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Former Stillwater mayor charged with aiding tax fraud

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Stillwater mayor
Former Stillwater Mayor Ken Harycki in 2012
Jeffrey Thompson / MPR News 2012

A former mayor of Stillwater was charged in federal court Wednesday with helping two Minnesota brothers keep millions of dollars in taxes from the state and federal governments. 

Ken Harycki, a certified public accountant, knowingly prepared false tax forms for twin brothers Thurlee and Roylee Belfrey and their health care companies, according to charges filed in U.S. District Court. 

Harycki resigned as mayor last month. He was charged "by information," indicating that he will likely plead guilty to the conspiracy count against him.

The Belfreys have controlled several health care companies over the past 15 years, according to charges. One of the companies, Model Health Care, submitted thousands of fake claims for Medicaid reimbursements from 2002 to at least March 2014.

Mayor's business raided
IRS, FBI and Health and Human Services criminal investigators raided the accounting firm of Stillwater Mayor Ken Harycki in March.
McKenna Ewen / The Star Tribune via AP

U.S. Attorney Andrew Luger's office said Harycki helped the Belfreys carry out a yearslong scheme to defraud state and federal governments. The twins spent thousands of dollars of state and federal health care funds on cruises, resorts and personal flights, Luger's office said.

Prosecutors say the Belfreys owe the federal government nearly $12 million in unpaid taxes and more than $2.3 million to the state of Minnesota.

Harycki began to work for the Belfreys in 2007, according to the charge against him. He submitted inaccurate federal tax forms that helped them conceal how much they owed state and federal authorities.

Harycki also created a company in 2010 to take control over the bank accounts used to fund Model Health Care. That company, prosecutors say, helped make payments to the Belfreys that weren't reported on their income tax returns. Internal Revenue Service and FBI agents raided Customized Payroll Services, Harycki's accounting business, in March.

A woman who answered a number listed as Harycki's cellphone said he wouldn't talk to reporters. She directed inquiries to Harycki's attorney, who did not return a call for comment.