Couple sentenced in fraud scheme
MINNEAPOLIS—A Stillwater couple was sentenced Thursday in U.S. District Court here in connection with a $5 million mortgage fraud scheme.
U.S. District Judge David S. Doty sentenced James Warren Hoffman, 52, to 78 months in federal prison on one count of engaging in a monetary transaction in criminally derived property and one count of income tax evasion. Doty also ordered James Hoffman to pay $344,409.26 in restitution to victims who filed a claim.
Doty sentenced Teresa Gay Hoffman, 53, to 12 months and one day in prison on one count of income tax evasion. The Hoffmans were charged on Jan. 26 and pleaded guilty on Feb. 3.
Following Thursday’s sentencing, Kelly R. Jackson, special agent in charge of Internal Revenue Service (IRS) criminal investigations in St. Paul, said: “Tax evasion is not a victimless crime. We all pay when others swindle the government. Today’s sentencing of James and Teresa Hoffman is another example how serious the courts take federal tax crimes.”
According to the original federal grand jury indictment filed Oct. 17, 2011, from August 2001 through 2009, James Hoffman conspired to defraud mortgage lenders and obtain money from those lenders. The indictment also alleges that Teresa Hoffman began participating in the scheme in August 2006.
The defendants allegedly recruited straw buyers to buy real estate in Minnesota and Wisconsin with the proceeds of fraudulent mortgage loans arranged by James Hoffman, and in some instances by both defendants. The defendants owned several entities, which arranged financing for the alleged fraudulent transactions.
From August 2001 through 2008, the indictment said the couple lived in a Hastings home without ever owning it. James Hoffman arranged for a series of straw purchasers to buy the property entirely with the proceeds of fraudulent loans.
From June 2001 through 2008, the indictment added that the couple used a Spicer Lake property as their vacation home without ever owning it by also arranging fraudulent mortgage loans for a series of straw buyers.
Starting in June of 2006, the indictment said the couple, through three of their businesses, purchased apartment buildings in Rochester, Sauk Rapids, and Spicer. They converted the apartments into condominiums and sold them to straw buyers, who paid for them with proceeds of fraudulent mortgage loans arranged by the defendants.
In total, the estimated loss to mortgage lenders is approximately $5 million. During the course of the conspiracy, the defendants received loan proceeds that were wire transferred by the lenders.
Between 2005 through 2010, the Hoffmans spent money gained from the scheme to pay for luxury items such as lawn services, Caribbean cruises, country club fees, boat and boat trailers, swimming pool maintenance, luxury furniture and private school tuition, rather than using those funds to pay the taxes owed to the IRS.
This case was the result of an investigation by the FBI and the IRS Criminal Investigation Division. Assistant United States Attorney David J. MacLaughlin prosecuted the case.