Plymouth Man May Have Orchestrated the Largest Mortgage Fraud Enterprise Yet

Jennifer Bjorhus over at the Press dropped this fantastic piece on something called Michael Prieskorn, whose now-shuttered Plymouth firm, Blackstone Sales, is under Federal investigation.  Raise your hand if you've heard this before:

The pitch went like this: Just show up at the closing and you'll pocket $5,000. The investment company uses your name and credit to get a zero-down mortgage for a new home, carves its management fee from the loan and resells the property fast, handling the mortgage payments until then. Cost to you: zero.

And if, as an aspiring real estate "investor," you believed that?  We'll stop short of saying you got what you deserved, but really. At least next time bring adult supervision when making financial decisions.

Ironically, this Michael seems to have been one of the few crooks smart enough to realize that he was commiting multiple Federal crimes - most of them seem to trundle along until the Feds roll in - and got out of dodge:

Then, last spring, Prieskorn closed his office and disappeared...His parents, who live near Ellendale, Minn., about 80 miles south of the Twin Cities, insist they don't know. Prieskorn, who sold his Plymouth house last summer, is believed to be living around Naples on Florida's west coast, according to last summer's search warrant affidavit.

Our guess and hope is he hasn't gone far enough.
Mortgage Scam Snagged Scores [PiPress - Bjorhus]

06/17/08 at 08:45 AM Permalink | Comments (1) | TrackBack (0)
Filed Under: Fraud

The Mess at Sexton: More Details

Front and center in the business section today is a massive version of the photo above, via Star Tribune.

Accompanied by an article with more detail on the ongoing saga down at the Sexton, where only 36 of 123 units are occupied, and the entire project is a messy tapestry of fraud, foreclosure, and lawsuits.

"[The Sexton] doesn't come up in conversations very often, but when it does, the comment usually is something like 'That place is really a mess,'" Melchior said.

We'd expect to see some indictments for some of the principal actors soon, and one wonders whether the Sexton Building will be given similar treatment as the TJ Waconia, and is being set up for city administration/ownership/receivorship.
Sexton Building: That Place is a Mess [Strib]

04/28/08 at 03:50 PM Permalink | Comments (2) | TrackBack (0)
Filed Under: Condos & New Developments, Downtown, Foreclosures, Fraud, Minneapolis

Guilty Pleas for TJ Waconia's Balko and Helgason

This hit the streets last Thursday, but since we've been following the trajectory of this now confirmed criminal outift pretty closely:

From approximately 2005 to 2007, Helgason and Balko executed a scheme to defraud and to obtain money by means of false and fraudulent pretenses.

Using the TJ Group, Helgason and Balko purchased approximately 162 properties throughout the Twin Cities metropolitan area, principally in north Minneapolis. 

They would then resell the property within a few weeks to an “investor” who would purchase the property, sight unseen, at a price set by Helgason and Balko without negotiation, oftentimes $20,000 to $60,000 more than that the TJ Group had paid.

According to the plea agreements, people were told by Helgason and Balko that the investors were simply “lending” his or her credit to TJ Waconia.

Then there's this bizarre bit of drama about Minneapolis somehow "taking control" of these TJ Waconia induced foreclosures:

A judge Wednesday appointed a receiver to manage 141 Minneapolis rental homes associated with a firm accused of mortgage fraud.

The city hopes to gain ownership, fix the homes and work with neighborhoods on whether they should be resold or rented, according to Tom Streitz, its housing director.

We've gotten a few emails on this, and there are more than a few folks assuming this means that the city now owns all of these properties, or soon will. 

Though the article is cheap on the details, all we can take from this is that a judge has assigned an attorney as receiver for the properties.  Exactly the scope of the powers this receiver will have - let's not forget that someone else (a borrower, bank, lender, or somewhere in between) actually still owns these properties and any action by a judge does not change that - is still unclear.

Our best speculation, based on a law degree we don't have, is that due to the nature and number of foreclosures involved in this case, that the Judge wants someone to take ownwership of, coordinate, and administer tasks that the absentee owners cannot or will not do (check on general condition, report hazards, etc. etc. etc.)

But putting properties into receivorship is a long way from Minneapolis "owning" any of these properties.

Paging Sam Glover, or any other attorney willing to expand on the meaning and import of this?

04/22/08 at 02:54 PM Permalink | Comments (2) | TrackBack (0)
Filed Under: Foreclosures, Fraud, TJ Waconia

More Questions than Charges for TJ Waconia

Finally, charges in the TJ Waconia Case, from the Star-Tribune:

A Roseville firm involved in hundreds of real estate deals in the Twin Cities area was charged Friday with a single count of mail fraud resulting from a federal mortgage fraud investigation.

That's it?  A single count?  For one of the poster children for mortgage fraud in the Twin Cities?

The charge suggests that a plea deal may have been reached and that federal attorneys may be looking at charges higher up the lending chain, according to those who have prosecuted white-collar crime.

Looks like we will see a plea agreement in the near future.  This also strongly indicates that TJ Waconia's principals have been cooperating with the FBI and others in building a case against other involved parties. 

This seems to be how things work - remember Jill Lehn's words:

Then, I got another visit from the FBI.

“Jill, we need to charge you now to go forward with the rest of our cases. You need to find a really good criminal defense attorney that specializes in money laundering and wire fraud.”

Real Estate Company Charged in Fraud Scheme [Strib]

04/14/08 at 11:27 AM Permalink | Comments (3) | TrackBack (0)
Filed Under: Fraud, TJ Waconia, Twin Cities

TJ Waconia: Sued by Three Minneapolis Neighborhoods

As we await a likely Federal Indictment for the principals of TJ Waconia, they are also being sued by three Minneapolis Neighborhoods:

...the lawsuit alleges that T J Waconia dealt fraudulently, causing widespread foreclosures in the three neighborhoods. It alleges that the vacant housing has hurt property values and increased crime.

Council members have said that the firm bought and resold properties in a concentrated area of the North Side, allowing its sales prices to be used as comparable sales for appraisals on additional transactions.

The city has already taken an unprecedented action to strip the rental licenses of 45 properties associated with transactions by the firm. It plans to revoke as many as 100 more.

There are also more than a few private parties who have filed and won lawsuits against TJ Waconia, so essentially everyone is racing to lay legal claim to damages owed by these operators before the Federal Indictments come down.  We expect their will be more claims than assets when it is all said and done.
Firm Linked to Northside Foreclosures Faces Lawsuit [Star-Tribune]

04/02/08 at 10:07 AM Permalink | Comments (0) | TrackBack (0)
Filed Under: Foreclosures, Fraud, Minneapolis, Real Estate Law

Minnesota Financial Crimes Task Force Dropping Mortgage Fraud from Menu

Not sure how we missed this gem from Jennifer Bjorhus last week (we'll blame the Pioneer Press RSS feed):

As for the Minnesota Financial Crimes Task Force, its 17-member oversight council in January instructed the group to shut the door on mortgage fraud, saying the cases were so time-consuming they threatened to overwhelm the group. Chris Omodt, a Hennepin County Sheriff's lieutenant who heads the task force, said he thinks crimes will go unchecked, but acknowledges it doesn't have the resources

This means that unless a new Minnesota task force is created to specifically tackle mortgage fraud, all of the heavy lifting will be done by the (also overwhelmed) Federal Investigators working locally. 

This in a state that is in the top ten nationally for mortgage fraud.

03/26/08 at 12:43 PM Permalink | Comments (7) | TrackBack (0)
Filed Under: Consumer Protection, Fraud

Otsego Frauds: City Pages Ads Some Color

City Pages Feature Story ads some color to the mortgage/real estate fraud ring in Otsego:

There were a dozen separate applications submitted on Clewette's behalf. She saw only one of them. There were two requests per property—for a first and second mortgage, a not-uncommon practice in the market at the time—totaling nearly $2 million. On every one of Clewette's loan applications, the box next to "primary residence" is checked and the box next to "investment property" is blank. Her reported income was more than triple her actual income of $27,000, and she was asked to sign only one of the 12 applications. On most of them, in the space reserved for the "interviewer" who filled out the form, the American Wholesale employee who signed was either the imprisoned John Searle or the disappeared Brian Matheson Sr.

Meanwhile, one of the alleged crooks, unwinds the remnants of a high life built on other people's money, lies, and who knows what else:

Flavin's yacht, the Nothin' but Trouble, is up for sale on Craigslist. The party bus is up there, too ("Have your own rolling money maker"). His half-million-dollar Maple Grove estate is for rent, and his Minnetonka office suite—the one Owens raided in December—is totally cleared out.

Nothing But Trouble [City Pages]

02/16/08 at 12:31 PM Permalink | Comments (4) | TrackBack (0)
Filed Under: Fraud, Northern 'Burbs, Rip-Offs

Another One: Otsego Gets the Frauds

You have not made it as a distant suburb until a mortgage fraud ring gets busted:

An alleged mortgage fraud case involving perhaps as many as 130 homes -- mainly in one Otsego development -- with mortgages totaling more than $40 million.

It's always the same sales pitch:

The two firms ran newspaper ads promising $25,000 to $30,000 to investors with no up-front costs as long as their credit score was above 680...All investors had to do was apply to buy multiple properties.

The firm promises to cover all the messy details, like finding rent-to-own tenants, managing the properties, and selling them to the renters in two years, at which point the profits would be split.

Of course, none of that happens.  The firm pockets the cash.  The investors wind up with multiple mortgages in foreclosure, shredded credit, and their name in the paper.  The renters are on the street trying to start over.  The lenders are out millions on the fraudulent loans.  The neigborhood gets pocked with foreclosures and values tank. 

When it is all said and done, the alleged perpetrators might get four years.  The impacted people and neighborhood will be lucky to recover in as much time.
Victims of Investment in Otsego [Strib]

02/14/08 at 04:27 PM Permalink | Comments (5) | TrackBack (0)
Filed Under: Fraud, Northern 'Burbs, Rip-Offs, Twin Cities

"Everywhere You Turn, It's Like a Fungus" (another huge mortgage fraud ring)

Jennifer Bjorhus at the Pioneer Press, continuing her excellent coverage:

It all started in 2006 when a Plymouth man called police after finding a mortgage notice in his mailbox, addressed to him, for a house he'd never heard of. Three arrests later, investigators now are sifting through the paperwork on some 80 closings done at title companies in Shoreview and Burnsville in an alleged mortgage-fraud ring that they say just keeps growing.

"Everywhere you turn, it's like a fungus," said Detective Cory Cardenas of the Bloomington police.

That bit by Detective Cardenas may prove to be the quote of the year for 2008.
Mortgage Fraud Probe Grows [Bjorhus: PiPress]

02/05/08 at 11:30 AM Permalink | Comments (1) | TrackBack (0)
Filed Under: Fraud

TJ Waconia Victims Blog

We are victims of the Helgasons and Balkos. We are determined to legally fight both of them for as long as it takes. Jon Helgason was a long time trusted friend and he stole from us.
                                                                                ~Victim T

A while back, we posted a tidbit on the ongoing mortgage fraud problem and the alleged role of one particular company in town, TJ Waconia.  The comments went bananas with all sorts of people who seemed to have direct and specific knowledge of the "business" practices of that organization and it's principal actors.

The comment stream got a little nutty even for our admittedly low standards of journalistic integrity, so we eventually shut it down.

Great thing about the internet is, you can't contain conversations like this once they've started, and at least one of the commenters went off started a TJ Waconia victims blog.  Go check it out.

01/24/08 at 10:22 AM Permalink | Comments (1) | TrackBack (0)
Filed Under: Consumer Protection, Fraud, TJ Waconia, Twin Cities