Hennepin County prosecutors filed racketeering charges Tuesday against husband and wife real estate team James and Wendy Ober of Hudson, Wis., and two Minnesota men, who they say ran a sophisticated mortgage fraud scheme involving at least 65 properties in the Twin Cities that netted at least $10 million in ill-gotten gains.
And that may account for only half of the scheme, authorities say.
The Obers, along with Raul Pliego of Farmington, and Alejandro Sanchez of Bloomington, "engaged in a racketeering scheme through a pattern of criminal activity that included theft by swindle and concealing criminal proceeds to unlawfully obtain millions of dollars in mortgage loan proceeds," according to the charges.
The Obers and their alleged co-conspirators face charges worth a maximum penalty of a $1 million fine and 20 years in prison.
The charges announced at a Wednesday morning press conference by Hennepin County Attorney Mike Freeman might only tell less than half the alleged fraudsters' story: the U.S. Department of Housing and Urban Development estimated that the Obers' mortgage brokerage "originated approximately $23 million" in loans, according to the complaint. If proved true, the HUD estimated would add 71 more Minnesota properties and $13 million in fraudulent loans to the case.
From June 2009 through August 2010, the Obers, through their St. Paul-based company Mortgage Planners, Inc., preyed on the depressed housing market to buy foreclosed homes at reduced prices. The Obers allegedly used "straw buyers," who pretended to purchase a home but were in fact colluding with the Obers, to obtain millions of dollars in loans backed by the Federal Housing Authority.
Pliego and Sanchez are alleged to have worked as loan officers for the Obers. In addition, the complaint alleges Pliego ran a business called RP New Horizon, LLC as part of the Obers' scheme. RP New Horizon was "used to disguise illicit kickbacks of loan proceeds" to the Obers, according to the complaint. Also named in the complaint, but not charged, are Pliegos parents, who are alleged to have offered their names and bank accounts to help disguise kickbacks. [DOWNLOAD COMPLAINT]
The charges against the Obers are backed by a long paper trail. To obtain the FHA loans, the Obers created seven phony businesses -- like "Bio-Medical Solutions," supposedly in Red Wing, and "Franconello Italian Restaurant," said to have been on Minnehaha Ave.-- which were listed as employers on loan documents. Minnesota Department of Commerce determined that none of the businesses ever existed at the given addresses.
In a search of the Obers' home in Hudson, officers discovered a cell phone which investigators believe was used as a "phone tree," which took calls for the fake businesses. When a call came in, the phone could bring up a number which identified which fake business was being called, allowing the person answering to "correctly pose as each employer," the complaint alleges. The Franconello Italian Restaurant is listed in the Yellow Pages, but a call to the given phone number produced a "not in service" message.
The Obers are also alleged to have falsified college transcripts, to explain a straw buyers' lack of documented income. The Obers also "used counterfeit divorce decrees that purported to be issued by Minnesota District Courts in Hennepin, Ramsey, Anoka, Dakota, and Wright Counties," according to the complaint. In some instances, the Obers allegedly used the names of real area judges and forged signatures.
Other times, they allegedly created fictitious judges to grant divorces. When interviewed by investigators from the state Department of Commerce, each of the supposedly divorced couples said they had never divorced. [DOWNLOAD THE ALLEGED FORGERY]
Freeman said the majority of the straw buyers, who often know little about the scheme, would likely not face criminal charges for participating.
"Often a straw buyer is an unemployed or homeless person," he said.
Freeman said the county attorney's office had filed 53 mortgage fraud charges in the last five years, "almost all" of them related to sub-prime mortgages. In an unprompted tangent during the press conference, Freeman made reference to the pending Minnesota government shutdown.
"We're going into this time of government shutdown," Freeman said. "I'm not talking politics here, I'm talking about good work by hard working state employees, and federal employees, and county employees. Without that, this fraud, this scheme would not have been uncovered, these people would not be brought to justice."
None of the four defendants are in custody. The Obers and Pliego have been issued a summons, and a warrant has been issued for Sanchez's arrest.