Insurance company: Developer John Kline, wife responsible for fire that destroyed house

Iowa developer, owner of Oaks Development and other co's., under federal investigation for arson on his own house, plus in another case, for violation of bank laws in development project.

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Developer John Kline and his wife are responsible for the intentional setting of a fire that destroyed their Urbandale home in 2009, a civil lawsuit filed late last week says.

The lawsuit, filed in U.S. District Court by American Family Mutual Insurance Company, accuses Kline and his wife, Michelle, of concealing information about the nature and circumstances of the Feb. 9, 2009 fire in an attempt to fraudulently collect damages for the loss of the house and a 1964 Chevrolet Corvette under a homeowners and auto insurance policies.

The fire destroyed the 13,000-square-foot house located at 3536 129th St., Urbandale. The fire is still under investigation.

“Mr. and Mrs. Kline say they were the only adults in the house when the fire started,” the lawsuit says. “They are the only reasonable suspects. Therefore, American Family has concluded that the Klines are responsible for the fire.”

As a result, the lawsuit asks for a ruling removing the insurance company’s responsibility to make any payment to the Klines for the losses. “American Family has determined that the Klines are not entitled to payment for any property destroyed in the fire,” the lawsuit says.

Attorneys for Kline could not be reached for comment this morning.

Documents filed by Kline in U.S. Bankruptcy Court set the value of the home at $1.1 million. In addition, the documents set the value of the Klines’ homeowner’s insurance policy at $4 million.

Federal officials are involved in the investigation of the fire at Kline's house. A little more than a week after the fire, Kline filed for bankruptcy. An agent for the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives has said the cause of the fire, which burned the million-dollar home to the ground, has been determined, but he has declined to provide details.

In addition, the State Fire Marshall’s office has declined to issue any ruling on the circumstances of the fire and whether it was intentionally set.

In its lawsuit, American Family also asks for a finding that John and Michelle Kline participated in fraud by attempting to conceal or misrepresent the cause and nature of the fire.

Kline, a long-time central Iowa developer with a variety of companies including Oaks Development Co., is under federal investigation, according to one of his lawyers. Last September, Jerrold Wanek, said in bankruptcy court that his client is consulting with a local criminal lawyer as a result of an investigation being conducted by the U.S. attorney's office.

Kline’s legal woes have mounted since the finances of his companies began to collapse in 2007. Those woes include a 2009 decision by a Dallas County judge who entered a $4.5 million judgment against Kline and one of his businesses, John C. Kline Inc.

Judge Gregory Hulse ruled that instead of paying a land-moving company to turn raw land into housing lots, Kline used a bank loan for the development for unrelated expenses, including political contributions and private jet service.

Kline declined to defend himself in the case. Hulse also included a finding that Kline's actions violated federal bank fraud laws.

http://www.desmoinesregister.com/article/20100719/NEWS/100719012/-1/cauc...