FBI says Twin Cities area is hotbed for mortgage fraud

The FBI identified the Twin Cities as one of the 10 worst areas in the nation for mortgage fraud.

By DAN BROWNING, Star Tribune

Last update: June 20, 2008 - 5:32 AM

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The FBI has identified the Twin Cities as one of the 10 worst areas of the United States for mortgage fraud and said it has literally dozens of criminal investigations underway here as part of a national crackdown on the problem.

Deputy U.S. Attorney General Mark Filip and FBI Director Robert Mueller called a news conference Thursday afternoon in Washington to announce a special enforcement effort targeting mortgage fraud and mortgage-related securities fraud.

The multi-agency initiative is called Operation Malicious Mortgage. From March 1 through June 18, the government charged 406 defendants in 144 mortgage fraud cases around the country. The FBI estimates the total losses from these cases at about $1 billion. Six of every 10 cases had losses of at least $1 million.

In Minnesota, it's even worse, said Rick Thornton, assistant special-agent-in-charge of the criminal division in Minneapolis.

"We have three cases where we are expecting losses approaching $50 million -- in each case," Thornton said. "That's a real loss to one or more financial institutions."

Two of the biggest cases include the prosecutions of Parish Marketing and Development of Eagan and TJ Waconia of Roseville, said Paul McCabe, FBI spokesman in Minneapolis. The Parish case involved more than 200 homes in some southern Twin Cities suburbs; the TJ Waconia case involved 165 homes in Minneapolis. The losses in those cases are still being tallied. McCabe declined to discuss the third case, an indication that it may still be pending.

The FBI's Minneapolis office currently has "40 plus" investigations underway, Thornton said. But even that understates the scope of the problem.

He stressed the fact that his agency has been participating in an informal mortgage fraud task force for some time with the U.S. Postal Inspection Service, Internal Revenue Service-Criminal Investigative Division, the U.S. Attorney's office, the Hennepin County Attorney's office and other agencies. They work together, but each also has its own cases.

Almost all cases top $1 million

Most of the cases they investigate have losses in the $5 million to $10 million range, Thornton said. "Virtually everything that we're working has a loss in excess of a million dollars," he added.

The FBI recently sent notices to 24 of its offices nationwide that have been identified as having particularly high mortgage fraud problems -- the Minneapolis office, which covers Minnesota and the Dakotas, was listed among the top 10, Thornton said. He said the problem area is the Twin Cities.

The agency directed each office to stop opening lower-priority white-collar crime cases for the time being and to concentrate on mortgage fraud. Thornton said his agents would keep working existing cases. And the office does have some flexibility to pursue new cases that have significant community impact. But more routine white-collar crimes may get pushed aside for a while, he said.

60 arrests in one day

On Wednesday, federal agents arrested 60 people in 15 federal districts. None was in Minnesota, but plenty have already been arrested here.

In 2007 and 2008, the U.S. Attorney's office charged 23 defendants who have either pleaded guilty or have been sentenced for mortgage fraud and related crimes, a spokesman said Thursday.

Some of the defendants include Sabry Wazwaz, Christopher Horton, Adam Leaf, Jill Lehn, Isadore Stewart, Mario Lewis, Ron Joseph, Ramiz Saadeh, Kristopher Robbins, Molly Heise, Joseph Van Huebl and John Rubischko.

"Obviously, we've been engaged in mortgage fraud investigations and this building problem for some time," Thornton said.

Dan Browning • 612-673-4493