3rd Minnesotan Sentenced in $5M Mortgage Fraud

Eric Bernard, who allegedly received more than $300,000 in personal profits from a $5 million mortgage fraud scheme, is the third defendant to be sentenced in the case.

The third defendant who was convicted of racketeering in a multimillion-dollar mortgage fraud scheme was sentenced Tuesday to seven years and three months in prison.

In addition to the prison term, Eric Devon Bernard-a 24-year-old man from Brooklyn Park who legally changed his name to Eric Allen Shapiro-was also ordered to pay a $10,000 fine and $1,000 in restitution to a man whose identity was stolen during the fraud scheme, according to the Hennepin County Attorney's office.

Bernard was found guilty of racketeering in August. He was the third defendant to be found guilty in the case, and the third to be sentenced.

Last month, David Schoenhofen of Prior Lake received a sentence of four-and-a-half years for his role in the fraud. He was also ordered to forfeit a rental home he owned, which was valued at about $250,000, the Hennepin County Attorney's office said.

Stacy Harrold of Burnsville was sentenced in late September to six years and three months in prison, fined $10,000, and ordered to pay $1,000 to the same California man to whom Bernard must provide restitution.

The three defendants worked together to fraudulently obtain loan proceeds in connection with the sale of seven residential properties in the Twin Cities metro area in 2006, according to the Hennepin County Attorney's office. Schoenhofen-who was president of residential mortgage originator LHS Mortgage, Inc.-would either identify properties to buy or have already purchased them through one of his companies. Then Harrold, who worked as a loan officer at Enzo Mortgage Group, would create fraudulent documents and set up the sales to Bernard or to two California residents whose identities they had stolen.

The three would then share in fees, kickbacks of loan proceeds, and payments to a sham company formed by Bernard for work that was never actually performed on the houses, the Hennepin County Attorney's office said. Since no buyers ever intended to occupy the homes, most went into foreclosure, resulting in losses for the lenders.

Bernard fraudulently received more than $300,000 in personal profits from the $5 million fraud scheme, according to the Hennepin County Attorney's office.

Michael Hudalla, co-owner of Enzo Mortgage and the last person among those charged who has yet to stand trial, will go on trial later this month.