News

Exec from Health Services Nonprofit Sentenced to Two Years in Prison

Michael Tobak pled guilty to using assets from the business to cover personal expenses and make multi-million dollar investments.

Michael Tobak, the longtime president of Golden Valley-based International Health Care Services (IHCS), was sentenced to two years in prison for hiding payments the nonprofit received in a separate bank account and falsifying tax documents between 2006 and 2013.
 
Court documents indicate the 55-year-old resident of Wayzata obtained approximately $3.3 million in income during the eight-year period that was not reported on his individual income tax returns. Most of the cash went toward payments on his home mortgage, to pay off personal credit cards and to transfer to other bank accounts under his name, legal filings show.
 
According to the Internal Revenue Service, the tax loss from Tobak’s actions amounted to nearly $1.4 million.
 
IHCS started in 1993 as a private corporate providing assistance to seniors and others with ongoing care needs. Tobak transitioned the business into a nonprofit in 1999. The nonprofit receives Medicaid and Medicare funding for the services it provided.
 
An investigation into Tobak and IHCS began in August 2016. The Minnesota attorney general’s office discovered, according to its filing, that Tobak and his family used money from IHCS to cover shopping trips to Saks Fifth Avenue and Neiman Marcus.
 
Salaries for Tobak and other family members also received a significant bump. In 2013, Tobak was paid $73,000 to run the nonprofit. That increased in 2015 to about $683,000. Annual pay for his wife Irina nearly tripled during the same period to $140,000.
 
Last October, Tobak told the Star Tribune that the payments were justifiable as he was “personally underpaid for several years.”
 
At one point, IHCS “loaned” $10 million of its “charitable assets” to Tobak, according to the filing from Attorney General Lori Swanson’s office. “He promptly lost $9 million of this amount in a single futures trade.”
 
On top of his two-year sentence, Tobak is expected to serve an additional year under supervised release.