Inquiry into Minnetonka condo project backed by developer Jerry Trooien has ensnared six people.
Two real estate professionals have pleaded guilty in connection with kickbacks at the troubled Cloud 9 Sky Flats development in Minnetonka, a scheme that prosecutors say defrauded lenders out of $7 million to $20 million.
Daniel Douglas Boler, 42, of Maple Grove, and Susanne Eileen Mathis, 42, of Minnetonka, pleaded guilty in federal court Wednesday to conspiracy to commit mail and wire fraud. They face a maximum of 20 years in prison.
Boler was owner and loan officer of the mortgage brokerage company Team Access. Mathis owned the business Trend Title and closed residential real estate transactions.
Kickbacks, inflated incomes
Boler and Mathis admitted that from 2007 to 2008, they obtained mortgage loan proceeds under fraudulent pretenses on behalf of home buyers associated with an unnamed investment group.
Boler admitted that he lied on those applications, including inflating the incomes of buyers and failing to disclose that buyers would receive cash kickbacks from mortgage loan proceeds. Boler secured mortgage loans for the purchase of about 108 properties in all.
Mathis admitted that she closed about 88 fraudulent transactions for the investment group, concealing from mortgage lenders that the purchasers got kickbacks from mortgage loan proceeds and that the buyers were often not the source of the "cash to close."
The kickbacks were disguised as prepaid management fees and facilitator fees.
Mathis also closed eight to 10 transactions involving undisclosed Cloud 9 buyers.
Four others have already pleaded guilty in the Cloud 9 scheme.
One -- former broker Sheri L. Delich, who pleaded guilty in June -- testified that she was following instructions from St. Paul developer Jerry Trooien, once one of the area's more prominent commercial real estate developers. Trooien's company, JLT Group Inc., converted the office building into condos during the real estate boom.
Trooien has denied Delich's courtroom accusation and has not been charged.
JLT has said that Trooien no longer has an ownership interest in Cloud 9. The building was transferred to the condo association in 2005, and the last units were sold in 2007.
The number of condo units involved in the overall kickback arrangement has topped 100 at Cloud 9 and elsewhere. Kickbacks from the loan proceeds exceeded $8 million, according to federal prosecutors.
Jackie Crosby • 612-673-7335