Date: June 26, 2020
MADISON, WIS. – Dudley Hellenbrand and Cherie Hellenbrand, both of Middleton, Wisconsin, were sentenced today by U.S. District Judge James D. Peterson to each serve six months in federal prison for filing a false income tax return with the Internal Revenue Service. The judge staggered the prison sentences to allow one parent to stay home with their children. Dudley Hellenbrand reports to prison on July 27, 2020. Cherie Hellenbrand must report on June 14, 2021.
On July 11, 2019, both defendants pleaded guilty to a one-count information that charged them with filing a false 2017 income tax return with the IRS. The information alleged that the Hellenbrands owned and operated a sports bar/bowling alley in Middleton called Middleton Sport Bowl.
According to the information, the defendants contracted with a video gambling machine ("VGM") vendor to have VGMs placed at Middleton Sport Bowl. The defendants split the cash receipts generated by the VGMs with the vendor, with the defendants most recently receiving 75% of the VGM profits, and the vendor receiving the remaining 25%.
As part of the plea agreement, the Hellenbrands admitted they skimmed the VGM cash receipts from Middleton Sport Bowl and did not report the skimmed receipts on their state and federal income tax returns. The Hellenbrands agreed the total tax loss from the skim, for both state and federal income taxes, totaled $268,852.04 for the years 2010-2017.
This tax investigation started with a U.S. Department of Treasury Special Agent working as an undercover agent and posing as a buyer of a bar listed for sale by Cherie and Dudley Hellenbrand in August 2017. The bar was Middleton Sport Bowl (MSB) in Middleton. On May 31, 2018, the undercover agent met with the Hellenbrands and their VGM vendors at Middleton Sport Bowl. During that meeting, the vendors told the undercover agent they skimmed the cash receipts from the VGMs and prepared fake handwritten collection tickets showing much lower numbers for what came in, what came out, and what was the profit. These fake tickets were then used to report a fraction of the skim on the state and federal tax returns for the vendors as well as the Hellenbrands.
At today's sentencing, Judge Peterson noted the Hellenbrands were good and decent people, but they compartmentalized an area of their lives to justify the cash skim of the VGM receipts at Middleton Sport Bowl, and not report all of these receipts on their tax returns. Judge Peterson stated that a term of incarceration was necessary to punish these defendants for their criminal conduct because it was knowing, calculated, and deliberate. Lastly, Judge Peterson explained that a period of incarceration was necessary to send a general deterrence message to the taxpaying community – "the tax laws must be respected and if you violate those laws you will not receive a slap on the wrist, and you may end up going to federal prison, like these two defendants."
On June 19, 2020, Judge Peterson sentenced Tom Laugen to 1 year and 1 day in federal prison for his role in this VGM skim and tax evasion scheme. Laugen pleaded guilty to federal income tax evasion on July 12, 2019 and admitted he was a VGM vendor who supplied VGMs to the Hellenbrands at Middleton Sport Bowl from 2004 to 2017 and split the skimmed VGM cash receipts with the Hellenbrands.
The case against the Hellenbrands and Laugen is the result of an ongoing investigation being conducted by IRS Criminal Investigation and the Wisconsin Department of Revenue, Office of Criminal Investigation. The prosecution of this case is being handled by Assistant U.S. Attorneys Daniel Graber and Chadwick Elgersma.