The administrative action comes after months of investigation by the Utah Real Estate Division and is expected to lead to additional actions taken against other individuals.

Division director Derek Miller said Culbertson has admitted to "equity skimming," in which an individual uses someone else's identity - or a false identity - to buy a home at an inflated value in order to take out some of the equity in cash.

The state would not say whose identity Culbertson allegedly used, or whether that person was part of the fraud.

Miller said Culbertson admitted to falsifying loan documents and forging signatures, although Culbertson contends the investigation into his business dealings is politically motivated.

According to Miller, Culbertson's actions are part of a larger loan fraud ring within Eagle Mountain and surrounding Utah County areas, involving real estate agents, mortgage lenders, appraisers and others. "We expect action to be taken [against several other individuals] shortly," Miller said.

The division also is referring the case to the state Attorney General's Office and the U.S. Attorney's Office and the Utah County Attorney's Office for possible criminal charges.

In the meantime, Culbertson said he will continue to campaign for mayor.

In a statement, he said he participated in real estate transactions "which I was led to believe at the time were completely legal and ethical."

Culbertson said he believes "the origin of this investigation was politically motivated" and said since embarking on the mayoral race and speaking out against developers and "land speculators," a massive effort has been undertaken to destroy his credibility.

"I have had my life investigated back to my birth with the intent to destroy me and those I've campaigned with," he said. "Anyone who thinks these recent events are not politically motivated is unaware of the history of this town. There are forces here that rival the politics of Chicago and New York City."

Miller would not say who provided the division with information about Culbertson.

"The fact remains that Mr. Culbertson was engaged in fraudulent activity and he admitted to it." Miller said.

Eagle Mountain, a small community 6 miles west of Lehi that soon will get its 10th mayor in 11 years, certainly has seen plenty of political turmoil.

Just last month, City Councilwoman Linn Strouse was charged with a second-degree felony for failing to report a loan she allegedly accepted from a developer.

Strouse is up for re-election this year and is running on the same slate of candidates as Culbertson.

Strouse was appointed mayor pro-tem briefly in late 2006 to fill in for Brian Olsen. He resigned from office and days later was charged with seven third-degree felonies for misuse of public funds.

In 2004, then-Mayor Kelvin Bailey pleaded no contest to a Class B misdemeanor charge that he faked his own kidnapping. In 2003, he called his wife, saying a hitchhiker forced him, at gunpoint, to drive to Barstow, Calif. His alert caused his wife to call the police, even though authorities say Bailey was actually returning late from a pheasant hunting trip.

Heather Jackson, who is running against Culbertson, said she is concerned about the effect even more controversy will have on the community.

"It's an unfortunate situation for us in the Eagle Mountain area that someone is once again in the spotlight for all the wrong reasons," she said.

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* STEVE GEHRKE contributed to this story.