The Great Minnesota Tax Dodge
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.
Anthony J. Fant
Eden Prairie, Minnesota
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."
John D. Morken
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."
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.
FUN FACT In August of 2000, Gendler purchased a home in Naples, Florida, for $55,000. The property is now valued at $363,764.
QUOTE "I don't remember him," says Sjoberg. "I bought the car through somebody else. I probably had it for five years."
Randy S. Miland
White Bear Lake, Minnesota
TAX STAT Owes $270,572.48 in income, provider, sales, and withholding taxes incurred between 1994 and 1998
CAREER HIGHLIGHTS In the '80s and '90s, Miland operated a chiropractic firm in Woodbury known as the Back and Neck Pain Clinic. In 1996, he began soliciting short-term loans from friends and patients. The money was supposedly going to be used to seed new Blockbuster Video franchises. Miland claimed that he had a personal connection with the corporation and could produce extravagant returns of 25 to 30 percent for investors in just three months. Between 1996 and 1998, according to a criminal complaint, he collected more than $1.2 million from at least 21 people. But instead of investing the money in video stores, Miland squandered it on his hedonistic lifestyle, heavy on strippers and booze. When disgruntled investors successfully sued him in court, he generally either ignored the judgments or wrote them bad checks. Barbara Benassi and Robert Harvey, for instance, got a default judgment of $277,671 against Miland in Washington County District Court, but were unable to collect on the debt. In October 1998, Miland was charged with five counts of theft by swindle. He eventually pleaded guilty and was sentenced to up to 45 months in prison. However, because he participated in Minnesota's "Challenger Incarceration Program," which emphasizes intense work and chemical dependency treatment, Miland ultimately served less than a year in prison.
FUN FACT In 1997, Miland and the Back and Neck Pain Clinic were sued by his former fiancée, Gina Benassi, in Washington County District Court. Miland responded by filing a counterclaim seeking return of the $24,000 engagement ring that he'd given her. In 2001, the Minnesota Court of Appeals ultimately declared Miland the ring's proper owner.
QUOTE Robert Harvey, testifying at Miland's 1999 sentencing: "And I believe, Randy, that you preyed on the vulnerable patients, your friends and your professional associates, and I resent that personally because of the status that you had.... And then when I learned, as we all did, of the spending of the monies that we had invested, spending thousands of dollars as Doctor Big Shot in all the strip joints, feeding your sexual addiction, I don't know what else to call it, on drugs and girls and the lifestyle... I can't tell you how much that hurts."
Rollin C. Green
TAX STAT Owes $592,283.16 in state sales tax incurred between 1994 and 1998
CAREER HIGHLIGHTS Green has operated an auto mechanic shop--variously known as Southside Service, Southside Rebuilders, or Southside Auto--in Northfield for three decades. He supposedly specializes in working on diesel engines. However, Green has piled up his share of disgruntled customers. In Rice County District Court, he's been successfully sued at least five times. David Seleen, for instance, says that he took his diesel-engine Volkswagen Jetta to Green in 1994 to have a head gasket replaced after seeing the mechanic's advertisement in the Star Tribune. Seleen was living in Minnetonka at the time, but couldn't find anyone local to do the job. He says that he made three or four trips down to Northfield to pick up the supposedly repaired vehicle, but that each time the car conked out before he could make it home. Seleen eventually sued Green and received a judgment of $4,473.35, but he's never collected a dime of it. Green has been equally elusive for state tax collectors. An audit conducted by the Minnesota Department of Revenue concluded that between 1981 and 1998 he failed to pay $540,000 in sales taxes. Green filed for bankruptcy in 1999, claiming to have just $12,310 in assets and a monthly income of $2,000.
FUN FACT From 1972 to 1981, Green and his then-wife operated a milk-delivery company known as Green Acre Dairies.
QUOTE "He's such a good talker," says David Seleen. "I actually had faith in the guy at first. I don't know why I paid him but I did."
John I. Priscella
TAX STAT Owes $5,202,402.41 in income taxes incurred between 1995 and 1997
CAREER HIGHLIGHTS Priscella became a notorious figure in the Twin Cities business community almost immediately upon arriving from California in 1988. Within five years, according to a 1993 Star Tribune story about Priscella's company, Impression Delivery Corp., the then 41-year-old entrepreneur had racked up more than $400,000 in adverse civil judgments. As detailed in the prescient story, Priscella's company had far-flung ventures--AIDS drugs, a potato harvesting company, gambling operations--but few revenues and no profits. The bad publicity did little to slow Priscella's wheeling and dealing. He next made headlines in the late '90s with the collapse of Equisure, a mysterious Minneapolis-based insurance company that Priscella helped found. As chronicled in two Pioneer Press articles, the company saw sensational gains in its stock price after joining the American Stock Exchange in 1996, but was de-listed the next year amid accusations of fraud and insider trading. Former shareholders won a $45 million class-action judgment against the company in 1998. The FBI investigated Priscella and the firm, but no one was ever charged criminally. In the years since, Priscella has been involved in an array of fledgling corporations, none of which have panned out. In 2003 he filed for Chapter 7 bankruptcy protection in federal court. In the filing he claimed to have less than $1,501 worth of assets and almost $600,000 in debts.
FUN FACT In 2002 Priscella was sued in Hennepin County District Court by his brother-in-law, Alvin Robbins. Robbins was seeking more than $50,000 in damages for allegedly bad investment advice and unfulfilled financial promises. The case was terminated when Priscella filed for bankruptcy protection.
QUOTE "The difficulties that I have faced are not unusual in businesses that are starting out," Priscella told the Star Tribune in 1993. "I have made mistakes and certainly wish that I had had the opportunity to change those events. The next best thing was to recognize those mistakes that were made and then make them right."
James D. Sheehan
TAX STAT Owes $260,321.32 in income and withholding taxes incurred between 1986 and 1998
CAREER HIGHLIGHTS Sheehan is most famous for running a vast auto-parts telemarketing scam in the late '80s and early '90s. He operated under a slew of different corporate names: James Automotive, U.S. Warehouse, General Automotive, and Kar Kare Industries, among others. The basic con was quite simple. Sheehan's employees would call up auto parts stores pitching supplies such as brake cleaner and silicone sealant. They would then offer the employee responsible for filling orders a "premium" (better known as a bribe) in return for making a purchase. In most cases this premium was a TV, a camcorder, a handgun, or cash. Sheehan's workers would then sell the stores vastly overpriced merchandise. For example, according to a Hennepin County criminal complaint, in 1991 one of Sheehan's employees sold a carton of three-ounce tubes of Permatex silicone sealant to an auto parts store for $7.82 per unit. The tubes had originally been purchased for $1.77 each. The premiums promised in return for purchasing the overpriced merchandise never arrived. If the individuals who'd agreed to bribes refused to make subsequent orders, Sheehan's employees would threaten to tell their bosses about the scam. The telemarketing operation, which ran roughly from 1988 to 1992, had up to six employees at any one time and generated proceeds of at least $4.4 million, according to court records. In 1992 Sheehan was charged with one count of racketeering, 10 counts of theft by swindle, and 13 counts of commercial bribery. He ultimately pleaded guilty to seven of the counts and was sentenced to 32 months in prison.
FUN FACT In 2001, Sheehan's ex-wife obtained a restraining order against him in Hennepin County District Court.
QUOTE "The Respondent called Petitioner and told her he should slit her throat. In early 1/01 he left phone messages for the Petitioner telling her that she is a slut." --From his ex-wife's petition for a restraining order.
Jeffrey P. Van Haveren
St. Paul, Minnesota
TAX STAT Owes $385,686.39 in income, sales, and withholding taxes incurred between 1998 and 2003
CAREER HIGHLIGHTS Van Haveren has operated flower shops in various Minneapolis locations (Nicollet Mall, Gaviidae Common, the farmers' market) for years. His stores have probably been best known for offering good deals on roses. Jeffrey Van Haveren has been a fairly regular visitor to local courthouses in recent years. Judgments have been entered against him in at least Ramsey, Hennepin, and Dakota counties. In 2000, for example, Van Haveren was sued in Hennepin County District Court by Zeller-OFP Trust, his landlord at Gaviidae Common, for failing to pay rent. The company evicted him and ultimately received an $89,158.31 judgment against Van Haveren and his business. In 2003, the Minnesota Secretary of State's Office revoked the sales and use tax permit for Van Haveren's Flowerworks because the company had allegedly failed to pay $23,112.55 in sales taxes.
FUN FACT Van Haveren was sued in Ramsey County District Court in 2001 by the Billman-Hunt Funeral Chapel. He was ordered to pay $6,767.75 in outstanding bills stemming from his wife's funeral. The debt is still outstanding. According to funeral home officials, part of the bill included a large flower order that was made with Van Haveren's own company.
QUOTE "You know what the kicker is?" asks Jeff Hunt, one of the northeast Minneapolis funeral parlor's owners. "He took all the flowers after the funeral. There weren't any flowers left. Not even any on the grave. It's not hard to figure out what he did with them."
Deborah M. Barker
TAX STAT Owes $277,991.85 in income taxes incurred between 1994 and 1996
CAREER HIGHLIGHTS Deborah Barker apparently does not believe in the validity of income taxes. In 1997, Barker and her husband, Stephen, filed a lawsuit in United States District Court against then-Treasury Secretary Robert Rubin. The gist of their argument was that the Internal Revenue Service had no authority to tax their income because the government agency had never been legally established. More specifically, the couple argued that their privacy rights had been violated by the Treasury Department's unwillingness to furnish sufficient documentation to back up the agency's claim to a chunk of their assets. Not surprisingly, this legal rationale was rejected by the courts. Undeterred, in 1999 the Barkers filed a similar lawsuit in Hennepin County District Court seeking protection from Minnesota Department of Revenue collection agents. According to court records, the Barkers filed a joint income-tax return for 1994, but failed to do so in the following two years--this despite the fact that Stephen Barker was earning more than $1 million annually working at brokerage firm R.J. Steichen & Company. In 1999, the state revenue agency sent the couple a bill for $235,000 in back taxes for the three years in question and subsequently placed liens on their property. The Barkers responded by filing the lawsuit seeking to stop the liens from being enforced. "This is your notice," Stephen Barker wrote the revenue agency in January of 2000, "you have 5 business days to remove the lien and make a public retraction before legal action is taken against you, your superiors and your agency." The letter was cc'd to then Gov. Jesse Ventura and other public officials, but had little impact. The Hennepin County lawsuit was dismissed. The Barkers currently own two homes in Naples with a combined value of roughly $838,000, according to the Collier County Property Appraiser.
FUN FACT The Barkers were once represented in their federal anti-tax case by conservative rabble-rouser Larry Klayman, best known as the attorney for both Gennifer Flowers and Paula Jones. More recently Klayman and his organization, Judicial Watch, have joined forces with environmental groups in arguing that documents related to Vice President Dick Cheney's 2001 energy task force should be made public.
QUOTE The Barkers frequently closed their legal briefs with declarations of their Christian faith, such as this comment from a 1999 Hennepin County District Court filing: "Wherefore the Plaintiffs pray for the Judge to respond on the following: May the God of creation intervene in the hearts of men that truth may prevail over deception, that law may prevail over lawlessness. May God cause me to see truth, to acknowledge the truth and to act on the truth. Even so come quickly Lord Jesus. Amen."
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