Prison for 2 men whose bogus loans totaled more than $4M

Article by: PAUL WALSH , Star Tribune
Updated: February 5, 2010 - 9:13 PM

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Two Twin Cities men, one of them a loan officer, were sentenced this week in federal court for defrauding a bank on at least 21 loans totaling more than $4 million.

Eric R. Krahnke, 52, of Andover, was sentenced to three years and one month in prison. His conspirator, Michael I. Striker, 56, of Minnetonka, was sentenced to three years and five months in prison. Both pleaded guilty to bank fraud and money laundering.

"These schemes need to be exposed to stop the cascading negative effect this type of fraud has on our economy and the innocent parties involved," said Julio LaRosa, special agent in charge of the St. Paul field office of the IRS-Criminal Investigation Division. "These sentences send the message that mortgage industry fraudsters will not go unpunished."

According to the indictment, the conspiracy took place in 2003, when Krahnke worked as a construction loan officer for Associated Bank and also owned an independent mortgage brokerage called Worldwide Mortgage & Investments. Striker, president and sole owner of a real estate investment firm called U.S. Equities of Minnesota Inc., was one of Krahnke's customers.

Striker submitted 21 loan applications through Krahnke that contained false or misleading information; the applications overstated his and U.S. Equities' finances. Striker also allegedly submitted inflated appraisals to justify loan amounts exceeding the true market value of the properties.

Krahnke manipulated the bank's loan approval processes to fund the loans, yielding more than $724,000 for Striker personally at the closings, the indictment said.

Striker also gave Krahnke "a Rolex-brand watch worth several thousand dollars," which violated the bank's rules against accepting bribes or kickbacks, the indictment said.

Paul Walsh • 612-673-4482