The United States Department of Justice announced in a press release on October 21 that former Tax Court judge Diane L. Kroupa had pled guilty to a charge of conspiring to defraud the United States.
The news release details the actions in question that lead to this guilty plea as follows:
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.