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Olson: State needs to become more involved in prosecuting mortgage fraud

The state needs to become more involved in uncovering and prosecuting mortgage fraud, says state Sen. Mary Olson, DFL-Bemidji. What was at first a metro area problem has now spread statewide, and many counties don't have the resources to work wit...

The state needs to become more involved in uncovering and prosecuting mortgage fraud, says state Sen. Mary Olson, DFL-Bemidji.

What was at first a metro area problem has now spread statewide, and many counties don't have the resources to work with what basically are white-collar crimes, Olson said last week in an interview.

While the current case of alleged mortgage fraud in Bemidji has spurred efforts, Olson said she was already working on it as a member of a financial crimes task force.

The task force "had asked me to carry a bill for them that would have given them additional funding to handle the area of mortgage fraud," she said.

"The reason they asked for the funding is that county attorneys typically don't have available someone within their employ that really has the time or the effort or the expertise to follow these cases, said Olson, who is a former assistant county attorney.

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But with lawmakers struggling with a budget deficit this year, it may be until next year before additional resources can be found, Olson said.

Public Safety Commissioner Michael Campion is also interested and may try to do something administratively through an executive order, said the Bemidji Democrat, who met with Campion last week. But a legislative answer would be more permanent, she added.

Olson was appointed in August to the Financial Crimes Oversight Council to represent the Minnesota Senate, She also serves as vice chairwoman of the Senate Judiciary Committee and serves on the Senate Commerce and Consumer Protection Committee.

The Financial Crimes Oversight Council is charged with developing an overall strategy to reduce the harm caused to the public by identity theft and financial crime within Minnesota. The council works with state and local law enforcement agencies to create protocols and procedures to investigate financial crimes.

The FBI execution of a search warrant March 26 at Realty Executives in Bemidji resulted in an affidavit accusing Bemidji real estate agent Eddie Detwiler and his associates of real estate fraud.

An FBI affidavit accuses Detwiler -- who no longer works for the firm -- of participating in a conspiracy to inflate property values through sham sales, kickbacks and falsified loan applications. The 33-page affidavit says Detwiler allegedly sold properties to buyers who later defaulted on their loans and sent the properties into foreclosure.

Charges have yet to be filed in the case, which Beltrami County officials suspected for four years when County Assessor Duane Ebbighausen suspected real estate fraud that raised assessed values of properties beyond reason.

Ebbighausen worked with the state Departments of Commerce and Revenue, but said none of the suspected sales were included in studies the county conducts of sales to determine assessed value of all properties.

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"Like what happened this time, sometimes the FBI gets involved," Olson said. "But it's usually handled through the Department of Commerce, which has a mortgage fraud unit. But (Commerce) is typically more of an administrative agency, a regulatory agency."

The Commerce Department has the authority to perform a law enforcement function with mortgage fraud, she said, "but typically they don't -- they do very little of that."

The agency instead usually works with the county attorney, the FBI or another law enforcement agency to do the actual law enforcement work, Olson said. "The problem is that this has been such a problem statewide ... and they really haven't had sufficient resources available to deal with this."

The Commerce Department, however, wants to keep its role and doesn't welcome the intrusion by the Financial Crimes Oversight Council, she said. "We have to allow the process the opportunity to work, but the question was raised about why it took so long, and that's a very legitimate question," she added.

"I think there is an argument that can be legitimately made that the resources, the approach that we've had, to address this issue statewide really hasn't been adequate," Olson said, noting that the Commerce Department worked four years on the Bemidji case, which the FBI finally triggered.

"It's not just the issue of mortgage fraud, but in a broader sense it's the issue of financial crimes across the spectrum," the Bemidji Democrat said, listing off identity theft "and a host of ways that organized crime is using computers and the U.S. mail to defraud people in some very sophisticated ways."

It's also a growing trend nationally, she said, and Minnesota continues to lag behind the best methods of dealing with a new generation of white-collar crimes.

For example, national legislation allows states to join a network to share information about vehicle titling, Olson said. The effort attempts to catch vehicles which have had their identities switched -- with a stolen car retitled with a legitimate vehicle identification number from a similar make, model and color that is legally registered.

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"They can determine the VIN number by looking through the windshield of a car," Olson said. "They'll take that information and they'll have a similar vehicle -- one with the same make, model and year that needs a new identity, either because the vehicle has been stolen or a vehicle that has had extensive damage like a lot of the vehicles after Hurricane Katrina."

A new identity is created for the stolen or damaged car, and the owner of the legitimate car ends up with the problem when they attempt to sell their vehicle.

States in the network have access to all vehicle titles, and are able to prevent someone from "washing" titles in another state, she said.

"That's something available to deal with financial crimes that Minnesota is one of the few states that hasn't joined this yet," Olson said. "There's lots of things we should be doing as a state to address this. The amount of financial loss to our banking industry and to individuals is really growing every year and we're not putting in nearly the financial resources into this issue that we should be."

Gov. Tim Pawlenty's budget-balancing measure this session further cuts the financial crimes task force's budget in half, Olson said, with the task force in the Department of Public Safety.

"He (Campion) said there are limited places in which he has to cut the budget and this was a judgment call that he had to make," she said, "but he did commit to me that over the interim we're going to be looking at revamping the financial crimes task force and look at the broader issue of ... mortgage foreclosure as well and working with various law enforcement agencies to decide how we might best address this."

Chances are better large that metro agencies may have their own in-house white-collar crime investigators, but those resources are rare in rural Minnesota, she said. Plus, such cases are complex and often cross over into other jurisdictions.

"Commissioner Campion said that while the majority of that type of crime might occur in the metro area, Ramsey and Hennepin counties are much more likely to have the expertise within their very large departments where smaller, rural counties really need the help of something like the financial crimes task force to be able to provide that expertise to where it isn't otherwise available," Olson said.

The financial crimes task force now consists of members of various law enforcement units sent from around the state sent to St. Paul to work. Olson told Campion that having members stay in the field in rural Minnesota would be a greater benefit, and suggested Bemidji as one possible field location.

Bemidji already has a Bureau of Criminal Apprehension Laboratory. Campion was receptive to the idea, she said.

Campion, however, hopes that in the coming year the task force won't lose members even though its budget will be cut in half. That means local units would have to pick up more of the costs.

"Right now, the state is reimbursing them for 100 percent of the funding," Olson said, "whereas with other task forces, such as the drug task force, the state pays half and the local governments pay half. I'm not real excited about asking our local governments to pick up more of the funding."

But both Campion and Olson agree that next year more resources need to be targeted to the task force, she said. "We don't want to see people continue to be victimized as the process goes forward."

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