James Warren Hoffman, 52, and Teresa Gay Hoffman, 53, Stillwater, Minnesota, were sentenced by United States District Judge David S. Doty in connection with a $5 million mortgage fraud scheme.
James was sentenced to 78 months in federal prison on one count of engaging in a monetary transaction in criminally derived property and one count of evasion of payment of United States income taxes. Judge Doty also ordered James Hoffman to pay $344,409.26 in restitution to victims who filed a claim.
Judge Doty sentenced Teresa to 12 months and one day in prison on one count of evasion of payment of United States income taxes. The Hoffmans, who were charged via informations on January 26, 2012, pleaded guilty on February 3, 2012.
According to the original indictment filed in the case on October 17, 2011, from August of 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 of 2006. The defendants 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 defendants. The defendants 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 2006, the couple, through three of their businesses, purchased apartment buildings in Rochester, Sauk Rapids, and Spicer. 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 defendants received loan proceeds that were wire transferred by the lenders.
Between 2005 through 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.
Following the sentencing, Kelly R. Jackson, Special Agent in Charge of Internal Revenue Service (IRS) Criminal Investigation for the St. Paul Field Office, said, “Tax evasion is not a victimless crime. 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.”
This case was the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation Division. It was prosecuted by Assistant United States Attorney David J. MacLaughlin.