Regulators allege that a Twin Cities man is involved in investment and mortgage fraud. But his lawyer claims that his client is the victim.
For years, Adam LaFavre cultivated an image as a successful real estate dealmaker and a man of faith.
He drove luxury cars, wore a Rolex watch and owned a $7.5 million mansion on Lake Minnetonka in Wayzata. He spoke openly of his belief that he was called by God to minister to world leaders, according to former business associates.
But federal regulators, in an affidavit submitted in support for a search warrant of his home and businesses, describe a far different LaFavre. The IRS' criminal investigation division alleges that he helped raise money for an illegal investment scheme that promised high monthly returns in offshore banking programs at no risk.
A court-appointed receiver estimated that 1,300 individuals and investment groups nationwide (including 238 in Minnesota) were defrauded of more than $150 million.
LaFavre, 41, is also under investigation by the state Department of Commerce for violations of state real estate laws, after state and federal regulators uncovered what they believe is evidence of a multimillion-dollar mortgage fraud at a Burnsville firm.
That company is LHS Mortgage Inc., which LaFavre founded.
In June, the Commerce Department permanently barred Ronald Clark Joseph, who worked for LHS, from originating or servicing mortgages. Earlier this year, two LHS loan officers pleaded guilty to federal wire fraud and money laundering charges.
LaFavre's attorney, Doug Kelley, said in an interview Friday that his client had sold LHS by then and was unaware of any wrongdoing. Kelley also said that, contrary to the IRS' claims, LaFavre was a victim, losing "a substantial part" of the money he invested with Travis Correll, an Atlanta man indicted in June on federal charges of money laundering and mail fraud.
"If Adam made a mistake, it was placing his trust in Travis Correll," Kelley said.
The allegations against LaFavre, who referred all questions to his attorney, have attracted attention in Twin Cities real estate circles, where LaFavre was once considered one of this market's most proficient dealmakers.
In 1997, he closed more than 300 transactions and had more listings than any real estate agent in the state, according to the Twin Cities edition of "Broker Agent" magazine. In his first nine months at Edina Realty, he made $6 million in sales -- a "company record for a new agent in such a short time," the magazine said.
LaFavre was also known for his lavish lifestyle. When IRS agents executed a search warrant of his home in March, they seized a large amount of valuable property, including five Rolex watches, 62 plastic containers of silver coins and some solid silver bars, among many other items. They also seized bank statements and other financial documents from his business address in Wayzata.
The IRS said in its affidavit that LaFavre reported no taxable income in 2003 and 2004, yet he made a $1.2 million down payment on a 32,000-square-foot Wayzata home in October 2004 and was to make monthly payments of $50,000 under a contract for deed. LaFavre bought the home from auto dealer Denny Hecker, and paid off the financing in less than three years, Hecker said.
Hecker said he never met LaFavre before selling him the home. "He said he was in real estate and he drove up in a new Bentley" on the day of the sale, Hecker said. "That impressed me."
Scotty Wiers of Shakopee, a former personal assistant and property manager for LaFavre Homesellers, said in an interview that he never understood how LaFavre amassed his wealth. In the final three years that he worked for LaFavre, Wiers said, he saw him driving more than a half-dozen luxury cars, including a Hummer, Cadillac Escalade, Bentley and Mercedes.
"When I asked, he just said it was land deals," Wiers said. "He continued to buy all those cars when we weren't selling a whole lot of houses."
LaFavre talked openly about trips he made to countries such as El Salvador and Russia as part of a mission to spread the Gospel to foreign countries, Wiers recalled. "He felt that God blessed him to be financially successful," Wiers said.