St. Paul businessman denies ex-employee's charges of tax evasion

St. Paul businessman denies allegations of former employee that he was dodging income taxes.

By DAN BROWNING, Star Tribune

Last update: April 30, 2008 - 11:17 PM

The Internal Revenue Service is investigating whether a St. Paul manufacturer of ice cream pies and frozen pastries concealed hundreds of thousands of dollars in personal bills as business expenses.

The criminal investigation was made public when a search warrant was unsealed recently in U.S. District Court in Minneapolis. Nicolette Deplazes, an IRS special agent, filed a sworn statement to obtain permission to inspect two computer hard drives turned over by an unidentified "cooperating witness."

Deplazes identified the subject of the investigation as Joe Berg Sr., CEO of Royalston Foods LLC and owner of Wycliff Associates II LLC and Wycliff Associates LLC. The latter two businesses are involved in real estate.

Berg said he knew nothing of the probe until a reporter gave him a copy of the court papers. He blamed a disgruntled ex-employee and called the investigation a waste of time. He said the witness was an accounts-receivable clerk studying to become a certified public accountant.

According to Deplazes' affidavit, the witness contacted the IRS last June and said he believed his employer was evading income taxes.

He said that soon after he started working for Berg in January 2007, he was told to disguise certain personal bills as business expenses "and not to report any of these amounts to the IRS," according to the affidavit. Deplazes wrote that the witness also said he was told to provide incorrect financial reports to Berg's tax preparer.

The witness turned over his employers' business records for 2004, 2006 and 2007, and they appeared to support the allegations, the affidavit said. It also said that it appears Berg had about $648,000 in personal expenses paid through business accounts for 2004 and 2006. In addition, about $187,500 of Berg's salary or wages may have gone unreported in 2003, it said.

In August, the witness brought the IRS two computers, and an agency expert made copies of the hard drives.

Berg said his ex-employee did not know all the facts. He said he had loaned his companies money, and the accounting measures were ways to record his reimbursement. "I'm the kind of guy ... that says to my accountant, 'I don't want a refund. Make sure I pay money because I don't need this stuff in my life,'" he said. "I knew exactly what I was doing and exactly how I was doing it, based on instructions from a CPA."

Dan Browning • 612-673-4493

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