Duluth headshop owner guilty of selling illegal synthetic drugs

A Duluth head shop owner who brazenly sold synthetic drugs from his downtown store was convicted of more than 50 federal felony charges Monday, verdicts that authorities called a major victory in the war on synthetic drugs.

Jim Carlson, 56, owner of The Last Place on Earth, was found guilty on 51 of 55 felony counts in U.S. District Court in Minneapolis. His girlfriend, Lava Marie Haugen, 33, was convicted on all four counts against her, including conspiracy. Carlson's son, Joseph James Gellerman, 35, was convicted of two misdemeanors, but was found not guilty of two felonies, including conspiracy.

The two-week trial was the most significant synthetic drug case in Minnesota history and law enforcement officials statewide were watching closely, said Paul Murphy, former chief of the criminal division in the U.S. attorney's office in Minneapolis, now retired.

"One of things law enforcement officials will take away from this is that synthetic drug cases can be prosecuted and the safety of the community can be successfully addressed," he said. Because of the federal shutdown, officials in the U.S. attorney's office said, they could not talk to the media.

The rising popularity of synthetic drugs has alarmed authorities nationwide. Packaged and sold as innocuous products such as "herbal incense" and "bath salts," the drugs are touted by users as legal alternatives to marijuana, cocaine and other controlled substances. More than 20 deaths in the United States, including at least two in Minnesota, are attributed to them.

The seven-woman, five-man jury deliberated for about two days. Carlson and his son watched stoicly as the verdicts were read by U.S. District Judge David Doty.

Doty ordered Carlson to be placed in custody immediately, while Gellerman was given no restrictions. Doty allowed Haugen to remain free on bail. She broke into tears as she left the courtroom.

Randy Tigue, Carlson's lawyer, said he would seek a new trial because he was not allowed to introduce evidence he considered key. He said Carlson could face 10 to 20 years in prison.

At trial, prosecutors introduced evidence, including media interviews, in which they said Carlson went so far as to admit to illegal acts. The defense, however, said his public comments showed quite the opposite, that he believed he was not selling anything illegal or hiding anything.

Defense attorneys also argued their clients did not believe they were committing crimes because the substances they sold were different from the prohibited compounds.

"This is a prosecution by ambush of someone who obeys the law," Tigue said in his closing argument. "We do not have secret laws."

Assistant U.S. Attorney Surya Saxena stressed that in some instances there was only a single molecule change from substances formally banned by the Federal Drug Administration, and that Carlson made millions of dollars in profits. "They had a huge incentive to keep that business going," he said.

A community scourge

Carlson's storefront in Duluth had become a major magnet for addicts and a pariah for downtown businesses, city officials said.

"It was like a crack neighborhood," said Dean Baltes, co-owner of Sheldon Group Inc., a printing company next to the head shop.

"There is a great sense of relief in the city of Duluth that we won't have this massive problem in our downtown, going forward," said Duluth Mayor Don Ness.

A Senate-House hearing is being held in St. Paul on Wednesday, the fourth such hearing this year where lawmakers are considering establishing a statewide educational program as well as more legislation to tackle synthetic drugs that mimic drugs that have already been banned. Rep. Erik Simonson, DFL-Duluth, said the existence of the head shop was the driving force behind the hearings.

Concern about the deadly effect of synthetic drugs has led to a significant increase in federal prosecutions. From 1986 to 2011, an average of 34 people per year nationwide were charged under a law barring synthetic drugs, but since 2011, 280 individuals have been indicted.

A 2011 Star Tribune investigation reported that at least two products sold at Carlson's store in 2011 contained chemicals that mimic illegal drugs. The head shop was raided July 25, 2012, as part of a nationwide "takedown" by the federal Drug Enforcement Administration.

Mark Ryan, director of the Louisiana Poison Center, was one of the first in the country to warn about dangerous synthetic drugs being changed slightly and marketed. He said state and federal governments have improved their efforts to quickly add specific compounds to their lists of banned substances, but he noted that the federal "analog" law has made closely related substances illegal, too.

"We've seen that down here in Louisiana, too, where somebody would come forth and say, 'Hey, this is new, it's a new substance, it's legal,' and when you look at the chemical structure and how it fits into a group, law enforcement and the statute goes, 'Nah, that's an analog so you're guilty.' "

But Joseph Daly, emeritus professor at Hamline Law School in St. Paul, said the synthetic drug law is vague and could lead to a successful appeal. "I think the defense may have a good argument," he said.

All 55 felony counts in the indictment, including conspiracy, misbranding drugs, distribution of a controlled substance and illegal monetary transactions, named Carlson. Haugen and Gellerman were charged with four counts each, including conspiracy.

Attorneys for Haugen and Gellerman tried to distance themselves from Carlson, saying that he had told them that the substances were legal.

Gellerman was merely an $8 or $9-an-hour sales clerk who made no decisions on the suppliers or the nature of the substances he sold, his attorney, Charles Hawkins, told the jury.

His father told him the substances were legal and why wouldn't a son believe his father, Hawkins asked. "He wouldn't put you in harm's way."

Staff writer Pam Louwagie contributed to this report. Randy Furst • 612-673-4224