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In the spring of 2004, a letter from American Alliance Mortgage arrived in Telsche Paulson's mailbox. The company knew Paulson was in danger of losing her home of 46 years to foreclosure. The company said it could help.
"I was in dire straits," Paulson said. "I just had to do something and I didn't know what to do. I thought the letter was just what I needed."
Within weeks, Paulson, then 81, was chauffered to an office, given papers to sign and driven home. For three years, she thought she had merely refinanced her south Minneapolis duplex.
Then, in May 2007, two federal investigators arrived at her door and told her she was living in someone else's house. Paulson had fallen victim to a group of real-estate insiders who took advantage of her to profit from the housing bubble.
This month, a federal judge ruled that the now-divorced couple at the center of the scheme, Timothy Beliveau and Shelley Milless, had "tricked" and "deceived" Paulson out of her home, equity and subsequent monthly payments. Paulson's situation is part of a case that federal investigators say encompassed 35 properties in Minnesota and drew in a number of Northwest Airlines pilots as investors.
The judge's ruling was bittersweet for Paulson. In September, as she turned 86, she moved out of 4231 Pleasant Av. S. as a bank moved forward with foreclosure. She had lived there since 1958.
"I knew I was going to have to go. But I didn't want to. I still didn't want to when I was packing things up," she said.
Paulson was a classic target for unscrupulous real-estate investors: an elderly person with significant home equity who reaches a desperate situation, senior citizen advocates say.
"Oftentimes, people in their 80s, longstanding citizens, are the people that thieves are going to go after," said Amy McDonough, communications director for the Minnesota AARP. "When people are in crisis, and somebody knocks on their door, and says they can helps them, who says no? Who reads all those mortgage documents?"
Paulson was a fixture of her south Minneapolis neighborhood, the white-haired lady who lived upstairs in the stucco duplex with red-trimmed windows. Fifty years ago, she and her husband, longtime KSTP radio and TV announcer Al Paulson, bought the house and moved into the upstairs unit. They raised their two sons there.
Paulson retired from Northwestern Bell in 1983 and kept working as an office administrator well into her 70s. Her husband died in 1989.
"I kept saying that they'd have to carry me out if I was ever going to have to leave this place," Paulson said.
Then, in 2003, the downstairs tenant moved to California. Paulson couldn't find a new one. Without those rent checks, Paulson couldn't make her mortgage payments.
An unintended sale
In the spring of 2004, Wells Fargo Home Mortgage said it would start foreclosing.
When the letter arrived from American Alliance Mortgage, Paulson said, she didn't have any reason to suspect a swindle. She told Tim Beliveau and others with the company that she didn't want to sell her home.
On June 18, 2004, however, she unwittingly sold her home to someone she has never met, Lawrence Maahs, a Northwest Airlines pilot now retired in Florida. Her suspicions wouldn't have been raised because the $155,000 she was supposed to gain from the transaction instead went into an escrow account controlled by the Beliveaus.
That money went into a tangle of bank accounts that the Beliveaus drew on to pay for a second home in Marco Island, Fla., a 35-foot boat and other personal expenses. Meanwhile, Paulson continued making monthly payments as bills arrived with the amount due labeled "mortgage."
In January 2006, the duplex was sold once again, this time to relatives of Beliveau and Milless. The transaction provided a $99,881 commission to Shelley Milless, more than 20 percent of the purchase price. That money was the remainder of Paulson's equity in the house.
Another year and a half passed. Then the two fraud investigators from the U.S. Postal Inspection Service paid a visit and asked to see Paulson's mortgage papers.
She was shocked. Then she got angry, both at Beliveau, and herself. "I feel so stupid," she told the investigators.
You need to talk to a lawyer, they said. They referred her to Mid-Minnesota legal assistance. In June 2007, Paulson filed a civil suit against the Beliveaus, Maahs and others involved in the transactions.
Their business relationship had already taken a nasty turn. Beliveau called Paulson and asked her to let an appraiser into the property. Paulson hung up on him.
Then, on June 11, a handwritten note from Beliveau was shoved under her door. It demanded that Paulson allow an appraiser on the property or else face eviction. "We will bring the sheriff with us and will force our way in if necessary," the note continued. "We have done everything possible to keep you living here at your low payment and this is how you repay our kindness."
No one tried to batter down the door. Beliveau came by and rang the doorbell. Paulson pretended she wasn't home.
She was fortunate in one respect. She received pro bono legal assistance from two attorneys at Faegre & Benson, Peter Hennigan and Eleasalo Ale. Despite the attorneys' efforts, by spring 2008, they couldn't figure out a way to keep the duplex in Paulson's hands. A tight mortgage market, the loss of her equity and the fact that the property had been sold twice made it virtually impossible for Paulson to refinance it. The lender foreclosed on the property in July.
In September, for the last time, Paulson walked down the steps of her house.
Trying to move on
On Dec. 1, U.S. District Judge Patrick Schiltz finally handed Paulson her victory in her civil case against Tim Beliveau and Shelley Milless.
But the couple, who split up last year, claim in court papers to have nothing left. Beliveau, whose million-dollar home in Mound is being repossessed, disagreed with the judge's ruling, saying Paulson knew what was happening the whole time. He didn't put up a defense in the civil case, Beliveau said, because he didn't want to damage his defense against any criminal charges, which he expects.
"I'm not this person they're making me out to be," Beliveau said. An attorney for Shelley Milless said her ex-husband really controlled all the transactions and business, and that Milless "feels horrible about the whole thing."
Paulson now lives far from south Minneapolis, across the windswept fields of southern Dakota County, in a rented house in a quiet grid of streets outside downtown Farmington.
Paulson has gone back to the neighborhood in Minneapolis, trying to keep her mind off the fact that she's visiting now, not going home.
"You don't let yourself think about it," she said. "Because it isn't going to do any good to sit and think about it and worry about it."
Her lease on the Farmington home expires in March. Paulson doesn't know yet whether she'll stay, or find someplace else to live.