Minnesota man's high living leaves web of charges

Jim Hoffman had big plans when he dropped out of college to run the family's lucrative farming operation in central Minnesota after his dad died. But before long, bills went unpaid, creditors came calling and his family lost faith. Hoffman's 30-year run of alleged frauds, bad dealings and dishonesty had begun.

"Wherever he's been there's a trail of pissed-off people, and they'd like to see him hanged," said Lance Peterson, a Willmar funeral director who buried Hoffman's mother in 2010. "Jim took me to the cleaners here for thirteen grand on his mother's funeral."

The trail of complaints and lawsuits resulted in criminal charges last fall, when Hoffman and his wife, Teresa, were indicted in Minneapolis on federal mortgage fraud charges. This week, federal prosecutors plan to add more charges, saying that the original indictment was just a "small subset of the fraud which has become known to the government."

Jim Hoffman's attorneys, Peter Wold and Aaron Morrison, say the Hoffmans have "bona fide" defenses to the charges. But they're bracing for new charges that they expect will dredge up old conflicts.

They're not hard to find.

Former business associates, creditors and attorneys depict Hoffman in court records and interviews as a man who's spent most of his life living large on other people's money, then ducking for cover when the bills came due.

The 'embezzlement'

Jim was studying business and agriculture when he dropped out to run the farm with plans to buy it. But even then, at 23, he was mired in debt from bad commodities trades. To get him started, the family gave him $105,000 to cover his debts, and Robert guaranteed a line of credit that grew to $150,000.

Within a few years, Jim had burned through all of it, and much more. Norwest Bank in Redwood Falls demanded repayment of nearly $855,000 in loans. The family kicked him off the farm.

Hoffman filed for bankruptcy in 1986, blaming his losses on the farm. Norwest sued, alleging fraud. The evidence at trial showed that he lived high on the hog even while losing big money in real estate ventures. He bought expensive vehicles, spent lavishly on jewelry -- including an $18,000 ring for his wife -- traded commodities, and traveled to the Cayman Islands, Las Vegas and elsewhere.

Bankruptcy Judge Nancy Dreher found he had burned through nearly $1 million of Norwest's funds and embezzled $335,000 by surreptitiously selling grain that had been pledged as collateral on a loan.

"Jim's operation of the farm created financial issues for both Jim and the Harold Hoffman Trust," said Randy Gullickson, an attorney representing his brothers, who declined to be interviewed.

The family had to sell land to pay off some of the debts Jim ran up. Jim settled claims against him from the family trusts by agreeing to a $400,000 judgment that could not be cleared in bankruptcy.

Despite Dreher's finding of embezzlement, no criminal charges were filed against Hoffman, who went on to even bigger financial disasters.

Hoffman rebounded in the late 1980s, seeking to reinvent himself in the dairy business. He borrowed money and ran or had an interest in dairies in several states, including Arizona, Minnesota, Georgia, Texas and California. They went bust, owing millions to lenders and suppliers.

"I never detected anything improper or suspicious during my representation," said David Shein, an attorney in Scottsdale, Ariz., whose firm represented Hoffman and his Heartland Dairy near Phoenix until it went broke.

Steve Soderholm of Alexandria, Minn., felt burned. He had supplied cattle for some of Hoffman's dairies and guaranteed a cattle lease in Texas that went into default. "When the end came, I was out about $800,000," he said. "He's got into a lot of people's pockets."

The FBI said in a recent court filing that Jim Hoffman apparently "has done nothing but fraud schemes" to make a living since 1995.

In 2000, First State Bank of Conrad, Iowa, won a $1.3 million judgment against him on allegations that he had used one of his companies, Agricultural Financial Services Inc., to defraud the bank on dairy cattle leases. The bank questioned whether the cows had been leased and delivered.

Hoffman petitioned for bankruptcy again in 2001, listing assets of $438,000 and debts of $3.1 million.

That's when Jim and Teresa Hoffman allegedly began "flipping" their home in Hastings, prosecutors say. Investigators say the Hoffmans lived in the home even as it changed hands among straw buyers several times, selling for a high of $1.2 million in 2006 to a single mother who waited on Jim Hoffman at a Woodbury restaurant.

Hoffman and friends

In 2003, Pawlenty rival Mike Hatch, then the Minnesota attorney general, alleged in a lawsuit that Hoffman and some associates were running an "equity-stripping" and "property flipping" scheme.

Hoffman and his companies settled the suit by agreeing to return 19 homes and by paying restitution to about 40 others. The 2004 settlement permanently barred Hoffman from working as a real estate agent or mortgage broker and prohibited his companies from doing business in foreclosures.

The state Department of Commerce brought related charges against Hoffman and two former business partners, including Ron Esau, Pawlenty's campaign treasurer. The agency barred the business partners from mortgage work and fined the firm they formed with Hoffman $10,000. But Hoffman jumped back into real estate, according to the FBI. Special agent Eileen Rice alleged in a 2006 affidavit that Hoffman and some companies he worked through -- including Avidigm Capital Group Inc. -- were defrauding banks on properties in Anoka, Ramsey and Hennepin counties.

Hoffman wasn't charged, but Avidigm CEO Steve Mattson pleaded guilty to making false statements to a bank and was sentenced in 2008 to a year in prison. A real estate attorney and title company owner pleaded guilty to related mail fraud and money-laundering charges in 2010 and was sentenced to more than four years in prison. Hoffman went on to work more deals.

Turning up the heat

The Hoffmans' codefendants in that lawsuit, a Maplewood mortgage brokerage owner and one of his employees, each pleaded guilty last year to one count of conspiracy to commit mortgage fraud.

Hoffman and his wife were indicted in October on mortgage fraud charges. Wold said they'll fight the charges. Prosecutors said in a recent filing that they expect to add more fraud- and tax-related charges, and possibly another defendant.

Wold said if the government alleges that Hoffman has been running an ongoing criminal enterprise, prosecutors can present evidence that otherwise would be barred by the statute of limitations.

In a filing made public last week, FBI Special Agent Jared Kary alleged that Jim Hoffman has been committing frauds involving real estate in Iowa, working through a Miami company owned by his 24-year-old son.

Jim Hoffman hasn't had a legitimate source of income since 2001, Kary wrote. When police pulled Hoffman over recently, even his license plate tabs were fraudulent, Kary said.