An investigation into possible fraudulent practices by a local construction company and mortgage firm has branched from the Utah County attorney's office to the FBI and U.S. attorney's office in Salt Lake City, County Attorney Steve Killpack confirmed Tuesday.

The investigation, under way since January, centers on Federal Mortgage Corp. of Orem and Ultimation Construction and Development Co. of Provo.The firms and their respective managers have been named in a multimillion-dollar lawsuit filed in 4th District Court by Mountain America Credit Union, with headquarters in Salt Lake City. The lawsuit charges the defendants with fraud and breach of contract, contending they "diverted funds from several construction loans and used those funds" for their own purposes.

"All of that is the subject of a criminal inquiry," Killpack said. "I can confirm that we're investigating the business practices of Federal Mortgage Corp. and some of its business managers and operators."

He said several people are under investigation for fraud, theft and forgery.

Craig J. Harris, Federal Mortgage Corp. president, already faces related third-degree felony charges over accusations of witness tampering. Harris, 29, of Orem, is charged with asking a business associate on March 3 to alter his testimony to officials involved in the criminal investigation.

Harris faces a preliminary hearing on the charges at 11 a.m. April 3 in Provo's 4th Circuit Court.

While the FBI already is involved in the investigation, Killpack said local officials also are bringing the U.S. attorney's office into the case.

"Some of the investigation involves federal charges, which may be more appropriately prosecuted by the U.S. attorney's office," Killpack said. "It's definitely an important case in our office."

Grant Clayburn, Mountain America Credit Union president, said that when loans were initially given a year ago to Ultimation Construction, they were legitimate loans given to qualified people.

Homes were sold and the construction loans were paid off, but "at some point it appears there may have been some false applications," he said. "There are 10 loans out there, some to legitimate, qualified people. We are trying to establish who they are.

"We don't anticipate any losses," he said. "This is just a typical foreclosure. The only difference is that criminal charges have been filed. Everything they owe us is current and up-to-date."

Clayburn said the loans were given to build upscale homes in the Provo and Orem Riverbottom neighborhood. Those named in the lawsuit have obtained construction loans from the credit union for $2 million.

Mountain America officials believe that further investigations will show additional breaches of contracts.

According to the lawsuit, the defendants, "acting individually or in concert one with another," made false representations to the credit union to receive extended loans for their own benefit.

The false representations involved two individuals, Bart F. Parker and John C. Harris, the lawsuit says. It says the false representations include fraudulent Social Security numbers for John C. Harris, Bart F. Parker and David Olsen.

Mountain America has been harmed, the lawsuit says, because "the individuals are either fictitious or are not credit-worthy for the receipt of the funds."