Tax preparer faces prison for Identity theft, failure to file taxes

Wednesday, April 08, 2015

A tax preparer has pleaded guilty to charges of identity theft and failure to file taxes, Hennepin County Attorney Mike Freeman announced Wednesday.

John Zastrow, 65, of Minnetonka, pleaded guilty late Friday to a single count of identity theft with eight or more victims in a scheme that netted Zastrow more than $25,000. He also pleaded guilty to six felony counts of failure to file taxes, which allowed him to evade at least $50,000 in Minnesota corporate and individual income taxes. Zastrow is expected to also be sentenced to paying restitution and cooperate completely with the Minnesota Department of Revenue in determining what he owes in back taxes and penalties and pay those, as well.

He will be sentenced June 12 and is expected to receive an 18-month prison sentence on the failure to file charges and 105 months on the identity theft. However, instead of serving the additional 105 months, he will be placed on probation for 10 years and will only be sent to prison on that charge if he violates the conditions of probation.

“Mr. Zastrow swindled tens of thousands of dollars from numerous clients who trusted him to prepare their taxes,” Freeman said. “He stole their names, birthdates and social security numbers in order to divert their income and property tax refunds to his own bank account. I’ve got to say, a week before tax filing, this case is an insult to all Minnesotans who work hard and pay their taxes and pay on time. But if you don’t these police officers and this commissioner will find you and we will prosecute you.’’

“We take seriously our role in ensuring everyone, tax preparers included, follows our tax laws,” said Revenue Commissioner Cynthia Bauerly. “With a week left before filing, this case is a reminder that taxpayers have to be vigilant. Our website offers great resources and tips for taxpayers so they can choose a reputable preparer to help them do their taxes.”

The investigation of Zastrow began when a couple went to the Minnetonka Police Department in October 2012 and reported they had learned that Zastrow prepared their income tax return but then had the federal and state refunds sent to his house and never turned the money over to them.

Minnetonka police executed a search warrant at Bremer Bank and that revealed that Zastrow controlled a bank account for Arbordale Development Corp. The records showed 92 deposits of tax refunds meant for other people being deposited into the Arbordale account. The Minnesota Department of Revenue then began a simultaneous investigation.
 
According to the criminal complaint, reviewing the revenue department’s records and interviewing the people whose names were found on the refund checks revealed that Zastrow was using his clients’ information to divert the refunds into his account and often changed their tax information so as to get a larger refund. In fact, one of the victims told investigators that she stopped using Zastrow after 2007, yet he managed to get a property tax refund in her name for 2008.

While Zastrow made his living by preparing and filing income tax statements for others, he did not file any tax returns for himself, Arbordale Development Co. or another of his businesses for at least the last six years, the complaint states.
 
“This was a very lengthy investigation and I want to acknowledge the work of  Investigator Mark Stock,” Minnetonka Police Chief Jeff Sebenaler said. “Any crime committed in Minnetonka will be investigated thoroughly and wherever you try to hide, we will find you.”

Zastrow has continued to work as a tax preparer even though his license to perform public accounting was revoked in 1993 for an embezzlement scheme, which was resolved in civil court. He does not need a license to be a tax preparer. In 1994, he was convicted of felony unlawful expenditure of charitable gambling funds for which he was placed on probation for three years.

Criminal Complaint (PDF)