A co-owner of two Twin Cities title insurance agencies pleaded guilty Thursday in federal court to fraud and money laundering charges related to a scheme that siphoned about $5.3 million from more than 3,000 mortgage transactions.

Trent Jonas, 42, of North Oaks, said he is cooperating with authorities in an investigation of an unidentified former business partner who he alleges participated in the scheme to divert money from real estate closings.

Jonas is a graduate of Hamline Law School but said he has not been practicing law. He owned and operated Title Source and Zen Title of Mounds View, which acted as an agent for Ticor Title Insurance Co., a Florida-based underwriter. Ticor is a subsidiary of Fidelity National Financial and United General Title Insurance Co.

In 2001, Title Source and Zen Title began acting as the purchasing agents and customer service representatives for Fidelity nationwide, the charges say.

Jonas said he and a partner, who also is a lawyer, misappropriated money from about June 2005 through at least August 2007.

The money was supposed to be used to pay title insurance premiums, title search costs and recording fees. Jonas said it was spent instead on salaries and operational expenses for the businesses, among other things.

"The idea was, it wouldn't be that long," Jonas told U.S. District Judge Ann Montgomery. He indicated that he and his partner hoped to repay the misappropriated funds, but that never happened.

As a result, the charges say, the mortgage lender, borrower and title insurance underwriter were defrauded. Ticor Title absorbed the losses and has issued new insurance policies for the defrauded homeowners, the government says. Ticor has paid $2.3 million in recording fees and more than $1.8 million in expenses and losses on claims related to the failures of Title Source and Zen Title, the charges say.

According to Jonas' plea agreement, the federal sentencing guidelines call for a prison term of 51 to 63 months, a fine of $10,000 to $100,000, and up to three years of supervised release. But if he provides "substantial assistance" to the investigation, prosecutors could recommend a sentencing reduction as a reward.

The Minnesota Department of Commerce originally investigated Title Source and Zen Title, leading an administrative law judge in 2008 to revoke their agency license and impose a civil penalty of $2 million.

Last year, the department agreed to a settlement with co-owner Jennifer K. Frantz, reducing her personal penalty to $7,500 from $500,000. Frantz, a lawyer, was barred from the industry as part of the settlement, a Commerce Department spokesman said at the time. Frantz could not be reached Thursday for comment.

Dan Browning • 612-673-4493