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OAH 16-1005-2000-2 |
STATE OF
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE DEPARTMENT OF COMMERCE
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In the Matter of Michael Prieskorn, individually and the Mortgage
Originator License of Michael Prieskorn |
FINDINGS OF FACT, CONCLUSIONS AND RECOMMENDATION |
This matter came on for a hearing before Administrative Law
Judge Manuel J. Cervantes (ALJ) on December 17, 2008, at the
Michael J. Tostengard, Assistant Attorney General,
1. Whether the
Respondent, by engaging in the fraudulent scheme, demonstrated
untrustworthiness in violation of Minn. Stat. § 45.027,
subd. 7(4) (2006)?
2. Whether the
Respondent, by engaging in a fraudulent investment scheme, demonstrated
fraudulent, deceptive or dishonest practices, in violation of
Minn. Stat. § 45.027, subd. 7(4) (2006)?
3. Whether the
Respondent has demonstrated untrustworthiness in violation of Minn. Stat. § 58.12,
subd. 1(b)(2)(v) (2006)?
4. Whether the
Respondent has demonstrated financial irresponsibility in violation of
Minn. Stat. § 45.027, subd. 7(4) (2006)?
Based upon the evidence in the hearing record, the ALJ
makes the following:
1. On October
29, 2008, a Notice of and Order for
Hearing, Order for Prehearing Conference, and Statement of Charges (NOH)
in this matter was mailed to the Respondent’s last known address. The NOH indicated that a prehearing
conference would be held in this matter on December 17, 2008.
2. The NOH in
this matter includes the following statements:
Respondent’s failure to appear at the prehearing
conference or hearing may result in a finding that Respondent is in default,
that the Department’s allegations contained in the Statement of Charges may be
accepted as true, and that its proposed disciplinary action may be upheld.
…
Pursuant to Minn.
Stat. § 45.027, subd. 6 (2006), Respondent may be subject to a civil
penalty not to exceed $10,000 per violation upon a final determination that
Respondent violated any law, rule or order.
3. No one
appeared at the December 17, 2008 prehearing conference on behalf of Michael
Prieskorn. No prehearing request was
made for a continuance, nor was any communication received by the undersigned
from Michael Prieskorn.
4. The statement
of charges alleges that:
(a) The
Respondent was licensed as a mortgage originator by the Department, License No.
20538787. The license became inactive on
July 31, 2007.
(b) The
Department received a complaint concerning the Respondent’s activities in
connection with the sale of numerous residential properties.
(c) The
Department’s investigation revealed that from January 2006 through March 2007,
the Respondent and his companies participated in a fraudulent scheme in which
numerous investors were induced to purchase approximately 220 investment homes
at prices well beyond their true market value.
Most of the sellers were builders with excess inventories of unsold
homes.
(d) In
order to induce investors into making the purchases, the Respondent prepared a
fraudulent lease which certified that Blackstone Sales would pay the investors
$5,000 per property upon successful closing, make mortgage and utility payments
on the property for the entire length of the lease, typically eight to nine
months, and purchase the property from the investors at the end of the term of
the lease. The Respondent misrepresented
to the investors that the transaction would be “virtually risk free.” Respondent further misrepresented that he
always kept at least $2,000,000 in his checking account to cover any
unforeseeable events.
(e) The
homes were sold at inflated purchase prices which allowed the sellers to profit
substantially and also allowed the Respondent’s company, Maine Estates, to
collect “management fees” out of the closing proceeds ranging from $22,000 to
more than $105,000.
(f) The
Respondent misrepresented to the investors that the fee Maine Estates would
receive at each closing, approximately 10-15% of the purchase price, was to be
used in making mortgage and utility payments in accordance with the
leases. Actually, most of the fees were
diverted to Respondent’s personal use.
(g) In
April 2007, when it became clear that the scheme would no longer support
itself, the Respondent emptied his bank accounts, stopped making lease payments
in accordance with the contracts, and failed to purchase any of the investors’
homes. Most of the homes have fallen
into foreclosure, resulting in significant losses to lenders, investors, and
the communities in which the homes are located.
5. The
allegations contained in the statement of charges are deemed proven and are
incorporated into these Findings by reference.
Based upon these Findings of Fact, the ALJ makes the
following:
1. The ALJ and
the Commissioner of Commerce have jurisdiction in this matter pursuant to
Minn. Stat. §§ 45.027, 82B.03 and 82B.20 (2006).
2. Respondent
received notice of the charges against him and of the time and place of the
evidentiary hearing. This matter is,
therefore, properly before the Commissioner and the ALJ.
3. Respondent is
in default as a result of his failure, without the ALJ’s prior consent, to
appear at the scheduled prehearing conference.
4. Pursuant to
Minn. R. 1400 6000, a contested case may be decided adversely to a
party who defaults. Upon default, the
allegations and claims set forth in the original statement of charges may be
taken as true or deemed proved without further evidence.
5. Based upon
the facts set forth in the statement of charges, the Respondent engaged in a
fraudulent scheme and demonstrated untrustworthiness in violation of
Minn. Stat. § 45.027, subd. 7(4) (2006).
6. Based upon
the facts set forth in the statement of charges, the Respondent engaged in a
fraudulent investment scheme and demonstrated fraudulent, deceptive or
dishonest practices in violation of Minn. Stat. § 45.027,
subd. 7(4) (2006)?
7. Based upon
the facts set forth in the statement of charges, the Respondent has
demonstrated untrustworthiness in violation of
Minn. Stat. § 58.12, subd. 1(b)(2)(v) (2006).
8. Based upon
the facts set forth in the statement of charges, the Respondent has
demonstrated financial irresponsibility in violation of
Minn. Stat. § 45.027, subd. 7(4) (2006).
10. The imposition
of disciplinary sanctions against Respondent is in the public interest.
Based upon these Conclusions, the ALJ makes the following:
IT IS HEREBY RESPECTFULLY RECOMMENDED that appropriate disciplinary action be taken
against Michael Prieskorn, individually and the Mortgage Originator License of
Michael Prieskorn, License No. 20538787.
The undersigned recommends that discipline be imposed based upon Counts
I, II, III, and IV of the Statement of Charges
Dated: January 8, 2009
s/Manuel
J. Cervantes
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MANUEL J. CERVANTES Administrative Law Judge |
Reported: No Recording.
This report is a recommendation, not a final decision. The Commissioner of the Minnesota Department
of Commerce will make the final decision after a review of the record. The Commissioner may adopt, reject or modify
the Findings of Fact, Conclusions, and Recommendations. Under Minn. Stat. § 14.61, the
final decision of the Commissioner shall not be made until this Report has been
made available to the parties to the proceeding for at least ten days. An opportunity must be afforded to each party
adversely affected by this Report to file exceptions and present argument to
the Commissioner. Parties should contact
Glenn Wilson, Commissioner, Minnesota Department of Commerce,
If the Commissioner fails to issue a final decision within
90 days of the close of the record, this report will constitute the final
agency decision under Minn. Stat. § 14.62, subd. 2a. The record closes upon the filing of
exceptions to the report and the presentation of argument to the Commissioner,
or upon the expiration of the deadline for doing so. The Commissioner must notify the parties and
the Administrative Law Judge of the date on which the record closes.
Under Minn. Stat. § 14.62, subd. 1, the
agency is required to serve its final decision upon each party and the
Administrative Law Judge by first class mail or as otherwise provided by law.