Third Person Pleads Guilty in $42M Cloud 9 Scheme
Sheri Lynn Delich, a former real estate broker from Apple Valley, on Tuesday pleaded guilty to two charges for her role in a $42 million mortgage scheme involving the Cloud 9 Sky Flats in Minnetonka-and she testified in court that she was following the instructions of Cloud 9's developer Jerry Trooien.
According to court documents, Delich pleaded guilty to one count of conspiracy to commit mortgage fraud and one count of money laundering. She was charged in April and faces a combined maximum sentence of 15 years in prison for the two charges.
With the help of others, Delich allegedly found buyers to apply for mortgage loans to purchase units in the Cloud 9 development. The loan applications exaggerated the purchase price of the units, and kickbacks of approximately 30 percent of the reported purchase price of each unit were distributed after the inflated loans were approved.
Delich allegedly kept a percentage of the kickbacks for herself and others and then delivered the remainder to the appropriate buyer.
Delich's plea agreement is sealed, but her attorney-Mark Larsen of Lindquist & Vennum, PLLP-told Twin Cities Business that she testified in court that she received kickbacks from the sale of units in the Cloud 9 development and was following instructions from Trooien with respect to how to handle the money.
Trooien filed for Chapter 11 bankruptcy protection in October. In February, the Federal Bureau of Investigation and the Internal Revenue Service searched Trooien's St. Paul offices in an attempt to find evidence relating to an alleged fraud scheme.
Larsen said that prosecutors asked Delich if there were others who participated in the scheme and she told them that there were, but she did not disclose any names.
Trooien-who owns St. Paul real estate company JLT Group, Inc.-e-mailed the following statement to Twin Cities Business: “I do not know this woman and have never in any manner communicated with her, let alone having given her 'instructions' on any real estate transaction. I have hired attorney Earl Gray and he will be handling this matter. Any further comment will come from him.”
Gray could not be reached for further comment on the case.
Delich is the third person to plead guilty in the scheme, which allegedly involved more than 40 Cloud 9 units. According to the U.S. Attorney's Office in Minnesota, more than 80 percent of the loans for those units have since defaulted.
My Dinh Lam of Minneapolis and Ashley Elizabeth Prasil of Eden Prairie were charged with Delich in April, and both pleaded guilty in May. They each face a maximum penalty of five years in prison and will be sentenced at a later date.
Larsen said that he will argue that Delich's sentence should be below the federal guideline range of 51 to 63 months because she is a “minor participant” in the scheme. Her sentencing date has not yet been set.