IRS, FBI agents raid Stillwater mayor's business

Agents from several federal law enforcement agencies raided the accounting business owned by Stillwater Mayor Ken Harycki Thursday morning, rifling through papers and removing boxes of materials, including a large computer tower.

The raid, which started about 8 a.m. and lasted all morning at Harycki's Customized Payroll Solutions in the 1800 block of Curve Crest Boulevard, involved agents from the FBI, the Internal Revenue Service and the inspector general's office of the U.S. Health and Human Services Department (HHS).

The agents were executing a search warrant, said Don White, spokesman for the HHS.

Neither White nor Vicki Petricka, special agent with the IRS criminal investigations unit in Minneapolis, the agency leading the operation, would say what agents were looking for. "I can't say anything right now," Petricka said. "We have very strict disclosure rules."

In a statement later Thursday, however, Harycki said the raid involved a former client. Harycki did not identify the client or elaborate, saying only: "I am deeply disappointed by this situation and we are fully cooperating with authorities."

The Washington County's Sheriff's Office was called in to assist in the raid after the Stillwater Police Department deferred, but deputies did not participate in the search itself. Stillwater Police Chief John Gannaway said he asked the Sheriff's Office to get involved in the matter to avoid a conflict of interest.

"As soon as we realized who it was, we stepped out of it," Gannaway said. "The less I know about it, the better."

Cardboard covered the windows of the office as agents worked throughout the morning. Nevertheless, several agents wearing rubber gloves could be seen inside sorting through papers and putting them into boxes.

At one point, four federal agents emerged from the building carrying boxes of materials seized from the business.

They also removed the large computer tower.

One person, when asked if Harycki was inside, said only that the mayor was unavailable.

As agents worked, the parking lot outside the office building was quiet, with just a few customers heading to or from other nearby businesses.

The building also houses the United Way of Washington County-East, a treatment center and the 10th Judicial District's public defender's office.

Harycki's business provides tax preparation services, including corporate tax preparation and other accounting and business management services, according to his website.

Harycki, a former Stillwater City Council member who was first elected mayor in 2006, was narrowly re-elected in 2010.

His tenure has been marked by several controversies, including a city moratorium on summer festivals after the promoter of Lumberjack Days was charged criminally for issuing worthless checks.

The HHS inspector general's office fights waste, fraud and abuse in more than 300 agency programs, White said. The two largest programs, by far, are Medicare and Medicaid.

Just this week, the inspector general's review on Medicaid fraud in Minnesota found that between fiscal years 2010 and 2012, there were 62 criminal convictions and 59 civil settlements in such cases, leading to recovery of more than $64 million.

The IRS criminal investigations unit, meanwhile, investigates cases of involving tax fraud, money laundering and other violations of the tax code.

Staff writer Libor Jany contributed this report. Jim Anderson • 651-925-5039 Kevin Giles • 651-925-5037