Mastermind Pleads Guilty to $20 Million Real Estate Scheme

admin —  May 7, 2009 — Leave a comment

Thomas Hastert, has pled guilty to 59 felony counts of embezzlement, securities fraud, and selling unregistered securities.

Hastert brokered over 270 hard-money loans in Nevada, Sacramento, Sutter, Butte, Placer, and Yolo Counties between September 2004 and September 2007 for real estate development projects. Hard-money loans typically provide high returns for private investors and are secured through collateral such as real estate.

Hastert secured $20 million from several investors, using the funds to broker hard-money loans to borrowers seeking to develop homes on real estate.

In the criminal complaint, Hastert is alleged to have:

  • Misled investors. Hastert told investors that borrowers had excellent credit scores and were capable of repaying the loans. This proved to be untrue. Many borrowers had poor credit scores, did not make regular payments on the loans, and held properties that were in foreclosure.
  • The loans that Hastert brokered were required by law to be placed into a special trust account overseen by a third-party escrow firm to ensure the project was being built. Hastert never did. Hastert used the money to pay his office expenses and other development projects. There was no oversight.
  • Hastert told investors he would personally oversee the development of the land. In one instance, he was asked by investors to drive them to a particular property that was supposedly under development. Hastert could not locate the property.
  • Set up fake investors, known as “straw men,” to keep concerned investors at bay. Hastert filed documents with a county recorder’s office saying that his secretary owned a majority interest in the investment, despite the fact that she had never invested a single dollar. If a legitimate investor tried to initiate foreclosure proceedings, Hastert would contend that the supposed majority owner opposed the action.
  • Embezzled fees. Hastert was entitled to collect a 3% fee on loans he brokered. However, he took all his fees up-front as if the loan were fully funded. In fact, some loans never fully funded, and others took more than a year to fully fund.

For three years, Hastert pulled off an elaborate real-estate scam, squeezing millions out of investors,” Attorney General Edmund G. Brown Jr. said. “Hastert’s days of swindling are at an end, and he will spend the next 5 years in prison.

Brown filed criminal charges against Hastert in the Nevada County Superior Court in February 2009 for embezzlement, securities fraud, selling unregistered securities, and filing false documents.

Hastert will be formally sentenced on June 25 in Nevada County Superior Court. He is expected to receive 5 years in prison.


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