Troubled Sexton now caught up in fraud probe

Federal investigators are looking into suspected fraudulent property flipping at the Sexton. One person already has pleaded guilty.

By SUSAN FEYDER, Star Tribune

Last update: March 11, 2008 - 1:47 AM

The Sexton, a downtown Minneapolis condominium development already caught up in foreclosure and a tangle of lawsuits among its partners, now is at the center of a mortgage fraud investigation by the U.S. Attorney's Office.

On Monday, Joseph Huebl of Burnsville pleaded guilty to mail fraud and conspiracy for his role in a scheme to illegally profit from the sale of one of the Sexton's 123 condo units. In his plea agreement, Huebl said he was involved in the scheme along with an unspecified agent of the project's developer, Sexton Lofts.

As part of his plea, Huebl, 28, has agreed to cooperate with an ongoing investigation of others suspected of taking part in mortgage fraud at the Sexton, including the unnamed agent of the developer.

The project, at 521 S. 7th St., was developed by Sexton Lofts LLC, a partnership of JJT Development, Heather Enterprises II and Medved LP.

Ben Houge, JJT's attorney, declined to comment. Mary Yeager, attorney for Heather and Medved, said neither of her clients has been contacted in connection with any investigation.

In the plea agreement, Huebl said he bought a unit in the Sexton in March 2007 for $366,756 at the direction of the developer's agent.

Huebl resold the unit the same day for $700,000 to another person he had recruited to be part of the scheme. Huebl admitted helping the new buyer falsify financial information in order to qualify for a mortgage. The developer's agent provided an inflated appraisal to justify the mortgage amount, the plea agreement said.

The $333,244 profit from the fraudulent transaction was split between Huebl and the developer's agent, with Huebl receiving $272,980 in two wire transfers, according to the plea agreement.

Neither the plea agreement nor the U.S. Attorney's Office identified the seller in the first transaction. The buyer in the second transaction and the lender that supplied the mortgage also were not identified. Hennepin County property records identify Sexton Lofts LLC as the seller in the first purchase by Huebl's company, St. Joseph's Financial Inc.

Assistant U.S. Attorney Joseph Dixon declined to comment on whether the case against Huebl is connected with other lawsuits in which the Sexton's partners have accused each other of a variety of misdeeds. JJT, which holds a 50 percent interest in the development, has accused Heather and Medved of mismanaging a $26 million construction loan that played a part in the project's foreclosure.

Heather and Medved have accused JJT of selling condo units for more than the advertised prices and paying real estate agents inflated commissions.

U.S. District Judge Patrick Schiltz accepted Huebl's plea but did not sentence him. Huebl faces penalties of 18 to 24 months in prison, two to three years of supervised release and a fine of $4,000 to $40,000 under sentencing guidelines.

Susan Feyder • 612-673-1723

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