Broker pleads not guilty to $20 million loan fraud

Grass Valley lawyer and real estate broker Thomas Hastert pleaded not guilty Monday to all 73 felony counts in a $20 million loan fraud case filed against him by the state attorney general.

Hastert entered the plea in Nevada County Superior Court to charges of grand theft, filing false documents and securities fraud, and denied all special allegations.

Hastert's fraud allegedly involved duping investors for developments in six counties, including Sutter.

The attorney general's office filed an amended complaint against Hastert Monday, adding up to 14 more charges, many of them embezzlement, said Jason Nichols, special investigator for the state Department of Justice.

"The embezzlement charges were further identified," Nichols said.

Cases of suspected fraudulent construction loans also were found in the ongoing investigation, and new victims may yet be identified Nichols said.

"As long as we continue the investigation, we'll continue to amend," Nichols added.

Hastert is accused of taking $20 million from investors and using the funds to broker "hard-money loans," which typically provide high returns, to borrowers seeking to build homes on property.

He allegedly is responsible for 270 hard-money loans in Sutter, Nevada, Sacramento, Butte, Placer and Yolo counties since September 2004.

Hastert allegedly secured funding from investors and used the money to broker loans to borrowers seeking to develop homes on real estate. Investors were told that borrowers had excellent credit scores, but many of the borrowers did not make regular payments or held properties in foreclosure, according to authorities.

Hastert also is accused of setting up fake investors to lead legitimate investors to believe the loans they were funding were secure, the state alleges.

Hastert walked into the courtroom shackled and wearing an orange jump suit. Since his arrest in February, he has been incarcerated at the county jail in Nevada City.

A preliminary hearing has been scheduled to start at 9 a.m. May 18 in Nevada County Superior Court and continue for 10 days.

"There's a lot of evidence to present," Gillespie said.

If convicted, Hastert could face up to 32 years in state prison.

Laura Brown is a reporter for the Grass Valley Union. Contact her at 477-4231 or e-mail lbrown@theunion.com.