Lawyers say feds are probing Twin City Fan Cos. after family dispute

A fight over control of one of the Twin Cities' largest family-owned businesses has attracted the attention of the Internal Revenue Service, according to lawyers on both sides of the conflict.

The dispute centers on allegations that the former chief executive of Twin City Fan Cos., Charles Barry, inappropriately used company funds to support his longtime girlfriend and current wife.

At a court hearing Wednesday, a lawyer for Barry alleged that Barry's son, Michael, tried to persuade IRS agents to launch a criminal investigation of his father.

A lawyer for Michael Barry, Chris Madel, confirmed that Twin City Fan (TCF) is the subject of an ongoing IRS investigation. Cecilia Barreda, an IRS spokeswoman, said the agency is "not at liberty to comment on any open cases."

Madel also acknowledged that Michael Barry met with IRS agents last year, but he said Michael did not initiate the contact.

"If there is an allegation that Michael spoke to the IRS with the idea of sparking an investigation of his father, that is false," Madel said. "The IRS was investigating TCF's books before Michael was there, and they are currently looking at them right now."

Charles Barry's lawyer, William Mauzy, said his client has broken no laws, and he said he was able to temporarily derail the investigation. But Mauzy told the judge that a recent investigative report on the family-owned company by a retired Minnesota judge is full of "juicy" details that could reignite the interest of prosecutors.

Attorney James Gilbert, a former member of the Minnesota Supreme Court, recommended that Twin City Fan take legal steps to recover about $21 million from Charles Barry.

Charles Barry has repeatedly denied doing anything improper at TCF.

In court filings, Charles Barry has argued that Michael used the threat of criminal prosecution to oust his father from the company without paying him a fair price for his 26.6 percent ownership stake in TCF. The company, which makes industrial fans and generates annual revenue of $275 million, is worth about $450 million, according to court records.

Charles Barry was fired by the board in May after Gilbert submitted his findings, and Michael was named his successor.

The family feud began during a failed effort to sell TCF in 2015. As part of the sales process, company officials undertook an internal review that revealed millions of dollars in questionable expenditures by Charles Barry. In court filings, Michael Barry said the review prompted him to hire an outside law firm to investigate his father's "misconduct" and to advise him of any "potential civil or criminal liability."

"This is much more than a threat," Mauzy said in court. "These are bullets fired at Mr. Barry's head."

Mauzy is seeking court approval for more than $200,000 in legal expenses related to his criminal defense work. Earlier this month, Hennepin County Judge Bruce Peterson ordered TCF to pay nearly $470,000 in legal bills racked up by Charles Barry's legal team for work it did relating to the company's investigations.

Peterson has not ruled on Mauzy's request. But considering the threats made against Charles Barry, Peterson said in court, "Any rational corporate CEO would have a criminal defense lawyer on his team."

The question, Peterson said, is whether Gilbert's report provides a factual basis for the court to deny financial assistance. Courts typically order corporations to pay certain expenses for former executives in legal disputes to make sure those companies don't have an unfair advantage in court. But such help can be denied if the court finds the former executive acted improperly.

In an affidavit, Tom Brever — a former IRS attorney who now works for TCF — said an IRS agent told him last year that the agency was unlikely to initiate criminal action against Charles Barry "due to his age and health." Barry is 76 and suffers from failing kidneys and a chronic form of leukemia, according to court records.

"It is incredibly sad what has occurred here," Michael Barry said in the interview. "There are so many ways this could have been done quietly and privately."