GRASS VALLEY, Calif. and#8212; Investors and borrowers who lost millions of dollars in real estate transactions with Thomas Hastert’s company, Loan Sense, say they had one thing in common: Trust.

At 1:30 p.m. today the former lawyer and real estate loan broker is slated appear in Nevada County Superior Court for sentencing. Hastert pleaded no contest to 62 counts related to a $20 million fraud case involving more than 100 victims in six Northern California counties.

Many who invested with Hastert were elderly and at least one man had dementia. All were counting on the investments to supplement meager retirement incomes.

After winning their trust, victims say Hastert went on to fleece them by giving them a false sense of security. He assured them borrowers had excellent credit, and investments were secured by collateral property, victims say.

Hastert misled the people who invested and borrowed from him by using phony investors, failing to properly record documents and never fully funding loans, according to victims and investigators. Those who began to doubt

Hastert were strung along with fresh money when new investors were recruited.

and#8220;You have to get innocent-type people. That’s what Hastert did,and#8221; said Bob Brewer, an investor who estimates he lost $265,000 in seven loans with Hastert. and#8220;None of them had to do with the economy.and#8221;

No borrower was ever turned down, even those with bad credit who couldn’t mqualify for a loan at a traditional bank, according to an investigation by the California Department of Justice. Hastert told everyone to and#8220;trust him,and#8221; Brewer said.

and#8220;The one thing that made this work was trust,and#8221; added Melissa Kaput. Though she had poor credit, Hastert gave her two loans.

Kaput was the first borrower who went to authorities on April Fools Day 2007 when she suspected fraud after several checks totaling $45,000 bounced.

She also is involved in two civil lawsuits against Hastert.

One 66-year-old investor told Grass Valley investigators that Hastert used his legal clients as investors. He said he was the youngest of the investors, according to police reports.

and#8220;There’s no one he didn’t use. There’s no end to his manipulation and how he can lie,and#8221; Brewer said.

Like many, Brewer said he trusted the law and real estate licenses hanging on the walls of Hastert’s Brunswick Road office.

It wasn’t until Brewer took a drive out to a property he had invested in did he begin to think something was awry. His investment account showed a number of draws for construction work, but when Brewer visited the land, he found no sign of activity.

That’s when the reality of the scam hit.

and#8220;You’re already caught. You’re a bee in a spider’s web,and#8221; Brewer said. and#8220;(Hastert) was not interested in getting the projects finished. The construction loan was being bled to death.and#8221;

Brewer contacted Grass Valley Police in March 2007 when monthly payments began drying up, and he and other investors realized they weren’t going to get their money back.

Investigators from the police department realized something was amiss when both investors and borrowers of Loan Sense began surfacing. Police seized truckloads of file cabinets and documents during a raid of the Loan Sense office in September 2007.

In February 2009, after a year-long criminal investigation led by the state Department of Justice, California Attorney General Edmund G. Brown filed 73 criminal counts against Hastert including embezzlement, securities fraud and filing of false documents.

After nearly a week-long manhunt, a tan Hastert was arrested as he was getting into his brother’s Lexus parked in front of his daughter’s house in Santa Cruz. Hastert has been in the Nevada County jail since then.

Brewer and other investors say they were lured into Hastert’s trap by the lawyer’s assurance the construction loans he offered were secured by the value of the collateral property.

Hastert repeatedly told investors a borrower’s credit was and#8220;fineand#8221; when it wasn’t. In some instances, borrowers owned other properties that were being foreclosed on, said special agent Jason Nichols with the state Department of Justice in a declaration issued Feb. 20.

Hastert never fully funded the loans. Instead, he used a longtime friend and his secretary as and#8220;strawand#8221; investors; their names appeared on deeds of trust even though they never put in a dime to back up what was depicted as a majority holding.

Investors were led to believe their property investments were protected by the appraised value of the land and#8212; a value determined by Hastert’s in-house appraiser, a value some investors have called and#8220;inflated and bogus.and#8221;

and#8220;He can put you right where he wants you and you don’t know how you got there,and#8221; Brewer said.

Hastert lured in investors by misrepresenting the amount of equity that borrowers held in the property, much like a down payment.

and#8220;Typically, the maximum loan to value ratio is 65 to 70 percent. That is, if the property was worth $100,000, the lender would advance $65,000 to $70,000 against it,and#8221; Nichols said.

and#8220;This low LTV provides added security for the lender in case the borrower does not pay, and they have to foreclose on the property,and#8221; Nichols stated.

Hastert offered what looked like a low-risk investment by showing borrowers held 20 to 30 percent equity to back up their loans, a commitment that would keep them from walking away in case of trouble.

and#8220;The loan-to-value is where he gets you. He says you’re absolutely safe here,and#8221; Brewer said.

Hastert typically charged 3 percent of the principle as his broker fee, as entitled by law.

On top of that, he embezzled other fees by taking all of them up front when loans closed, based on the total amount of the loan, regardless of whether the loan was fully funded.

Of 33 loans studied, eight were never fully funded, Department of Justice investigators found.

and#8220;Analysis of those eight loans revealed that Hastert took fees to which he was not entitled under any circumstances,and#8221; Nichols said. and#8220;The improper taking of fees diminished the monies available to the borrowers to complete their construction projects.and#8221;

Hastert also acted as the servicing agent, collecting the interest from the borrower and making the payments to the multiple lenders.

Hastert failed to use a draw schedule to ensure proper and timely disbursements were being made for construction projects, investigators found. Neither did he use an independent person to certify that work was completed, as required by law, Nichols said.

Instead, he told investors he would personally oversee the projects. But on one occasion, when investors asked to visit a property, Hastert couldn’t find it, Nichols stated.

As a result of not following these safeguards, 24 construction loans out of Hastert’s 270 loans have been and#8220;unproductive, uncompleted and most have either been foreclosed on or are now involved in foreclosure and/or quiet title litigation. Investors have lost the value of most if not all of the $8 million invested,and#8221; Nichols stated.

In at least 33 multi-lender investments, Hastert used a straw investor. In those investments, he also failed to fully fund loans as required by the state Business and Professions Code, yet he recorded deeds of trust as if they had full financial backing, according to Nichols.

and#8220;The straw person, who made no contribution of funds, is listed in the recorded documents… which created the appearance they had purchased a fractionalized interest in the deed of trust along with other investors,and#8221; Nichols stated.

and#8220;In each transaction, the recorded securing document misrepresented on its face that the straw investor had contributed actual funds, and was therefore a legitimate beneficiary of the note. The straw person had not contributed any funds; but only the straw person, Hastert and other Loan Sense employees knew that for certainand#8221; Nichols said in his declaration.

Investors grew anxious when payments slowed to a trickle and properties went into default, and some tried to foreclose to recover their investments.

But the presence of a straw person’s name on the loan documents gave Hastert the upper hand. On paper, the straws had the majority stake in the property, and because Hastert spoke for them, he could block any legal actions taken by the real investors, according to investigators.

Deeds were often not recorded at the Nevada County Recorder’s Office and#8220;until long after the date new investor funds were received,and#8221; Nichols said. This left investors without any recorded security for their investments.

The names of Hastert’s secretary, Nancy Selecman, and long-time friend Debra Newby show up repeatedly on documents as investors who supposedly contributed more than 50 percent to the loan.

That recurring pattern jumped out at some of Hastert’s victims.

and#8220;That’s how we knew we were up against a pre-determined scam,and#8221; Kaput said. Newby has denied any knowledge of Hastert using her name as a beneficiary until after the fact. In Kaput’s civil suit against Hastert, Newby has said she did not give Hastert written or oral consent to be added as a beneficiary on a deed of trust.

As additional funds rolled in from new investors, and#8220;a sham sale was documented and often (but not always) recorded, showing that the straw person sold a portion of his or her alleged percentage of ownership,and#8221; Nichols said.

In reality, and#8220;the new investor funds were an infusion of new capital, not the sale of an existing investment,and#8221; Nichols stated.

With new investors came a fresh flow of cash to quiet those who were beginning to question Hastert’s motives.

and#8220;For Hastert, it was like putting out fires. If you were a threat to him, he’d pay you off, because he didn’t want this thing unraveling,and#8221; said Kaput.

Under the original charges, Hastert could have faced up to 32 years in a state prison.

In May, 21 counts of filing false instruments and one count of embezzlement were dismissed in Nevada County Superior Court. Hastert pleaded no contest to the 62 remaining counts.

Under the plea bargain, Hastert would receive a sentence of five years in a state prison, but probably will serve half that time, prosecutors estimated.