Ex-US Tax Judge Pleads Guilty In 10-Year Tax Cheat Scheme

By Suevon Lee
Law360, Los Angeles (October 21, 2016, 10:22 PM EDT) — Former U.S. Tax Court Judge Diane L. Kroupa pled guilty in Minnesota federal court on Friday to conspiring with her husband to cheat on their taxes during a 10-year stretch, including understating their taxable income by $1 million, federal officials said.
Kroupa, 61, who was appointed to the United States Tax Court in 2003 for a 15-year term but retired in 2014, was indicted with her husband earlier this year for conspiring to obstruct the Internal Revenue Service from accurately determining joint income taxes filed with Robert E. Fackler, a lobbyist and political consultant who owned and ran Grassroots Consulting.
Fackler, 63, last month entered a guilty plea himself, telling prosecutors Kroupa prepared summaries of personal expenses to put into his business tax returns to disguise them as deductible, and that the couple expensed everything from international vacations to Pilates classes.
“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,” Shea Jones, Special Agent in Charge of the St. Paul Field Office, said in a statement Friday.
The fraudulent tax returns were filed between 2002 and 2012. Among the expenses Kroupa and Fackler counted as business expenses for Grassroots Consulting were: rent and utilities for their home in Maryland, renovation expenses at their Minnesota home, pilates classes, spa fees, wine club fees, Chinese language tutoring, music lessons and trips abroad, according to federal prosecutors.
For a six-year stretch beginning in 2004, the couple passed off at least $500,000 of personal expenses as business expenses, according to officials, with Kroupa preparing summaries of these falsely categorized personal expenses for Fackler or compiling and providing to their tax preparer these expenses herself.
During this same six-year period, Kroupa and Fackler understated their taxable income by about $1 million and also the amount of tax they owned by $450,000, prosecutors said.
Additionally, the pair failed to report about $44,520 that Kroupa had received from a 2010 land sale in South Dakota and falsely claimed insolvency to avoid paying tax on $33,031 on cancellation of indebtedness income, according to prosecutors.
Before becoming a judge, Kroupa worked as an attorney-adviser for the IRS and practiced tax law at Minneapolis law firm Faegre & Benson LLP. She also served as a judge on the Minnesota Tax Court before her appointment to the federal bench by George W. Bush, according to a brief biography on the U.S. Tax Court website.
Sentencing dates for Kroupa and Fackler have not yet been set.
An attorney for Kroupa did not immediately respond to a request for comment.
The government is represented by Benjamin Langner and Timothy Rank of the U.S. Department of Justice.
Kroupa is represented by Thomas M. Kelly of Kelly & Jacobson.
Fackler is represented by Thomas E. Brever of Foster & Brever PLLC.
The case is USA v. Fackler et al., case number 0:16-cr-00084, in the U.S. District Court for the District of Minnesota.
—Additional reporting by Kat Greene. Editing by Bruce Goldman.

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