ST. PAUL, Minn. (KMSP) - A former U.S. tax court judge pleaded guilty to conspiring to defraud the IRS of $450,000 in taxes, according to U.S. Attorney Andrew Luger.
On Oct. 21, Luger announced the guilty plea of Diane L. Kroupa, 61, to conspiring to defraud the United States.
Kroupa, who was indicted on April 4, 2016, pleaded guilty before U.S. District Judge Wilhelmina Wright in U.S. District Court in St. Paul, Minnesota.
According to the plea agreement and Kroupa’s testimony at the hearing, she was appointed to the U.S. Tax Court in June 2003 for a term of 15 years. During that time, Kroupa was married to Robert Fackler, a “self-employed lobbyist and political consultant who owned and operated a business known as Grassroots Consulting.
Between 2002 and 2012, Kroupa and Fackler “conspired to obstruct” the IRS from accurately determining their joint income taxes.
As part of the conspiracy, the two worked together to compile several personal expenses “for inclusion as supposed ‘business expenses’ for Grassroots Consulting in their joint tax return.”
According to the plea agreement and testimony, those expenses included rent and utilities for their additional home in Maryland, 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 and personal computers. The expenses also included vacations to Alaska, Australia, the Bahamas, China, England, Greece, Hawaii, Mexico and Thailand.
In total, between 2004 and 2010, the defendants fraudulently deducted “at least $500,000 of personal expenses as purported Schedule C business expenses. At times, Kroupa prepared and provided to Fackler summaries of personal expenses falsely described according to business expense categories.”
On other occasions, she herself compiled and provided to their tax preparer the fraudulent personal expenses.
Additionally, Kroupa made a series of other false claims on their tax returns, including “failing to report approximately $44,520 that she received from a 2010 land sale in South Dakota. Kroupa also falsely claimed financial insolvency to avoid paying tax on $33,031 on cancellation of indebtedness income that she and her husband received.”
According to the plea agreement and testimony, the couple intentionally concealed documents from their tax preparer and an IRS Tax Compliance Officer during an audit for their 2004 and 2005 tax returns.
In a second audit in 2012, Kroupa and Fackler caused “false and 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. After the IRS requested documents pertaining to their tax returns, the couple removed certain items from their personal tax files before giving them to their tax preparer because the documents could reveal they had illegally deducted numerous personal expenses. During the audit, Kroupa also falsely denied receiving money from the 2010 land sale. Later, when they learned the 2012 audit might progress into a criminal investigation, [she] instructed Fackler to lie to the IRS about her involvement in preparing the portion of their tax returns related to Grassroots Consulting.”
In those six years, the couple purposely understated their taxable income by approximately $1,000,000 and intentionally understated the amount of tax they owed by at least $450,000.
Kroupa is convicted of one count of Conspiracy to Defraud the United States.