10 years later, justice in fraud scheme

  • Article by: DAN BROWNING , Star Tribune
  • Updated: November 8, 2012 - 11:35 PM

"We've been waiting for this day for a long time," Kevin Brown, above with his wife, Kris, as they saw Jim and Teresa Hoffman, sent to federal prison for their equity-stripping scheme.

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Kris and Kevin Brown were evicted from their home 10 years ago in an equity-stripping swindle and had to fight to get it back.

Photo: Glen Stubbe, Star Tribune

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Kevin and Kris Brown's trip to federal court began on their wedding day, Dec. 28, 2002. That's the day that they and their six children were evicted from their home in Hastings by Jim Hoffman in an equity-stripping scheme.

On Thursday, they sat quietly in a Minneapolis federal courtroom to see Hoffman and his wife, Teresa Gay Hoffman, sent to federal prison.

"We've been waiting for this day for a long time," Kevin Brown said afterward.

"It's amazing it's taken 10 years," Kris Brown added. "And he's kept hurting people."

Jim Hoffman, 53, pleaded guilty in February to money laundering and tax evasion, and Teresa Hoffman, also 53, pleaded guilty to tax evasion.

U.S. District Judge David Doty sentenced Jim Hoffman to 6 1/2 years in prison -- the top of the advisory guidelines' range -- followed by three years of supervised release. He sentenced Teresa Hoffman to a year -- six months below the minimum in the sentencing guidelines -- followed by two years of supervised release.

The charges in the plea agreement fail to illustrate Jim Hoffman's trail of crimes, Assistant U.S. Attorney David MacLaughlin argued.

"He is a true fraudster," MacLaughlin said, arguing for the stiff sentence. Unlike some people who resort to fraud because of economic hardship, he argued, "fraud is all that he has done since the 1990s."

Victims paid dearly

MacLaughlin noted in court filings that Hoffman had owned a dairy operation in southern Minnesota in the 1990s and financed its operations by defrauding an Iowa bank and by stealing employment taxes he'd withheld from its workers. Next, he systematically stole the equity from large numbers of vulnerable people facing foreclosure. He went on to operate a complex fraud scheme involving the now defunct Lake Elmo real estate company Avidigm Capital Group Inc., inflicting huge losses on investors and lenders.

Then he committed mortgage fraud schemes that led to his indictment, MacLaughlin wrote. Finally, while awaiting trial on those charges, he launched a new fraud scheme involving a nursing home in Muscatine, Iowa.

"Along the way, Mr. Hoffman lived in luxury homes that he did not pay for, drove expensive cars titled in other people's names and inflicted great economic harm on others to possess these luxuries, including a cocktail waitress and single mother who bought for $1.2 million a home in Hastings so that Mr. Hoffman and his family could live well, even as her credit rating was destroyed by her predictable inability to make the mortgage payments on the home," he continued.

MacLaughlin said Jim Hoffman involved his wife in the mortgage fraud scheme and his eldest son in the nursing home scam. And the government recovered documents showing that he has used the identities of his minor children to set up various entities that appear similar to those he has used in past fraud schemes.

Peter Wold, Jim Hoffman's attorney, said his client asked for only one thing: mercy for his wife. "But your honor, I ask for some mercy for him."

In court filings, Wold said that Jim Hoffman has been a good husband, father, son and friend. He's been generous with many. "His candor and truth in his acceptance of responsibility are hallmarks of redemption," Wold said.

Losses set at $5 million

Doty agreed with MacLaughlin's request for a 78-month sentence and ordered him to pay restitution of $344,409.

MacLaughlin objected, saying the amount reflected only the losses of victims who've requested repayment. FBI special agent Eileen Rice conducted an exhaustive review of his mortgage fraud deals and calculated the losses at $5,16 million.

Doty said it's unrealistic to think he'd ever repay that amount, not to mention several million dollars in old debts, civil claims and judgments ranging from banks to dairy suppliers and even the Convent of the Visitation School.

But Doty agreed to review the law on mandatory restitution to craft his final order on the matter.

MacLaughlin took no position on Teresa Hoffman's sentencing.

Her attorney, Casey Rundquist, argued for probation, saying she's primarily been a homemaker for the couple's four children. Since her indictment, she's become the family's primary provider as three of her children attempt to finish college, he said.

Doty said a year in prison was appropriate for Teresa Hoffman because she not only failed to pay sufficient taxes, but she spent the money on unnecessary items such as lawn care, country club fees, a boat, furniture and private-school tuition. She also must pay $258,561 in back taxes.

The Browns attended the sentencing hearing along with a representative of the state attorney general's office, which helped them get back into their home seven months after Hoffman evicted them. They seemed satisfied with Jim Hoffman's sentence, but said Teresa Hoffman got off too easily.

"I think she could've gotten more," Kris Brown said. "My kids have learned great lessons from what we've been through. Their kids have learned nothing."

Dan Browning • 612-673-4493

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  • Jim Hoffman, left, with Teresa Hoffman, photographed near Green Lake in 2011.

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