Hanson Motors manager: I never knew about ill-gotten gain

BELCOURT, N.D. - When Hunter Hanson last fall filed for a license to start a used car business at the Turtle Mountain Band of Chippewa, Stuart Medrud was by his side.

But Medrud, 54, is adamant he was an employee-manager of the then-21-year-old Hanson - never a true partner or owner in Hanson Motors - and that he didn't know the money for the business came from ill-gotten grain.

The used car venture is one place Hanson - North Dakota's notorious grain marketer - found to pour away money some of the $11.2 million that should have been paid to 60 farmers and elevators who were owed money by his Midwest Grain Trading and Nodak Grain businesses.

Hanson was arrested and in jail from April 4. On July 30, he pleaded guilty federal money laundering and wire fraud charges and is to be sentenced Nov. 12. Separately, he faces a court date Sept. 26 in Mountrail County over a $94,000 non-sufficient funds check to United Quality Grain.

Medrud thinks $200,000 to $600,000 may have gone into the car business. In less than six months Hanson Motors bought and sold some 160 vehicles. Medrud is still taking checks from a handful of customers who still owe money on cars. Of those, 35 or so have stopped paying because no one - Medrud or any government entity - can assure them they'll get a clear title. Medrud estimates car buyers may still owe roughly $200,000 to the defunct dealership.

"I'm afraid (officials) are going to come and start taking cars from people, instead of giving them the titles," Medrud says.

A 'Chippewegian'

Medrud jokingly describes himself as a "Chippewegian": part Norwegian and part Native American. He was finance manager at M.J. McGuire's, a Ford dealership in Rugby, N.D., when he first met Hanson in about January 2018.

Hanson, at age 20, came in and wrote out a check for $30,000 check to buy a car. Hanson explained to Medrud that his Midwest Grain Trading business, a roving grain buying company, was "doing very well." Hanson had bought a grain elevator facility at Tunbridge, N.D. An auto salesman indicated Hanson had "money from his grandparents and (he) had invested it very well," Medrud recalls.

Hanson's youth wasn't a concern. Medrud himself at age 25 had started A&S Painting, (named for his wife, Allison, and himself). That had led to a career in the convenience store business and now autos.

"So to see this kid come in, full of energy, I kind of seen myself," Medrud says.

Hanson would go on to buy "a lot of vehicles" at McGuire's in 2018. A few weeks apart, he bought a "Raptor," the top-of-the-line Ford F-150, for perhaps $70,000, and a new diesel F-150 for about $50,000. He came in with a Cadillac Escalade he'd gotten somewhere else.

One day, Hanson ordered five "Super Duty," three-quarter-ton work pickups. He paid for two of them with a check but ended up not buying the other three when law enforcement told drivers they'd need commercial licenses to haul custom-made fifth-wheel trailers.

About this time, Medrud told Hanson he was going into business for himself, perhaps starting a used car business at his home at Belcourt so he would eliminate a 40-mile drive to work.

Surprise: Hanson said he, too, was setting up a car business at Leeds, N.D. He already owned some cars. On Aug. 23, he had registered Hanson Motors with the North Dakota Secretary of State's Office. The business had a physical location of 6402 55th Ave. NE, Leeds, a farmstead where he placed a Park Model house and built a shed for his equipment.

Medrud said Hanson told him "'You should run come to work for me!'"

Not wanting to drive 55 miles to Leeds for work, Medrud instead urged Hanson to come look at a rental building at Belcourt.

On Oct. 19, Medrud and others were promoting the start of the new dealership at Belcourt on Facebook.

According to their agreement, Hanson would pay the entire rent for the building, one half mile east of the Skydancer Casino on Highway 5. Medrud would manage the Hanson Motors half of the building. Medrud later would rent the other half when he got a separate auto car parts store going.

$500K? No worries

Medrud remembers the two "went partners" into the tribe's Tribal Employment Rights Office, to get the required TERO license, a business license from the reservation that would apply to the building they'd share. (From 2002 to 2004, Medrud served on the tribe's nine-member council and served as secretary-treasurer.)

Medrud says it was "our dream" to present an upscale showroom, a less expensive version of Rides Auto Sales in Bismarck, he says, in an interview. It would be the only car dealership in Belcourt.

"I said 'Do you have the money?'" Medrud remember asking Hanson at the start. "You're going to need at least a half-million to make this run right if you want a nice dealership.' Medrud says Hanson showed him a bank account on his smartphone that held more than $700,000, but Medrud later estimated he'd spent much less-as little as $200,000 on the car business.

Medrud says he coached Hanson to buy vehicles for $5,000 to $10,000 wholesale, to match the Belcourt used retail market. Medrud knew a couple of local banks that would finance customers because of his history in autos.

Hanson went on trips to wholesale car auctions in Phoenix or Las Vegas, an area "smothered" with low-mileage rental fleet cars-without the rust from northern states. After Hanson made purchases, the auction would email Medrud who would send the appropriate amount from a Hanson Motors account in a local area bank. Three or four days later the cars would show up-five or 10 every week.

On Nov. 26, Hanson re-registered the business as Hanson Motors LLC. Medrud says Hanson "wanted to know if I would be a partner and I told him 'no.'"

Making the news

The car biz seemed to go well until Hanson's grain failures started making the news.

Public Service Commission regulators started hearing complaints Nov. 9, and immediately went in, initially suspecting non-payment of $2 million. When Hanson was on the cover of Agweek in Dec. 3, the area banks pulled out from financing car deals. "He had us believing he was not guilty, it was all going to pass," Medrud says. Medrud urged Hanson to "take care of the NSF checks" in his grain business. But the bad court news and criminal charges kept coming.

By January 2019, Hanson had shifted to a "buy here, pay here" business model.

In these transactions, the dealership extended credit to purchasers. Medrud said Hanson would "personally" finance them for a year or two, at about 14% interest.

Instead of going to Las Vegas, Hanson increasingly operated out of an apartment in West Fargo, N.D., attending a car dealer wholesale auction in Fargo or at New York Mills, Minn. He started "floor-planning them," putting car purchases on credit through a company called NexGear Capital, sometimes getting 30 days, interest free while he tried to sell them through the dealership.

He began to buy cheaper vehicles that needed cost-prohibitive investments to make them sellable. He'd turn around and take them back to the auction, losing both ways.

Medrud says he tried to convince Hanson he couldn't expand out of his cash flow problems.

Meanwhile, Medrud was getting emails from auctions, indicating Hanson had bought vehicles. But now Medrud wasn't getting titles and wasn't being asked to pay out of company accounts. Auctions explained they'd given titles directly to Hanson, who was paying out of a new "Hanson Motors" account in Fargo that Medrud didn't know about. "Maybe he was starting another Hanson Motors," Medrud speculated, "maybe sell(ing) cars from his bedroom. I don't know."

Fast, fancy rides

Medrud put his parts store venture on hold. Through March, Hanson was still appearing in new personal vehicles. One time he had a blue 2018 Escalade, another time a white 2016 Camaro with low miles. He learned that Hanson had bought a Tesla, maxing out his $50,000 credit limit through NexGear, acquiring it in New York. Hanson told Medrud the vehicle should bring at least $65,000 at the auction in Fargo. Hanson told Medrud he bought a Chevy Volt, one of the electric cars.

When the Hanson Motors checking account dipped dangerously low, Hanson would go and sell a car or pickup to generate cash.

"It was his money, his business," Medrud says. "All I could do was advise him, as the old guy. 'That isn't smart business,' But it didn't seem to matter to him. If he needed 20 grand today to buy a Bobcat attachment, he'd go sell a vehicle he had somewhere and get his 20 grand. Didn't care what he lost on it, whatever."

Hanson was arrested and jailed April 4. On June 18, he was arraigned on federal money laundering and wire fraud charges. He was released under GPS monitoring. On July 30, he pleaded guilty and was freed from monitoring before a scheduled Nov. 12 sentencing.

'Not Hanson Motors!'

On April 10, Medrud says he applied for a license to operate as Stu's Hardware and Furniture in the old Hanson Motors location.On May 15, he and Allison registered A&S Auto Sales.

The auto auctions in early August suspended Medrud's dealer purchase privileges because of his association with Hanson, even though he wasn't an owner. One auto auction thinks Medrud is somehow responsible for $73,000 that Hanson owes them.

"I'm not Hanson Motors, I was an EMPLOYEE," he says, adamantly. But he also acknowledges his role: "He couldn't have done this car business without me. He knew that; I knew that."