The smell of espresso and freshly baked croissants fills the private-jet terminal of Orlando Sanford International Airport. A businessman in a tailored gray suit sits on the suede couch of the lounge, reading the Economist and waiting for his Gulfstream to refuel. A family in Bermuda shorts and polo shirts, carrying their fluffy white Maltese, parades out the door to their NetJets plane on their way to the Caribbean.
It’s another peaceful morning in the rarified world of the private-jet set. Then Ken Cage barges through the door.
He is stout and quick, with a slight potbelly hanging over his jeans and a Phillies cap pulled low on his forehead. He is the only person in the lounge with a goatee. As Ken waves to the startled receptionist, the businessman clutches his briefcase. The NetJets family scurries faster toward their plane. Cage bounds through the terminal and opens a glass door that leads to the tarmac.
Following close behind him is Randy Craft, a six-foot-two former professional wrestler with a shaved head and tattoos. He has a black Ford F-150 with the words “The Bone Collector” inscribed on the steering wheel.
In the hot Florida sun, Ken and Randy walk along the concrete apron and scan the line of planes parked in a neat row alongside the terminal. They home in on a shiny white Cessna 515, with silver propellers and a red racing stripe.
Ken pulls out a sheet of paper and reads out a series of letters and numbers. Randy scans the numbers on the plane’s tail fin.
“That’s our baby,” says Randy.
Ken’s BlackBerry beeps. It’s an urgent text sent from one of his secret informers nearby—either a mechanic or a fuel guy, Ken won’t say. Ken reads the text. “Cessna to depart to Mexico at noon. Owner tipped off, on way back to airport. Owner is six foot six.” Ken looks at Randy. “Six foot six?” he says. “I don’t want to stick around for that.”
Ken looks at his watch. It’s 11:57 a.m.—leaving them exactly three minutes until he’s face-to-face with a pissed-off, NBA-size airplane owner.
Randy runs over to the plane and starts picking the lock on the door. Within seconds he’s got it open, and he lowers the stairway. Ken’s pilot, a fearless crop duster and stunt pilot who has just come onto the apron, rushes over to the plane and jumps in. After a cursory safety check (Wings? Check. Engines? Check) the pilot starts the engines, and the propellers roar to life. In two minutes he’s careening off the apron and onto the taxiway. After getting clearance from the tower, he guns the plane down the runway and hits the air at exactly 11:59.
Randy looks at his watch “Plenty of time. We still have thirty seconds left.”
Randy and Ken run back through the terminal and hop into their Ford pickup truck. As they tear out of the parking lot, a black Bentley with a tall, silver-haired driver roars down the entrance road toward the terminal. Ken ducks in his seat as the car races past.
When the coast is clear, he pops his head up and looks back. “I could use a beer.”
Randy cranks up the radio and puts on his Texas Longhorns baseball cap. “That was an easy one. Wait till you hear about the yacht we’re about to get.”
Ken Cage and Randy Craft are repo men of Richistan. While other repo men take cars and trucks from the poor and lower middle class, Ken and Randy take private jets, helicopters, yachts, and racehorses from the overextended wealthy. They are the scavengers of high-beta wealth, picking up the shiny remains of a decade’s worth of conspicuous consumption financed with debt, asset bubbles, and soaring stock prices.
In their three years in business, they’ve have been shot at, assaulted, run over by a car, and nearly strangled by an ex-NFL linebacker. While they are hardly popular with the formerly rich, they have become a necessary part of the new life cycle of wealth, where today’s millionaires are tomorrow’s deadbeats.
In 2009, Ken’s company, Orlando-based International Recovery Group, repossessed more than seven hundred boats, planes, helicopters, and other wealth trophies (he calls them “units”). The combined worth of that year’s catch was more than $100 million, up sixfold from 2007, and he says 2011 and 2012 could be even better.
The main reason? The rise of high-beta wealth.
Ken says most of his targets are highfliers who made their money in real estate, financial markets, or business. When their rising debts caught up with the plunging values of their assets, they experienced what the well-heeled like to refer to as a “short-term liquidity issue.” In other words, they were out of cash.
“The big thing is that people made money quickly and went hog wild,” he says. “They didn’t realize that the highs at some point become lows. They just thought this wave would roll forever. Well, guess what? It crashes too. And they still haven’t learned their lesson, even after this shit storm we’ve been through. I hate to say it, but I’m going to be in business a long time.”
Sudden wealth loss has become a profitable business for elite repo men such as Ken and Randy. They’ve created a cottage industry around the shattered lifestyles of the rich, and their ranks are growing. Most of today’s other high-end repo men specialize in one area, whether it’s planes or yachts or Lamborghinis. Nick Popovich, the self-described “big-game hunter” of Indiana, has nabbed more than fifteen hundred planes in his career and says “business has never been better.”
Ken Hill of Santa Barbara, California, whose friends call him “the Grim Reaper,” has repossessed hundreds of planes since taking his first Piper Cherokee in 1969. He travels at a moment’s notice and carries just a few essentials—a propeller lock, a portable radio, a handheld GPS, and a fanny pack stuffed with hundreds of keys.
Jeff Henderson, a Michigan-based repo man who targets boats, told the New York Times that he has a number of repeat offenders, or people who get the same boat repossessed multiple times as they’ve lost a fortune, made it back, then lost it again.
“One guy, I took his boat four times,” he said.
The private-jet and yacht craze of the past fifteen years was driven by the explosion in multimillionaires and easy loans from banks. Between 1995 and 2010, the number of private jets in the air more than doubled, from 7,176 to 17,199. With prices of private jets falling by more than half, many jet owners who used borrowed money are now upside down on their plane finances, leading to rising loan defaults.
Some of the more public defaulters include Minnesota auto dealer Denny Hecker, who built an empire of GM and Chrysler dealerships and bought a twenty-two-seat Hawker private plane with $12.8 million borrowed from a finance unit of General Electric. He borrowed an additional $357,196 against the plane shortly after the purchase. When his business tanked, the lender repo’d the plane. Hecker’s yacht was also repossessed as part of his fruitless efforts to pay back $767 million in debts.
The vagaries of the rich have created other new kinds of business as well. A national chain of pawnshops, called Boomerang Lending, has grown rapidly over the past few years by focusing on the affluent. Wealthy debtors hock Rolexes and Rolls-Royces in exchange for up to $200,000 in cash. Rather than walking into a dingy pawnshop and risk being seen, they can ship their items or drop them off at a discreet office.
“There is a certain type of affluent customer that will not go into a pawnshop,” said founder Todd Hills. “And they don’t have a $50 or $100 problem. Maybe they have a $100,000 problem.”
Recessions have always claimed their share of rich people living on the edge. But high-end repo men say that the past three recessions—for reasons we’ll examine in the next chapter—have each claimed successively larger numbers of rich people, with successively larger paper fortunes.
“For us, 2008 was much better than 2000, and 2000 was better than 1990,” Popovich says. “Each time we get a recession, the private jets we’re taking just get bigger.”
He said there are airport hangars in Pennsylvania, Michigan, and Indiana filled with mothballed jets that were repo’d by banks. Since many planes were bought with balloon loans, with interest rates that start low and surge higher after five years, those loans are now starting to default.
The skies are filled with an even larger fleet of so-called zombie jets—jets that are in default but haven’t been repo’d by banks. Popovich says it’s often cheaper for the banks to take a hit on the loans than to repo the planes and pay for insurance and maintenance until the plane can be sold.
“Given the decline in aircraft values, the banks are getting nervous about pulling these planes back,” Popovich says. “You’ve got planes that people bought for $8 million with an $8 million loan, and now the plane is worth $3.5 million. It’s sometimes easier for the banks to just work out a deal with the owners.”
Popovich still isn’t worried: “I’ve got enough business that I now find myself telling the banks to hold off on repos.”
Like most luxury repo men, Ken Cage fell into his profession by accident. He grew up in rural Pennsylvania, the son of a middle-class family in a middle-class town. His dad owned a trucking company that delivered paper towels and toilet paper from the local Scott Paper plant.
“Everyone was in the same economic boat,” he says. “A guy was super-rich in my town if he had $10 more than anyone else. I’m kidding, but you know what I mean. Everyone lived in the same kind of split-level ranch house with the same white aluminum siding. There wasn’t a big difference between anybody.”
Ken’s dream was to play baseball or maybe become a math teacher. He loved math and had an unusual talent for numbers and statistics. He also played some semi-pro baseball. But after Ken graduated from high school, his father died. Instead of going to college, he decided to go to work.
“My dad’s death just kind of changed everything for me,” Cage said.
He worked as a bank teller for a while, then found a job at a hazardous waste site in New Jersey. For eight to twelve hours a day, he shoveled mounds of contaminated soil and medical waste into a giant incinerator. Ken got married and had two kids.
The money was good. But eventually he decided he wanted more out of life than shoveling hazardous waste into a scorching furnace. He enrolled at a nearby commuter college and got a degree in math, later earning a place in the national mathematics honor society.
Ken bounced around from job to job and eventually landed as head of security for a Pennsylvania hospital. Most hospital security chiefs just watched the doors. But Ken launched his own internal investigation unit. He blew open two mini crime rings in the hospital, including one employee who was stealing computer chips and another who was stealing equipment.
Ken was thrilled by the task of rooting out bad guys, and he found a certain mathematical beauty in investigations.
“An investigation is very similar to math. It’s all logic, where you learn the steps and the variables in order to put a case together,” he says. “But this was a lot more fun.”
He went on to work for Chrysler Financial, the Chrysler unit that handed out loans to its car buyers. He wound up in the high-risk collections department, dealing with customers who were more than thirty days late paying their car loans.
Ken says he learned two things from the collections department. “The first thing was that here are some people who are just financially stuck, and that’s okay. You learn to be sympathetic to them. You work with them. Most of the time they’re in a bad economic situation that’s not their fault.
“The second thing I learned was that the lending practices in this country are totally screwed up.”
Ken saw the loan documents for people who were late with payments and realized that many had never filled in the line indicating their occupation. Others didn’t have an address or list any source of income.
When the German CEO of Chrysler Financial visited the offices, Ken asked him how the company could continue giving away such cheap, easy money.
“He said they were working on it, but that it would be hard to change,” Ken recalls. “All my co-workers looked at me like I was crazy for asking the question. But to me it was obvious that they were going to have a problem.” Working in high-risk collections meant handling repossessions. Ken didn’t actually do any repos. But he assigned them, and most important, he answered the calls from people who had just had their cars repossessed.
“That breaks your heart. I mean, you got a mom who had her minivan taken while she was at work, with the child seats still inside. And she can’t get home or pick up her kids. That’s really tough.”
Ken looked around for a more promising career. He and a golfing buddy started browsing business-broker sites, looking for a small business to buy. He found his dream: a high-end repo company in Florida that grabbed planes and boats from delinquent rich people. Ken could reap the benefits of the repo business without the heartbreaking calls from the minivan moms.
Ken’s partner loved the idea. Ken’s wife didn’t. “She thought I’d get killed,” Ken said. “She vetoed.”
Ken abandoned his repo dream. A few months later, he and his wife were sitting on the couch watching TV and saw a show featuring a repo guy taking a plane in Alaska. It looked quick, safe, and easy.
“We looked at each other and said, ‘That didn’t look too bad. How hard could it be?’ ” Ken smiles. “I don’t need to tell you, but TV can be misleading.”
There is an art to taking the prized possessions of the rich. After taking hundreds of yachts and planes, Ken has come up with some useful insights into the mind of the indebted millionaire. While repossessing from the poor or middle class requires muscle, stealth, and speed, the key to repossessing from the rich is to soothe their wounded egos.
“With the rich, it’s all about pride and control. They’re used to getting their way. So if they confront me while I’m taking their boat or plane, I say, ‘I’m so sorry, sir. There must be a misunderstanding with the bank. I’m sure you’ve made your payments and there’s been some terrible clerical error. So I’m just going to move this boat to storage until you can clear it up with the bank. Then we’ll be happy to bring it back.’ These rich guys know they’ve defaulted. And I know they’ve defaulted. But I never say it. So they say, ‘Ah, right. Well, yes, it’s a misunderstanding. Take it to storage for the time being and I’ll clear it up later.’ They lose the boat, but they save face. That’s what they really care about more than the money.”
Some rich people require a more direct approach.
“There are guys who say, ‘You’re not going to get my plane.’ And I say, ‘Oh yes I will.’ It’s me against the debtor, and he’s not going to win.”
Ken tells the story about the time he and Randy went to grab a yacht from a Cuban real estate tycoon in Florida.
“We go and we snoop around his mansion and see the yacht behind his house, docked in his private marina. So we rush in and grab it and start motoring down the Intracoastal Waterway. All of a sudden I look back and there’s the guy, chasing us in another boat. I don’t know if he had a gun or what, but he was approaching us real fast and screaming his head off. I call the Coast Guard, and they get there right as he’s pulling up alongside us. The Coast Guard pulls him over, and we kept going. That was scary. But the funny thing is, I eventually repo’d his other boat as well. You can run, but you can’t hide.”
He mentions the time he thought he was about to be shot over a private jet.
“We’re taking this Challenger jet and the pilot is a former NFL player who had become a pilot for the owner. He was huge. He was also a coke addict. So we were taking the plane and he comes out and jumps onto the plane and starts attacking us, punches our pilot, and says he has a gun. We eventually contacted the owner and got him calmed down. I felt sorry for the guy. The plane was his livelihood and we were threatening that.”
When rich people turn bad, Ken turns to his hulking sidekick, Randy. Randy was a United World Wrestling star who went by the name “Rockin’ Randy” and was known for his signature versions of the piledriver and the figure-four leg hold. When it comes to high-end repos, Randy Craft has two other essential skills: he can pick just about any lock in the world, and he knows the art of staged combat.
“One day I send Randy to Minnesota to get a plane in the middle of the winter, and he’s walking to the hangar and the owner drives up in his car and starts heading right for Randy. Well, with the wrestling background, Randy was able to jump on the hood of the car and roll over the top without getting hurt. But the guy thought he’d killed him. So he freaked out and apologized. He was easier to deal with after that.”
Ken has sad stories too—not like the ones from Chrysler, but still sympathetic. He was taking a boat from behind a house one summer day and a friendly woman came out to ask if he needed help.
“I started to tell her why I’m there, and she was very understanding. So we get to talking and she tells me that when housing prices were good, she bought a second house as an investment. She flipped it, made money, and bought two more. She said she only planned to have two or three properties, but pretty soon she had fifteen, and the boat and cars and all the rest. I told her I felt bad. But she said, ‘Don’t be sorry. It’s all my fault. I should have known better. We all should have known better.’ I thought that was pretty honest.”
Ken and Randy even get the occasional words of praise from their targets. Hanging above Ken’s computer in his spare, concrete-walled office near Orlando is a letter from a man who had his boat taken back by Ken and Randy.
To whom it may concern:
Reference: 2007 Angler
A repossession is a very humiliating experience, particularly when one is generally a responsible human being. This sentence is an oxymoron because logic would question a “responsible human being” being in the same sentence as “repossession.” Nonetheless a series of events that will only bore you will not be explained here, but rather I would like to commend your company on one of your lead investigators, Randy Craft.
The referenced boat was repossessed from my home today. I was extremely surprised at Mr. Craft’s demeanor. He was as polite and respectful as he could be, while trying to obtain information and get his job done. He never gave an attitude, or was rude, or portrayed himself in any way that would have made an already bad and traumatic experience any worse.
We will try to get our boat back, but the main objective of this email is to let you know that Mr. Randy Craft should be commended on handling such an awkward, stressful, traumatic, emotional situation in the best possible manner—by treating the impacted person as a human being.
When Ken bought his repo business from a previous owner in 2005, he expected to make a modest but steady income. During the first two years, he and Randy kept themselves busy scooping up single-engine propeller planes, twenty-foot fishing boats, personal watercraft, and the occasional broken-down helicopter.
He would clean up the repossessions and sell them at auction, keeping a percentage of the proceeds as profit and sending the rest back to the bank that held the loan.
“It was a nice, steady business,” he says, “like reeling in small fish off the docks.”
In late 2007 he got a giant tug on the line.
“One day I’m sitting in the office and I get a call from a bank for a plane job on the West Coast. I’m taking down the loan information and then the guy says ‘GII.’ As in Gulfstream II. I kind of paused for a minute because that’s a $15 million plane. Until that point, all of our planes were Pipers and maybe a Cessna worth a couple hundred thousand. But the idea that we were repo’ing a Gulfstream was shocking. I mean, that’s someone who once had $15 million to spend on a plane and now was now out of cash.”
After that, he started getting more jets. The boats also got bigger, from little cruisers to full-size yachts. The average value of Ken’s repossessions before the crisis was between $30,000 and $50,000. By 2010, the average value soared to between $300,000 and $500,000. He was not only doing more repossessions. His repossessions were also far more valuable, and he was taking them from people who are much wealthier—or at least they used to be.
Ken credits the banks for part of his newfound prosperity. During the boom times of the mid-2000s, banks loaned money to the wealthy at a record pace for homes, yachts, planes, art, cars, and even horses. Many banks would lend 100 percent of the value for a plane or boat, meaning buyers could sometimes walk away with a $20 million Gulfstream without putting down a single cent.
“There was an assumption that the rich had plenty of money, so why not lend them money,” said so and so. “I mean, what could go wrong?”
A lot, as it turns out. Whenever he gets a job from a bank, Ken looks at the loan history. He usually discovers that the loan amounts are much larger than the property was ever worth.
Sifting through a pile of loan documents in his office one day, Ken ticks off a list of ill-considered loans. There’s a Sea Ray boat he’s about to repossess. The owner received a $240,000 loan to buy it at a time when the book value was under $200,000. Next Ken pulls out a sheet for a Cessna, purchased with a $345,000 loan at a time when the plane was worth $300,000.
“The lending practices are ridiculous. Why would a bank do that? How does that make sense?”
The main reason was deal flow. Like subprime mortgages, loans to the rich generated huge fees to bankers and lenders, regardless of the eventual outcomes. Loans were also a great way to win more profitable investment-advisory business from the wealthy. The rich would take out a jet loan, then give the bank their $200 milllion to manage. Banks figured the rich would always have money to pay back their loans because, well, they were rich.
What they failed to take into account was the rise of high-beta wealth. Many of the the new millionaires were borrowing to support their businesses and lifestyles. They were also products of an ever-rising real estate bubble and stock market. When both markets tanked, some of the rich had little or no cushion. In 2009, the number of defaults on plane loans more than doubled compared to 2008. Boat-loan defaults jumped fourfold the same year.
“They were no different from the rest of us,” Ken says. “They just figured that if the wealthy were spending all this money, they had plenty more in the bank or in assets. But they didn’t. A lot of these guys were living right on the edge, even though they seemed super-rich.”
In the early days of the crisis, most of his business was concentrated around Florida, which was crawling with real estate developers, agents, and house flippers. By 2010, however, Ken was flying all over the country for repossessions and chasing down everyone from fallen tech titans in Silicon Valley to unemployed Wall Streeters in the Hamptons. High-beta wealth, Ken noticed, was now everywhere.
On a humid morning, Ken walks along the creaky docks of the Big Isle Marina near Orlando. The parking lot is strewn with rusted-out fishing boats, sailboats turned on their side, and old wooden hulls with gaping holes, giving the marina the feel of a nautical graveyard. A morning mist floats along the top of the St. Johns River and unfurls behind the mangrove trees and Spanish moss.
Ken stands at the edge of the dock and looks down at a row of gleaming white boats tied to their berths. There’s a sixty-six-foot Ocean Sport Fisherman, with shiny chrome railings, three levels, and high-tech fishing gear. There’s a sleek thirty-eight-foot Concept center console with orange racing flames painted on the side, and a thirty-nine-foot Luhrs Open with a custom gangway.
All of the boats have been repossessed in recent months and all are now for sale. After Ken and Randy take the boats, they’re brought here for repairs and cleaning. They sell most of the boats on their website for about half of the original purchase price.
Ken has a similar resting place for his planes—a nearby airfield with more than a dozen turboprops, jets, and helicopters grounded for lack of funds. As he walks down a line of planes, he taps each plane on the nose and offers a brief history: “Florida real estate agent … Las Vegas developer … tech guy …”
He adds, “I wonder how many of these planes I’ll see again one day. I bet some will be back.”
After grabbing the Cessna in Orlando, Ken and Randy set off on their next hunt. They drive toward Ocala National Forest, a vast stretch of pinelands laced with swamps, rivers, inlets, and creeks northwest of Orlando. It’s a perfect place to hide a boat. Today they’re looking for a sixty-five-foot Sea Ray that’s in default. One of their informants, a local dock worker, gave them a tip that it might be nearby.
Ken and Randy have tipsters all over the country, from ground-crew workers at airports and receptionists at private-jet terminals to tugboat captains and marina workers. They say they rarely pay the tipsters, “except for the occasional beer. They help us because they think it’s fun,” Randy says.
In the search for the Sea Ray, they drive up to a small marina near Eustis and casually make their way along the docks. They wave hello to another boat owner and a dock worker, as if they’re setting off for a morning sail. No one knows they’re repo men.
The Sea Ray’s not there. They try another marina. Nothing. Then a third and fourth. They’re about to give up for the day when Randy gets an e-mail from his office. One of his boat captain friends has called in with a tip.
“The guy said a boat came into Hontoon Landing in the middle of the night last night with no lights,” Randy tells Ken.
“No lights?” Ken asks
“No lights,” Randy says.
Ken explains that there are only two reasons why boats around Ocala would cruise without lights: either they’re running drugs or they’re running from repo men. They race over to Hontoon, a well-manicured marina lined with large sport-fishing boats and party barges. A male rowing team, dressed in matching white spandex and baseball hats, have just finished their morning row. “Nice shorts,” Randy chuckles.
Ken and Randy walk onto the dock and start inspecting the boats. They pass two Sea Rays, but neither is their target. They walk down to one end, then the other. No luck. At the very end of the dock, Randy spots the tip of a boat moored around the corner. It’s blue and white, with a long bow platform, just like the one they’re looking for. They glance around to make sure no one else is coming, then walk toward the boat. Randy jumps on first and lands on the rear deck. He opens the door to the galley and peers inside.
“Anyone home?” he calls. “Hello, hello?”
There’s no answer. Kens jumps on, and they start looking for the boat’s registration number, which Randy finds near the engine room. “This is our boat,” he says. “Let’s move.”
Ken sits down in the control room and notices a cup of coffee, still hot, sitting on the galley counter. The owner, he says, is probably close by.
They crank up the engines, and Randy jumps out and unties the ropes. They check the fuel and start motoring down the river.
Once they’re clear of the marina, Ken sits back in a plush leather chair on the main bridge and soaks up the sun. White egrets and pelicans glide along the shore, and a pair of fishermen bob nearby in a rowboat. Ken cracks open a bottle of water and enjoys a brief moment of quiet. He knows his cell phone will soon start ringing, with another job or an angry target.
But for now, Ken Cage is riding on the top deck of a Sea Ray, enjoying the life of an occasional boat owner.
“Someday I’d like to get my own boat,” he says. “I almost bought one last year, but my wife said no. She thought it was a waste of money. But this is pretty nice. I could get used to this. I tell you one thing: If I bought one, I’d pay all cash.”
Ken says he’s not rich enough to buy his own yacht with cash—at least not yet. But as we’ll see in the next chapter, the American rich are changing in ways that likely will keep Ken Cage in boats and planes for years to come. While 2008 and 2009 may have been banner years for the repo men of Richistan, their best payday is yet to come.