A man indicted for allegedly running one of the largest mortgage fraud schemes in state history pleaded not guilty Wednesday to the 27 charges filed against him in federal court in Minneapolis.

Michael Prieskorn, who cleared out his Minnetonka office in early 2007 and disappeared, returned to Minnesota and showed up in court wearing a pinstriped suit and accompanied by a lawyer. A trial was set for May 3 in St. Paul before U.S. District Judge Paul Magnuson.

Prieskorn, 35, originally of Ellendale, Minn., has been free on a $75,000 bond secured by his girlfriend's house. The judge said that agreement continues to cover his release.

Prieskorn associate Richard Laho also appeared Wednesday. Laho, a 54-year-old mortgage broker from Buffalo, pleaded not guilty to the 25 charges against him. His trial was also set for May 3 in St. Paul.

Laho told the judge that the mortgage and real estate business had been "very, very slow," that he was out of work and too broke for an attorney. His vehicles, a Lincoln Navigator and a Lexus, have been repossessed, he said, and his bank account has a negative balance. The judge released him on a $25,000 unsecured bond, arranged for a federal defender to be appointed and told Laho to get a job.

The Internal Revenue Service arrested Prieskorn last month in Cape Coral, Fla., according to the U.S. attorney's office in Tampa. He was ordered to return to Minnesota, where the indictment was filed last month.

The two men allegedly scammed buyers through two companies Prieskorn ran: Blackstone Sales and Main Estates. The companies bought new homes from builders at discounts.

From December 2006 to April 2007, the two men paid people $5,000 to let them use their names and credit histories to buy about 70 homes in Minnesota and Florida, promising people they'd manage the properties for them and quickly resell them, according to the indictment. The pair are accused of supplying the down payments for the purchases, lying to the mortgage lenders, and then skimming hefty management fees from the mortgage loans they obtained. Prieskorn pocketed more than $5 million, according to the indictment.

The alleged swindle left a long trail of foreclosures and ruined credit. The indictment lists 175 other homes Prieskorn persuaded investors to buy, but those weren't included in the charges.

Last year, the state Commerce Department fined Prieskorn $2.2 million and revoked his mortgage originator license for swindling investors in the purchase of about 220 homes, making his one of the largest mortgage fraud schemes ever operated in the state, judging by the number of homes involved. The penalties came after Prieskorn failed to show up for an administrative hearing on the matter and couldn't be located.

Jennifer Bjorhus • 612-673-4683