Charges: Chisholm shop duped classic car buffs to tune of $1 million

A onetime Iron Range businessman faces two criminal charges for a three-year scheme that swindled classic car buffs out of $1 million with false promises to restore their vintage vehicles.

Edwin S. Verdung, 26, was charged Tuesday in federal court in St. Paul with wire fraud and money laundering via information, meaning that he intends to admit to the crimes committed while he and his father, Scott Verdung, operated Memory Lane Classics. The elder Verdung, 60, has not been charged.

According to the criminal complaint:

From April 2007 through May 2010, Edwin Verdung was paid money by people in the market for classic cars or who brought their own vehicles into the shop to be restored or rebuilt. However, he allegedly failed to provide the vehicles or the restoration services as promised. In some instances, he represented falsely that he had made progress in the work.

The younger Verdung also required some customers to make "progress" payments, providing them with bogus photographs of the restoration in progress.

If convicted, Verdung faces a potential maximum penalty of 20 years in federal prison on the wire fraud count and 10 years in federal prison on the transaction money laundering count.

Edwin Verdung has since moved to Dearborn, Mich. Last month, he was charged in Wayne County with larceny, writing bad checks and writing a check on an account that did not exist.

Sheriff's investigators say he bought a car for $9,500 in February, wrote a check for $3,300 for security deposit on a garage he rented and wrote a check for $8,300 as a down payment on a BMW. All the checks bounced. He also was in possession of a truck reported stolen in Minnesota, authorities in Michigan allege.

He pleaded guilty May 3 to one charge in exchange for having five others dismissed. He'll learn his sentence on Tuesday, and in the meantime he remains jailed.

Scott Verdung was convicted in a Hibbing, Minn., court in February of passing a bad check. Court records showing him with a Duluth address say he was given a stayed prison sentence and put on three years' probation.

Memory Lane Classics hastily shut down in the spring of 2010 as the Verdungs were being investigated by local and state authorities. Investigators pored over the shop's financial records as they tried to sort out a warehouse of half-finished cars and rare car parts. When word of the closure spread online through the classic car community in June of that year, customers rushed to Chisholm to pick up their cars and parts. Many who had paid between $30,000 and $80,000 found their cars in various stages of completion.

Edwin Verdung told the Star Tribune's Whistleblower soon after the shop's closing that there was no fraud. He said the business fell apart because his employees didn't do their jobs, forcing the company to spend more to finish the work. All of the money he and his father received went back into the business for payroll, cars and parts, he said.

"We had every intention of building the cars and finishing the cars," Edwin Verdung said at the time. "I am trying to make a resolution of everything."

He said he and his father "have split over this whole situation."

Before they shut down the shop, the Verdungs and Memory Lane have been sued more than a dozen times since 2007.

Scott Verdung and his wife, Barbara, had previously operated Memory Lane Classics in West Palm Beach, Fla., but they filed for bankruptcy in Florida in 2005, according to court records.

Paul Walsh • 612-673-4482