Two metro-area brothers already indicted on a charge of alleged health care fraud now face an additional count of conspiring to defraud the Internal Revenue Service.
Thurlee and Roylee Belfrey worked with each other and Stillwater accountant Kenneth Frank Harycki to hide tens of thousands of dollars from the tax agency, according to a new indictment issued in U.S. District Court in Minneapolis.
Harycki, who was Stillwater’s mayor until he resigned abruptly last fall, wasn’t named as a defendant in the new indictment. However, he pleaded guilty in January and admitted in court that he had conspired to defraud the government of millions of dollars in taxes through his accounting business, Customized Payroll Solutions.
The new indictment against the Belfreys, filed Aug. 19, alleged that they falsely claimed mortgage interest deductions — Roylee at $40,000 and Thurlee at $45,000. They also allegedly transferred sums ranging from a few thousand dollars to $16,000 to disguise what they were doing.
Among those “overt acts,” according to the new indictment, was drawing money on a closed bank account and spending owed tax money on a boutique, a penthouse apartment in St. Paul, a residence in Edina and a Royal Caribbean cruise.
They also failed to pay about $220,000 in payroll taxes withheld from employees’ paychecks, the indictment said.
The new indictment also specified that the Belfreys, if convicted, will forfeit all property “from gross proceeds traceable to the commission of the offenses.”
Thurlee Belfrey, of Medina, and Roylee Belfrey, of Eden Prairie, owned and managed several health care businesses with a history of Medicaid fraud and lavish spending, according to court documents. They include Royal Health Care, Model Health Care, Integrated Health Services and an entertainment business, according to court documents and state records.
Harycki, a certified public accountant, began doing accounting work for the Belfreys and their companies in 2007, and the IRS began investigating him in October 2012.
His involvement in concealing state and federal tax liabilities occurred during most of the two terms he served as mayor, although felony charges filed against him by the U.S. attorney’s office didn’t relate to his elected position.
His guilty plea included a provision that he will provide “substantial” assistance to law enforcement in the investigation and prosecution of the Belfreys and that he will testify against them at their yet-unscheduled trials.
The Belfreys have yet to be arraigned on the new indictment. Two counts from the original indictment — conspiracy and health care fraud — are included in the latest, “superseding” indictment.