Michael Prieskorn, mortgage originator, has had his license revoked by the Minnesota Department of Commerce, who also fined him $2.2 million, for his involvement in the fraudulent sale of approximately 220 homes in new developments in high-growth areas including Eagan, Buffalo, Rochester and St. Cloud, Minnesota. Commerce investigators have been unable to contact or locate Prieskorn and he failed to appear at an administrative hearing on the matter on December 17, 2008.
The department charged Prieskorn with participating in a fraudulent scheme involving numerous investors who were induced to purchase approximately 220 homes at prices substantially above their market value. The scheme is referred to as a “builder bailout” with most of the homes coming from the excess inventories of new homes belonging to local builders.
The homes involved were mostly in the fast growing areas of Eagan, Buffalo, Elk River, Oak Grove, Maple Grove, Delano, Otsego, Rochester and St. Cloud, Minnesota.
Selling the homes at inflated prices allowed the sellers to make substantial profits and allowed Prieskorn‘s company, Maine Estates, to collect “management fees” ranging from $22,000 to $105,000.
In addition to Prieskorn, the Minnesota Department of Commerce has taken action against several other licensees who worked with Prieskorn in this fraudulent scheme:
In July 2008, the department revoked the real estate salesperson license of Michael Robert Bohn and permanently barred him from the mortgage originating industry in Minnesota. Bohn was charged with originating 70 to 80 loans involving straw buyers, promising that Prieskorn‘s company, Maine Estates, would arrange renters for the properties and then resell them at a profit after one year.
In November 2008, the department retroactively revoked the mortgage originator license of Vista Mortgage and permanently barred owner Kim David Norling from engaging in residential mortgage originating or servicing. The department also revoked Norling‘s real estate salesperson license. Bohn worked under the license of Vista Mortgage while he set up straw buyers for 70 to 80 homes at inflated prices, paying substantial fees to Maine Estates and kickbacks to the buyers and sellers.
In June 2008, the department revoked the real estate salesperson license of Peter Douglas Lyle and permanently barred him from engaging in residential mortgage originating or servicing for his participation in the scheme to defraud mortgage lenders and servicers.
In May 2008, the department retroactively revoked the mortgage originator license of Expert Mortgage and permanently barred owner Guy Abernathy from engaging in residential mortgage originating or servicing for his participation in the scheme to defraud mortgage lenders and servicers.
Instead of keeping up on the mortgage and utility payments, the Department charges that Prieskorn spent the money himself. In April 2007, Prieskorn emptied his bank accounts, stopped making payments and did not purchase any of the investors’ homes as promised. Most of the homes have fallen into foreclosure.
“This is the kind of behavior that drives up foreclosures and completely destroys the market value of entire neighborhoods,” said Commerce Commissioner Glenn Wilson. “We will continue to untangle these complex cases and take action against those who don’t follow the law. We will also continue to work with local, state and federal prosecutors to put people in jail for criminal activity.”
Peter Douglas Lyle should be in jail for the role he played in this.
What happened to Richard Laho, who was in on the scam with Prieskorn?
I got roped into this scam, after being referred by a couple of friends. They would write up several mortgages at one time. I did 3 loans at the same time for $280,000 townhomes. In reality I couldn’t afford one. Not sure how these loans went through. They gave me $5,000 cash for each one at closing for a total of $15,000. Of course all are foreclosed and my credit is gone.
Thomas – if you have actual knowledge of what went on in this case, I’ll defer to your judgment. In addition, the fact that Prieskorn did not show up at the adminstrative hearing makes it look like there was a problem he didn’t want to face. BUT . . .
I have been in this position – sued for fraud – and I know that lawyers and investigators throw around incendiary terms and half truths in order to prejudice the proceedings. For instance “straw buyers” is a great term to throw out. In my case, the “straw buyers” were investors who purchased property for their own portfolio over a period of six years, holding and managing all of them (except one, which they determined they did not want and sold after 18 months) from the time of purchase until both the rental and resale market crashed in the area, and they declared bankruptcy. There is no way that these buyers could have been classified as “straw buyers,” yet that is what the lawsuit claimed. “Scheme” is another one (also used against me).
Also, the “$22,000 to $105,000” in management fees. Is that per house? per year in the aggregate over 220 houses? total of management fees over the years? Notice the accusation doesn’t say. It’s hard for me to believe that it is per house, but if it’s per year, for 220 houses, that isn’t really unreasonable – less than $40 per house per month for management fees.
It’s also very easy to find appraisers to join the chorus, long after the fact of course, that the houses were overvalued. This happened in my case, too – even though the underwriter, on at least one of the questioned transactons, questioned the value and assigned the appraiser of her choice to a field review. His value assessment supported the one submitted in the file. But that didn’t stop the lawyers from, 4 years later, finding some appraiser who would say that the original appraisal (and review appraisal) was inflated and the transaction was therefore fraudulent.
So, basically what I am saying, is that even as far back as 2001, underwriters WERE questioning values, WERE requiring review appraisals and/or testing the values against automated valuation programs, etc. I’m just wondering how 220 excessively inflated homes in one area got through.
Not saying Prieskorn didn’t commit fraud – just saying that, without actual knowledge of the facts, I’ve been in the boat where emotionally charged accusations were hurled when the facts said something different. In many cases, the lawyers go for the emotionally charged BECAUSE the facts say something different.
Oh yeah, and it is my real name. And I did go to my hearings and I did win my case. And I was still out $12,000 in attorneys’ fees, so maybe I have reason to cast a suspicious eye on the accusations brought against others. Again, not saying they didn’t do it – but I’m just sayin . . .
John — if that is your real name — I’m surprised that you would make such a comment about the houses that did sell. Any con man will be able to show you success stories. Just take a look at the ‘success stories’ you can find in a late-night infomercial. You hear from two or three people who claim they made it rich. However, you never hear about the thousands who didn’t get a dime from yet another get-rich-quick scheme.
If some properties DID sell, it’s still fraud, no argument, end of discussion. Prieskorn and his cronies knowingly perpetrated fraud in order to line their pockets. No matter how many homes did sell, Prieskorn, et al, committed fraud.
It is true that the buyers were sucked into a too-good-to-be-true scam and they lost their shirts. This does not in any way, shape or form remove the burden of the crime from Prieskorn, et al, shoulders. He committed the crime by pitching a scheme. Someone who rakes in 10-20 million dollars and goes into hiding isn’t innocent despite his claims that he’s been tried in the “court of public opinion.”
Prieskorn, you know you read these articles. You’ll be caught soon despite your cockiness. You can’t run for long.
The buyers knew EXACTLY what was going on. Unfortunatly the market crashed. They don’t talk about all the houses that did get sold.
The buyers were getting cash back on these transactions, that is why they bought them according to what I heard about these deals.
How do you actually induce people to buy 220 homes at prices so much over market value that you can pay out fees to all these people? This in an area where the builders apparently couldn’t sell the homes at market value.
Do these investors truly have no clue about the real estate market?
Did the underwriters really not use any type of automated valuation “reality check” on the appraisals?