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Justice News

Department of Justice
U.S. Attorney’s Office
District of Minnesota

FOR IMMEDIATE RELEASE
Friday, October 21, 2016

Former United States Tax Court Judge Pleads Guilty To Conspiring To Defraud The IRS Of $450,000 In Taxes

United States Attorney Andrew M. Luger today announced the guilty plea of DIANE L. KROUPA, 61, to conspiring to defraud the United States. KROUPA, who was indicted on April 4, 2016, pleaded guilty today before United States District Judge Wilhelmina M. Wright in U.S. District Court in St. Paul, Minn.

“Abusing her position of public trust, Diane Kroupa conspired to defraud the government and break the very tax laws she was sworn to uphold,” said United States Attorney Andrew Luger. “My Office remains committed to prosecuting individuals who engage in fraud schemes such as this, regardless of their position or profession.”

“Those charged with upholding the laws are not above the law. While serving as a United States Tax Court Judge, Diane Kroupa conspired to break the law by evading the taxes she owed. Her actions were not only unlawful and dishonest, but they were a theft from the American public. No matter what your position, it is unacceptable to cheat the system that provides the government services and protections that we all enjoy. IRS Special Agents will continue to pursue tax cheats at all levels of society, regardless of position or status,” said Shea Jones, Special Agent in Charge of the St. Paul Field Office.

According to the plea agreement and KROUPA’s testimony at the plea hearing, KROUPA was a former judge who was appointed to the United States Tax Court on June 13, 2003 for a term of 15 years. During the same period, KROUPA was married to Robert E. Fackler, a self-employed lobbyist and political consultant who owned and operated a business known as Grassroots Consulting. From 2004 to 2013, KROUPA and Fackler owned a home in Plymouth, Minnesota. From 2007 to 2013, they also leased a second residence in Easton, Maryland, where KROUPA lived while fulfilling her duties as a Tax Court Judge in Washington DC.

According to the plea agreement and KROUPA’s testimony at the plea hearing, between 2002 and 2012, KROUPA and Fackler conspired to obstruct the Internal Revenue Service (IRS) from accurately determining their joint income taxes. As part of the conspiracy, KROUPA and Fackler worked together each year to compile numerous personal expenses for inclusion as supposed “business expenses” for Grassroots Consulting in their joint tax return. Those expenses included: rent and utilities for the Maryland home; utilities, upkeep and renovation expenses of the Minnesota home; pilates classes; spa and massage fees; jewelry and personal clothing; wine club fees; Chinese language tutoring; music lessons; personal computers; and expenses for vacations to Alaska, Australia, the Bahamas, China, England, Greece, Hawaii, Mexico and Thailand. In total, from 2004 through 2010, the defendants fraudulently deducted at least $500,000 of personal expenses as purported Schedule C business expenses. At times, KROUPA prepared and provided to Fackler summaries of personal expenses falsely described according to business expense categories. On other occasions, KROUPA herself compiled and provided to their tax preparer the fraudulent personal expenses.

According to the plea agreement and KROUPA’s testimony at the plea hearing, KROUPA made a series of other false claims on their tax returns, including failing to report approximately $44,520 that she received from a 2010 land sale in South Dakota. KROUPA also falsely claimed financial insolvency to avoid paying tax on $33,031 on cancellation of indebtedness income that she and her husband received.

According to the plea agreement and KROUPA’s testimony at the plea hearing, KROUPA and Fackler purposely concealed documents from their tax preparer and an IRS Tax Compliance Officer during an audit for their 2004 and 2005 tax returns.

According to the plea agreement and KROUPA’s testimony at the plea hearing, during a second audit in 2012, KROUPA and Fackler caused false and misleading documents to be delivered to an IRS employee in order to convince the IRS employee that certain personal expenses were actually business expenses of Grassroots Consulting. After the IRS requested documents pertaining to their tax returns, KROUPA and Fackler removed certain items from their personal tax files before giving them to their tax preparer because the documents could reveal they had illegally deducted numerous personal expenses. During the audit, KROUPA also falsely denied receiving money from the 2010 land sale. Later, when they learned the 2012 audit might progress into a criminal investigation, KROUPA instructed Fackler to lie to the IRS about her involvement in preparing the portion of their tax returns related to Grassroots Consulting.

According to the plea agreement and KROUPA’s testimony at the plea hearing, between 2004 and 2010, KROUPA and Fackler purposely understated their taxable income by approximately $1,000,000 and purposely understated the amount of tax they owed by at least $450,000.

This case is the result of an investigation conducted by the Criminal Investigation Division of the IRS and the United States Postal Inspection Service.

Assistant U.S. Attorneys Benjamin Langner and Timothy Rank are prosecuting the case.

 

Defendant Information:                                                                                                                                                        

DIANE L. KROUPA, 61

Minnetonka, Minn.

Convicted:

  • Conspiracy to Defraud the United States, 1 count

 

 

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United States Attorney’s Office, District of Minnesota: (612) 664-5600

Updated October 25, 2016