Patricia Knish was sentenced to 30 months in prison. Steven Knish was sentenced to 24 months in prison. Each sentence imposed represented the maximum possible term of imprisonment under the sentencing guidelines. In addition, Judge Donovan Frank ordered the Knishes to serve three years of supervised release, which will include 300 hours of community service for each defendant. Today’s sentencings conclude what was one of Minnesota’s largest personal income tax evasion cases ever prosecuted.
As part of their plea agreements, the Knishes agreed to pay their outstanding federal tax liabilities, which, with interest and penalties, could total as much as $2.5 million. In an effort to partly repay their tax liabilities, the Knishes have sold their Lonsdale, MN residence and other assets including their motorhome, a boat and trailer, a “four wheeler,” a pontoon and trailer, snowmobiles and a trailer, and stocks and bonds. The Court expressed reservations regarding the recent sale of the defendant’s residence to Randy Knish, Steven Knish’s brother, and as a special condition of supervised release, the Court prohibited the defendants from living in the home after service of their sentences until they have paid all outstanding tax liabilities to the IRS and the State of Minnesota.
The Knishes pled guilty in January 2003 to three counts of tax evasion for calendar years 1997, 1998, and 1999. During their guilty plea hearings, Patricia and Steven Knish admitted that they had failed to report approximately $1,990,000 in income on their joint federal personal income tax returns, resulting in a tax loss of $810,000.
The Knishes willfully underreported their income in each year by repeatedly obtaining, and not reporting as income to the IRS, various and numerous payments and reimbursements from customers and insurance companies in connection with their concrete construction business. They also failed to report more than $200,000 in so-called “market recovery reimbursements” from certain union officials, which represented reimbursements for their company’s payment of union wages to their employees in jobs where non-union companies had competed for the same work.
During the time they were underreporting their income on tax documents, the Knishes wrote off through their company more than $900,000 in costs associated with building their lavish Lonsdale, Minnesota, home in order to evade substantial federal income tax.
The Knishes owned Knish Construction Company, a Montgomery, MN based business that engaged in concrete highway construction and repair, as well as curb, gutter and related work for commercial and private jobs. Patricia and Steven Knish sold their interest in that company in February 2000. In November 2002, the Knishes sold their remaining business assets to a relative, although they continue to work for that relative.
This case is the result of an investigation by the Internal Revenue Service - Criminal Investigations - and was prosecuted by Assistant United States Attorney Hank Shea.