Nothin' But Trouble

While young real estate dealers were enjoying the high life, their investors were headed toward foreclosures
Adam Turman

On a weekday in the spring of 2006, Linda Clewette, a 57-year-old transcriptionist and self-employed candy machine vendor, slid into a booth at the Baker's Square in Maple Grove and ordered a coffee. With a modest income but a stellar credit score, she was about to become a real estate investor. Brandon Flavin and Nathan Nordvik, both in their twenties and dressed casually, sat across from her. They were there to tell her how.

Two years later, Clewette owns six suburban properties in various stages of foreclosure, her credit is shot, she's selling her north Minneapolis home of 10 years, she's living on her 35-year-old daughter's couch, and she's suing Flavin, 29, and Nordvik, 26, for $500,000.

Clewette is not the only real estate investor suing Flavin. One other suit has been filed and at least two more are in the offing, according to investors' lawyers. All make similar claims: that Flavin and his associates allegedly recruited them into a real estate investment scheme designed to implode by deliberately partnering with a dishonest mortgage company, making false promises to rent the homes and pay the mortgages, and leaving investors to pick up the pieces.

At Minnetonka police headquarters, an entire room is reserved for the criminal investigation into the accusations against Flavin and a mortgage company he partnered with. A detective working the investigation believes Flavin and his companies may have made millions from the home sales at the front end of their investment deals.

To secure loans for his investors, Flavin leaned heavily on American Wholesale Lending, a national mortgage broker with franchises in several states. The Minnesota franchise, which purported to match borrowers with lenders offering the best rates, quietly closed up shop about a year ago. One principal in the company, John Searle, went to prison on a felony stalking charge. Another, Brian Matheson Sr., disappeared sometime in 2007. Investigators say he's rumored to be in South Africa. His two sons—Jonathan and Brian Jr.—worked for Flavin.

American Wholesale has also been hit with multiple mortgage fraud lawsuits. It lost its first suit in November when Searles and Matheson didn't show up for court. Now they owe $322,000 to a subprime lender in Colorado. Indymac Bank, the seventh-largest mortgage originator in the country, filed another suit against American Wholesale just as the first one wrapped up, also naming Flavin and Nordvik as co-defendants.

All of Flavin's real estate companies are caught up in one lawsuit or another: Innovative Personal Solutions, National Investment Group, and United Management Group. Asked if his companies are still in the business after all of this, Flavin hedges a bit: "Not really."

As the lawsuits have piled up, Flavin has built a small empire for himself. He's registered at least six companies in his name. He drives a 2007 Cadillac Escalade. He owns a half-million-dollar house on a quiet street in Maple Grove and a $130,000 yacht he docks in Stillwater called the Nothin' but Trouble. When the water freezes over, there is always the coach bus—converted into a party bus built to hold 30 people, with four mini bars, wraparound seating in the rear, booths up front, and a wall built to hold a flat-screen television.

Ten years ago Flavin looked every bit the part of the scrappy stoner type you'd expect to aspire to these kinds of trophies, with shaggy bleached hair and a wry grin propping up a suggestion of a mustache. Today, with close-cropped hair, a gentle face, a confident voice, and a neck like a linebacker, he employs a friendly smile in service of a complex scheme.

In her interview with a Minnetonka detective, Clewette laid out the details of her ruined finances. "She just burst into tears," says her attorney, Nathan Hobbs. She couldn't believe, she said, that these "nice young boys" had done this to her. "She's constantly afraid people will think she's dumb," Hobbs says. "She wasn't dumb. She was trusting."


MOST SUNDAYS LINDA CLEWETTE opened the Star Tribune and browsed sale flyers and coupons. She can only remember breaking the routine once: It was April 27, 2006, and she was still fired up from a seminar on real estate investment hosted at a suburban hotel ballroom. She pulled the real estate section, spread it out, and zeroed in on an ad: "INVESTORS WANTED / $25-$30K PAID UP FRONT / 700+ Credit Score Req." It was an ad Flavin ran in every Sunday Strib for a year and a half.

She called first thing on Monday. Nordvik answered and gave her the pitch, which they later had printed up on a flyer:

In the right area a home price can double in a matter of years. We help you invest with zero out-of-pocket money. The property management company that manages our properties has a constant watch on our investments and actually guarantees [to pay] the mortgages for two years. These homes are rented on a rent-to-own basis; our tenants go through a credit restoration program to get financed. We sell these properties to the tenants if possible, or put the house on the market for sale.


Clewette would get $5,000 per property up front, Nordvik told her, and when it was all over, they'd split the equity down the middle—everybody wins.

The plainspoken, unsuspecting Clewette liked what she heard and arranged to meet Nordvik and Flavin at Baker's Square to talk some more. "I was excited," she says. "I didn't feel anything bad in my gut."

Meeting the two face-to-face and hearing the finer points of the investment plan, her confidence held. She gave them her social security number for a credit check. They gave her $5,000, courtesy of Flavin's company, Innovative Personal Solutions, and told her to deposit the money and keep it for closing fees on her first property. "I put it right in the bank," she says, "and I kept it there."


THE FIRST TIME CLEWETTE VISITED her new investment partners at their Minnetonka office was about a week after their first meeting, and things were a bit chaotic. Walls were bare and boxes were everywhere. "Excuse the mess," said a cordial Flavin, "we're just getting set up."

Even with the benefit of hindsight, "everything seemed legitimate," Clewette says. "They had somebody answering phones and a guy working on advertising. They had property listings. They had an office."

Nordvik was there that day, and she was introduced to Jonathan Matheson and Brian Matheson Jr.—regular fixtures in Flavin's office and his link to American Wholesale Lending, where their father, Brian Sr., was a key player.

Flavin handed a contract to Clewette—a guarantee from Innovative Personal Solutions that they would pay Clewette's mortgage for six months whether they found tenants for her properties right away or not. "Sometimes it can take a few months," she was told.

The eager investor had her daughter with her, who had a question: "Have you ever had to deal with foreclosures?"

Innovative Personal Solutions had only existed for a few months, and Clewette was one of its first investors. Flavin left that part out. "No," he said. "That wouldn't benefit us at all."

Clewette signed the contract.


THE CITY OF OTSEGO, about an hour northwest of the Twin Cities, is a sort of frontier for suburban development. Highway billboards offer home buying opportunities and directions to the nearest John Deere dealership. The Otsego Preserve would be an unremarkable American suburban subdivision—except for the fact that it's virtually a ghost town. Flavin was a sort of savior at Otsego Preserve. Inspired by a euphoric real estate market, the subdivision went up quickly. By the time the houses were ready, however, the market was a mess and the homes weren't selling. Flavin got word of the stagnant development and decided to buy up the subdivision with the help of investors like Clewette.

It took a few months, but eventually Innovative Personal Solutions located six properties for Clewette—five of them in Otsego Preserve and one in the city of Ramsey. It all happened fast, much of it over the phone. Flavin told her she'd be hearing from someone at American Wholesale Lending who would get her loan applications in order. He gave her more "upfront money" and soon she had deposited $30,000, which did wonders for the asset-to-debt ratio that any lender one step beyond American Wholesale would be looking for. Soon there was a meeting to close on the first property—then another and another. She closed on six properties in less than two weeks. "It was a bit overwhelming," she says. Flavin warned her it would get crazy at closing time, and she wrote it all off as a quirk of the business.


AT POLICE HEADQUARTERS IN MINNETONKA, detective Steve Owens tends to a growing mess of documents in a room dedicated solely to a criminal investigation of Flavin's real estate investment business. He's got settlement statements, purchase agreements, leases, and loan applications. He's got files on American Wholesale Lending and other players big and small. Owens stresses this is an open investigation and no charges have been filed. He's been at it since 27-year-old nursing assistant Richard Tonn walked into his office in October 2007. Tonn told a story much like Clewette's. He was making $27,000 a year. It wasn't until his loans came through that he discovered his income had been inflated to $84,000 on the American Wholesale application. He had four Otsego Preserve properties in foreclosure.

"The earliest investor I've found is February 2006," says Owens. All told, he's identified 29 investors—"straw buyers," as he calls them—and more than 130 properties, most of them Otsego Preserve houses.


For months he's been interviewing investors and others affected or involved. He's had people crying in his office. "These people are suffering financially and going into what they believe is a legitimate business deal. And they end up losing everything. And that loss is reflected in our communities and in our neighborhoods. Go out to Otsego yourself—it's eerie. There's a sense that these homes and this neighborhood just aren't going to make it."

An investigation into potential real estate fraud promises one thing: a dense paper trail. Owens has spreadsheets and piles of paper and DVDs of scanned paperwork. He brings printouts home with him. It's a complex investigation and it's always on his brain. "There are so many players," he marvels.

Independently, City Pages has reviewed some of the loan applications American Wholesale Lending drew up for Flavin's investors.

There were a dozen separate applications submitted on Clewette's behalf. She saw only one of them. There were two requests per property—for a first and second mortgage, a not-uncommon practice in the market at the time—totaling nearly $2 million. On every one of Clewette's loan applications, the box next to "primary residence" is checked and the box next to "investment property" is blank. Her reported income was more than triple her actual income of $27,000, and she was asked to sign only one of the 12 applications. On most of them, in the space reserved for the "interviewer" who filled out the form, the American Wholesale employee who signed was either the imprisoned John Searle or the disappeared Brian Matheson Sr.

Another investor, Joseph Addie, an African immigrant who came to Minnesota 18 years ago, has identical omissions and fabrications on loan applications for his six Otsego Preserve properties, and he asserts, through his lawyer, Ryan Ahlberg, that the six purchase agreements bearing his signature were documents he had never seen, much less signed. What's more, on his first visit to Flavin's office in December 2007, he was given a flyer from National Investment Group (Innovative Personal Solutions had been dissolved) claiming that the company "has been managing and investing in real estate for over five years with a history of excellence" and that "the property management company that manages our properties has a track record of success." Yet National Investment Group had been incorporated just five months—not five years—earlier. The property management company, United Management Group, had been incorporated just one month earlier.

Flavin defends his business practices and denies any wrongdoing: "This is not a scam kind of deal," he says. In December, Detective Owens served a search warrant at National Investment Group's Minnetonka office. "I would have never figured anything like that should have happened," Flavin says. The search, he says, was "stupid."

"Somewhere along the line people think we did the mortgages on these things," he says. "We never filled out any loan documents." He doesn't name names, but he's passing the buck to American Wholesale. Owens isn't buying it. "I believe there was collusion," he says.

Owens's interest, however, runs deeper than the loans—because the loans aren't the only documents being looked at. There are also the settlement statements—the forms filled out when the sale of the house is complete and shipped off to the U.S. Department of Housing & Urban Development. Five of the seven settlement statements City Pages obtained from lawyers of Flavin's investors include a line item for a consulting fee to one Flavin company or another. These are fees paid out by the seller once the deal is done. On one statement it's a "construction consulting fee" to National Investment Group for $66,000 on a $350,000 sale. On another statement it's a "Consulting Fee to Innovative Personal Solutions" for $46,000 on a $300,000 sale. All told, Flavin and his companies made $268,199 upfront on five of the properties City Pages examined. In the cases of Clewette and Addie, the fee was never discussed. The seller simply cut a check once the deal was closed. From information obtained on his search of Flavin's offices, Owens believes these settlement-statement payments likely earned Flavin and his companies millions as his investors tumbled toward foreclosure.


IN APRIL 2007, Clewette opened a letter from a mortgage company that had purchased her loans from American Wholesale. They were offering a better rate. She was a bit surprised. She had been told that National Investment Group was adept at keeping rates as low as possible. Something else struck her, too: Her loans appeared to be primary-residence, not investment, loans. She called Flavin.

"He seemed surprised and told me they had never had any problems with their loans," she says.

Next she wanted to apply for a loan to renovate her north Minneapolis home. She needed to collect information on her investment properties. She called Flavin and he told her the properties were full and the rent was being paid.


Then, in May, Flavin invited her into the office for an "investors' meeting."

When she showed up, she was the only investor there. Flavin and Jonathan Matheson met her in the front, where she sat waiting and thumbing through realty listings and back issues of Parade of Homes. Things seemed pleasant enough as they led her into a conference room. Flavin shut the door and sat down across from Clewette, looking glum. "Our company is going bankrupt," he said. "Your loans are going to default." Her heart sank. "But you told me in March my properties were all rented and things were going well," she shot back. "I didn't want to worry you," came the response. "If you haven't heard from the bank yet, call them and tell them you won't be able to make the payments."

In shock, she offered to help. "He really seemed sad. He blamed the market. I thought maybe if we got all the investors together we could think of some way to help." He told her there was no turning back.

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.

"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, 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."

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