Philip and Virginia Carlson sentenced to workhouse for business fraud

Thursday, November 06, 2014

Real estate developers Philip and Virginia Carlson were escorted to jail to begin serving a year sentence for fraud, Hennepin County Attorney Mike Freeman announced Thursday.

Hennepin County District Court Judge Lois Conroy on Monday sentenced the Carlsons to 21 months in prison, which they will not have to serve if they remain law-abiding.  She also ordered them to serve 365 days in the Hennepin County Workhouse starting immediately and denied the option of serving this time on electronic home monitoring, stating that “did not adequately reflect the criminality in this case.” Judge Conroy  did allow work release for Philip Carlson and job seeking and medical furloughs for Virginia Carlson.  Both are prohibited from holding fiduciary positions in the real estate, construction or design industries.

“This kind of fraud and double dealing created great hardship to many regular people while the Carlsons’ lived in splendor,” Freeman said.  “We salute the judge for requiring immediate jail time.”

In August, Virginia Carlson, 62, and Philip Carlson, 58, were convicted of five counts of theft-by-swindle for taking hundreds of thousands of dollars from an office development project in Orono that was never completed.  This theft played a role in the collapse of First Commercial Bank of Bloomington.

During the sentencing, the prosecution noted that Hennepin County Probation did not think either Carlson was amenable to probation because they still did not accept responsibility for their crimes, there continues to be a “staggering amount of blame shifting.”  The prosecutor also read from a victim impact statement that contrasted the luxurious lifestyle of the Carlsons with the hardworking people who lost their jobs and savings with the failure of First Commercial Bank.

Acting against the advice of her lawyer, Virginia Carlson spoke at great length. She began with an apology, which soon turned into a monologue about her life and struggles ending with a plea for leniency and a desire to fulfill her life’s dream of becoming an architect.

The Hennepin County Attorney’s Office originally sought a longer sentence, but due to a court ruling the sentence was limited to probation.  Prosecutors are also seeking $633,311 in restitution related to the demise of First Commercial Bank, which disbursed nearly half of a $6.4 million loan for the doomed project.  Another hearing will be scheduled to determine restitution.  

Defense counsel asked that Virginia Carlson’s sentence be stayed pending appeal, which was denied; the defendants are currently in the workhouse.

The Carlsons also were charged earlier this year in a new case where they attempted to steal about $170,000 from loan funds when they were hired to build a residential home in Scandia in 2013. The Hennepin County Attorney’s office filed those charges because the construction loan came from a bank in the county. That trial is scheduled for Feb. 2.