Three real estate professionals in St. Paul, Minnesota were indicted earlier this week for their participation in a mortgage fraud scheme that led to fraudulent loans totaling more than a million dollars[1]. When the loans involved in the scheme were made and approved, the money was used to purchase properties at excessively high, inflated prices. Excess money over the value of the property was shared among the two mortgage brokers, John Spencer and Patrick Dols, and the real estate appraiser, Bryan Lenton, as well as various other co-conspirators who had to be paid off in order for the fraud to continue. The three men have been charged with conspiracy to commit mortgage fraud and 10 counts of wire fraud. Additionally, Spencer has been charged with money laundering.
The group initiated the scheme in 2005, when a condo owner approached Spencer with the idea. He wanted to sell five units at inflated prices and agreed to divide the difference if Spencer could help him. To this end, Spencer recruited Lenton, a real estate appraiser, who was able to appraise the units much higher than their actual value. Using a straw buyer, the group put together a fraudulent loan application and arranged for more than a quarter of a million dollars in “repairs” to be made on the properties. No work was done and the company that was paid for the work did not even exist.
The plan worked so well that the group repeated the effort at least two more times, resulting in the massive lending fraud. Now, they face five years in prison for conspiracy, and 20 years for each of the ten counts of wire fraud. Money laundering carries an additional 10 years.
[1] http://www.kare11.com/news/news_article.aspx?storyid=888138
