A Mound man who allegedly defrauded six Northwest Airlines pilots and a flight attendant out of $1.5 million in a real estate investment scheme has been indicted by a federal grand jury on conspiracy, mail fraud and tax charges.
The indictment, made public Thursday, accuses Timothy Lynn Beliveau, 41, of using two firms he owned to skim the equity from distressed homeowners who had turned to his companies for help in avoiding foreclosure.
Beliveau owned American Alliance Mortgage Group, which had offices in Minnetonka, Plymouth, Roseville, Wayzata, Edina and Hudson, Wis., and U.S. Housing & Financial Services LLC, "which held itself out as a company that assisted distressed homeowners in foreclosures," the indictment says.
From 2004 until July 2007, the indictment says, Beliveau conspired to "fraudulently induce" investors into buying real estate at inflated prices with borrowed money as part of a "mortgage reconveyance" program. But Believeau and an unnamed coconspirator then spent the money raised from investors for their own use.
In addition, the indictment says Beliveau raised more than $1 million from real estate investors that he then used to pay personal expenses.
In an interview last year, Beliveau said he was "absolutely not" a criminal. "I feel horrible about every single property we were ever involved with," he said. "Everything was done in a good upstanding accountable manner. The real estate market went in the tank," Beliveau said. "It cost me everything."
The government says Beliveau preyed on people facing foreclosure by promising to sell their homes to investors who would let them remain in the homes and repurchase them on contracts for deed while they worked to restore their credit. In fact, the process "artificially increased the purchase price of the homes and therefore made it extremely difficult for the homeowners to reacquire them," the indictment says.
Telsche Paulson was one of the homeowners caught up in the case. After her husband died and her downstairs tenants moved out, the 87-year-old fell behind on mortgage payments on the Minneapolis duplex she'd lived in for 50 years. Beliveau's company sent her a letter offering to save her home from foreclosure. Like most of the distressed homeowners who turned to Beliveau for help, Paulson ultimately lost the house. Although she won a lawsuit against Beliveau and his ex-wife, Shelley Milless, they said in court filings that they had no money left.
Investors bought the distressed homes with mortgages brokered by Beliveau's firm, which was paid substantial fees and premiums, the indictment says. The investors believed they were helping people stay in their homes because Beliveau and his co-conspirators said they'd deposit the equity left over from the sale of the homes into an escrow account that would be used to make payments on the contracts for deed.
The indictment also says Beliveau falsely assured them that an unindicted co-conspirator had screened the homeowners to ensure their financial setbacks were circumstantial and could be overcome and that they'd get credit counseling. It says the investors were assured they wouldn't be on the hook for unpaid mortgages.
The indictment says Believeau obtained inflated appraisals on the properties, charged exorbitant fees and used the proceeds from the escrow accounts to support his "lavish lifestyle."
Some investors said Beliveau exuded success. He lived in an expensive home, dressed well and drove a Lexus. He entertained investors on a Lake Minnetonka cruise and took them to Lord Fletcher's Old Lake Lodge.
"Ultimately, the defendant's scheme occasioned losses to approximately 14 investors, the investors' mortgage lenders and 35 distressed homeowners in an amount exceeding $2.5 million," the indictment says.
Among the investors were some Northwest Airlines pilots who were looking for ways to make up for steep pay cuts they were facing in 2005. The pilots' credit ratings and their finances were ruined as a result of their investments, and several were sued by some of the homeowners they tried to help.
Their attorneys say they are another set of victims in the string of mortgage fraud and equity stripping cases that investigators continue to uncover in Minnesota in the housing bubble's aftermath.
Besides the conspiracy charge, Beliveau faces two counts of mail fraud and nine tax avoidance charges. In the latter counts, Beliveau is accused of failing to properly account for and pay $813,024 in trust fund taxes withheld from employees' of his mortgage business.
The investigation was led by the U.S. Postal Inspection Service and the Internal Revenue Service's Criminal Investigative Division.
Star Tribune reporter James Eli Shiffer contributed information to this story.
Dan Browning • 612-673-4493