Of the scores of lawsuits filed against Barry Shy, one case is particularly noteworthy because of its seriousness. In October 2007, U.S. Bank alleged that Shy and several other defendants committed mortgage fraud.

The Minneapolis bank alleged that Shy, an appraisal company, an escrow company and a mortgage brokerage conspired to sell four condominiums in Shy’s SB Grand building to “nonexistent or unqualified” individuals. The bank claimed it never received any mortgage payments and sought restitution of $1.8 million for the loans and other expenses. It also sought unspecified punitive damages.

“Assuming this were true, this would most likely amount to criminal fraud – a scheme that was well thought out, took a lot of planning and was very deceptive,” said attorney Andrew Kirsh of Raines Law Group LLP, who reviewed case documents at the request of the Business Journal.

Shy’s attorney Steven Schuman acknowledged the transactions were problematic, saying “clearly something untoward was going on – absolutely.”

But, he said, “I believe it did not involve Barry in any way,” noting bank investigators tried hard to connect his client to the problems but were unable to do so.

Shy, for his part, denied any wrongdoing, saying he was not involved in the sales of those units at the 312 W. Fifth St. building.

“I never met those (buyers). I don’t know what their intention was when they purchased it,” he said. “The (bank) realized I did nothing wrong and they dismissed me.”

In fact, the lawsuit was settled after Shy and his 5th Street Loft LLC entity, which owned the units that were sold, paid $90,000 to the bank, according to Schuman and court filings. The bank either dismissed or settled with the other defendants.

Schuman said the settlement made sense and was not an admission of culpability.

“What if Barry had gone to trial and spent $100,000 on the trial and won? If he can settle for that much or less without regards to the merits of the case, there is financial incentive to do this,” the attorney said.

Schuman believes that fraud did occur, with the buyers lying about their income, employment and debts to qualify for loans to buy the units. And in at least some of the purchases it appeared that identity theft was involved, he said.

U.S. Bank and its attorney, James Neudecker, declined to comment.

The Business Journal attempted to contact several of the other parties named as defendants, but all were either unreachable, did not return phone calls or declined to comment.