Twin Cities orchestrator of $2M mortgage fraud scheme gets 12 years in prison

An Independence man was sentenced to more than 12 years in prison for directing a mortgage fraud scheme that cost lenders about $2 million, with one loan taken out for a million-dollar penthouse condo in Bloomington.

Alpha R. Mshihiri, 39, was sentenced Monday in federal court in Minneapolis after jurors took less than a day's deliberations in February to convict him of bank fraud, wire fraud and mail fraud and conspiracy to commit bank fraud between 2007 and 2009. His sentence includes five years' supervised release and an order to pay restitution.

Assistant U.S. Attorney Tim Rank called the sentence "significant" and "appropriate."

"It was a fair sentence, given the scope of the scheme and the conduct of the defendant, who was the leader of a criminal organization that recruited a number of other participants and caused harm to numerous victims," Rank said in an interview Tuesday.

Probation would have been punishment enough for Mshihiri, his defense attorney, Rick Mattox, said in court filings. Mshihiri had undergone significant rehabilitation in the years following his crimes.

The onetime licensed mortgage broker and his co-conspirators defrauded lenders of millions of dollars by recruiting straw buyers, falsifying loan applications and other documents and inflating real-estate purchase prices, prosecutors contended during the seven-day trial.

"Every property purchased through the scheme went into foreclosure," the U.S. attorney's office in Minneapolis said in a statement announcing the sentencing. Along with Mshihiri's home in Independence and the Bloomington penthouse, the other properties used in the scheme were a duplex and a single-family home, both in Minneapolis, according to court documents.

The priciest of the residences in the scheme was the Reflections penthouse, near the Mall of America, which was bought with a loan for nearly $900,000 under the name of Mshihiri's wife in 2007. The sale price topped $1 million.

Another relative was "exploited by the defendant" to act as a straw buyer but ended up bunking "in the basement of someone else's home."

In arguing for a 15-year prison sentence, the prosecution noted in a court filing that the conspiracy "left individual and institutional victims in its wake and foreclosed homes in Twin Cities neighborhoods. Victims spent years trying to undo the damage."

Prior to the country's subprime mortgage crisis, mortgage fraud was seen as an easy way to make money, said Rank, who leads the section of the criminal division that focuses on financial and tax fraud.

"When that all fell apart, the harm to the economy was massive, but more than that the foreclosures that were the result of the mortgage fraud also caused large harm to the communities," he said.

Mattox went on to highlight Mshihiri's "exemplary life as a legal immigrant to this country of immigrants" before the crimes were committed.

The financial institutions caught up in the scheme included Wells Fargo, Washington Mutual, JPMorgan Chase, Prime Mortgage and Private Bank, and Citizens State Bank Norwood Young America.

The investigation was conducted by the Internal Revenue Service, the Minnesota Financial Crimes Task Force, the U.S. Secret Service and the U.S. Department of Housing and Urban Development's Office of Inspector General.

Staff writer Nicole Norfleet contributed to this report.