NWA pilots say they were misled in foreclosure venture

Some Northwest Airlines pilots were looking for ways to make up for the steep pay cuts they were facing in 2005 when they learned of a "foreclosure rescue" plan promising them extra cash while helping struggling people hang onto their homes.

Two years later, the pilots' credit ratings and their finances are in ruin. Several have been sued by some of the homeowners they tried to help.

All told, the six pilots and one flight attendant sank more than $1.5 million into two real estate ventures, some of them taking out second mortgages on their own homes and raiding their savings for the cash. Their attorneys say they are another set of victims in the string of mortgage fraud and equity stripping cases that investigators continue to uncover in Minnesota in the housing bubble's aftermath.

The foreclosure venture and related real estate investments are the subject of a federal criminal investigation, and total losses could exceed $2 million.

Mindy Conradi, a 45-year-old pilot from Chanhassen, said she got involved largely because of the endorsement of senior pilot Larry Maahs, who introduced her and some colleagues to Timothy Beliveau of Mound.

Beliveau, 39, was seeking investors for the businesses that he operated with his wife, Shelley, 36, a real estate agent.

Conradi said Maahs, a DC-9 captain, personally vouched for Beliveau, who was related to Maahs' daughter by marriage.

"We trusted him," Conradi said of Maahs. "Unfortunately, because we trusted him, we trusted the Beliveaus, and we shouldn't have trusted anybody."

The Beliveaus could not be reached for comment for this article. They have invoked their Fifth Amendment rights against self-incrimination in some recent civil suits, declining to testify on the advice of Peter Wold, an attorney they retained for the criminal investigation. Wold declined to comment.

Legal action

In August, the Beliveaus disclosed in a letter to a Hennepin County district judge that "due to the number of foreclosed homes we were involved with" a federal criminal investigation has been started.

Maahs, 62, has retired and moved to Florida. He could not be reached for comment. His attorney, Joel Hilgendorf, said Maahs considers himself a victim. In May, Maahs and his wife won a $628,832 default judgment against the Beliveaus and their companies.

Court records show that the investigation is being led by the U.S. Postal Inspection Service and the Internal Revenue Service's Criminal Investigative Division.

The probe spun off from an alleged equity skimming conspiracy involving Michael Fiorito, 39, of Prior Lake. Fiorito, who recently pleaded guilty in federal court, used to work with the Beliveaus, according to a source with knowledge of the case.

Some pilots said Tim Beliveau exuded success. He lived in an expensive home, dressed well and drove a Lexus. Conradi said he entertained her and other investors on a Lake Minnetonka cruise and took them to Lord Fletcher's Old Lake Lodge.

Northwest pilot Tom Martin said he borrowed $235,000 against his home to invest with the Beliveaus. "This was supposed to be a win-win deal for everybody," said Martin, a 44-year-old Duluth-area resident who flew with Maahs and said Maahs set up a meeting for him with Beliveau.

Beliveau had his lawyer, Ryan Simafranca, explain the foreclosure prevention program, Martin said. "That is what convinced me that everything was legitimate."

Simafranca's attorney, John Lundquist, said his client did nothing more than provide legal services to a Beliveau-owned company. Jurors in a recent civil case found him liable for helping the Beliveaus strip $55,000 in equity from a Thai woman's home in Brooklyn Center.

The pilots and some of the original homeowners now say in state and federal lawsuits that the Beliveaus' foreclosure venture was nothing more than a well-disguised equity stripping scheme. The targets were unsophisticated, desperate homeowners on the one side and Northwest employees trying to cope with pay cuts of nearly 40 percent on the other, they contend.

The pitch

According to investors, Tim Beliveau's pitch was that he would use the good credit ratings of the investors to buy properties that were in or near foreclosure, then sell them back to the distressed homeowners on contracts for deed. The homeowners would get to keep their homes while they made payments and worked to restore their credit so they could qualify for new mortgages.

The Beliveaus were supposed to ensure that the mortgage companies and the investors got paid. The pilots were to receive a modest fee of about $5,000 per house.

The pilots said they learned that the mortgages were not being paid when they were notified that some of the homes were heading to foreclosure again. The pilots were unable to carry the multiple mortgage payments on their own, homes were lost and their personal credit ratings were ruined.

Some pilots also invested heavily in a plan Tim Beliveau developed to buy and rehabilitate housing. That endeavor went awry, and the pilots contend that the Beliveaus spent the money for their personal uses, including a home on Marco Island, Florida and a motorcycle dealership in Arizona.

Some investors and homeowners have won civil judgments against the Beliveaus and their companies. But it's unclear whether the Beliveaus have money to repay them and restore the homeowners' equity. The couple told a judge in August that they were planning to file for bankruptcy. Tim Beliveau had filed Chapter 7 bankruptcy once before, in 1994.

"We are trying to figure out what [they've] got, and where it's at," said Michael Puklich, an attorney for Martin, Conradi and eight other investors.

Telsche Paulson was one of the homeowners caught up in the case. After her husband died and her downstairs tenants moved out, the 85-year-old Minneapolis resident fell behind on mortgage payments on the duplex she'd lived in for 50 years. Beliveau's company sent her a letter offering to save her home from foreclosure. Ultimately, Maahs bought the property. He later sold it to one of Beliveau's relatives.

Salo Ale, an attorney with Faegre & Benson, filed suit this year against the Beliveaus, their companies, Maahs and several others, alleging that Paulson was duped into selling her home. The defendants stripped $175,000 in equity, fees and other charges, according to the suit.

"She was not aware that she was a tenant in her own property until some federal inspectors came by and alerted her to an ongoing investigation," said Ale, who took the case without compensation. Ale hopes to have the property returned to Paulson, and possibly get some monetary damages.

Pitch vs. reality

The pilots say the Beliveau deals were pitched as modest risk, modest reward.

"They were looking for people who had a temporary hiccup in their income, like a job loss or an illness and had gotten behind on a couple of their mortgage payments," Martin said.

He invested heavily in the second Beliveau program, in which properties were to be bought, improved and sold for a profit. Conradi also invested in that venture, using money from a second mortgage on her home.

Martin said he received half of his money back in February 2006, after he threatened to sue. But because three homes went into foreclosure with his name on the first mortgage, "My credit is basically trashed," he said.

Conradi is in similar straits, having lost two homes to foreclosure.

In Hennepin County District Court, an arbitrator in August awarded Puklich's clients a judgment of $569,033 against the Beliveaus and their businesses. Martin and Conradi were each awarded about $155,000, but they don't know if they'll get paid.

Conradi recalled how excited she was to invest in the foreclosure rescue program. "We all thought, 'Wow, this is great! I'm helping someone and I'm helping make up for my massive pay cut at the same time.'" Now, she said, "We're all just kind of mortified."

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