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 Lawsuit Update: Press Release Details Allegations, Plus Maps

As a supplement to their lawsuit, The City of Minneapolis has put forth a presser, with map (above, click to biggify) which details the specific allegations of damages caused and costs incurred by the practices of TJ Waconia:

The City of Minneapolis has incurred damages as a result of TJ Waconia’s practices:

• City inspections staff responding to code violations
• Securing vacant and abandoned homes
• Acquiring and rehabilitating vacant homes
• Responding to increased criminal activity in vacant homes
• Increased costs due to unpaid water bills and garbage removal
• Administrative and legal services related
• Finding new homes for renters displaced by foreclosures

Neighboring homeowners have incurred direct and indirect costs due to TJ Waconia:

• Proximity to a vacant home has a significant impact on property values. This negative impact is multiplied when there are multiple vacant homes on a block, such as TJ Waconia has created.
• Property owners in the areas where TJ Waconia properties are concentrated have seen their property values decline as a result of TJ Waconia activities.
• Property owners in the areas where TJ Waconia properties are concentrated have experienced increased criminal activity and neighborhood unsightliness, which causes property values to further decline.

Renters have been harmed as a result of TJ Waconia’s foreclosures:

• Every home TJ Waconia flipped was used as rental property, resulting in 140 rental families without landlords.
• Loss of landlord results in property neglect, utility shut-offs and un-recovered damage deposits for renters.
• TJ Waconia’s failure to pay rental licenses forced renters out of their homes.

Neighborhood and community groups have spent thousands of dollars and countless hours attempting to remedy the problems caused by TJ Waconia:

• Funds were spent to acquire and rehab foreclosed TJ Waconia homes.
• Time and money were spent to research and track fraudulent TJ Waconia activity.
• Time and money spent by these organizations to investigate and fight TJ Waconia’s fraudulent practices could have been spent on other community improvement projects.

Full text of press release, which we spent 15 agonizing minutes reformatting their overcooked HTML, follows
--------

City Leaders Join Neighborhoods and Residents to Stop Fraudulent “Flipping”

April 2, 2008 (MINNEAPOLIS) -- Minneapolis Mayor R.T. Rybak and other city leaders today announced that the City is joining three north Minneapolis neighborhoods in a lawsuit against a fraudulent real estate scheme that has worsened the foreclosure crisis in Minneapolis.

The suit seeks redress from TJ Waconia, which engaged in a complex and fraudulent residential real estate scheme that converted owner-occupied homes to rental units, most of which have since been foreclosed and many of which are vacant. TJ Waconia’s practices have left many north Minneapolis homeowners unable to sell their homes or owing significantly more for their homes than they are worth.

Minneapolis is bringing two causes of action against TJ Waconia. One is under the Minnesota Tenant Remedies Act for violation of housing and other codes and seeks the appointment of an administrator to manage the properties to remedy code violations and mitigate costs. The second cause of action is under the Minnesota Prevention of Consumer Fraud Act and seeks to recover monetary damages as well as injunctive relief against TJ Waconia to prevent it from continuing its fraudulent activities.

Plaintiffs include the City, Folwell Neighborhood Association, McKinley Community, Webber-Camden Neighborhood Organization, Family Housing Fund, Greater Metropolitan Housing Corporation and local residents.

“TJ Waconia has caused significant and undeniable damage to the City, to our renters, to our homeowners, and to the neighborhoods of north Minneapolis,” Mayor Rybak said. “We’re fighting to take back these properties and regain control to rehabilitate homes, to put these homes back in the hands of sound homeowners, and to repair the community.”

“The City is stepping forward with our partners, our residents and our neighborhoods to address these fraudulent, damaging and unacceptable real estate practices in Minneapolis,” City Council President Barbara Johnson (Ward 4) said. “We’re sending a message to other investors that we’re aggressive in confronting fraudulent behavior and will not tolerate it.”

“TJ Waconia has stripped our neighborhoods of people and value,” said Council Member Diane Hofstede (Ward 3), who represents north and northeast Minneapolis. “We are filing this lawsuit to stop them from destroying our community and to send the message that these types of investors are not welcome in our city.”

“The foreclosures and vacated dwellings resulting from TJ Waconia have caused damage to the City including increased costs for inspection of buildings for code violations, boarding vacant buildings, providing increased police and fire protection, acquiring and rehabilitating vacant buildings, and providing maintenance such as garbage removal and weed-cutting,” said north Minneapolis Council Member Don Samuels (Ward 5). “We deserve redress for these costs.”

From 2003-2006, TJ Waconia purchased and flipped 140 north Minneapolis homes, 88 in three neighborhoods of Folwell, Webber-Camden, and McKinley. TJ Waconia’s systemic, targeted, and intentional over valuation of these homes used fraudulent appraisals to falsely inflate property values in north Minneapolis. Of 140 TJ Waconia homes, at least 108 are vacant and 89 have been sold through foreclosure.

TJ Waconia concentrated its practices in specific blocks of north Minneapolis, such as the 3200 block of Humboldt Avenue North, the 3300 block of Dupont Avenue North, the 3500 block of Aldrich Avenue North, the 3900 blocks of Colfax and Dupont Avenues North.

The City of Minneapolis has incurred damages as a result of TJ Waconia’s practices:

·         City inspections staff responding to code violations

·         Securing vacant and abandoned homes

·         Acquiring and rehabilitating vacant homes

·         Responding to increased criminal activity in vacant homes

·         Increased costs due to unpaid water bills and garbage removal

·         Administrative and legal services related

·         Finding new homes for renters displaced by foreclosures

Neighboring homeowners have incurred direct and indirect costs due to TJ Waconia:

·         Proximity to a vacant home has a significant impact on property values. This negative impact is multiplied when there are multiple vacant homes on a block, such as TJ Waconia has created.

·         Property owners in the areas where TJ Waconia properties are concentrated have seen their property values decline as a result of TJ Waconia activities.

·         Property owners in the areas where TJ Waconia properties are concentrated have experienced increased criminal activity and neighborhood unsightliness, which causes property values to further decline.

Renters have been harmed as a result of TJ Waconia’s foreclosures:

·         Every home TJ Waconia flipped was used as rental property, resulting in 140 rental families without landlords.

·         Loss of landlord results in property neglect, utility shut-offs and un-recovered damage deposits for renters.

·         TJ Waconia’s failure to pay rental licenses forced renters out of their homes.

Neighborhood and community groups have spent thousands of dollars and countless hours attempting to remedy the problems caused by TJ Waconia:

·         Funds were spent to acquire and rehab foreclosed TJ Waconia homes.

·         Time and money were spent to research and track fraudulent TJ Waconia activity.

·         Time and money spent by these organizations to investigate and fight TJ Waconia’s fraudulent practices could have been spent on other community improvement projects.

The lawsuit will be filed to the Hennepin County District Court. For copies of the complaint filed, go to the Hennepin County District Court.

04/03/08 at 10:51 AM Permalink | Comments (1) | TrackBack (0)
Filed Under: Foreclosures, Real Estate Law, TJ Waconia

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

High Drama in The Comments on TJ Waconia Mortgage Fraud Investigation

If you haven't been following the comments on this post, which started out as a general post on foreclosures, but has now ballooned to a 33 comment rolling firefight, you are missing out on some high drama and good insider backstory on the FBI mortgage fraud investigation of Roseville based TJ Waconia.

It all started when one commenter, posting from Texas, was all: "What's with the witch-hunt?  These guys might just be legit investors that have been unfairly singled out, and whatever happened to the whole Innocent until proven guilty thing"

Turns out, the defender-of-the-presumption-of-innocence also happens to, it appears, know some of the principal individuals involved with TJ Waconia, and may have more than just an abstract "I'm just a concerned but nuetral party" stake in defending some of those being investigated. 

So if you are into admissions, denials, accusations, stunning reversals, unfounded assertions, and bombs like this, (which may or may not have a shred of truth to them, mind you. These are anonymous internet comments, after all):

You know why [he] is protecting Tom Balko? He was involved back in 2002-2003. He is worried the FBI will look into him. TJ waconia, if you dig deeper will find that many of the properties were friends and family properties that they inflated.

You'll want to follow along, or fan the flames, or whatever, but don't miss the drama and intrigue, and inside information,  unfolding now, right here.

12/20/07 at 07:59 PM Permalink | Comments (0) | TrackBack (0)
Filed Under: TJ Waconia

Foreclosure: Daily Doom and Gloom

Foreclosures, near-North Minneapolis, Via Star-Tribune Foreclosure Map

It's getting hard to keep up with the now daily real-estate-is-going-to-hell in-handbasket data stream, but we wanted to point out a couple of stats from some of the recent coverage that had us pausing mid-read.

For instance, from the Pioneer Press, on North Minneapolis, which as you can see from the map above, is Ground Zero for the Twin Cities foreclosure problem:

In the Jordan area of North Minneapolis, banks are repossessing homes at a rate of about 200 per half-square mile — the highest rate in the Twin Cities

And this, from the Strib, detailing an FBI raid of perhaps the biggest fraud-for-profit outfit yet:

"The affidavit indicates that about 150 north Minneapolis properties foreclosed on in one six-month period earlier this year passed through TJ Waconia's hands.

That's one in every five foreclosed properties in that area in that period,..."

Just jaw-dropping stuff.
More Trouble in Sight [Pioneer Press]
FBI Names Two in Latest Mortgage Fraud Case [Strib]

Update: Commenter John Hoff went all Columbo and posted at least a partial list of properties that passed through TJ Waconia and are now in foreclosure.  Nice work there.

One thing to keep in mind is that these properties aren't by definition damaged goods - as always there is a market value for any property - its just that the history of values on these properties will have very little to do with reality, since they were inflated for fraudulent purposes.

Of course, these fraudulent sales distort the market, because they become comparable (albeit inflated) sales for legitmate transactions.  Because of the sheer volume of properties involved, it is highly likely that many legit buyers in north paid more than the true market value.  This is where mortgage fraud hurts everybody.

11/28/07 at 03:07 PM Permalink | Comments (92) | TrackBack (0)
Filed Under: Foreclosures, Fraud, Housing Maps, Industry News, Market Stats, Minneapolis, TJ Waconia, Twin Cities