Former Tax Court Judge Kroupa Indicted

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Former Tax Court Judge Diane Kroupa and her husband were indicted yesterday on charges of conspiracy, tax evasion, making and subscribing false tax returns and obstruction of an IRS audit. I do not have much to add on this, other than wow, and obviously not in the Lily’s Purple Plastic Purse way.

The US Attorney’s Office press release is here; Jack Townsend over at Federal Tax Crimes has some initial thoughts on this here.

Some of the lowlights from the press release:

They fraudulently claimed the following personal expenses as deductible business expenses: 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.

According to the indictment and documents filed in court, KROUPA and FACKLER made a series of other false claims on their tax returns, including failing to report approximately $44,520 that KROUPA received from a 2010 land sale in South Dakota. The defendants falsely claimed financial insolvency to avoid paying tax on $33,031 on cancellation of indebtedness income.

According to the indictment and documents filed in court, in 2006, KROUPA and FACKLER concealed documents from their tax preparer and an IRS Tax Compliance Officer during an audit. During a second audit in 2012, KROUPA and FACKLER caused 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.

According to the indictment and documents filed in court, 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 $400,000.

Judge Kroupa resigned her position a couple of years ago. At the time, it was not clear (to me) why.  Now it looks like we know. A very sad day.

Leslie Book About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.

Comments

  1. Raymond J Caron says:

    Every tax year it seems something like this happens and the IRS jumps on it, makes it into a large production and basically lets the taxpaying public know that this can happen to you to. It only takes one high profiled case to make an impression and this year its this one.

    • Jason T. says:

      Good point, Raymond.

      For decades in early April the IRS and DOJ have announced some criminal case event related to a public figure. They have led millions to believe, “if the IRS can get him/her, then what could it do to me?” The powers-that-be selected Judge Kroupa as the 2016 “Voluntary Compliance” Poster Child.

      On a related matter, could the Tax Court’s Chief Judge recall Judge Kroupa to the Tax Court bench in senior status?

      Two years ago, the Tax Court announced that Judge Kroupa had “retired.” Her indictment says that too. (“KROUPA was appointed to the United States Tax Court on June 13, 2003, for a term that was scheduled to end on June 12, 2018. However, on or about June 16, 2014, KROUPA retired from the United States Tax Court.” Indictment at 2.)

      The DOJ’s press release that announced Judge Kroupa’s indictment, however, says
      she is now 60 years old. Even that age, plus her 11 years of service, would not qualify her to serve as a senior judge on recall. Why, then, did the Tax Court and the DOJ say Judge Kroupa had “retired”? To me, she had resigned. Legally, resignation is different from retirement.

      Does anyone know more about this Tax Court senior status subject generally, or about Judge Kroupa’s Tax Court senior status particularly?

  2. Bob Kamman says:

    Kroupa was appointed to a 15-year term as a tax court judge by then-President George W. Bush in 2003.

    • Jason T. says:

      You’re right again, Bob.

      From the fact you supplied, you wish us to infer that the DOJ targeted Judge Kroupa to get her off the bench so now-President Obama could make another appointment….right?

  3. Norman Diamond says:

    When Kroupa was a judge, why didn’t she just issue an injunction prohibiting the IRS from auditing her?

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