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Press Release

Former Mayor Of Stillwater Pleads Guilty To Tax Fraud Conspiracy

For Immediate Release
U.S. Attorney's Office, District of Minnesota

United States Attorney Andrew M. Luger today announced the guilty plea of KENNETH FRANK HARYCKI, 51, to conspiracy to defraud the United States by preparing and filing tax forms that he knew to be fraudulent. HARYCKI pleaded guilty today before U.S. District Judge Ann D. Montgomery in Minneapolis.

“As a former mayor, Mr. Harycki understands, better than most, the magnitude and impact of the fraud he helped to perpetrate,” said U.S. Attorney Luger. “By his guilty plea, Mr. Harycki has taken responsibility for his actions, but that does not excuse his criminal acts. This defendant not only violated his accounting license by covering up a tax fraud, he eroded the trust of the residents of Stillwater, who elected him to a position of high public office.”

According to his guilty plea, during the course of the conspiracy, HARYCKI owned and operated businesses that provided bookkeeping, payroll, and accounting services, including tax- related services, to clients. In 2007, the defendant began providing services to two separately charged co-conspirators. Within the first few payroll cycles for Model Health Care (Model), a company controlled by the two separately charged co-conspirators, the defendant concluded that while payroll taxes were being withheld from the wages of employees, those taxes were not being paid over to the government. The defendant learned that these co-conspirators had directed that the withheld taxes not be paid to the government and, instead, the taxes would be used for other purposes, including compensating the co-conspirators and their family members and funding other businesses operated by the co-conspirators.

According to the defendant’s guilty plea, on February 18, 2010, HARYCKI created the entity MKH Holdings, Inc., to assume control over bank accounts used to fund businesses operated by the co-conspirators. The entity was used to cause funds falsely reported on income tax returns to be paid to the co-conspirators and others. During the course of the conspiracy, HARYCKI also incorporated other businesses, obtained employer identification numbers, paid for personal expenses, filed false tax returns, and opened and used numerous bank accounts for the benefit of the separately charged co-conspirators in order to avoid payment of taxes.

The tax loss from the defendant’s relevant conduct is between $1 million and $2.5 million.

This case is the result of an investigation conducted by the Internal Revenue Service – Criminal Investigation Division, Federal Bureau of Investigation, and Department of Health and Human Services Office of the Inspector General.

This case is being prosecuted by Assistant U.S. Attorney Robert Lewis.

Defendant Information:

Stillwater, Minn.

• Conspiracy to Defraud the United States, 1 count



Updated April 30, 2015