Guilty plea in giant mortgage fraud case

A Minnesota man indicted for allegedly running one of the largest mortgage fraud schemes in state history reversed his earlier plea Tuesday and pleaded guilty to two of the 27 charges against him in federal court.

Michael Prieskorn, 35, pleaded guilty in St. Paul before U.S. District Judge Paul Magnuson. He admitted to conspiracy to commit wire fraud and to an illegal monetary transaction involving $225,000, bringing closure to a winding mortgage fraud scandal that led from his shuttered Minnetonka offices to southwest Florida and back.

Magnuson accepted the guilty pleas -- meaning Prieskorn won't have a trial and cannot appeal -- and ordered Prieskorn to meet with a probation officer to start sentencing. He faces a likely sentence of 11 to 14 years in prison and will have to repay victims. He could face less time because he's cooperating with investigators against others who might be involved. He also agreed to forfeit assets connected to the illegal activity.

Prieskorn, originally from Ellendale, Minn., had been scheduled to go to trial May 3 after initially pleading not guilty last month. One of his associates, mortgage broker Richard Laho of Buffalo, Minn., also pleaded not guilty to 25 charges against him. Laho's trial is tentatively set for May 3 in St. Paul.

Prieskorn appears to have fled the state in the spring of 2007 after hastily shutting down his Minnetonka offices, to the consternation of his many customers. The Internal Revenue Service arrested him in Cape Coral, Fla., in January, and he was ordered back to Minnesota. It's unclear why the arrest took so long.

At least two people who bought homes through Prieskorn said the new guilty pleas provided some satisfaction.

"I'm glad he admitted to it and I'm glad there's not going to be a trial because it's all going to save us all more agony," said Michael Herr. Herr, 49, a computer programmer who lives in Brooklyn Park, said he bought seven homes through Prieskorn's group for $3.5 million. Herr acknowledged he had no idea how he could have qualified for the loans, but that Prieskorn and his associates assured him he could.

"I wasn't even reading the stuff that I was signing," he said.

Prieskorn and Laho allegedly scammed buyers through companies Prieskorn ran from his Minnetonka office: Blackstone Sales and Main Estates. Prieskorn marketed "risk-free" real estate investments. He paid people about $5,000 to use their names and credit to buy about 70 homes, while promising they wouldn't be responsible for any of the bills and that he'd quickly resell the properties. He provided down payments and closing costs for the buyers, misrepresenting their true financial status to mortgage lenders and skimming "management fees" from the mortgage loan proceeds.

The original indictment also mentioned more than 100 other homes Prieskorn persuaded investors to buy, though they weren't part of the criminal case.

Karen Lieder, a 57-year-old Osceola, Minn., woman who bought two Florida condos through Prieskorn, said one mortgage lender later told her her loan application stated she earned $10,700 a month. She works three jobs and makes less than $50,000 a year, she said. Lieder said the scam has been a huge drain on her life and she's still trying to clear her credit report of the mess.

The scheme cost mortgage lenders at least $20 million, prosecutors said. At the same time, Prieskorn admitted receiving at least $1 million as a result of the scam.

Unlike other fraudsters who have been in the news of late, Prieskorn wasn't living the high life off his proceeds, said his attorney, Frederick Bruno.

"He never had a Bentley, he never had a Mercedes. ... He's a Chevrolet kind of guy," Bruno said. "Many of the transactions he participated in were at the time thought to be legitimate, although they clearly were not, and Mr. Prieskorn understands that."