Wayzata Couple Charged With Swindle in Orono Development Project

A Wayzata couple has been charged by the Hennepin County Attorney’s Office with major theft by swindle in connection with the now defunct Amber Woods commercial real estate project in Orono.

Virginia Marie Carlson, 60, and her husband, Philip Lee Carlson, 55, each face four counts of theft by swindle over $35,000 and one count of attempted theft by swindle over $35,000.

The office building development, with room for about 10 businesses, began construction in 2007 but came to a halt in mid-2008, according to a statement issued Thursday by the Hennepin County Attorney's Office.

The charges

The case was investigated by Detective Cory Cardenas of the Bloomington Police Department, and First Commercial Bank in Bloomington was the primary victim of the Carlsons' alleged swindle.

Court documents say Virginia and Philip Carlson acquired the land on which the Amber Woods development was to be built sometime before 2006 through their limited liability company, Sugarwoods Office Center. An agreement to gain financing needed to develop the property was made with a second limited liability company, Hilloway East.

The investigation began after subcontractors complained to the Hilloway East that they weren't being paid.

The criminal complaint states the agreement between Sugarwoods and Hilloway East called for the project to be owned by a third limited liability company called Amber Woods Office Centre—of which Hilloway East owned a 51 percent share and Sugarwoods a 49 percent stake.

Interspace West, a fourth company owned by the Carlsons, served as the project’s general contractor. Interspace was to hire a variety of subcontractors to perform work and submit payment invoices to First Commercial Bank in Bloomington.

In 2008 members of Amber Woods Office Centre LLC began to notice what are described in court records as “irregularities” in the invoices being submitted.

As part of their investigation, police discovered approximately $750,000 in payment invoices that are being called fraudulent and which were signed by both Virginia and Philip Carlson during 2007 and 2008.

The full scope of the Carlson’s alleged swindle came into focus in July of 2008 when Paul Jaunich, the construction manager hired to oversee development of the Amber Woods project, says he became aware that the Carlsons were asking subcontractors to overstate their invoices. Jaunich also told police that the Carlsons told him they had forged invoices in order to capture money for personal use.

In all, nearly $6.5 million in loans and letters and credit were issued by First Commercial Bank in Bloomington for the project between 2006 and 2008—$3.1 million of which was advanced before the project halted in 2008, according to the criminal complaint.

Additionally, an administrative assistant hired by the Carlsons told police that she was asked by Virginia Carlson to prepare false pay requests from subcontractors, which were then submitted to First Commercial Bank in Bloomington.

Investigators also interviewed bank officers, lawyers and more than a dozen subcontractors—many of whom are based in the Lake Minnetonka area.

Neither Virginia nor Philip Carlson could provide police with an explanation for the evidence against them. Philip Carlson claimed in police interviews that his wife handled all paperwork associated with invoice preparation.

The Carlsons are not currently in custody. Both face lengthy prison sentences and hundreds of thousands of dollars in potential fines if convicted of the crimes they are accused of.

Both will make their first court appearance Nov. 22.