As previously reported by Mortgage Fraud Blog, Sand, along with Donald W. Krause, 49, Plymouth, Minnesota, and Brenda Epperly, 58, Oak Grove, Minnesota, were indicted in federal court in Minneapolis for allegedly obtaining approximately $1.5 million in bank loans by submitting fraudulent applications and closing documents. The defendants are with three counts of mortgage fraud through the use of interstate wires. In addition, Sand was charged with 11 counts of money laundering, while Krause was charged with one count of money laundering.
The indictment alleges that from February 21, 2008, through April 29, 2008, the defendants devised a scheme to obtain loan proceeds fraudulently, using two residential property transactions to get the funds. On February 21, a purchase agreement was executed for the $1.6 million sale of an Orono, Minnesota, residence to a corporation, RSN Companies, in which Krause was a general partner. The next day Krause sold the residence to Sand‘s 86-year-old mother for $2.6 million, a $1 million increase from the previous day’s transaction. In order to obtain $2 million from the bank, a false loan application allegedly was submitted. Under the terms of the closing documents, Sand‘s mother was to pay $602,000 as her equity contribution. Based on the falsified documents, the loans were approved.
On March 20, 2008, two $1 million loans were wired from the bank to a mortgage title company used by Epperly, a closing agent. Then Epperly allegedly gave $900,000 of that money to RSN Companies prior to receiving any money from Sand‘s mother. Next, on March 22, 2008, Krause allegedly used part of that $900,000 to purchase two cashier’s checks, one for $602,018.78 made payable to the title company to close on the purchase of the Orono residence. That check was allegedly used to pay the down payment on the property. As a result, the purchase was totally funded by loan proceeds. The second cashier’s check, in the amount of $224,371.08, made out to the Ramsey County Sheriff’s Department, was allegedly used by Sand to redeem a property he owned in St. Paul. The building was in foreclosure and was sold at a Ramsey County Sheriff’s sale in 2007. In addition, Sand used $170,000 in loan proceeds for his own personal benefit.
On April 4, 2008, RSN Companies sold another residence, this time in Rogers, Minnesota, to Sand‘s mother for $460,000. A similar scheme was allegedly orchestrated in which, once again, the cash to close the real estate transaction was funded totally by loan proceeds. Then, on April 29, 2008, Sand allegedly used $9,355.62 in loan proceeds to pay the county property taxes due on his St. Paul property.
If convicted, the defendants face a potential maximum penalty of 30 years on each mortgage fraud count and ten years on each money laundering count. All sentences will be determined by a
federal district court judge.
This case is the result of an investigation by the Internal Revenue Service-Criminal Investigation Division and the U.S. Secret Service. It is being prosecuted by Assistant U.S. Attorney James E. Lackner.