Local Real Estate Developer Pleads Guilty To Conspiring To Defraud The United States
MINNEAPOLIS—Earlier today in federal court, a local real estate developer pleaded guilty to conspiring to evade paying federal taxes. Jeffrey John Wirth specifically pleaded guilty to one count of conspiracy to defraud the United States. Wirth, who, on August 17, 2011, was indicted along with two co-defendants, including his ex-wife, entered his plea before U.S. District Court Judge Ann D. Montgomery.
In his plea agreement, Wirth stated that from at least 2003 through October of 2006, he conspired with his then-wife, Holly Damiani, and their tax return preparer, Michael James Murry, to defraud the Internal Revenue Service (“IRS”) by failing to pay their true tax obligations. Wirth is the sole owner and chief executive officer of The Wirth Companies (“TWC”), a commercial real estate development and management business. Until recently, he also owned the Grand Hotel in downtown Minneapolis, the Grand Rios Hotel & Waterpark in Brooklyn Park, and the Grand Lodge Hotel & Waterpark of America in Bloomington, as well as nearly 30 other businesses.
In entering his guilty plea, Wirth, who was married to Damiani from 1980 until their divorce in 2008, stated that the two of them used TWC and the other related businesses to fund their lavish lifestyle, including the $2 million purchase of an island in St. Alban’s Bay in Lake Minnetonka, at least $3 million to design and construct a mansion on that island, more than $600,000 to buy a home near Cedar Lake in South Minneapolis, and tens of thousands of dollars for world travel and to benefit their children. He claimed he and Damiani often recorded personal expenses as business expenses in an effort to understate the company’s income for tax purposes. He also contended that he, Damiani, and Murry caused year-end adjustments to the tax returns for TWC and other related businesses by claiming bogus “management fees,” all in an effort to reduce the company’s overall taxable income to nearly zero.
According to Wirth, who is the sole shareholder, president, and chief executive officer of TWC, he also understated his own TWC salary to the IRS. From 2002 through 2005, while managing TWC and receiving substantial monetary distributions from it, he claimed a salary of only $12,000 annually on his Form W-2s, knowing the fair market value of his labor greatly exceeded those amounts. Moreover, from 2003 through 2006, Wirth failed to report on TWC’s tax returns substantial amounts of fee income earned by the company during the construction and development of the Grand Rios Hotel & Waterpark and the Grand Lodge Hotel and Waterpark. As a result, Wirth caused the amount of adjusted gross income, taxable income, and total tax shown on his individual income tax returns, which he filed jointly with Damiani, to be grossly understated. Wirth also admitted that the tax loss was between $2.5 and $7 million. As part of his plea, Wirth agreed to pay mandatory restitution to the IRS.
For his crime, Wirth faces a potential maximum penalty of five years in federal prison. Judge Montgomery will determine his sentence at a future hearing, not yet scheduled.
On May 3, 2012, Damiani pleaded guilty to one count of filing a false federal individual income tax return. She is awaiting sentencing.
Murry faces one count of conspiracy to defraud the U.S., two counts of preparing a false corporate tax return, and two counts of preparing a false individual tax return. A plea hearing has been scheduled for Monday, May 15, 2012. If convicted, he faces a potential maximum penalty of five years in federal prison on the conspiracy charge and three years on each tax count.
This case is the result of an investigation by the IRS-Criminal Investigation Division. It is being prosecuted by Assistant U.S. Attorneys William J. Otteson and Christian S. Wilton.
Per U.S. Department of Justice policy, the U.S. Attorney’s Office is not allowed to provide the age and city of residence for defendants charged in criminal tax cases.