Crime & Safety

Lake Minnetonka Island Owner Pleads Guilty to Defrauding Government

Former wife of local real estate developer pleads guilty to filing a false income tax return.

Holly Claire Damiani, the former wife of local real estate developer, Jeffrey John Wirth, pleaded guilty yesterday in federal court to one count of filing a false federal individual income tax return. Damiani was indicted back on Aug. 17, 2011, along with two co-defendants, including her ex-husband.

In her plea agreement, Damiani stated that from at least 2003 through October of 2006, she conspired with Wirth and their tax return preparer, Michael James Murry, to defraud the Internal Revenue Service by failing to pay their true tax obligations.

Wirth is the sole owner and chief executive officer of The Wirth Companies, a commercial real estate development and management business. Until recently, he also owned 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. 

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In entering her guilty plea, Damiani, who was married to Wirth from 1980 until their divorce in 2008, stated that she and Wirth used The Wirth Companies and the other related businesses to fund their lavish lifestyle, including the $2 million purchase of an island in St. Alban’s Bay in Lake Minnetonka and at least $3 million to design and construct a mansion on that island.

According to Damiani, who was a vice president at The Wirth Companies from 1988 to 2006 and the company’s chief financial officer from at least 2003 to 2006, she and Wirth often recorded personal expenses as business expenses in an effort to understate the company’s income for tax purposes. She also stated in court that the two of them caused other personal expenses to be recorded in The Wirth Companies books under a special category.

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Damiani further contended that although she, Wirth and Murry knew those special-category amounts should have been noted on their tax returns as distributions by the company to its shareholder, the three of them intentionally failed to do so. As a result, the personal taxable income for Damiani and Wirth, both of whom hold accounting degrees, was, likewise, underreported to the IRS. 

Moreover, Damiani stated in court that from 2002 through 2005, while she and Wirth were actively engaged in the management of the businesses and were receiving substantial distributions from The Wirth Companies, they each claimed only $12,000 a year as wages on their Form W-2s, although they fully understood that the fair market value of their labor exceeded those amounts. 

Consequently, the employment taxes paid by The Wirth Companies, Wirth and Damiani were far less than what should have been paid.  

Damiani also admitted she was aware of false “management fee” entries made in The Wirth Companies books for the sole purpose of further reducing the company’s taxable income. In addition, she indicated that she, Wirth and Murry caused The Wirth Companies to make car payments for some employees’ personal vehicles and refraining from reporting those payments as employee compensation so as to underreport employees’ taxable wages and understate The Wirth Companies’ employment tax obligations. 

Finally, Damiani stated that for calendar years 2003 through 2006, she and Wirth signed federal income tax returns that she knew to be false.

For her crime, Damiani faces a potential maximum penalty of three years in federal prison. A judge will determine her sentence at a future hearing, not yet scheduled.

Wirth and Murry each face one count of conspiracy to defraud the U.S. government. In addition, Wirth was charged with two counts of filing a false individual tax return and two counts of filing a false corporate tax return. Murry was also charged with two counts of preparing a false corporate tax return and two counts of preparing a false individual tax return.

Wirth and Murry have entered pleas of not guilty, and a jury trial has been scheduled for May 29.If convicted, Wirth and Murry face a potential maximum penalty of five years in federal prison on the conspiracy charge and three years on each tax count. 

This case is the result of an investigation by the IRS-Criminal Investigation Division. It is being prosecuted by Assistant U.S. Attorneys William J. Otteson and Christian S. Wilton.


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