Real Estate Company Owners Sentenced in $35 Million Mortgage Fraud

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Education & Training with 123 ConEd LLC -- Michigan real estate continuing education School Sponsor 373

Scales of JusticeHere is another example of a recent legal case involving fraudulent real estate loan schemes and bank fraud, all related real estate transactions involving real estate professionals. I try to post case summaries in order to provide timely updates to real estate professionals on important issues.

On April 16, 2009, the two owners (Jonathan Helgason and Thomas Balko) of a Minnesota real estate company were sentenced in federal court for mortgage fraud in connection with a scheme involving at least 162 properties, principally in north Minneapolis, and mortgage proceeds of approximately $35 million.

handcuff

Mr. Helgason was sentenced to 96 months in prison and three years of supervised release. Mr. Balko was sentenced to 84 months in prison and three years of supervised release. Restitution will be ordered at a later date.

According to their plea agreements, Mr. Helgason, a licensed real estate agent, and Mr. Balko were the owners of numerous companies, including TJ Waconia, Total Title LLC, Complete Real Estate Services, Inc. and CityWide Management, LLC and Investor’s Warehouse LLC (collectively, “the TJ Group”).

From approximately 2005 to 2007, Mr. Helgason and Mr. Balko executed a scheme to defraud and to obtain money by means of false and fraudulent pretenses. Using the TJ Group, Mr. Helgason and Mr. 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 Mr. Helgason and Mr. Balko without negotiation, often times $20,000 to $60,000 more than the TJ Group had paid.

According to the plea agreements, people were told by Mr. Helgason and Mr. Balko that the investors were simply “lending” their credit to TJ Waconia (one of their companies). In exchange for “lending” their credit, the investors would receive a kickback payment of about $2,500 and a promise of an additional payment after two years when the TJ Group was to repurchase the property from the investor.

Through the scheme, the defendants perpetrated a fraud on the lenders who were led to believe that the “investors” were the actual owners of the properties, when, in fact, the “investors’” ownership was in name only. During the two-year period during which the investor owned the property, the TJ Group was responsible for all payments and maintenance on the property. In some instances, Mr. Helgason and Mr. Balko also provided investors with funds to pay the buyer’s portion of the property purchase price and worked with others to provide lenders with false loan applications on behalf of the investors so that they would qualify for the loan.

The two men, on behalf of the investors, obtained approximately $35 million in mortgage proceeds to purchase the properties from the TJ Group. Ultimately, the scheme collapsed, and the TJ Group did not repurchase the properties or continue making payments to the investors in order to pay their mortgages. The investors were left owning properties with mortgages that exceeded their property’s market value.

This case was the result of an investigation by Federal Mortgage Fraud Task Force, including the Federal Bureau of Investigation and the U.S. Postal Inspection Service. It was prosecuted by the United States Attorney's Office.

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Suzanne McLaughlin 05/16/2009 01:46 AM
Topic:
ActiveRain Community
Location:
Michigan
Groups:
Realtors®
Michigan Realtors
Michigan Real Estate
Almost Anything Goes
Greater GRAND RAPIDS, MI Real Estate
Tags:
mortgage fraud
legal update

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Rainmaker
829,415
The Trumm Team Omaha Homes for Sale, Real Estate
Keller Williams Greater Omaha - Omaha, NE

Timely topic in this day and age.

May 16, 2009 01:42 AM #1
Ambassador
1,613,719
Harry F. D'Elia
RentVest - Phoenix, AZ
Investor , Mentor, GRI, Radio, CIPS, REOs, ABR

It is hard to do business with white and black pin stripes and behind bars

May 16, 2009 01:44 AM #2
Rainmaker
122,504
Jim Valentine
RE/MAX Realty Affiliates - Gardnerville, NV

Jason - They deserve everything they got.  They abused the system and violated trust.  With more stories like this the public might have cause to trust lenders and agents more.  Thanks for the information - I was glad to read it for the sake of our entire industry.

May 16, 2009 01:47 AM #3
Ambassador
1,194,394
Ralph Gorgoglione
Maui Life Homes / Metro Life Homes - Kihei, HI
Hawaii and California Real Estate (310) 497-9407

One of my clients has been working with a lender that turns out was ripping her off.  She is an investor buyer with alot of capital.

Before this happened, she would rave about him and told me to use him myself.

It's a good thing I never did!!

Turns out he has mob connections!!

Yikes!!

May 16, 2009 01:48 AM #4
Rainer
182,446
Stuart Dobson
eLoanRates.org - Thornton, CO

These guys were so blatant.  I'm glad they were caught and convicted.  It helps get some of the the crooks out of the real estate industry.

May 16, 2009 01:50 AM #5
Rainmaker
593,807
Neal Bloom
Brokered by eXp Realty LLC - Weston, FL
Realtor CRS-Weston FL Real Estate

Typical here in FL and have actually been approached in similar situations that I advised my clients to walkaway from.....they did.

May 16, 2009 01:51 AM #6
Rainer
45,230
Elizabeth Benefield
Montana Country Real Estate - Libby, MT

It sounds crazy and complicated. I hope they learned from it.

Thanks

Liz

May 16, 2009 01:54 AM #7
Ambassador
1,229,656
Melissa Zavala
Broadpoint Properties - Escondido, CA
Broker, Escondido Real Estate, San Diego County

I'm wondering if the "investors" was also identity theft or whether they were real individuals really willing to lend their credit. Thanks for sharing. People go to great lengths to create these schemes when the easiest thing (working hard) is right in front of them.

May 16, 2009 02:00 AM #8
Rainer
188,778
Eric Villaverde
DoubleTree Home Inspection Services L.L.C. - Phoenix, AZ

Book'em Dano-Will people ever learn to do it the honest way?

May 16, 2009 02:34 AM #9
Rainmaker
2,374,965
Charles Stallions
Charles Stallions Real Estate Services - Pensacola, FL
800-309-3414 - Pensacola, Pace or Gulf Breeze, Fl.

It is sad what greed can do with a little help from the government (called liar loans). If these type loans had not been available then maybe some of these folks would not have been tempted. You could say that anyone who did one of those loans, along with everyone involved is guilty of mortgage fraud.

May 16, 2009 02:39 AM #10
Anonymous
Jennifer Perez

These guys got what they deserved!  Thanks for posting.

May 16, 2009 02:48 AM #11
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Jason Rose

www.123ConEd.com
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