Given the choice between a nearly certain prison sentence and seeing their 24-year-old son charged in a mortgage fraud scheme, Jim and Teresa Hoffman chose prison Friday, admitting that they duped mortgage lenders out of more than $5 million.

In exchange for their guilty pleas, prosecutors agreed not to charge their son Benjamin with any crimes arising from a federal investigation into a wide-ranging mortgage fraud and equity-skimming scheme.

Until now, the Hoffmans have been saying through attorney Peter Wold that they had a story to tell about their ventures in real estate. But they dropped that posture in front of U.S. District Judge David Doty and admitted guilt.

As part of the agreement, Jim Hoffman pleaded guilty to one count of money laundering and one count of tax evasion. He faces a maximum of 10 years in prison, though sentencing guidelines suggest a range between 5¼ and 7 1/2 years. Teresa Hoffman pleaded guilty to a single count of tax evasion, which carries a maximum of five years in prison. The sentencing guidelines suggest a term of 1 1/2 to two years in her case.

The Hoffmans agreed to pay restitution as if they had been convicted of the mortgage fraud scheme. They agreed to work with the Internal Revenue Service to pay back taxes. They admitted living the high life on the proceeds of the mortgage frauds while ignoring their obligation to pay more than $258,000 in income taxes.

The Hoffmans are longtime Hastings residents who recently moved into a $6,500-a-month rental home in Stillwater. They came under surveillance last month on suspicion of committing a new fraud scheme with their son Benjamin, who lives in Miami.

The FBI said in court filings that Jim Hoffman, 52, had raised nearly $400,000 from investors to convert a building in Muscatine, Iowa, into an assisted-living residence for the elderly. But he spent at least $200,000 of that money on personal expenses and $50,000 toward a legal retainer for him and his wife, FBI Special Agent Jared Kary wrote in an affidavit to get a search warrant.

"It appears that Hoffman has done nothing but fraud schemes related to real estate or bank fraud since 1995," Kary wrote.

In January, the Star Tribune reported about complaints and fraud allegations against Hoffman going back three decades, though none resulted in criminal charges until he was indicted in October.

According to the FBI, Hoffman kept right on working on his deal in Muscatine even while awaiting trial. Federal agents seized more than $4,000 in cash and numerous boxes of evidence from his home on Jan. 17.

No charges have resulted from the Iowa case, but Assistant U.S. Attorney David MacLaughlin contends in Jim Hoffman's plea agreement that the "Muscatine Living fraud" is relevant for determining how much restitution he should pay.

As part of their plea agreements, the Hoffmans agreed to forfeit any assets rounded up by a court-appointed receiver in the wake of a civil complaint filed in 2008 to put a halt to the fraud scheme.

Dan Browning • 612-673-4493