Developer Wirth to Pay $6.5M, Serve 4 Yrs. for Tax Fraud Conspiracy

The owner of The Wirth Companies and developer of major Minnesota projects like the Grand Lodge Hotel Waterpark in Bloomington was sentenced to four-and-a-half years in prison and ordered to pay $6.46 million in restitution.

Local real estate developer Jeffrey Wirth was sentenced Wednesday to four-and-a-half years in prison for consipiring to defraud the federal government, Minnesota’s U.S. Attorney’s Office said.

In addition, U.S. District Judge Ann D. Montgomery ordered Wirth to pay $6.46 million in restitution to the U.S. Internal Revenue Service (IRS).

Wirth, owner and CEO of Brooklyn Center-based The Wirth Companies, is also the former owner of the Grand Hotel in downtown Minneapolis, the Grand Rios Hotel & Waterpark in Brooklyn Park, and the Grand Lodge Hotel & Waterpark of America in Bloomington—as well as nearly 30 other businesses, according the U.S. Attorney’s Office.

He was indicted in August 2011 along with his ex-wife and another co-defendant, and in May he pleaded guilty to one count of conspiracy to defraud the United States.

Wirth admitted to conspiring with his then-wife Holly Damiani to defraud the IRS by failing to pay the taxes they owed between 2003 and 2005. The scheme also involved their tax return preparer, Michael Murry, who allegedly helped the couple file false tax returns.

Wirth admitted in his plea agreement that the scheme caused the federal government to lose between $2.5 million and $7 million. According to a report by the Star Tribune, prosecutors have characterized the scheme as one of the largest tax fraud conspiracies in Minnesota’s history.

Wirth and Damiani used money from their businesses to fund their “lavish lifestyle”—including $2 million to buy an island in Lake Minnetonka and at least $3 million to build a mansion there, according to the U.S. Attorney’s Office. They also allegedly used more than $600,000 to buy a home in South Minneapolis and “tens of thousands of dollars for world travel and to benefit their children.”

They often recorded personal expenses as business expenses and claimed false “management fees” in an effort to “reduce the company’s overall taxable income to nearly zero,” the U.S. Attorney’s Office said. Wirth also admitted to understating his own salary to the IRS.

Damiani in May pleaded guilty to one count of filing a false federal individual income tax return; meanwhile, Murry pleaded guilty that same month to one count of preparing a false corporate tax return. Both will be sentenced at a later date.

Court documents indicate that Wirth was not taken into custody following his sentencing. Montgomery said that she would let Wirth turn himself in later so he could attend his son's piano recital in New York, according to a report by the Star Tribune.

“I realize I'm taking a risk on that,” Montgomery reportedly said, adding that Wirth's attorney would likely tell him that “the most stupid thing you could do in this situation is to run.”