A year after the worst market quake since the Great Depression, aftershocks from the credit crunch are rumbling through Montecito’s upper crust.
Patricia Klink filed for Chapter 11 bankruptcy protection Aug. 17 with $29.3 million in assets and $22.2 million in liabilities. She is the wife of John Klink, a longtime high-level Vatican adviser whose anti-abortion views kicked up controversy when George W. Bush nominated him for a State Department position in 2001.
Nearly all of the assets listed are interests in Montecito properties, including a $21.9 million beachfront estate on Fernald Point Lane. John Klink is listed as a co-debtor on many of the debts.
Through an attorney, the Klinks said they were caught in the same crunch that has snared businesses and consumers alike. They had debt that needed to be repaid or restructured, they couldn’t find new loans, and the clock ran out. They filed for bankruptcy to gain time to sort it all out.
The financial woes facing Klink and other members of Montecito’s wealthy elite may signal that Santa Barbara, with its high-end real estate market, is not as insulated from recession as it may have hoped. And a cutback in spending by what one economist calls the “gentry class” could spell trouble in the everyday economy of a city of 90,000 that supports outposts for retailers such as Saks Fifth Avenue, Tiffany & Co. and Louis Vuitton.
Reached by phone, Patricia Klink, a Harvard MBA who runs an investment firm, referred questions about her bankruptcy to her attorney, Rob Egenolf.
“It’s one of those situations that is not uncommon in today’s world, where real estate debt needs to get restructured or repaid, and it’s tough to find replacement debt,” Egenolf said. “Timing becomes an issue, and a bankruptcy helps buy the time” to negotiate with creditors, Egenolf said.
The creditors range from big institutions to area shops. Top secured creditors listed in Patricia Klink’s filings include Chase, owed $11 million; Santa Barbara-based American Riviera Bank, owed nearly $5 million; Santa Barbara’s First Bank, owed $2 million; and Allstar Financial Services, owed $1.6 million.
The filings also list a $1,189 debt to McDonald Animal Hospital for medical treatment for a dog and $2,625 to Santa Barbara Training for health and fitness work.
Egenolf said creditors large and small will be repaid. A longtime attorney for the Klinks, Egenolf is owed $75,000, according to the bankruptcy court filings.
“This is not one of those situations where anyone is going to be left holding the bag,” Egenolf said. “There isn’t a likelihood that anyone will get less than what they’re owed. It’s just a matter of when they will get it.”
The Klinks have kept a low profile in recent years. But when the couple wed in 1987, the ceremony at Mount Carmel Roman Catholic Church in Montecito merited a write-up in the Style section of the New York Times.
John Klink, a Georgetown University-educated investor, worked to help refugees by serving in Morocco, Yemen, Thailand and Haiti for Catholic Relief Services, according to reporting in The New York Times. He also served for nearly 10 years as the Vatican’s representative on the executive board of Unicef, the United Nation’s children’s fund, and now serves as president of the governing committee of the International Catholic Migration Commission.
John Klink also played in politics. Campaign finance records show that the Klinks have donated more than $50,000 to Republican candidates and causes. In 2001, John Klink was a member of the Republican National Committee’s Catholic Task Force, according to reporting in The New York Times.
In 2001, President Bush nominated John Klink as assistant secretary of state for population, refugees and migration. But Klink’s past advocacy against the use of condoms and oral contraceptive pills stirred up a firestorm in the press. The job eventually went to Arthur E. Dewey instead.
More recently, Patricia Klink was running a real estate rental business. The beachfront estate on Fernald Point Lane, for example, was available to renters on a weekly or monthly basis, going for $60,000 a month in the summer months, according to the real estate business’s Web site.
How much that business was bringing in to service Patricia Klink’s $22.2 million in debts is unclear.
At one point, Patricia Klink’s bankruptcy filing says the real estate venture brought in a net income of $114,000 a month, but at another point the filing suggests the business lost that much each month. William Winfield, the Oxnard attorney handling the bankruptcy filing, didn’t return repeated requests for a clarification.
Bill Watkins, an economist with Thousand Oaks-based California Lutheran University who studies the tri-county economy, said a pullback in spending by Montecito’s wealthy could have “potentially a huge impact” on Santa Barbara’s economy.
“Santa Barbara has never grown fast in the past two decades when the economy was booming,” Watkins said. “But then it typically doesn’t get hit as hard in recessions. Part of that is government institutions like the university and community college, but part of it’s also the gentry class there that keeps a lot of people employed.”