The indictment said he and another broker -- expected also to plead guilty -- stripped $160,000 in equity from six homeowners.
Two Twin Cities mortgage brokers have agreed to plead guilty to federal felony charges in connection with an alleged equity-skimming scheme that targeted financially distressed and vulnerable homeowners.
Michael Fiorito, 39, of Prior Lake pleaded guilty Tuesday in U.S. District Court in Minneapolis to a count of mail fraud in exchange for dismissal of a conspiracy charge and three other mail-fraud counts.
Kristin Louise Jerde, 21, of Eagan has been scheduled to plead guilty since Aug. 23, but the date has been postponed and is now set for Oct. 10. The terms of Jerde's plea agreement are not yet public.
Fiorito -- who has also used the names Fiori, Fiore and Fiorto-- and Jerde, who is also known as Kristyn Moss, stripped more than $160,000 in equity from six homeowners in Mound, Duluth, Vadnais Heights and Shoreview, according to the indictment.
David MacLaughlin, an assistant U.S. attorney who heads the white-collar crime section in Minnesota, described Fiorito's plea agreement as very unusual.
"It sure is," responded U.S. District Judge Paul Magnuson, chuckling.
MacLaughlin explained that Fiorito and the government disagree about many elements generally worked out in plea agreements, including the sentencing range, the loss amount, the victims, and whether Fiorito played a leadership role in the alleged conspiracy.
All of that will be argued in a future sentencing hearing.
Even so, the plea agreement offers benefits for both sides, MacLaughlin said.
The government will avoid a protracted trial, he said, and Fiorito will have some charges dismissed. If Fiorito cooperates in prosecution of others, the government may argue to reduce his potential prison term, and promise not to charge his wife, Marion Glatzmaier.
Magnuson said that although prosecutors have an absolute right to decide whom to prosecute, "I become very concerned when I see plea agreements that reference a spouse and a decision not to charge a spouse." Such agreements demonstrate "incredible influence" on a defendant, he said.
After the hearing Tuesday, Magnuson took the unusual step of ordering that any transcript be filed under seal, even though the hearing had been open to the public and was attended by a reporter. He also sealed the plea agreement.
"It has come to the court's attention that certain information contained in the plea agreement and discussed at the change of plea hearing is of a sensitive nature and should not be publicly disclosed at this stage," he wrote.
Fiorito had nearly derailed the plea bargain Tuesday with a testy exchange when Magnuson asked him if he understood his constitutional rights, including the presumption of innocence.
"I don't believe that," Fiorito said.
Fiorito has several prior convictions, according to federal authorities.
Magnuson told Fiorito that he wouldn't accept a guilty plea unless a defendant confirms that he would be presumed innocent and wanted to plead guilty because he was genuinely guilty.
"I understand," Fiorito said.
The indictment charged Fiorito and Jerde with conspiracy to commit mail fraud and four counts of mail fraud from January 2004 to March 2007.
Fiorito admitted to helping a woman refinance a home in Mound in July 2005 and promising to help her restore her credit profile and sell the house, which was owned by the woman's mother. Fiorito confirmed that he suspected the mother's signature had been forged on a power-of-attorney document that enabled the refinancing to go forward, but never alerted the lender. Fiorito said the owner was unaware of the refinancing.
Fiorito collected between $12,000 and $13,000 from the refinancing, but admitted that he never sold the house or repaired the credit as promised.
MacLaughlin said Fiorito could face 140 to 175 months in prison and have to pay restitution.
Bill Lannon, an investigator with the Duluth Police Department and a member of the Minnesota Financial Crimes Task Force, said earlier that more indictments might flow from the investigation, which uncovered about 15 victims and losses of about $400,000.
Dan Browning 612-673-4493