Two accused of mortgage scam

A man and woman from the Twin Cities area have been indicted by a federal grand jury, accused of defrauding homeowners of the equity in their homes, including a vulnerable adult and another woman from Duluth.

Michael Fiorito, 39, of Prior Lake and Kristin Louise Jerde of Apple Valley, whose age was unavailable, are charged with conspiracy to commit mail fraud, mail fraud and engaging in a financial transaction with criminally derived property.

According to the indictment unsealed Wednesday:

Fiorito and Jerde worked as mortgage brokers who arranged mortgages and other forms of financing for home buyers and homeowners. Six victims are listed in the indictment, including four from the Twin Cities.

The defendants allegedly misappropriated money from vulnerable homeowners who were in foreclosure or behind on their mortgage payments, either by causing the homeowners to refinance their homes and then stealing some or all of the proceeds of the refinancing or else by inducing the homeowners to sell their homes to the defendants or others and then stealing the checks paid to the victims out of the closing of the sale.

Fiorito is accused of persuading a vulnerable Duluth woman in about August 2005 to sell her home as part of a sale and lease-back arrangement to prevent the sheriff's sale of the home. He then intercepted a check for $36,061.38, which represented the equity the woman had in the home. He allegedly coerced the woman into endorsing the check over to him. He then wrote the woman a check for $2,200, claiming that was all of the equity in her home.

Fiorito then required the woman to make monthly rent payments to his company to continue living in the home.

Fiorito also is accused of taking $14,455.93 in equity from the other Duluth victim, who was facing the foreclosure of her home last year.

Investigator Bill Lannon of the Duluth Police Financial Crimes Unit said Duluth police started the investigation after Duluth Mayor Herb Bergson got a complaint from a citizen. Lannon said the Minnesota Financial Crimes Task Force, U.S. Postal Inspectors and the IRS also took part in the investigation.

Lannon interviewed the two Duluth victims.

"I think he used intimidation and I think he used bullying," Lannon said of Fiorito. "He victimized the vulnerable in order to take their homes and strip mortgage companies of large amounts of money. And then he walks away and leaves a big mess."

Fiorito is also known as Michael Fiori, Michael Fiore and Michael Fiorto. Jerde is also known as Kristyn Moss.

MARK STODGHILL covers public safety and courts. He can be reached weekdays at (218) 723-5333 or mstodghill@

duluthnews.com.