By Jake Rossen
By Jesse Marx
By Michelle LeBow
By Alleen Brown
By Maggie LaMaack
By CP Staff
By Jesse Marx
Death may well be certain in Minnesota, but taxes most definitely are not.
According to the Minnesota Department of Revenue, at the end of last year there were 167,690 individuals and corporations that owed money in back taxes, totaling $450 million in untapped revenues. Coincidentally, that figure is almost identical to the current deficit that legislators are wrestling with at the state Capitol. If Gov. Tim Pawlenty could somehow wave his magic hockey stick and compel every last citizen to pony up his or her delinquent funds, there would be no need to kick poor people off the public health care rolls or to jack up the fees charged to pheasant hunters.
Since November 2001, the state revenue department has published a partial list of these deadbeat citizens on its website. Known as "Delinqnet," the public roster is designed to shame tax scofflaws into compliance. Ron Schwageo, assistant director of the agency's collection division, believes that it works. "The majority of the money that is collected using this process is usually collected before the person is posted on Delinqnet," he notes.
The Delinqnet list accounts for just $74.5 million of the state's uncollected funds, however. People who have filed for bankruptcy, and therefore are protected from creditors, are removed from the list, but can be reinstated once their legal proceedings are completed. Individuals who have established a payment plan with the state are also dropped from the roster. And then there are some deadbeats--those living solely on Social Security, for instance--that the government has simply written off as financially incapable of ever coming up with the dough.
"Taxes are just like any other debt in their minds," says Schwageo. "They get overextended and get to a point where they have to prioritize which debt they pay. I think more and more people are living paycheck to paycheck and those are the types of people we deal with."
In dealing with citizens who aren't indigent, the state has numerous tools at its disposal with which to extract money. Liens can be placed on their property, paychecks can be garnished, and bank accounts can be seized. Last year these various efforts resulted in the state collecting some $212 million in back taxes.
Even so, people find ways to stymie the state's collection efforts. Some people shift assets to another person's name. Others leave the country or simply move to another state. "It's much more difficult for us to pursue individuals outside of the state because it's outside of our authority in terms of using the Minnesota laws to enforce collection," allows Schwageo. "It reduces our enforcement to that of other creditors."
The sums that people owe can be staggering. There are some 43 people on the Delinqnet list who allegedly owe more than $200,000 to the state government, while five individuals are more than a million dollars in arrears. The undisputed king of the tax deadbeats is John D. Morken, a onetime Spring Grove cattle broker, who currently owes $5.6 million in back taxes.
Who are these people willing to so extravagantly flout the edicts of government collection agents? Working from a list of the 43 individuals who owe more than $200,000 in taxes, City Pages searched online databases, state and federal court files, campaign contributions, property records, and various other public resources to find out. What follows are brief portraits of some of the more colorful characters. Depending on your perspective, they are either bums or heroes.
TAX STAT Owes $464,309.39 in individual income taxes incurred between 1998 and 1999
CAREER HIGHLIGHTS The Crossville, Alabama, native first surfaced in Twin Cities business circles in 1998, when he successfully led a hostile takeover of HEI Inc., a publicly traded, Victoria-based electronics company. Fant installed himself as the chairman and chief executive officer of the corporation, but quickly began operating it as his own personal fiefdom. According to court records, the executive billed hundreds of thousands of dollars in non-business expenses on his company American Express card. In the first quarter of 2003 alone, Fant charged $52,316.45 in dubious expenses, including more than $18,000 worth of electronics equipment and over $15,000 at Polo retail outlets. In addition, some $360,000 in non-HEI legal expenses were charged to the company. Fant was ousted as the company's top executive in March of 2003. HEI successfully sued him in Hennepin County District Court, receiving a settlement mandating that he pay some $2.2 million in damages. According to HEI's attorney, Charles Maier, the company has so far recovered roughly $1.7 million of that money, mostly in the form of HEI stock.
FUN FACT A former treasurer of the Alabama Democratic Party, Fant has popped up repeatedly in news accounts of the ongoing corruption probe involving former Gov. Don Siegelman. Two close associates of the governor have pleaded guilty to corruption charges since 2003. Siegelman was himself indicted for fraud, but the charges were later thrown out. Fant has not been charged with any crimes stemming from the scandal.
QUOTE "The damage done by Fant monetarily and otherwise is greater than the amount of the judgment," says Charles Maier. "He really disrupted my clients' business. They would have been a lot better off if Anthony Fant hadn't ever darkened their doorstep."