Albertville Man Sentenced in Connection to Mortgage Fraud

An Albertville man convicted as the ringleader of a mortgage fraud scheme that caused losses in lenders to pile up to the tune of $7.6 million was sentenced to more than 10 years in jail in a federal court today.

United States District Court Judge David S. Doty sentenced John Anthony Spencer to 125 months in prison on one count of conspiracy to commit mortgage fraud through interstate wire, 10 counts of wire fraud, one count of bank fraud, and one count of money laundering.

Spencer was indicted, along with two co-defendants, on December 7, 2010, and was convicted on June 2, 2011, after a three-week jury trial.

In one of the largest mortgage fraud operations Minnesota has ever seen, trial evidence showed Spencer brokered fraudulent loans that were used by recruited purchasers to buy residential real estate at inflated prices in areas of St. Paul, North Minneapolis and Albertville.

According to the indictment, Spencer organized illegal transactions that generated proceeds that greatly exceeded what the sellers were content to accept as full purchase prices for the properties; Spencer and two accomplices pocketed the extra money after transactions were brought to fruition, along with kickbacks to the property buyers.

Spencer, an Albertville resident, recruited Patrick A. Dols, a fellow mortgage banker at Mortgage One, and Bryan J. Lenton, a real estate appraiser, to create ring that would sell condominium properties on Fisk Street in St. Paul , four condo units on a Dayton Avenue property in St. Paul, a home in Albertville and two investment properties in Minneapolis.

According to evidence presented at his two-and-a-half week trial, Spencer, who worked as a mortgage broker at Minnesota One, agreed to assist the owner of a condo unit on Fisk Street to sell the units at inflated prices. He recruited Lenton to appraise each unit at the inflated price. Specner then recruited a “straw buyer” to purchase units with loan proceeds, provided based on a fraudulent loan application by Spencer and Dols.

Spencer also arranged for nearly a quarter of a million dollars in payments to AC Standard Construction for purported work on two of the five units. Investigators determined no work was actually done, and, in fact, AC Standard was northing more than a sham company through which the three men involved received kickbacks.

In April 2006, investigations showed Spencer engaged in similar conduct with a co-conspiring real estate developer who had been unable to sell six homes in north Minneapolis. Two buyers were recruited for the properties, again with loan proceeds fraudulently brokered by Spencer and Dols.

Federal court also proved Spencer conducted a third scam with the condominium owner on Dayton Avenue in St. Paul. After closing on four units, Spencer caused more than $320,000 to be paid into a sham homeowners’ association account (common with condo units), which was then used to pay out more kickbacks to Spencer and the buyers.

Lenton, 32, of Oakdale, pleaded guilty to one count of conspiracy back on March 8. Dols 38, Minneapolis, entered his guilty plea to charges of conspiracy on March 1. Both men provided statements to investigators that admitted to their roles in the fraud ring.

Spencer was also convicted of bank fraud after the trial showed he borrowed more than $700,000 from Anoka-Hennepin Credit Union to close on his home in Albertville. He received a $73,000 kickback at closing (without AHCU’s knowledge), and he took out second mortgages on two investment properties secured via phantom equity.

The case against the three men was a result of investigation by the Internal Revenue Service-Criminal Investigation Division. Asst. U.S. Attorney David J. MacLaughlin was the lead prosecutor.