Raid on mortgage company in fraud probe
Authorities seize documents on suspicious loans
By Robyn Moormeister
and Laura Brown, robynm@theunion.com
» More from Robyn Moormeister
and Laura Brown
12:01 a.m. PT Sep 22, 2007
Law enforcement agents seized documents Friday from the office of a Grass Valley mortgage company after an eight-month investigation identified suspicious real-estate loans and investments.
Officials from the California Department of Justice, the Grass Valley Police Department and the Nevada County District Attorney's office removed documents from Loan Sense, a Grass Valley office owned by Tom Hastert, a lawyer who also owns a real estate company.
The investigation could result in criminal charges against Hastert, Grass Valley Police Capt. Dave Remillard said.
Hastert could not be reached for comment. In an interview with The Union in August, Hastert contended some properties funded through his company were in foreclosure because "borrowers defaulted on payments," not because the loans were underfunded.
Grass Valley police, the D.A.'s office, state officials, the FBI, the California Department of Real Estate and the California Bar Association have been investigating Hastert since January.
"We have had multiple people come forward" to complain of faulty real estate investments and unpaid real estate loans conducted by Hastert and his business Loan Sense, Remillard said.
Most of the investors were elderly people trying to invest their retirement money, he added.
Roy Crain, of Grass Valley, told authorities he lost $100,000 when he invested in a construction loan through Hastert.
"This is only the tip of the iceberg, as Mr. Hastert has caused many people to lose hundreds of thousands of dollars, many of them elderly," Crain wrote in a July 26 letter to the California Real Estate Commission and State Bar Association.
"I feel he has committed fraud, larceny and embezzlement. He has used his position as an attorney to gain trust with people and encourage them to invest their money with him," Crain alleged.
Home foreclosed
The raid comes a month after Hastert's home appeared in the legal notices of The Union because he couldn't make his mortgage payments. The state Department of Real Estate suspended Hastert's license on Sept. 3, according to Grass Valley police.
In August, Hastert blamed the foreclosure of his home on the failing real estate market and a 50-percent drop in the number of investors who funded Loan Sense loans. Hastert began to dig into his own pockets for loan payments when the pool of investors shrank, he told The Union.
At the time, Hastert said 90 percent of the loans his company issued were paid off or current in payments. About 10 properties were in foreclosure because "borrowers defaulted on payments," Hastert contended. The 10 foreclosures were "never" caused by underfunded loans, he said.
Hastert said he continued to issue new loans and was confident the investments were secure.
"Most loans are successful. Most loans perform," Hastert said at the time.
It's going to take a while for forensic auditors from the California Department of Justice to analyze the financial records collected from Hastert's office, Remillard said.
Police ask that anyone doing business with Loan Sense, either as a borrower or investor who has had financial loss, to call Det. Colin Nelson or Sgt. Doug Hren at the Grass Valley Police Department, 477-4600.
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To contact Staff Writer Robyn Moormeister, e-mail robynm@theunion.com or call 477-4236. To contact Staff Writer Laura Brown, e-mail laurab@theunion.com or call 477-4231.
