Brown Announces Arrest of Fugitive who Masterminded $20 Million Real Estate Fraud Scheme

Friday, February 27, 2009
Contact: (415) 703-5837, agpressoffice@doj.ca.gov

FOR IMMEDIATE RELEASE
February 27, 2009
Contact: Christine Gasparac (916) 324-5500

Brown Announces Arrest of Fugitive who Masterminded $20 Million Real Estate Fraud Scheme

NEVADA COUNTY —Attorney General Edmund G. Brown Jr. and the Nevada County District Attorney announced that the man behind a $20 million “fraudulent real estate scheme,” Thomas Hastert, was taken into custody and arrested Thursday in Santa Cruz.

“Thomas Hastert’s days of swindling millions from investors and borrowers are at an end,” Attorney General Brown said. “Now the case moves to the courtroom, and Mr. Hastert can be held accountable for his fraudulent real estate scheme.”

A warrant was issued for Hastert’s arrest last Friday. Santa Cruz investigators, working with the Nevada County District Attorney’s Office, arrested him yesterday morning at his daughter’s house. Bail was set at $540,000.

Seventy-three criminal counts were filed against Thomas Hastert in the Nevada County Superior Court last Friday for embezzlement, securities fraud, and filing false documents.

Hastert brokered over 270 hard-money loans in Nevada, Sacramento, Sutter, Butte, Placer, and Yolo Counties between September 2004 and September 2007 for real estate development projects. Hard-money loans typically provide high returns for private investors and are secured through collateral such as real estate.

In this case, Hastert secured $20 million from several investors, using the funds to broker hard-money loans to borrowers seeking to develop homes on real estate.

In the criminal complaint, Hastert is alleged to have:

Misled investors. Hastert told investors that borrowers had excellent credit scores and were capable of repaying the loans. This proved to be untrue. Many borrowers had poor credit scores, did not make regular payments on the loans, and held properties that were in foreclosure.

o The loans that Hastert brokered were required by law to be placed into a special trust account overseen by a third-party escrow firm. The firm had to verify whether funds being withdrawn by borrowers were being used for construction projects. Despite telling investors he had established such a trust account, Hastert never did, and the money was regularly withdrawn and misused by borrowers with no oversight.

o Hastert told investors he would personally oversee the development of the land. In one instance, he was asked by investors to drive them to a particular property that was supposedly under development. Hastert could not locate the property.

• Set up fake investors, known as “straw men,” to keep concerned investors at bay. Hastert filed documents with a county recorder’s office saying that his secretary owned a majority interest in the investment, despite the fact that she had never invested a single dollar. If a legitimate investor tried to initiate foreclosure proceedings, Hastert would contend that the supposed majority owner opposed the action.

• Embezzled fees. Hastert was entitled to collect a 3% fee on loans he brokered. However, he took all his fees up-front as if the loan were fully funded. In fact, some loans never fully funded, and others took more than a year to fully fund.

If convicted, Hastert could face up to 11 years and 4 months in prison. Bail was set at $540,000. A warrant was issued for his arrest today.

To view the press release about his charges, please follow this link:

http://ag.ca.gov/newsalerts/release.php?id=1683

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