Tax Analysts Blog

No Deal for Former Tax Court Judge Kroupa – Blame Spiro Agnew?

Posted on Apr 7, 2016

Former Tax Court Judge Diane L. Kroupa and her husband were recently indicted in Minnesota on multiple tax charges, including conspiracy to defraud the United States, tax evasion, subscribing to false tax returns, and attempting to obstruct an IRS audit. According to the indictment, between 2004 and 2010 Kroupa and her husband deliberately concealed $1 million in taxable income, on which they failed to pay nearly $400,000 in income taxes.

Kroupa was appointed to the Tax Court by President George W. Bush and confirmed in June 2003 for a 15-year term on the court. She retired in June 2014, four years early. From the timing of the indictment – which followed an investigation by both the IRS Criminal Investigation division and the U.S. Postal Inspection Service – she probably saw the handwriting on the wall.

What happens next, and how is the case likely to end? If convicted on all counts, Kroupa will likely be doing hard time, as much as 4-1/2 years in federal prison (perhaps a bit less if she pleads guilty to the indictment). This leads one to wonder whether a talented criminal defense lawyer – of which there is no shortage – might be able to plead her down to a lesser offense, with little or no time behind bars.

Which brings us to Spiro Agnew. On October 10, 1973, literally in a matter of minutes, a sitting U.S. vice president resigned his office in disgrace, pleaded no contest to a single charge of tax evasion committed while governor of Maryland, and was sentenced under a plea agreement to three years’ probation and a fine of just $10,000.

While Agnew suffered extreme humiliation that day, his encounter with the criminal justice system was relatively brief. On the other hand, the Justice Department’s agreement to the plea deal would haunt it for years. That is because juries across the U.S. were reluctant to convict and possibly imprison some ordinary citizen, after seeing the vice president of the United States commit the same crime and get off essentially scot-free.

After seeing its conviction rates drop in the years following the Agnew debacle, the Justice Department made two strategic decisions: It would no longer agree to accept pleas of no contest to felony tax charges, and it would seek more severe sentences – not less – for prominent citizens convicted of tax crimes. Afterward, conviction rates returned to pre-Agnew-plea levels.

All this bodes ill for Kroupa. Whether she fights the charges and loses, or whether she accepts responsibility for some of the charges, two outcomes are nearly certain: Any plea agreement will require her to plead guilty to at least one felony, and she will go to prison. Thanks to Spiro Agnew (and Kroupa), no crafty defense lawyer can change that.

 

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