By Jesse Marx
By Chris Parker
By Jake Rossen
By Jesse Marx
By Michelle LeBow
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She went out to her car and just sat there for a long time. Then she drove out to her daughter's house. She called the bank—National Investment Group hadn't made a single payment in 2007. There were renters in at least five of her properties paying $6,550 every month to United Management Group. If that rent wasn't going toward paying the mortgages, it had to be going somewhere. She worried that Flavin had pocketed the money—somewhere in the neighborhood of $20,000. Meanwhile, unbeknownst to Clewette, her properties entered the first stages of foreclosure and her previously spotless credit had already started to tank. In Bloomington, American Wholesale Lending was quietly closing its doors.
TWO DAYS AFTER THE CLEWETTE MEETING, Flavin and Matheson called Addie into their conference room. Months earlier he had signed a "Two-Year Agreement" guaranteeing that Flavin would make the first 23 mortgage payments on time and that the two would split any profit from the sale of the house. Now Flavin put a new contract, simply titled "Agreement" in Addie's hands. "As a result of various detrimental changes in the market conditions," the contract began, "NIG is no longer able to make mortgage payments on owner's behalf...and owner is willing to forego and waive any claims against NIG as a result of failure to make such payments.... [E]ffective as of the date NIG last made a payment on owner's behalf, owner hereby releases NIG of its obligation to make any additional payments, and any and all Two-Year Agreements are hereby terminated." Addie left with the contract—unsigned—and called a lawyer.
Flavin asked Clewette to sign the "Agreement" also, and like Addie she walked out of the office with the unsigned contract and called a lawyer. Then, after stumbling upon a hotline in a mortgage fraud article, with trembling hands she called the FBI.
See supporting documents and additional images in Jeff Severns Guntzel's REPORTER'S NOTEBOOK for this story. Plus, learn what to do if you think you're a victim of real estate fraud.
"I think I might be a victim of mortgage fraud. I don't really know what to say." The operator asked some questions and took down Clewette's information, then told her it might be a year before she heard anything. "We get so many cases," the operator explained.
FLAVIN SAYS HE IS "PHASING OUT" of the property management business, and he complains that it's too hard to get loans these days. He says the real estate crash has taken a toll. "It's not like I'm sitting at the end of the day with millions of dollars. I can't even make it myself."
Flavin's yacht, the Nothin' but Trouble, is up for sale on Craigslist. The party bus is up there, too ("Have your own rolling money maker"). His half-million-dollar Maple Grove estate is for rent, and his Minnetonka office suite—the one Owens raided in December—is totally cleared out.
Still, the United Management Group website is offering credit repair through their rent-to-own plan. And Flavin's latest company, Investment Property Advisors, Inc., is placing ads seeking real estate investors in hurricane-damaged Mississippi. He is also branching out. He incorporated Go Fat Research and Development last year, just one month after declaring bankruptcy to Clewette. In January he launched Gofatpatch.com, a website that just weeks ago bore the address of the empty offices of National Investment Group. The site is a clearinghouse for obscure products like the Power Patch weight-loss patch and Synergex Woman, a "unique intimacy enhancing formula."
Nathan Nordvik stopped showing up at the Flavin office not too long after Clewette came on board. He was last spotted on an import/export message board, saying he was the owner of a "small import/export company" looking for help in buying "LARGE amounts of wholesale TVs, laptops, MP3 players, DVD players and CDs/DVDs."
Meanwhile, Owens expects to submit criminal charges to the Hennepin County Attorney sometime in the spring. From there, it will be up to the county to decide whether to prosecute. Flavin offered to settle with Addie for $50,000, but the offer was rejected. "My client is looking for the most severe remedies," says Ahlberg, who is considering skipping a state suit and filing with the U.S. Attorney's Office. "It's a total disregard for the consumer," he says. "You misrepresent yourself on federal forms. You tell lies and omit truths. You ruin someone's credit and force them to endure daily phone calls from multiple lenders. All for the sake of a couple million dollars, you've thrown people's lives into turmoil. I don't know if they even realize the effect they've had on people's lives."
At her daughter's home, where she's living for the time being, Clewette is still trying to make sense of it all. "I feel like this was some sort of test of my character." She spends a lot of time with her nine-year-old granddaughter. "It's good to be around people I know I can trust."
"Flavin picked his investors solely on the basis that they did not ask the tough questions," says Hobbs, Clewette's attorney. "And the investors had no idea what that would cost them."