A former U.S. Tax Court judge and her husband have been indicted for conspiracy to commit tax evasion and obstruction of an Internal Revenue Service audit.
Diane L. Kroupa, 60, and her husband, Robert E. Fackler, 62, were charged Monday with conspiring to evade assessment of taxes. They are expected to appear later this week in U.S. District Court in Minneapolis.
“The allegations in this indictment are deeply disturbing,” said U.S. Attorney Andrew Luger in a statement. “The tax laws of this county apply to everyone, and those of us appointed to federal positions must hold ourselves to an even higher standard.”
Kroupa was appointed to the U.S. Tax Court on June 13, 2003 for a term of 15 years, but she retired on June 16, 2014. Fackler was a self-employed lobbyist and political consultant who owned a business known as Grassroots Consulting.
According to prosecutors, Kroupa and Fackler fraudulently claimed personal expenses as Grassroots Consulting business deductions. They also fraudulently claimed a number of personal expenses as deductible business expenses, including rent and utilities for their Maryland home; utilities, upkeep and renovation expenses of their Minnesota home; Pilates classes; spa and massage fees; jewelry and personal clothing; wine club fees; Chinese language tutoring; music lessons; personal computers; and expenses for vacations to Alaska, Australia, the Bahamas, China, England, Greece, Hawaii, Mexico and Thailand.
They allegedly made a series of other false claims on their tax returns, including failing to report approximately $44,520 that Kroupa received from a 2010 land sale in South Dakota. According to prosecutors, they falsely claimed financial insolvency to avoid paying tax on $33,031 on cancellation of indebtedness income.
In 2006, Kroupa and Fackler allegedly concealed documents from their tax preparer and an IRS tax compliance officer during an audit. During a second audit in 2012, Kroupa and Fackler caused misleading documents to be delivered to an IRS employee in order to convince the IRS employee that certain personal expenses were actually business expenses of Grassroots Consulting.
“As a former tax court judge, Kroupa dealt regularly with individuals who cheated on their taxes, which makes these allegations particularly troubling,” said IRS Criminal Investigation chief Richard Weber. “Reporting personal expenses as business expenses on your tax returns is not tolerated, regardless of your job or position. We expect all taxpayers to follow the law—whether you are a business owner, individual, or government official—we all must play by the same rules and pay our fair share.”
Between 2004 and 2010, Kroupa and Fackler allegedly understated their taxable income by approximately $1 million and understated the amount of tax they owed by at least $400,000.
This case is the result of an investigation conducted by the IRS’s Criminal Investigation Division and the U.S. Postal Inspection Service. Assistant U.S. Attorneys Benjamin Langner and Timothy Rank are prosecuting the case.
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