Last Place On Earth Owner Sentenced To 17.5 Years In Federal Prison For Conspiring To Distribute

U.S. Attorney Andrew M. Luger today announced the sentencing of JAMES CARLSON, 57,
the former owner of Last Place on Earth (LPOE), and LAVA HAUGEN, 34, who were
convicted on October 7, 2013, after a jury trial in U.S. District Court in Minneapolis for their
roles in a conspiracy to distribute synthetic drugs. CARLSON was sentenced by United States
District Judge David Doty to 17.5 years in federal prison. HAUGEN was sentenced to 5 years in
prison.

Assistant U.S. Attorney Surya Saxena said: “The Court’s sentence, and the jury verdicts in this
case, should confirm once and for all that synthetic drugs are illegal, and that they always have
been illegal under both the Food Drug and Cosmetic Act and the Controlled Substances
Analogue Enforcement Act. These drugs are just as dangerous as traditional illicit drugs like
methamphetamine, cocaine, and heroin, and their effects are often more unpredictable.”

“Synthetic drugs, like those sold at Last Place on Earth, create health and safety dangers for
individuals, their families, and their communities,” said U.S. Attorney Andy Luger. “Residents,
medical personnel, and law enforcement officials in Duluth know this all too well. Moreover, these
drugs are illegal, and those who sell them should expect to be prosecuted.”

Kelly R. Jackson, Internal Revenue Service Criminal Investigation Division Special Agent in Charge
of the St. Paul Field Office said: “Today’s sentencing demonstrates how federal law enforcement
will band together to help put an end to the criminal behavior of those who prey on others for
their personal financial gain. IRS Criminal investigators will continue to use their financial
expertise to identify and trace laundered funds in these types of fraud schemes.”

John J. Redmond, U.S. Food and Drug Administration Office of Criminal Investigations, Special Agent
in Charge of the Chicago Field Office, which includes Minnesota, said: “The defendants in this case
demonstrated blatant disregard for the health and welfare of the general public by illegally
distributing dangerous misbranded drugs. The sentence speaks for itself and serves as a
deterrent to others who choose to put the public’s health at risk. We commend the
U.S. Attorney's Office and our law enforcement partners for their dedicated collaborative efforts in
pursuing this matter."

Jack Riley, U.S. Drug Enforcement Administration Special Agent in Charge of the Chicago Field
Division, which includes Minnesota, said: “Today’s sentence should send a message to those involved
in the distribution of synthetic drugs. And I hope they hear that message loud and clear; those who
sell these dangerous drugs in our communities and hope to avoid detection by mislabeling and
misrepresenting their intended use will be investigated and prosecuted to the fullest extent of the
law. I hope today’s sentence also sends a message to the community that these types of drugs pose
a serious public health threat to the state and region,” he added.

As proven at trial, CARLSON and HAUGEN conspired to obtain and sell synthetic drugs misbranded as
incense, potpourri, bath salts, exotic skin treatments, glass cleaner, watch cleaner. The items,
marketed under names like “No Name,” “Smoking Dragon,” “Role-X Watch Cleaner,” and
“Binger,” among others, were synthetic drugs as defined by federal law, and subject to regulation
pursuant to the U.S. Food and Drug Administration (FDA). The defendants intended to and did sell
these synthetic drugs for human consumption for the purpose of mimicking other illegal narcotics
and hallucinogens.

As proven at trial, CARLSON and HAUGEN intentionally misled government authorities with the false
labels, which, in addition to suggesting that the products were not drugs, failed to describe
package contents accurately, failed to include health warnings regarding use, and failed to
identify the manufacturer or distributor of the items. Between March 16, 2010, and September
29, 2012, the defendants paid nearly $2 million for at least 510 packages of synthetic drugs from
suppliers in California, Arizona, Wisconsin, Florida, and Pennsylvania.

From at least 2010 through 2013, CARLSON made millions of dollars by distributing synthetic drugs
through LPOE. He used LPOE employees as guinea pigs for testing untested and unregulated drugs so
that he could confirm that those drugs would “work” on his customers. Some LPOE customers became
addicted to the synthetic drugs sold by CARLSON and suffered dangerous side effects, including
tachycardia, paranoia, agitation, seizures, and black outs.

As proven at trial, HAUGEN regularly ordered synthetic drugs from suppliers. She acted as a general
manager of LPOE, and was responsible for weighing and repackaging bulk quantities of synthetics.
HAUGEN also managed inventory, verified orders of drugs delivered to LPOE, and sold synthetic drugs
both by mail, and in person to LPOE customers.

According to documents filed in court, Duluth-area hospital emergency rooms treated a
significant number of synthetic drug users while LPOE was in operation. By 2012, the
emergency room at St. Luke’s Hospital was receiving nearly three synthetic-drug-abuse cases each
day. Of those, approximately 10 percent exhibited serious symptoms requiring the use of physical
restraints and chemical sedatives or admission to the Intensive Care Unit or mental health ward.
Each patient willing to disclose to hospital staff where they obtained the synthetic drugs they
took, invariably reported obtaining the drugs from LPOE. After the City of Duluth successfully
enjoined LPOE from distributing synthetic drugs, St. Luke’s Hospital reported a 95 percent decline
in the number of synthetic drugs patients requiring emergency medical attention.

This case was prosecuted by Assistant U.S. Attorneys Surya Saxena and Nate Petterson.

U.S. Attorney Luger thanked the Duluth Police Department, the U.S. Food and Drug Administration,
the U.S. Drug Enforcement Administration, and the Internal Revenue Service- Criminal Investigation
Division, the United States Marshals Service, the Duluth City Attorney’s Office, the St. Louis
County Attorney’s Office, and the Lake Superior Drug and Violent Crime Task Force.

Defendant Information:

JAMES CARLSON, D.O.B. 4/30/1957
Superior, WI

Convicted:
• Conspiracy to Commit Offenses against the United States, 1 count
• Causing Misbranded Drugs to be Introduced into Interstate Commerce, 9 counts
• Delivery of Misbranded Drugs Received in Interstate Commerce, 6 counts
• Doing Acts Resulting in Drugs Being Misbranded While Held for Sale, 1 count
• Distribution of a Controlled Substance, 1 count
• Conspiracy to Distribute Controlled Substance Analogues, 1 count
• Distribution of Controlled Substance Analogues, 8 counts
• Monetary Transactions in Property Derived from Specified Unlawful Activity, 24 counts

Sentenced:
• 17.5 years in Federal Prison
• 3 years of supervised release

LAVA HAUGEN, D.O.B. 7/16/1980
Superior, WI

Convicted:
• Conspiracy to Commit Offenses against the United States, 1 count
• Delivery of Misbranded Drugs Received in Interstate Commerce, 1 count
• Doing Acts Resulting in Drugs Being Misbranded While Held for Sale, 1 count
• Conspiracy to Distribute Controlled Substance Analogues, 1 count

Sentenced:
• 5 years in Federal Prison
• 3 years of supervised release