Some say that smoking pot will lead to harder drugs. A federal prosecutor said Friday that a 37-year-old Minneapolis real estate agent's dependence on the drug led to a significant mortgage fraud scheme run through a Burnsville company called LHS Mortgage.

The ensuing investigation ultimately led to a 4½-year prison sentence Friday for Mario Augustin Lewis, whose indoor marijuana-growing operation provided the first clues in the mortgage fraud case.

Lewis, a former real estate agent at LHS Mortgage, apologized for his crimes, although he insisted that he was never out to hurt anyone, including the lenders who financed the nine houses he bought with proceeds from the fraud.

Lewis overstated the purchase price of homes and pocketed more than $430,000 in the fraud.

That drew a sharp response from Assistant U.S. Attorney Joe Dixon. "A lot of what has gone on here with mortgage fraud is that people have gambled with other people's money," Dixon said. "It's like stealing $5 and going to buy lottery tickets with it."

Many people who engage in mortgage fraud expect to repay lenders as property values appreciate and properties are sold, Dixon said. But the housing market downturn has exposed their schemes for what they are, he said: serious crimes.

Lewis' attorney, Earl Gray, said that the so-called "victim" lenders were also gambling with other people's money by offering deals rigged against consumers. "They were betting, as was everybody else, that the market would never go down," Gray said.

But Dixon said banks are not the only victims of mortgage fraud. The entire community also is harmed when the homes go into foreclosure, as all of the Lewis properties have. Dixon asked that Lewis be sentenced to 63 months in prison.

Lewis pleaded guilty to wire fraud, money laundering related to mortgage fraud and maintaining a marijuana "grow house."

Police seized about 650 marijuana plants from one of his homes.

Gray said that Lewis admitted to participating in the drug operation but that the "main participant" in the pot-growing enterprise has not been charged. Gray also downplayed an earlier crack cocaine conviction Lewis had, saying his client was 18 at the time and that it involved a relatively small amount of drugs. He asked for a sentence of 51 months, the minimum recommended by the advisory sentencing guidelines.

U.S. District Judge John Tunheim sentenced Lewis to just three months more than the suggested minimum. He said it reflected the fact that the loss attributed to Lewis' actions was near the bottom of the $400,000 to $1 million range taken into consideration by federal sentencing guidelines.

Tunheim ordered Lewis to pay restitution of $437,814 when the victims are eventually identified. He said two other defendants, Ronald Joseph and Jill Lehn, would be held jointly and severally liable.

Joseph, 49, of Credit River Township, pleaded guilty in July and is awaiting sentencing. He reportedly was hospitalized Thursday, after ingesting antifreeze. Scott County Sheriff Kevin Studnicka said Friday that the hospital would not discuss Joseph's condition, and that U.S. Marshals would be notified upon his release. Federal authorities declined to comment.

Lehn, 40, of Prior Lake, had been a mortgage closing agent at LHS Mortgage. She pleaded guilty in the case last December and is scheduled to be sentenced Jan. 10.

Dan Browning • 612-673-4493