Ex-Stillwater mayor charged in fraud scheme

Published 10:12 am Thursday, December 18, 2014

MINNEAPOLIS — The former mayor of Stillwater was charged in federal court Wednesday with fraudulent accounting that helped conceal millions of dollars in tax liabilities for a Twin Cities home-health company.

Ken Harycki, who abruptly resigned from office last month, was charged on an “information” by the U.S. attorney — a procedure that indicates the defendant is expected to plead guilty.

The charges against Harycki, a certified public accountant, said he “regularly prepared and assisted in the preparation of” tax forms he knew to be false.

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Two brothers who own the home-health company were arrested and indicted this week on a charge of Medicaid fraud. Thurlee Belfrey and his brother, Roylee, both 48, own and manage multiple health care businesses and an entertainment business, according to court documents and state records.

Home-health companies controlled by the Belfreys and relatives have outstanding federal tax liabilities of $12 million, according to court documents unsealed Wednesday, and state tax liabilities of $2.3 million as of April 2013.

Harycki began doing accounting for the Belfreys and their companies in 2007, and he came under an Internal Revenue Service investigation in October 2012, according to a federal search warrant affidavit. The document said he created shell companies for the Belfreys and filed false tax returns on their behalf. IRS agents raided Harycki’s private accounting office in Stillwater in March.

Kevin DeVore, Roylee Belfrey’s attorney, said that his client indicated in court that he would be pleading not guilty. DeVore said he hasn’t seen “one shred” of evidence, but that once he does, he believes he’ll be able to show the charges are unfounded.

Attorneys for Thurlee Belfrey and Harycki did not immediately return phone messages seeking comment Wednesday. No court date has been set for Harycki.