Dorean Group Sentenced in Mortgage Fraud



Back in 2006, at the height of the housing boom, the East Bay Express published a long story about Kurt Johnson and Dale Scott Heineman, two East Bay men who ran an elaborate mortgage fraud scheme that may have bilked more than three thousand homeowners and cost them their houses. Now, the San Jose Mercury News reports, a federal jury has convicted the two men of 35 counts of mail fraud, and they face decades of jail time.

Last week, federal judge Willam Alsup sentenced Johnson to 25 years in prison, and Heineman to just over 21 years. Between 2003 and 2005, the prosecutors claimed, the men, who operated under the rubric "the Dorean Group," conned thousands of homeowners into participating in a "vapor money" scam. Under the vapor money theory, any money wire transfer was guranteed by new currency generated by the Treasury Department; therefore, the mortgage was repaid the instant it was electronically transferred. If that sounds loony, it is, and it's hardly surprising that banks around the country refused to go along with it.

While vicitms of the scam, who stopped paying their mortgages, fell into default, the two men collected a small fortune in fees, secured title to the homes, and borrowed another small fortune against the increased equity. After the feds came down on the organization, Kurt Johnson went into hiding and posted defiant, rambling posts on his blog from a secret location. Even after he surrendered and awaited trial, Johnson still fed blog posts to friends, who posted his bizarre messianic claims on his blog. Now, Johnson will have to wait a quarter-century before he can put his vapor money to the test once more.