DOJ Minnesota Detloff Indictment
DOJ Minnesota Detloff Indictment
Defendants.
INTRODUCTION
or about June 2015, in the State and District of Minnesota and elsewhere, Defendants
(hereafter "LORI DETLOFF"), and others known and unknown to the Grand Jury, all
acting within the scope of their agency and employment, and for the benefit of Defendant
CASE 0:18-cr-00197-PAM-HB Document 1 Filed 08/15/18 Page 2 of 14
COMPANIES by soliciting and receiving kickbacks, and submitting false and fraudulent
bids and invoices to the VICTIM COMPANIES, all in connection with Real Estate Owned
this Indictment to ''the DETLOFFS" means JEFF DETLOFF and LORI DETLOFF
collectively.
Association, commonly known as Fannie Mae, and the Federal Home Loan Mortgage
included entities that are financial institutions within the meaning of 18 U.S.C. § 20. The
VICTIM COMPANIES are all businesses that own or otherwise have an interest in REO
3. The DETLOFFS induced others, known and unknown to the Grand Jury, to
participate in the scheme and artifice to defraud the VICTIM COMPANIES by making
"kickbacks."
2
CASE 0:18-cr-00197-PAM-HB Document 1 Filed 08/15/18 Page 3 of 14
of any corporation, the allegation means that the corporation engaged in the act, deed, or
while they were actively engaged in the management, direction, control, or transaction of
GENERAL ALLEGATIONS
the laws of Minnesota, with its principal places of business in Eden Prairie, Hopkins, and
they were actively engaged in the management, direction, control, or transaction of its
business or affairs.
(commonly called a "realtor") or Real Estate Broker (commonly called a "broker") licensed
with the State of Minnesota. For purposes of this Indictment, "realtor" refers to both
realtors and brokers. JEFF DETLOFF was an officer and agent of Defendant DETLOFF
MARKETING and other companies associated with his real-estate business. JEFF
DETLOFF was the husband of Defendant LORI DETLOFF. Throughout the conspiracy,
3
CASE 0:18-cr-00197-PAM-HB Document 1 Filed 08/15/18 Page 4 of 14
JEFF DETLOFF acted within the scope of his agency and employment, and for the
associated with JEFF DETLOFF. LORI DETLOFF was an officer and agent of
DETLOFF's real-estate business. She was the wife of Defendant JEFF DETLOFF.
Throughout the conspiracy, LORI DETLOFF acted within the scope of her agency and
REO properties, also known as foreclosure properties. Many of these REO properties were
located within the State and District of Minnesota. After foreclosure, repairs and routine
maintenance were often necessary before a REO property could be re-sold. To manage
such repairs and maintenance, the VICTIM COMPANIES relied on realtors who
specialized in managing and selling REO properties. These realtors were commonly
referred to as "REO realtors." After any repairs and maintenance, REO realtors sold REO
10. In some circumstances, the VICTIM COMPANIES required the REO realtor
4
CASE 0:18-cr-00197-PAM-HB Document 1 Filed 08/15/18 Page 5 of 14
obtaining such bids. In all circumstances, the VICTIM COMPANIES relied on REO
realtors to assign work to maintenance and repair contractors based on the best interest of
statutes, and ethical codes. Among other things, these guidelines, regulations, statutes, and
ethical codes (a) prohibited REO real.tors from soliciting or receiving kickbacks; and
(b) required REO realtors to disclose to the VICTIM COMPANIES any payments received
by a REO realtor in connection with any property owned or controlled by the VICTIM
COMPANIES.
DETLOFF and LORI DETLOFF-while they were actively engaged in the management,
13. Throughout the scheme, JEFF DETLOFF, acting within the scope of his
agency and employment, and for the benefit of DETLOFF MARKETING and various
other companies, worked as a REO realtor, managing and selling REO properties for the
VICTIM COMPANIES within the State and District of Minnesota and elsewhere. JEFF
5
CASE 0:18-cr-00197-PAM-HB Document 1 Filed 08/15/18 Page 6 of 14
DETLOFF managed repair and maintenance of REO properties for the VICTIM
COMPANIES. In this capacity, JEFF DETLOFF was able to choose, or influence the
choice of, which contractor was assigned to perform the repair and maintenance work on a
given REO property for the VICTIM COMPANIES. Also in this capacity, JEFF
DETLOFF submitted and caused to be submitted bids and invoices from repair and
maintenance contractors for work on a given REO property for the VICTIM COMPANIES.
DETLOFF MARKETING and various other companies, and acted within the scope of
her agency and employment, and for the benefit of DETLOFF MARKETING and those
payments to contractors for work performed on REO properties for the VICTIM
COMPANIES. LORI DETLOFF received invoices from contractors who were used by
the Defendants for work performed on REO properties owned or controlled by the VICTIM
COMPANIES. She also sent invoices to these contractors, including invoices for
to contractors used by the Defendants for work performed on REO properties owned or
controlled by the VICTIM COMPANIES. She also tracked payments received by the
Defendants, including kickbacks. These invoices and payments included invoices and
15. Beginning in or about September 2007, the DETLOFFS put the scheme into
effect by telling various contractors that the contractors were required to pay kickbacks
6
CASE 0:18-cr-00197-PAM-HB Document 1 Filed 08/15/18 Page 7 of 14
REO properties owned or controlled by the VICTIM COMPANIES and managed by the
DETLOFFS. The DETLOFFS then steered work on those REO properties to contractors
who paid kickbacks. The Defendants submitted and caused to be submitted false and
fraudulent bids and invoices to the VICTIM COMPANIES, which included the kickback
16. During, and in furtherance of, the scheme: (a) JEFF DETLOFF used his
position as a REO realtor to steer work on such properties to contractors who agreed to pay
kickbacks; (b) LORI DETLOFF demanded the specific kickbacks from contractors and
tracked whether the specific kickbacks were paid; (c) the DETLOFFS referred to the
kickbacks by various terms, including ''management fees," to conceal the true nature of
these kickbacks; (d) the Defendants knowingly concealed the kickbacks by submitting and
causing to be submitted to the VICTIM COMPANIES false and fraudulent bids, estimates,
and invoices that misrepresented the value of work received by the VICTIM
COMPANIES; and (e) when necessary, JEFF DETLOFF procured sham bids and
knowingly submitted those sham bids to the VICTIM COMPANIES to create a false
appearance of competitive bidding and to conceal the fact that he steered work to
contractors paid the kickbacks demanded by the DETLOFFS. These measures included
already done by those contractors; and (b) threatening to stop or actually stopping new
7
CASE 0:18-cr-00197-PAM-HB Document 1 Filed 08/15/18 Page 8 of 14
into the scheme for the purpose of using those other contractors to create the false
appearance of competitive bidding by providing sham bids. At least one of the recruited
contractors paid kickbacks in exchange for receiving work from the Defendants.
19. The purpose of the scheme was for the conspirators fraudulently to obtain
20. The Defendants and their conspirators (a) took steps to conceal the nature
and existence of the kickbacks from the VICTIM COMPANIES, (b) did not disclose the
the VICTIM COMPANIES, all so that the kickbacks would not be detected and so that the
Defendants would continue to receive ongoing assignments associated with the managing,
VICTIM COMPANIES. The Defendants were at all times aware of the misrepresentations
and concealments made by the contractors in the bids, estimates, and invoices submitted to
COUNT 1
(Conspiracy to Commit Mail and Wire Fraud Affecting a Financial Institution)
22. From in or about September 2007 and continuing through in or about June
2015, in the State and District of Minnesota and elsewhere, the Defendants,
8
CASE 0:18-cr-00197-PAM-HB Document 1 Filed 08/15/18 Page 9 of 14
did knowingly, voluntarily, and intentionally combine, conspire and agree with each other,
and with other persons known and unknown to the Grand Jury, to commit the offenses of
mail fraud and wire fraud by engaging in the scheme and artifice described above to
defraud and to obtain money and property from VICTIM COMPANIES (including entities
that are financial institutions within the meaning of 18 U.S.C. § 20) by means of materially
false and fraudulent pretenses, representations, promises, and material omissions; and for
the purpose of executing and attempting to execute such scheme and artifice (a) caused to
be sent, delivered, and moved by the United States Postal Service and private and
commercial interstate carriers various mailings, items, and things, in violation of Title 18,
United States Code, Section 1341, and (b) caused the transmission in interstate commerce,
by means of wire communications, certain writings, signs, signals, pictures, and sounds, in
COUNTS2-5
(Mail Fraud Affecting a Financial Institution)
24. On or about the following dates, in the State and District of Minnesota and
9
CASE 0:18-cr-00197-PAM-HB Document 1 Filed 08/15/18 Page 10 of 14
and others known and unknown to the Grand Jury, aiding and abetting, and being aided
and abetted by, each other, having knowingly and intentionally devised and participated in
the scheme and artifice described above to defraud and to obtain money and property from
the VICTIM COMPANIES (including entities that are financial institutions within the
representations, promises, and material omissions, and for the purpose of executing and
attempting to execute such scheme and artifice, did knowingly cause to be sent, delivered,
and moved by the United States Postal Service and private and commercial interstate
carriers various mailings, including, but not limited to, the following:
All in violation of Title 18, United States Code, Section 1341 and Title 18, United
States Code, Section 2.
10
CASE 0:18-cr-00197-PAM-HB Document 1 Filed 08/15/18 Page 11 of 14
COUNTS6-9
(Wire Fraud Affecting a Financial Institution)
26. On or about the following dates, in the State and District of Minnesota and
and others known and unknown to the Grand Jury, aiding and abetting, and being aided
and abetted by, each other, having knowingly and intentionally devised and participated in
the scheme and artifice described above to defraud and to obtain money and property from
the VICTIM COMPANIES (including entities that are financial institutions within the
representations, promises, and material omissions, and for the purpose of executing and
attempting to execute such scheme and artifice, did knowingly cause to be transmitted in
interstate commerce certain writings, signs, signals, pictures, and sounds by wire,
11
CASE 0:18-cr-00197-PAM-HB Document 1 Filed 08/15/18 Page 12 of 14
All in violation of Title 18, United States Code, Section 1343 and Title 18, United
States Code, Section 2.
FORFEITURE ALLEGATIONS
27. The Grand Jury re-alleges and incorporates by reference Counts 1-9 of this
Indictment, as if fully set forth herein, for the purpose of alleging forfeiture pursuant to
Title 18, United States Code, Section 98l{a){l)(C), Title 18, United States Code, Section
28. Upon conviction of the offenses alleged in Counts 1-9 of this Indictment,
the Defendants shall forfeit to the United States pursuant to Title 18, United States Code,
conjunction with Title 28, United States Code, Section 2461(c), all property, real or
12
CASE 0:18-cr-00197-PAM-HB Document 1 Filed 08/15/18 Page 13 of 14
forfeiture, the United States intends to seek the forfeiture of substitute property as provided
for in Title 21, United States Code, Section 853(p), as incorporated by Title 18, United
States Code, Section 982(b)(l) and Title 28, United States Code, Section 2461(c).
A TRUE BILL
DATED FOREPERSON
13
CASE 0:18-cr-00197-PAM-HB Document 1 Filed 08/15/18 Page 14 of 14
14