A Stillwater couple was sentenced to serve time in federal prison today in connection with a $5 million mortgage fraud scheme.
James Warren Hoffman, 52, was sentenced by U.S. District Judge David S. Doty to serve 78 months in federal prison after being found guilty on one count of engaging in a monetary transaction in criminally derived property and one count of evasion of payment of U.S. income taxes. Hoffman was also ordered to pay $344,409.26 in restitution to victims who filed a claim.
Doty also sentenced Teresa Gay Hoffman, 53, to one year and one day in prison on one count of evasion of payment of U.S. income taxes.
“Tax evasion is not a victimless crime,” Kelly R. Jackson, Special Agent in Charge of IRS Criminal Investigation for the St. Paul Field Office said after the sentencing. “We all pay when others swindle the government. Today’s sentencing of James and Teresa Hoffman is another example how serious the courts take federal tax crimes.”
According to the original indictment filed in the case on October 17, 2011:
From August 2001 through 2009, James Hoffman conspired to defraud mortgage lenders and obtain money from those lenders. The indictment alleges that Teresa Hoffman began participating in the scheme in August 2006.
The Hoffmans allegedly recruited straw buyers to purchase real estate in both Minnesota and Wisconsin with the proceeds of fraudulent mortgage loans arranged by James Hoffman, and in some instances by both of them. The Hoffmans owned several entities, which arranged financing for the fraudulent transactions.
From August 2001 through 2008, the couple lived in a Hastings home without ever owning it.
James Hoffman arranged for a series of straw purchasers to buy the property entirely with the proceeds of fraudulent loans.
From June 2001 through 2008, the couple used a Spicer Lake property as their vacation home without ever owning it by also arranging fraudulent mortgage loans for a series of straw buyers.
Starting in June of 2006, the couple, through three of their businesses, purchased apartment buildings in Rochester, Sauk Rapids and Spicer, according to the court records. They converted the apartments into condominiums and sold them to straw buyers, who paid for them with proceeds of fraudulent mortgage loans arranged by the defendants.
In total, the estimated loss to mortgage lenders is approximately $5 million. During the course of the conspiracy, the Hoffmans received loan proceeds that were wire transferred by the lenders.
Between 2005 and 2010, the Hoffmans spent money gained from the scheme to pay for luxury items such as lawn services, Caribbean cruises, country club fees, boat and boat trailers, swimming pool maintenance, luxury furniture, and private school tuition, rather than using those funds to pay the taxes owed to the IRS.