Woman convicted of embezzling $700K from Denny's franchisee and Rochester company

Federal jurors in Minneapolis have found a southern Minnesota woman guilty of embezzling about $700,000 while working for the owners of several Denny's restaurant franchises in the Twin Cities and Wisconsin and later for a Rochester construction company.

Following a five-day jury trial before U.S. District Court Chief Judge John Tunheim, Kimberly Sue Peterson-Janovec, 59, of Kenyon, was convicted on 13 counts of wire fraud, two counts of mail fraud, three counts of aggravated identity theft, three counts of making and subscribing a false tax return, and three counts of failure to file individual tax returns. A sentencing date has yet to be scheduled.

Also, Peterson-Janovec was sentenced to about 4 ¹⁄₂ years in prison for a federal fraud conviction from 1998 for embezzling more than $950,000 from another former employer. She spent some of the money on cars, jewelry, clothing, real estate and two janitorial service franchises.

"Over the course of several years, Ms. Peterson-Janovec deliberately abused her professional position to steal hundreds of thousands of dollars from her employers," Acting U.S. Attorney Charles Kovats said Tuesday in a statement after Friday afternoon's verdicts.

Peterson-Janovec used the money "to finance her lifestyle and hobbies, including a substantial down payment on her personal residence," read a statement from the U.S. Attorney's Office.

An indictment said she spent the stolen money on jewelry, concert tickets, apparel and in other ways.

Prosecutors say Peterson-Janovec also committed tax crimes throughout her fraud scheme, which led to more than $160,000 in unpaid taxes.

Defense attorney Wyatt Arneson declined to comment about the verdicts against his client, who remains in the Sherburne County jail pending sentencing.

According to the evidence presented at trial:

In 2014, Peterson-Janovec became director of operations for MI5 Inc., a Denny's franchisee that owned and operated eight Denny's restaurants in Minnesota and Wisconsin. In this role, Peterson-Janovec had extensive managerial oversight for all the restaurants, including payroll, cash deposits, vendor and contractor billing, marketing and coordinating reimbursements from the Denny's corporation.

For the next five years, Peterson-Janovec used her position to embezzle money from MI5 and parent Denny's by submitting false requests for vendor payments and then diverting the funds to herself.

She also issued to herself unauthorized compensation using the names of employees who no longer worked for the company. As part of the scheme, Peterson-Janovec falsified records, created fake e-mail accounts, and generated phony e-mail traffic in which she impersonated employees of various purported vendors.

In total, Peterson-Janovec received about $336,000 in bogus vendor payments and roughly $20,000 in fraudulently issued payroll submissions using the identities of others.

MI5 Inc. detected Peterson-Janovec's fraud in July 2019 and fired her. In early 2020, Peterson-Janovec lied about her work experience and landed a new job with the family-owned All Craft Exteriors construction company in Rochester.

She started as a bookkeeper, earned the company's trust, and eventually was promoted to general manager. Peterson-Janovec then carried out a similar scheme to the one she used while working for MI5 Inc. This netted Peterson-Janovec another $350,000 in as little as 18 months.