A Roseville firm involved in quick-turn deals faces one count, but it appears likely that charges for other lenders are ahead.
A Roseville firm involved in hundreds of real estate deals in the Twin Cities area was charged Friday with a single count of mail fraud resulting from a federal mortgage fraud investigation.
The charge suggests that a plea deal may have been reached and that federal attorneys may be looking at charges higher up the lending chain, according to those who have prosecuted white-collar crime.
The U.S. attorney's office filed the one-page charge against appraiser Thomas J. Balko, 37, of Rogers; Jonathan E. Helgason, 45, of Chisago City; and TJ Waconia, the company they formed in 2000.
They could not be reached Friday night.
"Its sounds minimalist," said City Council Member Don Samuels. He has compared the damage he said the company did in at least 140 deals in his and other North Side Minneapolis neighborhoods to the damage caused by drug dealers.
But a former assistant federal prosecutor, Mark Larsen, said filing the charge without an indictment strongly suggests a plea deal. Such deals often require testimony against others involved in a criminal activity, described in this case as a three-year mortgage fraud scheme.
"It could be a little cascading effect here," said former U.S. Attorney B. Todd Jones, whose tenure was marked by numerous mortgage fraud prosecutions. Larsen said that one potential target could be those who supplied the money.
"People who run mortgage companies are often in a position to give information about banks or other financial institutions that actually provide the money to make the deals close," Larsen said. He said a deal would be "consistent with the notion that people who run mortgage brokerages know that there are bigger fish to catch and the U.S. attorney is apparently trying to catch them." That could reach higher in the lending chain than previous local mortgage fraud cases, he said.
Some are waiting to see if that's the case. "We are hoping that this turns out to be significant," said Roberta Englund, staff director for a Folwell neighborhood group in Minneapolis that first dug out a pattern of suspicious transactions by the firm.
Samuels hopes so too: "I would hope to hear something reassuring in the very near future. Given the scope and scale of the transactions, it's hard for me with just this information to feel comfortable."
A lawsuit filed by the city of Minneapolis and others last week against TJ Waconia and its owners alleged that they repeatedly obtained mortgages from SunTrust Mortgage.
The federal charge contains no such detail, but a search warrant affidavit filed in November states that TJ Waconia and its owners defrauded property investors and lenders who held mortgages on their properties.
The affidavit indicates that the firm bought numerous homes out of foreclosures and resold them to investors at significant markups. It suggested that those deals created a likelihood that fraudulent documents were submitted to lenders. The city lawsuit alleges that the deals drove up prices in north Minneapolis, which then collapsed after the firm cashed in.
Steve Brandt • 612-673-4438