Crime

Former Miami lawmaker didn’t file tax returns during eight years in office

Erik Fresen arrives at federal court to plead guilty to not filing taxes

The former Miami lawmaker didn’t file tax returns during his eight years in office.
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The former Miami lawmaker didn’t file tax returns during his eight years in office.

For eight years, Erik Fresen served in the Florida House of Representatives, leaving office last November because of term limits.

During all eight of those years, Fresen never filed a federal income tax return.

Fresen, a Miami Republican, pleaded guilty in federal court Wednesday to failing to file a tax return for 2011, a year in which he received $270,136 in income he didn’t report to Uncle Sam.

But in all, Fresen admitted he actually failed to report his income to the Internal Revenue Service from 2007-16, according to a statement filed with his plea agreement. His tax troubles with the IRS arose before his political career, including the year before he was elected as a legislator.

In total, Fresen still owes at least $100,000 in back taxes, excluding fines and penalties, federal prosecutor Harold Schimkat said.

The nine-year period in which he failed to file any tax returns overlapped with Fresen’s eight-year tenure representing House District 114, which includes Flagami, West Miami, Coral Gables, Pinecrest, Palmetto Bay and Cutler Bay. In the GOP-controlled state House, Fresen, who obtained a bachelor’s degree in finance and international relations from Florida State University, rose to become the influential education budget chief. Fresen also worked during that time as a land-use consultant for the Miami architecture design firm Civica, and had previously worked for the powerhouse Miami law firm Holland & Knight.

Fresen, 40, faces from probation up to one year in prison under the terms of his plea agreement with federal prosecutors. He will be sentenced by U.S. District Judge Robert Scola on Aug. 18, when he must provide evidence that he has repaid the IRS or submit a repayment plan. His defense attorneys are expected to ask for probation, but Schimkat, the prosecutor, is recommending one year in prison.

Unlike a more serious felony conviction for tax evasion, fraud or filing a false return, the misdemeanor conviction for willfully failing to file a return in 2011 would not prohibit Fresen from running for office again. Prosecutors usually charge someone with tax evasion — a felony — if they file a tax return that hides income.

Fresen, who is free on a $100,000 bond, declined to comment outside the courtroom Wednesday. He wouldn’t say why he failed to file his returns.

“Are you pleading guilty out of your own free will because you are, in fact, guilty?” Scola asked Fresen in court.

“I am,” Fresen said.

IMG_Florida_Legislature__2_1_Q08BFTJB_L228026132
File photo of Erik Fresen while he was in the Legislature. Steve Cannon Associated Press

While in Tallahassee, Fresen did file annual financial disclosure forms required by the state that listed his income as a land-use consultant and legislator. The income came from primarily three sources: Civica, the architecture design firm; Neighborhood Strategies, Fresen’s land-use consulting firm, and the Legislature. It’s unclear why Fresen disclosed income to the state but didn’t file tax returns to the feds.

According to his defense attorney, Jeffrey Neiman, Fresen’s employers — the state of Florida and Civica — withheld taxes from his income in 2011, but he didn’t pay an additional $30,324 in taxes he owed for income from his self-employed consulting work for Neighborhood Strategies. This overdue tax bill would suggest that Fresen made more than the $45,000 in income that he reported from his business on a financial disclosure form for that year.

In total, Fresen owed about $215,000 in back taxes from his Neighborhood Strategies income from 2007-13, according to his plea agreement. He has paid back about $115,000 of that amount. He was supposed to file tax returns jointly with his wife.

Though Fresen owes back taxes, he has been able to hire Neiman, a former federal prosecutor who specializes in tax and white-collar criminal cases, and obtain advice from defense lawyer Marcos Jimenez, a former U.S. attorney, who was also at Fresen’s side in court.

Fresen’s 2008-15 income averaged about $214,000 a year, according to the financial disclosures. (The 2016 form is due by July 1.) In a typical year during that period, Fresen made about $150,000 from Civica, $40,000 from his consulting firm, Neighborhood Strategies, and $30,000 from the Legislature. His chief liability was a student loan that topped out at $113,000; during his eight years in office, his net worth fluctuated from about $272,000 to $594,000.

Civica, which specializes in designing charter schools, frequently does work for Academica, one of Florida’s largest charter-school operators and a recipient of millions of public dollars. Academica’s founder and chief executive is Fresen’s brother-in-law. Academica also has ties to one of Fresen’s defense lawyers, Jimenez, who has represented the charter-school operator over the past decade.

Neighborhood Strategies, the company Fresen founded in 2005, was dissolved by the state — effectively put out of business — in 2009. Fresen nevertheless kept reporting income from the firm in subsequent years; he formally reinstated the company with the state in 2015.

Fresen’s sloppy finances have dogged him for years. In 2011, the IRS slapped him with a $29,199 lien for taxes owed in 2007 and 2004, according to Miami-Dade County Court records. Of those, the larger lien for $21,925 was for unpaid taxes in 2004; the smaller lien for $7,274 was for unpaid taxes in 2007. No subsequent court record shows Fresen resolved those liens with the IRS.

The home Fresen owned in the Miami neighborhood of Little Gables — the house he grew up in — went into foreclosure in 2008, the same year Fresen was first elected. He stopped making mortgage payments in May 2008, claiming the bank tried to bill him improperly for about $14,000 in taxes he had already paid. That dispute accounted for his 2007 tax trouble, Fresen said at the time, though his accountant was still trying to find the source of the owed taxes from 2004.

The foreclosure was filed against Fresen, his wife and his mother, who transferred the deed to Fresen and his wife in 2006. Three years later, La Salle Bank won a $641,141 judgment for foreclosure on Fresen’s home, court records show. In 2011, the bank said Fresen owed nearly $615,000 in mortgage principal, interest and late fees. The house also had a $10,000 lien from the Miami-Dade Building Department for a pool fence built without a final permit.

Fresen finally sold the house — which was still in foreclosure — for $471,000 last month, public records show. His wife, Ethel, filed for personal bankruptcy last September, claiming between $50,001-$100,000 in consumer debt. But court records show the case was dismissed in October for lack of action, including failing to file a statement of her financial affairs. Among her creditors, she listed American Express and other credit card companies, along with the IRS, the U.S. attorney general and the U.S. attorney in Miami. The couple has three children.

Fresen’s foreclosure was first reported by the news media in 2011, the same year he filed high-profile legislation to allow casino gambling at “destination resorts” — a proposal backed by Genting, the Malaysian conglomerate that bought the old downtown Miami Herald site. The bill ultimately failed. During that time, Fresen also headed the Miami-Dade Republican Party, which at one point in his tenure had only $62.09 in its bank accounts.

His mortgage woes drew a state ethics complaint over Fresen’s failure to list the mortgage and foreclosure lawsuit in his financial disclosure forms from 2008-11. The following year, the Florida Ethics Commission found probable cause that Fresen had failed to properly disclose his annual net worth, assets and liabilities.

In 2013, Fresen corrected the forms and signed an agreement acknowledging his mistakes. But the case dragged on until 2014 because Fresen refused to pay a $1,500 ethics fine imposed in 2003 after he failed to file a financial disclosure form for 2002, when he worked as a legislative aide.

He said he didn’t find out about the fine until 2012, when it was no longer enforceable. Ethics commissioners eventually resigned themselves to never recouping the fine.

Last week, hours before news of Fresen’s impending guilty plea made headlines, his name was floated by political insiders as a potential candidate to replace former state Sen. Frank Artiles, who resigned from office in scandal Friday.

Asked by a reporter in a text message if he had any interest, Fresen responded: “Zero.”

Fresen is the third former state lawmaker to face federal charges in the past year. Last month, a grand jury indicted former Rep. Dwayne Taylor, a Daytona Beach Democrat, for falsely claiming thousands of dollars in campaign expenditures in order to conceal cash withdrawals and checks written to himself. Taylor was charged with nine counts of wire fraud.

In February, former Rep. Reggie Fullwood, a Jacksonville Democrat, was sentenced to six months of house arrest followed by probation. He pleaded guilty in September to one count of wire fraud and one count of failing to file a tax return — the same charge leveled against Fresen — after he misused campaign funds on personal expenses. Fullwood failed to file tax returns for four years.

The IRS and U.S. attorney’s office routinely make criminal cases against tax offenders who fail to file income tax returns, which are simpler to prove than complex allegations involving fraud and evasion.

Other defendants who have been charged with the same crime as Fresen include current Opa-locka Mayor Myra Taylor. She pleaded guilty, gave up her commission seat and was sentenced to one year of probation in 2005, based on thousands of dollars in unreported income in 1999 from a family-run private school. She and her husband, John Taylor, who pleaded guilty to filing false returns over three years and also got probation, were ordered to pay $50,000 in back taxes.

In a much bigger money case, lawyer Steven Siff of Davie was sentenced to 13 months in prison in 2014 for failing to file tax returns over three years when he earned more than $2.1 million in partnership profits. Siff also had to pay about $925,000 in back taxes.

Miami Herald staff writer Kyra Gurney contributed to this report.

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