MINNEAPOLIS (WCCO) — Police executed a search warrant at the Envy Nightclub in downtown Minneapolis Friday with probable cause for various alleged tax fraud violations.
“We collected a lot of information. Obviously tax and financial records,” said Myron Frans, commissioner of the Minnesota Department of Revenue (MNDOR).
At around 9 a.m., two officers and a dozen auditors entered Envy, which is located on 400 North 1st Ave. One of the club’s owners, 38-year-old James Shelly Beamon, allowed investigators in. Auditors searched the club for business records, credit and debit card transactions, as well as checks and money orders.
Frans said MNDOR investigating Beamon and his wife, Susan Kerry Beamon, for tax fraud. A search warrant says the Beamons have not filed individual income taxes since 2009.
According to MNDOR, the Beamons reported either very low or negative income in 2009 and prior tax years.
“Normally persons with very low incomes would not be able to purchase a downtown Minneapolis bar,” said Michael Morehead, special agent of the department’s Criminal Investigation Division.
Investigators also found a 2011 Cadillac listed under James Beamon’s name.
“This information usually suggests personal income tax violations,” Morehead said.
Moreover, the Beamons are being investigated for improperly filing sales tax.
MNDOR caught wind of the alleged fraud after someone familiar with the club’s operations reported to the City of Minneapolis’ Licensing Division.
The warrant says “the bar has certain cash registers that only take in cash. The owners skim the cash out of these registers and do not report the income. Many of the employees work for cash.”
MNDOR also looked at the bar’s food and admissions fees. According to Envy’s website, admission to enter the club is between $15 and $20 per person. But according to MNDOR, no food or admission tax has been remitted since the club opened in August 2011.
The Minneapolis Licensing Division allowed MNDOR to review Envy’s file.
MNDOR says the Beamons were required to submit tax returns for 2009 and 2010 to get a liquor license. The 2009 income tax matched MNDOR’s files, but the 2010, which hasn’t been filed, indicated the Beamons had well over $500,000 in income from three other businesses. The businesses are listed as Kerry Logistics, Shelly Transportation and Dealz Inc. MNDOR says the businesses are either inactive, non-filers or report no income.
“I suspect the 2010 tax return is completely fictitious,” Morehead said. “It was created to make the Beamons look like legitimate business persons with the experience and finance to obtain a liquor license and operate a bar in Minneapolis.”
Last month, the city recommended pulling Envy’s liquor license after city staffers observed over-serving of alcohol, minors drinking alcohol and the use of illegal drugs at the club.
The club had until Aug. 20 to decide whether to withdraw its licenses or file an appeal with the city council or an administrative law judge. But the club’s owners missed the deadline.
However, the Minneapolis Licensing Division did tell MNDOR that Susan Beamon attended an administrative hearing on Aug. 27 regarding their liquor license.