Federal grand jury indicts Judge Diane Kroupa and husband Robert Fackler on charges of tax evasion, obstruction of a tax audit, conspiracy and making and subscribing false tax returns.
USA – It doesn’t get any more blue-blooded, mixed with legal aristocracy than the 500 Lawyer firm of Faegre & Benson in Minneapolis. If you want legal work done, if money is no object, and perhaps you want a lawyer connected with the Republican Establishment… look no further. Faberge and Benson is the largest law firm in Minneapolis. Now, if you found yourself in the crosshairs of the IRS from 1995 to 2001, you would have sought out the top Tax Lawyer in the firm, Diane Kroupa.
Judge Diane Kroupa
Diane graduated from Georgetown University in 1978, got her Juris Doctorate in 1981, worked for the Legislation and Regulations Division of the Office of Chief Counsel, where the top IRS lawyer, the Chief Counsel, makes suggestions on what the tax laws should be and drafts the regulations, which create forms like the 1040. From there she worked at the Tax Court and was then an attorney clerk for Judge Joel Gerber in 1984. So it made sense that Faegre & Benson would want to sign up this bright, shining star, who also had political connections with the Tax Court. Who better to hire if a tax-payer found him or herself on the wrong side of the IRS facing an assessment in Tax Court? All those options were taken away from taxpayers though when President George W. Bush discovered this legal light and appointed her to a fifteen-year term with the United States Tax Court on June 13, 2003.
Meanwhile, Judge Kroupa’s husband, Robert (Bob) Fackler went about his job running Grassroots Consulting. Grassroots Consulting is a lobby firm. Let’s say you were a big company and your tax bill was too high. Maybe you would like a credit. The man to see might be Bob Fackler, a registered lobbyist whose wife happens to know a thing or two about taxes.
Judge Kroupa and Bob lived happily in their nearly million dollar home in Minneapolis, but they also had a rental house in Maryland so that Judge Kroupa could attend to her duties as a tax court judge and sit on cases in Washington D.C.
Now when you leave a job as a senior tax partner with the largest law firm in Minneapolis to do public service … to sit as a tax court judge, you are going to take a huge pay cut. Unless all the cars are paid off, and the kids are out of school, you are going to have to make due on the salary and benefits of a mere servant of the people. In Judge Kroupa’s case that would be in the $200,000 range, plus benefits. Thank goodness, at 60, all her kids were out of the house and grown and graduated from college. At least the family could rely on an extra million bucks over the years from Bobby’s little lobbyist business. “But things were still pretty tight.”
Fortunately, Kroupa had learned a few things about tax deductions from her decades practicing tax law and sitting on the tax court bench.
So, they allegedly deducted vacations to Alaska, Australia, Bahamas, China, England, Greece, Hawaii, Mexico, and Thailand as business expenses. Can you deduct your home groceries, and your laundry?
Bobby had a different problem with his lobbyist business. When he took clients out to eat, he would deduct the expenses. Makes sense doesn’t it? The problem, according to the government, is that he also got reimbursed for all those meals by his client. So if you don’t pay the expense at all, if your client pays it, can you still deduct it? Probably not. The dispute with the feds on these deductions is a little under a half a million dollars.
Some of the non-reported stuff will be even harder to defend. In 2010, Judge Krupa received $44,520 for the sale of real estate in South Dakota. Apparently this money did not appear on her 2010 tax return. Lots of people make mistakes, forgetting various things, and for a man and wife as well off as she and her husband were, it’s not as big a mistake as it would be for say, most everyone else who might not even make that much in a year. Still, as a Federal Tax Judge it is really hard to believe she just forgot to put it on her tax return. How many tax payers appeared in her court over the decade-plus that she sat on the bench and got to “leave off” a sale of real estate. If she had no explanation at all for the $44k that might be better than the one the IRS says she gave her tax preparer… that the money was from an unrelated inheritance. Another allegation in the indictment is that she and her husband didn’t pay $33,000 they had agreed to pay back to Bank of America. Added to the slight against paying a just debt, the judge and her husband claimed that the nonpayment of the debt, usually taxable, wasn’t in their case because they were indigent.
Judge Kroupa and her lobbyist husband Bob Fackler informed the IRS that they had not been keeping adequate records of their business expenses. This becomes a “pretty tuff pill to swallow” when the government accuses Judge Kroupa and lobbyist husband Bob Fackler of shorting their income by “approximately $1,000,000.” Coming from a judge who issued $25,000 sanction orders for bad conduct, stings a little. Taxpayers in Judge Kroupa’s court had to document their expenses.
Most tax professionals know that you can’t write off your homestead or residence. You can write off your office expenses. Judge Kroupa used a residence in DC, as her home, when she handled tax cases. However, to the IRS and to their tax preparer, Judge Kroupa claimed that it was a DC office. Since the judge has chambers and office provided for her by the taxpayers she can’t deduct for another “office” in DC. The IRS claims that Judge Kroupa falsely claimed she did not use the home as her residence.
One of the conditions for her bail is that “she continue with existing mental health therapy and medications management.”
In other words, the Judge who sat in Judgement for 11 years on American Taxpayers, claims she committed income tax evasion because she was nuts.
The Judge has a politically powerful white collar defense lawyer who does not show a single not guilty criminal tax jury finding on his website. Maybe modesty kept him from putting it up. Maybe he hasn’t tried a criminal tax defense case in front of a jury. Her husband’s defense attorney doesn’t show a single criminal tax not guilty verdict on his web page. Maybe he is too modest, or possibly his clients are not looking for trials but looking for favors? Maybe they think it’s too plebeian to talk about their jury trial victories. A quick google search didn’t pull up any published trials. These guys have contacts … and power… and they are not going to go to trial. They are already setting Judge Kroupa up for a settlement, and mercy, because the Judge has some mental disorders and a “slight” drinking problem. No idea about the husband. He has not yet shown any cards… except that; his lawyer would no more try this case before a jury than Isis would submit to American jurisdiction.
If Judge Kroupa and her husband are convicted on all counts they could spend more than the next ten years in a Federal Prison. It would be their new home, and not their office and they would not be entitled to deduct the cost of living there. Fortunately, as has been for the last decade of their life, most of their expenses would be picked up by the Taxpayers.
The indictment was issued April 4, 2016. The indictment is only an accusation. This author plans on being there for the sentencing and reporting on it. All citizens, including judges are presumed innocent unless otherwise proven.