April 23: Bookkeeper 'horrified' by Beale tax schemes

When her boss had suspicious tax requests, she took notes.

By JON TEVLIN, Star Tribune

Last update: April 22, 2008 - 11:13 PM

A bookkeeper's fastidious need to square her books created the paper trail that eventually got her boss indicted for tax fraud.

At first, Comtrol Corporation payroll clerk Eileen Johnson didn't think there was anything wrong with CEO Robert Beale's request to stop withholding taxes from his $700,000 salary.

"He was quite well off, and I didn't know what kind of advice he might be getting," Johnson testified Tuesday in the second day of Beale's tax evasion trial in U.S. District Court in Minneapolis.

But when Beale allegedly directed Johnson to pay him through a shell company and send checks to a Swiss bank account, she became suspicious and kept a file.

Despite fearing the loss of a job she had loved for 18 years, Johnson eventually contacted authorities and launched the investigation.

The trial threatens to put Beale, 64, in jail for 10 years. He faces charges that he failed to pay $1.6 million in taxes on more than $5.7 million in income over several years.

Beale, who is representing himself at trial, got to face Johnson, the former employee he called "Comtrol's mother," eye-to-eye Tuesday and question her.

"Good afternoon, Eileen, good to see you," he said. "I still love you."

The greeting began a strange cross-examination of Johnson, who earlier had detailed alleged attempts by Beale to evade paying taxes and conceal millions of dollars in income beginning in 2000 by paying himself through a sham company called "Chayil," and sending money abroad.

The deception began when Beale ordered Johnson to "reverse out" nine months of payments, as though he was never paid, so he could recoup taxes, Johnson testified.

But the transaction left a hole of more than $500,000 on the company's ledger. "I needed to balance my books," said Johnson, 64. "It was very important to me."

Paying the money back

She said she coaxed Beale into paying back the money, then issued a check to his company. Johnson said she repeatedly told her superiors that she was upset about Beale's financial maneuvers, but was told by them to ignore it. She was also told Beale was angry when she wrote e-mails confirming some of the transactions.

"You should never put it in writing," she was told by supervisors.

Johnson said she began to make notes of meetings and take home copies of documents because she thought there was a misunderstanding with her bosses "and they'd think I dropped the ball."

Transactions to Beale accelerated through 2005, she said. Chayil produced no invoices and received no tax statements, yet the checks to the sham company continued.

"There was nothing, it was vapor," Johnson testified. "I was horrified.".

She said she and another employee, Lee Aide, finally decided to contact state authorities. Once, she had her son call to report suspicious activity. But when Beale's home was seized for another tax issue dating back several years, she agreed to talk to the IRS.

"It was like the sun was shining," she said.

After the IRS raided Comtrol's offices, Johnson left the company. She received no severance or unemployment and had to sue Beale for attorney's fees.

Beale's defense to the charges against him seems to be that he responded several times to IRS calls for documents, but didn't feel he needed to present them. He said he figured if he was wrong, he'd eventually pay a fine. He also said it was no secret he didn't like paying taxes, which proved that he wasn't trying to hide his actions.

"How do you feel about going behind my back and getting me into trouble?" Beale asked Johnson.

"I'm very sorry you put yourself in this situation, Bob," Johnson replied.

The trial, before U.S. District Judge Ann Montgomery, is expected to last two weeks. But it may not be the last of Beale's legal troubles. On Monday, he was charged with conspiracy to prevent Montgomery from presiding at his trial. Four members of a group opposed to the way taxes are administered also were arrested.

Jon Tevlin • 612-673-1702

Recent Local + Metro stories

Bond set at $100K in ESPN reporter videos case - April 22, 2008

Bond set at $100K in ESPN reporter videos case - An Illinois insurance executive accused of secretly making nude videos of ESPN reporter Erin Andrews posted $100,000 bond on Friday — a much larger amount than previously imposed. More