomery County tax records show.
Review underway
US Aeroteam, the company Kakde currently runs, describes itself as a “successful, technology driven, aerospace and defense manufacturer.”
On its web site, the company lists its customers as Boeing, Lockheed Martin, the Air Force Materiel Command, Battelle, Raytheon, Honeywell and others.
In a short bio on the site, Kakde says he was educated in India but has spent his career in the Dayton-Cincinnati area. Before 1985, he said he worked for area companies ranging in size from small to Fortune 500, as a design engineer, manager and in other roles.
“He applied numerous initiatives which saved tens of millions of dollars for GE Aircraft Engine, General Motors and the U.S. Air Force,” the bio says.
The company sought the state loan to move from Beavercreek to a building at 1511 Kuntz Road in Dayton.
Although the Ohio Minority Development Financing Advisory Board gave initial approval to the loan, the money will not be disbursed until the State Controlling Board gives final approval, said Morgan Bleich-Lee, a spokeswoman for the Ohio Development Services Agency. There’s no set date yet for Controlling Board review, she said.
“There is no contract with U.S. Aeroteam, and no funds have been dispersed,” Bleich-Lee said in an email.
Before a contract is executed, Development Services program staff review personal information “of key personnel for the loan,” including “personal tax information, value of collateral” and other factors, she said.
‘Fresh start’
Kakde said the 2005-2009 bankruptcy of auto parts producer Delphi — then his No. 1 customer — had a cascading effect on his business, forcing him into personal bankruptcy.
“I personally lost over $10 million in the whole process,” Kakde said.
Paul Robinson, Montgomery County chief deputy treasurer, confirmed that K.K. Enterprises owes nearly $150,000 in back taxes on several parcels on or near Deeds Avenue and Edmund Street, including the building that caught fire Feb. 16.
Kakde notes that he no longer owns K.K. Enterprises, which dissolved in 2008.
“I do not really have ties (to K.K. Enterprises) because that was closed down,” he said.
Individuals who go through bankruptcy should be given a “fresh start,” Kakde said.
“I don’t want to evoke some important names, but President Lincoln had to go through bankruptcy,” he said. “He was allowed a fresh start. And I was allowed a fresh start, which allowed me to create additional positions and jobs, and we are going to be growing.”
Today, US Aeroteam has about 200 employees, Kakde said. The company sought the state loan in order to move to Dayton, he said.
“Our goal is to go back into the city and create more jobs and create the taxes,” he said.
Jeffrey Morris, a professor emeritus of the University of Dayton School of Law and a bankruptcy expert, said being discharged from your debts is “one of the primary purposes of Chapter 7.”
‘There’s nothing to get’
The county’s Robinson said pursuing payment from limited liability companies is “very difficult,” because of the legal protections individual business owners are given.
“It’s just impossible,” added Montgomery County Treasurer Carolyn Rice. “There may be no assets with the (building’s) actual legal owner … Even if you were take to them to court, there’s nothing to get.”
Dickstein blamed state lawmakers for crafting a “shield” for limited liability companies.
“The state is very staunchly protective of property rights and supportive of these LLCs,” she said.
Dan Tierney, a spokesman for the Ohio Attorney General’s Office, said the office can in some cases pursue business debts through a local government debt collection program, trying to find collectible assets that a failing business may leave behind.
“But when a business ceases operations, they tend not to have any assets,” he said.
Costly nuisance
Dayton Fire Chief Jeff Payne said fires at abandoned industrial sites have unfortunately become almost commonplace.
Although tearing the structures down is one option, cities can’t always afford to do that, he said. Dayton officials have estimated that demolishing the K.K. Enterprises-owned building would cost more than $500,000.
“I don’t know if any city has enough money to tear down all the nuisance structures they have,” Payne said.
Meanwhile, fighting the fires can get costly too. Payne said a single factory fire can cost his department $20,000 to $30,000.
“It’s a blight for the neighborhood, and a nuisance for the people who have to live in the vicinity of these buildings,” Payne said.
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