The indictment, filed under seal earlier this month, charges Carlson, 55, of Superior, Wis., and his employees with conspiracy to violate federal regulatory laws and conspiracy to distribute controlled analogue drugs.
The owner of a Duluth head shop and three workers are charged with selling synthetic drugs that authorities say were misbranded and marketed as incense, potpourri, bath salts or glass cleaner, according to a 54-count federal indictment unsealed Tuesday.
Prosecutors claim the synthetic drugs, labeled with names such as "No Name" or "Smoking Dragon," are illegal.
But Last Place on Earth owner Jim Carlson claims the products he sells are legal. Carlson and three of his employees made their first appearances Tuesday in U.S. District Court in Duluth. They were released on their own recognizance and an attorney for Carlson expected the store to reopen Tuesday afternoon. Phone calls to the store went unanswered.
The indictment, filed under seal earlier this month, charges Carlson, 55, of Superior, Wis., and his employees with conspiracy to violate federal regulatory laws and conspiracy to distribute controlled analogue drugs. The others charged are Lava Haugen, 32, of Superior, and Joseph Gellerman, 34, and Jamie Anderson, 24, both of Duluth.
"I am confident this indictment is a major step in reducing the supply of dangerous, designer drugs to the region," Duluth police Chief Gordon Ramsey said in a statement. "Our community, including families of those impacted by these drugs, as well as businesses ... can breathe a little easier today."
Randy Tigue, Carlson's attorney, said Carlson will "fight this thing tooth and nail."
The indictment covering March 2010 to this September claims Carlson and the others conspired to obtain and sell mislabeled items — marked as incense, potpourri, or exotic skin treatments — that were actually meant for human consumption. The government says the items were misbranded to mislead the government. The labeling not only suggested the products were not drugs, but failed to include health warnings or identify a manufacturer or distributor, the government says.
The indictment also claims Carlson and Haugen repackaged bulk quantities of drugs into individual bags for resale, and that the repackaged drugs were also misbranded. Authorities also said the defendants had the drugs shipped through interstate commerce and paid nearly $2 million to drug suppliers in California, Arizona, Wisconsin, Florida and Pennsylvania.
The indictment accuses Carlson and his employees of violating the Controlled Substances Analogue Enforcement Act enacted in 1986, which is designed to prevent drug dealers and underground chemists from skirting laws by changing the molecular structure of illegal substances. It also charges Carlson with additional drug crimes and 25 counts of engaging in monetary transactions involving property derived from a specified unlawful activity.
Synthetic drugs have been linked to deaths around the country, including two in Minnesota in 2011: a teenager in Blaine overdosed on a party drug and a young man shot himself in Maple Grove after smoking synthetic pot, though his parents have said the drug wasn't a factor.
Earlier this year, President Barack Obama signed legislation outlawing certain synthetic drugs, including some chemicals found in synthetic marijuana and bath salts. U.S. Sen. Amy Klobuchar is now working to strengthen the federal analogue statute to cover the drugs that are slightly altered in an attempt to circumvent the ban.
Authorities seized 20,000 packets of suspected synthetic marijuana from Last Place on Earth in July, as part of a broader nationwide crackdown. It was the second time the head shop had been raided in less than a year.
Tigue said Carlson is selling a product that is "perfectly legal."
"He's being persecuted by a bunch of busybodies," Tigue said. "All the product that he sold was legal at the time he sold it."
In the past 30 years, Last Place on Earth has sold everything from tobacco and pipes to sex toys and urine cleansers. About two and a half years ago, Carlson started selling herbal incense and was amazed at its popularity. In an interview with The Associated Press this summer, Carlson said incense accounted for 95 percent of sales, and on his busiest days, he sells about $16,000 worth.
"I am just a firm believer that people should be able to do what they want," Carlson said this summer. "It's not strictly a monetary thing with me. If somebody wants to buy this product they should have a right to, if they are not harming other people."
Rick Holmstrom, an attorney for Haugen, said his client will also fight the charges in what he called a "massive and wide-ranging" indictment.
"It looks to me like they are going to attempt to not only put Mr. Carlson out of business, but forfeit all the property that everyone has," he said, adding that it also looks like prosecutors will seek long prison sentences.
The indictment seeks forfeiture of the Last Place on Earth property and buildings, as well as money and other property derived from the alleged crimes.
An attorney for Gellerman did not immediately return a message seeking comment. Tigue said Anderson would be represented by a federal defender, but the federal defender's office said one had not yet been assigned.