As crime and punishment go, the 4 1/2 months of prison handed out Friday in Sacramento federal court to Johnny E. "Jay" Grivette Jr. for conspiring to grow marijuana isn't much, but it is the latest step in the government's march on purported fraud master Lawrence Leland "Lee" Loomis.

Grivette, a 37-year-old resident of Butte County who was once a top Loomis lieutenant, will remain free for at least the next three months while he continues to assist in the government investigation of Loomis. When he gets out of prison, he'll be on home confinement for 4 1/2 months.

Growing pot was a lucrative byproduct of Grivette's mortgage fraud, which created empty residential properties scattered around Northern California that he put to use with indoor gardens.

He is due back in federal court July 10 to plead guilty to conspiring with Loomis and others to fleece investors and lenders with false promises and fraudulent paperwork. He will also plead guilty to money laundering.

While Loomis, 55, is suspected by federal authorities of orchestrating massive thefts from investors and lenders that could total $100 million, he has not been charged with a crime and has denied any wrongdoing.

He formerly lived in Granite Bay and operated out of a suite of offices in Roseville under the banner Loomis Wealth Solutions LLC. Federal agents raided the offices and home and seized all of the records, leaving his business in ruins. He is now ensconced in a residential hotel in Indianapolis, still offering to make people rich if they take his advice, and has drawn the attention of the FBI there.

Grivette, who had an office in Chico, was for a time head of Advantage Financial Partners of California LLC, one of the entities under the Loomis Wealth Solutions umbrella.

Loomis' "business model was a Ponzi scheme integrated with a property-flipping scheme," according to a written agreement that Grivette has signed in connection with his anticipated plea next month. Loomis used newspapers, mailings and the Internet to advertise wealth seminars where he pitched his services as an investment guru, according to Grivette.

Loomis targeted individuals and families with good credit, existing home equity and retirement accounts, Grivette relates in the plea agreement. Loomis urged victims to refinance homes and drain retirement accounts to invest in his NARAS Secured Fund #2 LLC, a supposed real estate investment vehicle that was falsely represented to be safe, high yield and liquid, the agreement says.

In truth, money invested in the NARAS Fund was regularly diverted to underwrite the operating expenses of a multitude of companies and to make mortgage payments on properties held in the names of straw buyers, the agreement says.

It says that NARAS investors were urged to purchase homes chosen by Loomis as investments. Unknown to the investors, Loomis would acquire the properties through Advantage Financial Partners, the company run by Grivette, artificially inflate their prices through bogus appraisals, and then sell the properties at the inflated prices to the unwitting investors.

Grivette says in the agreement that the fraudulent appraisals were prepared by Darren Fehst through his Appraiser Networking Solutions LLC, a Contra Costa County firm. Fehst, 43, most recently has been living in his native Canada.

Inflated appraisals allowed Loomis' mortgage brokerage, Nationwide Lending Group, to finance the homes for the nominee borrowers at loan-to-value ratios significantly higher than the limits lenders authorized, Grivette explains.

He tells of signing a contract with Fehst in 2007 obligating the company managed by Grivette to pay Fehst approximately 5 percent of the estimated profit on homes flipped from Advantage Financial Partners to the nominees. The profit was the difference between the true purchase price and the loan, based on an artificially inflated appraisal.

Neither the lenders nor the nominee borrowers were aware of Fehst's financial interest in the homes.

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