Local real estate developer sentenced for conspiring to defraud the United States
FOR IMMEDIATE RELEASE
September 19, 2012
MINNEAPOLIS—Today in federal court, a local real estate developer was sentenced for conspiring to evade paying federal taxes. United States District Judge Ann D. Montgomery sentenced Jeffrey John Wirth to 54 months in prison and ordered him to pay a total of $6,457,500 in restitution to the U.S. Internal Revenue Service (“IRS”) for underpaying his taxes from 2003 to 2005. Wirth was indicted along with two co-defendants, including his ex-wife, on August 17, 2011. On May 11, 2012, he pleaded guilty to one count of conspiracy to defraud the United States.
Following today’s sentencing, Kelly R. Jackson, Special Agent in Charge of the IRS Criminal Investigations, St. Paul Field Office, said, “Tax violations have been erroneously referred to as victimless crimes, but it's the honest law abiding citizen who is harmed when someone tries to manipulate our nation's tax system. Those who illegally target our nation’s tax dollars for personal financial gain, along with others who assist them, undermine public confidence in our tax system and unfairly disadvantage businesses that play by the rules. As Mr. Wirth has discovered, operating outside the law and failing to pay taxes results in severe consequences.”
In his plea agreement, Wirth admitted that from at least 2003 through October of 2006, he conspired with his then-wife, Holly Claire Damiani, and their tax return preparer, Michael James Murry, to defraud the 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. Wirth is also the former owner of 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.
When Wirth, who was married to Damiani from 1980 until their divorce in 2008, entered his guilty plea, he stated that the two of them used TWC and the other related businesses to fund their lavish lifestyle, including $2 million to purchase 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 admitted he and Damiani often recorded personal expenses as business expenses in an effort to understate the company’s income for tax purposes. He also agreed 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 & Waterpark of America. 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 until 2006, 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.
On May 3, 2012, Damiani pleaded guilty to one count of filing a false federal individual income tax return. On May 14, 2012, Murry pleaded guilty to one count of preparing a false corporate tax return. They both are awaiting sentencing.
This case is the result of an investigation by the IRS-Criminal Investigations. 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.
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