MN real estate firm to pay $593K fine, restitution for fraudulent scheme involving foreclosed properties

A criminal fine, restitution and jail time were ordered for a Minnesota real estate company, its owner, and its accountant for their part in a long-running fraudulent bidding and kickback scheme in connection with foreclosed properties for nearly eight years, the federal bank deposit insurer’s inspector general office, which assisted in the federal case against them, said Thursday.

Detloff Marketing and Asset Management Inc., based in Hopkins, Minn., received more than $291,505 in kickbacks in a scheme that ran from September 2007 until June 2015, the Federal Deposit Insurance Corp. (FDIC) Office of Inspector General (OIG) said. The firm, its owner Jeffrey J. Detloff (of Minnetonka, Minn.), and its accountant Lori K. Detloff (also of Minnetonka, Minn.) were sentenced Tuesday in the U.S. District Court in St. Paul, Minn.: Jeffrey Detloff, to 16 months’ imprisonment and two years of supervised release; Lori Detloff, to seven months’ imprisonment and one year of supervised release; and Detloff Marketing, to a pay a $593,000 criminal fine. Defendants were also sentenced to pay full restitution to the victims of the scheme.

The FDIC OIG, citing court documents, said that from September 2007 and continuing until June 2015, Jeffrey Detloff conspired to defraud mortgage lenders and guarantors who had hired Detloff to oversee maintenance and repairs on foreclosed homes in the Minneapolis-St. Paul area. It says Jeffrey Detloff steered maintenance and repair contracts to contractors who would pay a kickback to Detloff Marketing. Without customers’ knowledge, it says, Jeffrey Detloff and Detloff Marketing included the kickbacks within bids and invoices sent to the lender or guarantor for reimbursement on maintenance and repairs. Lori Detloff was an accountant responsible for ensuring the kickbacks were paid by contractors to Detloff Marketing.

Detloff Marketing and Jeffery Detloff pleaded guilty to Count 1 of the Indictment, which charged a conspiracy to commit mail and wire fraud affecting a financial institution. Lori Detloff pleaded guilty to aiding and abetting the principal offense described in Count 4 of the indictment, mail fraud affecting a financial institution. As part of their plea agreements, the release says, the Department of Justice’s antitrust division agreed to move to dismiss the remaining counts against Detloff Marketing, Jeffery Detloff, and Lori Detloff upon sentencing.

The underlying investigation of housing repair contracts in the Minneapolis area is being conducted by the antitrust division’s Chicago office and the FBI’s Minneapolis division.