The Great Minnesota Tax Dodge

Meet 10 of Minnesota's most notorious state tax scofflaws

 

John D. Morken
Hemet, California

TAX STAT Owes $5,549,644.24 in income taxes incurred between 1994 and 1997

CAREER HIGHLIGHTS John Morken's father started the family cattle-brokerage business in the 1930s. The son began working for the Spring Grove-based company in 1964 and became the head of operations in 1992. Morken became a Carnegie-like figure in the tiny southeastern Minnesota town (pop. 2,200). In the early '90s, he was the largest cattle broker in the upper Midwest, with his annual income hitting $500,000 in 1992. Morken spearheaded numerous charitable endeavors in the town and served on his church council. He also created the All Phase Arena, a venue for livestock shows and other farm-related events. But even before taking over as chief executive of the company, Morken had apparently been engaging in dubious financial practices. In 1994, after the bottom dropped out of the cattle market, the company, known as Spring Grove Livestock, was forced to declare bankruptcy. That same year Morken was indicted by a grand jury on eight criminal counts, including bank fraud and making false statements to a financial institution. Prosecutors alleged that he'd written nearly $2.9 billion in worthless checks in order to prop up his business. Morken eventually pleaded guilty to one charge of bank fraud. He was initially sentenced to 48 months in prison (a downward departure from federal sentencing guidelines) by U.S. District Court Judge James Rosenbaum. The judge cited Morken's economic and civic contributions to Spring Grove as reasons for the leniency. Federal prosecutors appealed that verdict, however, and it was determined that the grounds for departing from sentencing guidelines were not adequate. In 1998, Morken ultimately received a 63-month sentence.

FUN FACT Some 68 of Morken's acquaintances, mostly residents of Spring Grove, wrote letters to the judge on his behalf calling for a lenient sentence.

QUOTE "Your wife and one of your children tell me you are a good man," Judge Rosenbaum told Morken at his sentencing hearing, according to the St. Paul Pioneer Press. "You are a thief, a straight-out thief. You are a fraud."

 

Donald G. Stelzner
Riviera Beach, Florida

TAX STAT Owes $859,090.21 in income taxes incurred between 1993 and 1998

CAREER HIGHLIGHTS Donald and Donna Stelzner, both Minnesota natives, married in Las Vegas in 1958. According to federal court records, over the years they worked in various industries, including gaming and real estate. In the 1970s, Donald Stelzner developed a foreign-currency exchange business that served casinos primarily in Nevada and New Jersey. His wife was his only business partner. Donald Stelzner served as a middleman for gambling operations that accept foreign currency. He traveled to client casinos, purchased their accumulated foreign currency with U.S. cash, and then arranged for its exchange. At the peak of the company's success, according to court records, the couple's business operations accounted for roughly 85 percent of the foreign-currency exchange conducted at New Jersey and Nevada casinos. In 1983, the Stelzners purchased a home on Lake Calhoun Parkway that served as their primary residence until 1999. During this time period they made more than $400,000 in renovations to the property. The Stelzners continued to conduct the bulk of their business, however, outside of Minnesota. They also claimed Nevada as their home for tax purposes and never filed a Minnesota income tax return. (Nevada has no income tax.) In 1987 Minnesota state law was amended to make it more explicitly clear that people who live more than half the year in the state are deemed residents and are therefore subject to its tax laws. Donald Stelzner was informed of this change by his accountant, according to state court records, but continued to file only federal income tax returns. The Minnesota Department of Revenue conducted an audit of the couple's finances covering 1987 to 1993 and determined that they owed $402,673.87 in back taxes. The Stelzners refused to pay. They fought the assessment in court for years, arguing that they were not subject to state tax laws because they conducted their business elsewhere. The case went all the way to the Minnesota Supreme Court, but was ultimately decided in the state's favor. According to records on file with the Nevada Secretary of State's Office, Donald Stelzner continues to conduct business in Las Vegas under the name Bond Mortgage & Investment Corporation.

FUN FACT In 1997 the Stelzners sued the Bakken Museum of Electricity in Life in U.S. District Court, arguing that the nonprofit group's expansion plans violated city zoning laws. Their home on Lake Calhoun Parkway abutted the Bakken Museum. The couple's lawsuit was unsuccessful.

QUOTE "This guy's a tremendous character," says Dale Korpi, Stelzner's former accountant. "A brilliant person, but constitutionally flawed."

 

Gary Gendler
Naples, Florida

TAX STAT Owes $338,708.32 in consumer use taxes incurred between 1985 and 1989

CAREER HIGHLIGHTS Gendler has a storied history of avoiding taxes. When the Minnesota Department of Revenue began investigating him in 1989, according to U.S. Bankruptcy Court records, he had not filed a state income tax return since at least 1970. In addition, he had never filed an income tax return for his company, Detroit Auto Brokers, despite having been incorporated in the state since 1975. In August 1990, Gendler was charged with 16 felony counts of motor vehicle excise tax fraud. According to a 1999 affidavit from revenue department investigator Jack Peterson, Gendler committed more than 100 fraudulent motor vehicle registrations between 1984 and 1989 in order to avoid paying taxes. For example, in April of 1987, according to a Hennepin County criminal complaint, he sold a 1987 Cadillac four-door Brougham to Alexius C. Sjoberg for $24,987. On the vehicle registration document filed with the state, Gendler indicated that the purchaser had received $21,000 in trade-in credit toward the purchase price. In fact, there was no trade-in vehicle. This maneuver allowed the car salesman to pocket $1,108.03 that Sjoberg had paid to cover the necessary taxes. Gendler eventually pleaded guilty to eight counts of fraud and was sentenced to 15 months of jail time, but all but 90 days of the sentence was stayed. He filed for federal bankruptcy protection in 1997, which would normally wipe out his past tax obligations. The state revenue department, however, successfully argued that because Gendler's tax debt stemmed from criminal activity, he should still be accountable for the assessment.

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