Walser to pay $490K in tax evasion settlement, criminal charges dropped

MINNEAPOLIS (FOX 9) - A Minnesota car dealership will pay nearly half a million dollars after it was charged with tax evasion earlier this year. 

Criminal charges against Walser Automotive were dropped after the company agreed to pay $490,000 to the State of Minnesota. 

MN car dealership tax evasion charges

The backstory:

A criminal complaint filed in Hennepin County Court shows criminal charges were initially filed against Walser on Jan. 30. 

According to the charges, investigators say Walser worked with William Frederick Ward, 59, to identify high-end new vehicles that Ward would purchase. Ward would allegedly say he was buying the vehicle for personal use instead of acting on Walser's behalf. He would then request that the title and purchase paperwork be put in the name of a Montana-based limited liability company.

For a time, that entity was Walser Investments LLC, which Ward solely owned. Later, Walser formed Green Hornet Holdings LLC in Montana and gave Ward permission to buy cars in its name. According to the complaint, witnesses say the switch happened because Walser Investments LLC was placed on a General Motors "known exporter" list, which restricted its ability to purchase GM vehicles.

The charges say Walser Preowned would then take in the vehicle as "used" and tax-free under its used motor vehicle dealer license, and sell it to the buyer Ward had already lined up. Under Minnesota law, a vehicle is not considered "used" until the title has been transferred from the person who first acquired it from the manufacturer and the vehicle has been placed in actual operation and not held for resale. Investigators say many of the vehicles had identical or nearly identical odometer readings when sold to the end buyer as when they were first acquired, indicating they were never actually placed in operation.

Investigators noted in court documents that Montana does not charge a motor vehicle sales tax, and registering a vehicle in Montana is a "well-established tax avoidance" tactic. 

Dig deeper:

According to the criminal complaint, investigators conducted multiple interviews, during which Ward and multiple Walser staff members denied that the purpose of using a Montana LLC was to evade Minnesota sales tax. They said buying vehicles through a Montana LLC was the only way to acquire the cars so they could be resold, and they said they were not aware of other Minnesota dealers using Montana LLCs.

Ward and Walser witnesses also denied knowing that a new car must be placed in actual operation and not held for resale before it is considered "used" under Minnesota law, according to the complaint. Employees also denied knowing that Ward was sometimes representing himself to dealers as an individual buyer seeking a vehicle for personal use.

Authorities say witnesses "did not give consistent answers about whether, and at what times, Ward, his Minnesota corporation or the Montana LLCs were operating under any Walser dealer license."

Investigators say statements by Walser witnesses and actions by Ward indicate Walser was attempting to evade Minnesota motor vehicle sales tax, according to the complaint. 

One Walser witness noted that the company would sometimes lease a car to an employee, let them drive it for a few months, then take it back and sell it as used, describing this as a method to "generate used cars," the charges say. Investigators say that comment suggests a corporate understanding that a vehicle must be placed in actual operation before it is considered "used." Ward was the only vehicle purchaser working for Walser who used Montana LLCs for his purchases.

Walser Automotive responds

What they're saying:

Walser Automotive CEO Andrew Walser shared the following statement on Aug 26: "We are pleased this matter has been resolved as we knew it would, with all charges against Walser fully dismissed."

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