Defendants Admit Minnesota Mortgage Fraud Scheme

Allison Tussey —  May 4, 2010 — 1 Comment

Gerald James Greenfield, 64, Bloomington, Minnesota, Nicholas Ryan Delon Smith, 30, Prior Lake, Minnesota, who both participated in a $2.5-million mortgage fraud scheme involving the sale of condominiums in the Sexton Lofts building in downtown Minneapolis, Minnesota, have pleaded guilty to that crime. Appearing before United States District Court Judge Patrick J. Schiltz in St. Paul, Minnesota, Greenfield pleaded guilty to one count of conspiracy to commit money laundering, while Smith pleaded guilty to one count of conspiracy to commit mortgage fraud through the use of wires along with one count of money laundering. Both men were indicted on February 10, 2010.

In his plea agreement, and in Court, Greenfield admitted that beginning in September of 2006, he conspired with an individual by the name of Brett A. Thielen, 40, Savage, Minnesota, along with others, to launder proceeds of the mortgage fraud scheme Thielen was executing at Sexton Lofts. Pursuant to the scheme, Thielen sold condos during a market downturn by recruiting financially unqualified buyers and fraudulently inducing mortgage lenders to lend those buyers money. To further the scheme, the condo prices were artificially inflated, which created substantial profits that Thielen needed to hide. Greenfield admitted helping to hide those profits, even while knowing they were derived from unlawful activity.

Specifically, Greenfield wired the illegal profits to an unindicted Australian attorney through whom he had previously laundered money. Then, at Thielen‘s direction, Greenfield instructed that attorney to wire portions of those profits to other places to make it appear as if they came from legitimate sources. For example, Greenfield directed the Australian attorney to wire a substantial amount of the illegal funds to a brokerage firm for the purpose of purchasing stock in a company called Digital Town Inc.

During the investigation into Greenfield‘s possible wrongdoing, an undercover law enforcement officer met with him at Manny’s restaurant in Minneapolis on June 30, 2009. In his plea agreement, Greenfield admitted that while at the restaurant, he also agreed to assist the officer in laundering $50,000 in supposed drug trafficking profits by converting the funds to Digital Town stock.

As for Smith, he admitted to participating in the mortgage fraud scheme from August of 2006 through April of 2007. During that time, he was the sole owner of Heloc, Inc., a mortgage brokerage company in Minneapolis. In that capacity, he falsified income and employment information regarding the straw buyers in an effort to convince lenders they were credit-worthy
loan applicants. Smith also knew the prices of the condos were greatly inflated, and that those prices were supported by fraudulent appraisals.

For his participation in the scheme, Smith received kickbacks from loan proceeds following the sale of condo units. On December 5, 2006, Smith wire transferred $25,500 in illegal proceeds from his company’s bank account to a third party during a transaction to purchase an automobile.

For their crimes, Greenfield faces a potential maximum penalty of 20 years in prison, and Smith faces a potential maximum penalty of ten years on the money laundering charge and five years on the conspiracy charge. Judge Schiltz will determine their sentences at a future date, yet to be scheduled.

Thielen pled guilty in December of 2008 for his role in the scheme. He awaits sentencing.

This case is the result of an investigation by the Internal Revenue Service-Criminal Investigation Division. It is being prosecuted by Assistant U.S. Attorney David J. MacLaughlin. This law enforcement action is in part sponsored by the interagency Financial Fraud Enforcement Task Force. The Task Force was established to wage an aggressive, coordinated, and proactive effort in the investigation and prosecution of financial crimes. The Task Force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The Task Force is working to improve efforts across the federal executive branch and, with state and local partners, investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

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Allison Tussey

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One response to Defendants Admit Minnesota Mortgage Fraud Scheme

  1. Robert McMahon May 4, 2010 at 8:39 pm

    Sheesh. There’s no limit to what people are willing to do to get some extra money, eh?

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