Ex-broker points finger at Trooien

A former real estate broker pleaded guilty Tuesday in a mortgage fraud scheme at a Minnetonka condo complex developed by Jerry Trooien, saying she was following instructions from Trooien.

The accusation came as Sheri Lynn Delich pleaded guilty to conspiracy to commit wire fraud and to money laundering. Tearing up during her testimony in a St. Paul courtroom, Delich, 45, described how she took kickbacks in an alleged $4.2 million mortgage fraud conspiracy involving more than 40 units at the Cloud 9 Sky Flats, an office tower in Minnetonka that Trooien converted into condos during the real estate boom.

Trooien on Tuesday denied the accusations.

"I do not know this woman and have never in any manner communicated with her, let alone having given her 'instructions' on any real estate transaction," he said via e-mail.

Still, the testimony is the latest challenge for Trooien, a prominent real estate developer and manager based in St. Paul. Trooien filed Chapter 11 bankruptcy last fall following the collapse of aircraft leasing companies he was involved in. Most of his core real estate holdings are in foreclosure -- such as the TriTech Building in downtown Minneapolis and the Sheraton Hotel in Woodbury -- and Trooien has been struggling to exit bankruptcy protection.

Delich said she did what Trooien told her to do, said her lawyer Mark Larsen, a partner at Lindquist & Vennum. When Assistant U.S. Attorney Robert Lewis asked whether other people were involved, Delich said yes but didn't name them.

"Ms. Delich accepts responsibility for her conduct, is cooperating fully in the investigation of others, and that is ongoing," Larsen said in an interview. "I don't know who the government is investigating."

Trooien's lawyer, Earl Gray, said he suspected that Delich was lying to "save her skin."

"Obviously she's trying to work off some substantial time for her own fraud," Gray said. "There's no proof at all that [Trooien] was involved in any scheme to defraud."

Delich is the third real estate professional to plead guilty in a kickback scheme at Trooien's Cloud 9 Sky Flats. My Dinh Lam, a Minneapolis appraiser, and Ashley Elizabeth Prasil, an inactive Eden Prairie real estate agent and mortgage broker, pleaded guilty last month of conspiring to commit wire fraud.

The swindle, which ran from 2006 through 2007, involved lying to mortgage lenders about sales prices and pocketing 30 percent of the purchase price outside of the formal closing. Most of the buyers defaulted on their mortgages.

The three were charged after federal agents raided Trooien's St. Paul offices in February looking for evidence of fraud. Trooien has not been named or charged in the federal investigation.