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Nov. 17, 2011

Real Estate Agent And Appraiser Plead Guilty In $1.8 Million Mortgage Fraud Scheme

MINNEAPOLIS Earlier today in federal court in St. Paul, a Maple Grove real estate appraiser pleaded guilty to charges connected to a $1.8 million mortgage fraud scheme that involved 28 properties. Ryan Daryl Krutzig, age 31, specifically pleaded guilty to one count of conspiracy to commit wire fraud. Krutzig, who was indicted along with Jesse Scott Hoffman on June 14, 2011, entered his plea before United States District Court Judge Richard H. Kyle.

In his plea agreement, Krutzig, who owned and operated US Appraisal Management, in Maple Grove, admitted that from March through June of 2006, he conspired with others to commit mortgage fraud. He admittedly purchased, along with others, a residential property but failed to disclose to the mortgage lender that US Appraisal had handled the appraisal. As part of the appraisal process, Krutzig prepared and approved required paperwork for the lender, acknowledging in part that he had no present or prospective interest in the property. In addition, on March 28, 2006, Krutzig and others purchased a property in the 3600 block of Bryant Avenue North, in Minneapolis. The property was listed in the name of another individual, although Krutzig had a financial interest in it and again had US Appraisal handle the appraisal. On June 29, 2006, the property was sold for $209,900 and again US Appraisal managed the appraisal. Krutzig received a portion of the sale proceeds. Afterward, the property went into foreclosure. In all, the property loss amount to $173,900.

On September 15, 2011, Hoffman, age 32, of St. Cloud, pleaded guilty to one count of wire fraud. In his plea agreement, the real estate agent for Stellar Realty admitted that from November of 2005 through December of 2006, he conspired with others, including Thomas Hunter and Frederick Deen, co-owners of Legacy Lending, a mortgage brokerage company, to obtain mortgage loan proceeds through fraud.

In addition, Hoffman admitted concealing payments from mortgage proceeds to the straw buyers of various properties. The co-conspirators recruited straw buyers to purchase real estate for which mortgage loans were obtained for dollar amounts substantially larger than the true values of the properties involved. Hoffman also admitted acting as the straw buyers' "agent" in numerous transactions, facilitating the transactions, knowing they were fraudulent. Krutzig, through US Appraisal, inflated appraisals, while Hunter and Deen provided the fraudulent loan applications to potential lenders for loan underwriting. Hoffman was paid approximately $166,000 in commission payments on 14 false transactions, worth approximately $9 million in total loan proceeds. At least $900,000 of that was paid to the co-conspirators.

In March of 2010, Deen, age 31, was sentenced to 24 months in prison for his role in the scheme. In September of 2010, Hunter, age 32, was sentenced to 40 months in prison. For his crime, Hoffman faces a potential maximum penalty of 20 years in prison, while Krutzig faces a potential maximum penalty of five years. Judge Kyle will determine their sentences at a future hearing.

This case is the result of an investigation by the Federal Bureau of Investigation. It is being prosecuted by Assistant U.S. Attorney Christian S. Wilton.

This law enforcement action is in part sponsored by the interagency Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. It includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

Source: United States Attorney's Office for the District of Minnesota

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