Former Minnesota tax court judge pleads guilty to $1M in tax fraud

A former U.S. Tax Court judge pleaded guilty Friday to conspiring with her husband to fraudulently omit nearly $1 million in income from their tax returns while she served as judge, using the gains to pay for personal expenses like international trips and Pilates classes.

Diane Kroupa, 61, faces up to five years in prison after pleading guilty to conspiracy to defraud the United States in federal court in St. Paul. A federal grand jury indicted Kroupa and her then-husband, Robert Fackler, 63, in April.

Fackler, a self-employed lobbyist and political consultant, pleaded guilty last month. Sentencing dates have yet to be scheduled for either defendant. The couple began divorce proceedings shortly after their indictment.

Kroupa, who was appointed to the court in 2003 and retired in 2014, and Fackler have admitted to purposely understating their taxable income by about $1 million and their amount of taxes owed by about $450,000 from 2004 through 2010.

Both defendants admitted to fraudulently deducting at least $500,000 of personal expenses, which they listed as expenses at Fackler's consulting firm, and another $450,000 in purported business costs, for which clients had reimbursed Fackler.

Kroupa also failed to report a $44,520 real estate transaction, instead claiming it was part of an unrelated inheritance.

Kroupa was born in South Dakota and practiced tax law at Faegre & Benson in Minneapolis before being appointed as a judge to the Minnesota Tax Court and later to the U.S. Tax Court in Washington, D.C.

The couple owned homes in Plymouth, Minn., and Easton, Md., where Kroupa stayed while presiding as a judge. She retired four years before her 15-year term was to end.

An investigation by the Internal Revenue Service's criminal division and the U.S. Postal Inspection Service helped result in charges against the couple. According to her plea agreement, Kroupa repeatedly told Fackler to lie to authorities after they learned that a 2012 Internal Revenue Service audit of Fackler's consulting firm could lead to a criminal probe.

"Those charged with upholding the laws are not above the law," said Shea Jones, special agent in charge of the IRS field office in St. Paul. "[Kroupa's] actions were not only unlawful and dishonest, but they were a theft from the American public."

Stephen Montemayor • 612-673-1755